October 08, 2012
The NYT has an excellent piece on how patents can obstruct innovation in high tech. The sector has wasted tens of billions of dollars in lawsuits in recent years and now takes out patents routinely as a legal weapon. The one major error is that the piece implies at one point that the story with prescription drugs is better, if anything it is almost certainly much worse. The enormous patent rents that drug companies are able to earn (drugs that can be profitably sold for $5 are instead sold for 100 or even 1000 times this much with patent protection) give them a huge incentive to misrepresent their effectiveness and safety and to market them for inappropriate uses. As the NYT has frequently documented in news stories, the drug companies respond to these incentives as economic theory predicts.
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