I think in the US the problem is more that you don’t have cost-benefit analyses to the same extent as other countries. For example, in the UK, NICE (the national institute for clinical excellence) determines whether a given treatment is worth the price, and therefore, whether the NHS will fund it, and of course, on top of that, the NHS can negotiate big discounts.

In the US, with your direct to patient marketing, and pay-for-treatment healthcare, the market can squeeze more out of you.

As for .GIFs, the story is a bit more complicated than that as Compuserve popularised the .GIF format as a free and defacto standard, only later did people realise it used the LZW algorithm patented by Unisys, who, when it was popular, tried to ring money out of commercial users. It is now out of patent. Rather than some kind of success of the internet community working together, it was just dumb luck that Unisys realy had little chance of chasing up private users.

The internet is actually the domain of all kinds of ridiculous and trivial patents, because challenging them is so difficult, so I’m not sure it is a great example – at least Pharma companies actually produce something tangible that actually does something.

If you look at Qualcomm and CDMA you get a much better idea of what happens when patent rights are enforced from the outset in the technology sector!

Although the GIF was originally developed in 1987 by a Compuserve special interest group, it has been regarded as an open, non-proprietary format since 1994, when Unisys negotiated with Compuserve to offer a limited, non-exclusive, royalty-free license for the format to the entire viewing on-line community.

I did mention Amazon’s patent. Patent and the lawsuit against B&N generated a huge controversy, activism, threats of boycott, etc. I’m not sure, but I don’t think it was enforced in the end. Again, somehow things did work out OK.

It doesn’t seem to happen in the pharma industry. One of the reasons is, probably, that getting a pill that might save your life is not the same as viewing a picture – you have a huge insentive to pay whatever they ask. If so, then it’s one the typical market failures, usually corrected by specially designed laws and regulations.

An essential part of the GIF format was indeed patented until quite recently. Obviously, if you know the format, you can program your own GIF codec.

However, that was illegal (also merely using your program), which is the entire point of getting a patent—the government grants you a temporary monopoly in return for disclosure.

If you want to know more about software patents, an interesting example is amazon’s one-click patent.

Don’t think so. In fact I’m almost certain that isn’t the case, if you look at the pretty limited discovery of useful drugs over the last few years. In fact, as the easy drugs have been developed, new drug production has slowed down. Fortunately, at the moment, small biotech has taken up the slack.

I get your point about the need for returns to make private industry possible, but at the moment, as far as I can tell, the pharmaceutical companies are thinking that easy development (me too drugs, new uses for old drugs) are the bread winners, and scaling back R&D.

As far as uncertainly, I don’t know for sure, but I suspect there must be some statistical certainty, so that you know that you need to spend between $X and $Y to discover with 95% probability something that will be worth $Z over the next 5 years (or something like that). And X and Y have to be close enough or private industry just wouldn’t be possible.

But under the US model, health insurance picks up the tab for drugs, but this way you are transferring costs to the state. Also, while R&D is obviously less than the total costs of the drug, there would stilll be a staggering cost to develop the drugs – i.e. even if R&D is less than half the cost (plus factor in manufacture and distribution), BigPharma is a multibillion dollar industry – half of that is still a multibillion dollar industry!

With regards to utilities, the analogy breaks down when you consider the uncertainty – build a power plant, costs lots, sell electricity, recoup investment and make profit. Do drug R&D, costs lots, find bugger all, make nothing, fold, lose all investment – the only way to make it worth while is to have staggering returns on the drugs that do work – and that is the current system of patents.

And I think there are utility companies that are somewhat similar: you need huge initial investment to build, say, a hydro power station and then you sell electicity and recover your investment over time and then some more. But utility companies (unless de-regulated) have to justify their expenses, prices and profits; it’s a standard procedure. So, why would anyone build a hydro power station? Well, because it’s profitable enough.

I think auto-insurance rates are regulated the same way, at least in Massachusetts.

But in the pentagon scenario, taxes would need to be very high to pay for development – remember, that profits from sales will be much lower, and you need to make pay-offs sufficient to justify the R&D on failed projects – just like the current market. That is why so much of the US budget is military spending.

In the At&T scenario, again, the company would need to be sufficiently reimbursed to make R&D worthwhile (otherwise you’re in the cloud cuckoo land of people that moan that generics are so much cheaper than branded drugs, so therefore, drug companies are ripping us off).

I don’t think a utility company model would work for pharmaceuticals – R&D isn’t a commodity in the same way.

Another scenario would be a ‘utility company’ scenario, where a monopoly operates under strict regulations; it would be a trade-off: much smaller but guaranteed profits, a lot of people invest in utilities.

“With the pharma, they could, for example, create a central agency that hires all these private companies to do what they do, just like the pentagon hires defense contractors; and that agency would hold all the patents. That would be kinda radical.”

So essentially state directed pharmaceutical research? But where would the money come from to pay the companies (because the state wouldn’t be able to profiteer in the same way)?

“What they could also do is to force the patent-holder to share the formula (well, it can be easily analysed anyway) with other companies for some kind of a compensation. This would be very similar to what they did with the AT&T, when they required it to lease the lines to all other long-distance companies. After that, long-distance rates fell in some cases to 10% of what it was under AT&T monopoly.”

They could do. But, again, in a market based capitalist economy, where does the money come from to provide the incentive?

Personally, I’m all for nationalising these things, but most people here wouldn’t agree (and it won’t work worldwide)…I was just arguing against infantile claims that pharmaceuticals companies don’t do anything for their money, not claiming we’re in the best possible world, which we clearly aren’t.

Hmm, I am sure you can write your own gif viewer if you know the format. Real Player can play Microsoft audio files. OpenOffice works with Microsoft Office files in the same manner Microsoft Office does. I think the IP laws are quite liberal in the world of software.

With the pharma, they could, for example, create a central agency that hires all these private companies to do what they do, just like the pentagon hires defense contractors; and that agency would hold all the patents. That would be kinda radical.

What they could also do is to force the patent-holder to share the formula (well, it can be easily analysed anyway) with other companies for some kind of a compensation. This would be very similar to what they did with the AT&T, when they required it to lease the lines to all other long-distance companies. After that, long-distance rates fell in some cases to 10% of what it was under AT&T monopoly.

Hey, I am no expert – what do I know. It just feels like there must be a better way.

I’m curious as to what you think should be done about the IP laws? I mean, as you say, a lot of internet based coding can be easily spread amongst hobbyists – as has been demonstrated by the open source movement (although, of course, it isn’t exactly responsive to commercial pressures). But if you started relaxing IP law when it comes to pharmaceticals, who is going to develop the drugs and run the trials, it isn’t going to be academic departments without massive extra public support, and it isn’t going to be pharmaceutical companies because everyone else can quickly jump on board with generics, making R&D unprofitable.

I understand that pharma is different in many respects, but still, it’s hard to believe that the current system is the best government could come up with (in regards to the IP laws in this area) – assuming they were thinking about the public good, of course.

Of course software has copyright protection as well.

And I suppose the most obvious difference is the development cycle in pharma requires patent protection more than the IT development cycle which is necessarily much quicker.