Graham Dutfield at the University of Leeds has published an article on the development of medical hormone products and patent law, “Patent on Steroids: What Hormones Tell Us about the Evolution of Patent Law.” The article doesn’t do as much with the evolution of patent law as its title suggests, but it does a great deal to describe how the use of patents on hormones shaped both company and non-company practices. Dutfield works through the major discoveries of the early to mid 20th century–adrenaline, insulin, cortisone, and sex hormones. German dye companies developed synthetic chemistry and transitioned into production of chemistry-based medical products–products for pain relief or fever reduction, like aspirin. In the United States, companies making medical products focused on extracting natural agents or purifying minerals.
When hormones got interesting at the turn of the 20th century, companies had to adapt. Hormones are too difficult and expensive merely to extract and purify. There must be ways to synthesize them, or make analogs. And once the hormones have been synthesized, then ways have to be found to make them in quantity and reduce the cost of doing so.
The pharmaceutical companies, as they came to be called, used patents to cover their investment in this new “development” process that involved much more than synthetic chemistry. Rather than having a product produced through a bit of cleverness and discipline, based on a published account of how to do it, for hormones companies had to undertake much more work–characterize the chemical structure of a complex molecule, figure out how to synthesize that molecule, and then adapt the molecule for specific medical uses and forms of delivery. And on top of all that, show that after all this work, the new molecule is safe and effective. “Development” has a much different meaning for the creation of a hormone-based therapeutic than it does for ether or aspirin or vitamin D.
What did company patenting of medical products–starting with the German companies and spreading to the U.S.–do to university practices? Here’s Dutfield’s assessment, with my comments interspersed.
Academic scientists and their university employers also used the patent system, either for financial reasons or, on occasions, to protect the interests of patients in safe and accessible treatments.
In the absence of government regulation, some academics justified patents as a means to control company activity in exploiting their discoveries–a patent could be used for quality control, to check advertising and claims, and to manage price. The University of Toronto, for instance, used this reasoning with regard to insulin. Mostly these functions of a patent–but for making money–have now been displaced, for medical inventions, by federal laws and regulations.
Dutfield then draws a contrast with the use of patents by the pharmaceutical companies:
In the commercial world, patent ownership and licensing was used to dominate and divide up markets, block new entrants and force out existing ones.
That is, corporations had a different set of uses for patents–marking territory and managing competition. We might see, then, how these two uses for patents, one set academic and the other corporate, might both argue for the importance of a patent system and yet be worlds apart on the proper use of patents. A university might acquire a patent to extract through licensing a financial return from “industry”–an objective often alien to any company in the industry. (“Why would we use a patent to license anything for mere money when we can use patents to dominate, to drive out others?”) But if that university licenses the patent exclusively to any one player in the “industry,” the university may also become complicit in corporate strategies to dominate markets, block new entrants, and the like. We have an instance in which a stated reason for an action (university licensing) does not square with what happens in practice. The intent and the consequence are at odds.
Dutfield then points out the problem for “open” work:
With so much patenting going on, non-owners and those refused licenses had little space left in which to innovate and get patents or even just to avoid getting sued.
If one did not have patents to trade–cross-license–to gain access to a patent pool (1937 European Hormone Cartel; 1950 Cortisone U.S. Patent Pool), then it was almost impossible to operate in the area staked out by industry patents. University exclusive licenses merely added to the problem for open work. Patents were used, in aggregate, to reduce the field of participants–one could not make, or use, or sell without having patents to trade. As Thucydides has the Athenians explain to the Melians (who were arguing for their lives), “Right is only in question between equals in power, while the strong do what they can and the weak suffer what they must.” Patents, it appears, is one way to gain some degree of equality in power. Pity, then, that university administrators so easily are ready to concede that equality for money.
Companies used patents to consolidate power over an entire field of therapeutic discoveries, variations on those discoveries, and their functional equivalents, methods of production, improvements, and applications. Doctors became dealers selecting from competing commercial products. Pharmacists became dispensers rather than formulators or local producers. Hormones, too, met the sweet spot for company interest, as they were not cures but rather made acute conditions chronic, ensuring continued sales.
But patents were also sources of scientific
information and commercial intelligence, and as such could be beneficial to all market actors and aspirant ones too.
Companies used published patent applications to anticipate research and development directions, get their own patents filed, and therefore found ways to gain leverage and maintain their presence in the market. There were ways to fight back against the consolidation of power.
Such high-volume usage of the system and the patent documents themselves undoubtedly influenced the structure of the market in hormonal products and the identities of the actors.
Yes–companies gained time to work out the chemistry and production methods, in addition to testing. The companies that could secure patents on discoveries early had an advantage in controlling the downstream market. Academics could be used to assist in the chemical characterization and science of therapeutic action as well as to conduct clinical trials. Why, there was an “innovation ecosystem” developing. “Innovation ecosystem” isn’t what Dutfield calls it. That’s just my adding the bureaucratic candy words people use these days when talking their silly talk. What came about was not the only possible “innovation ecosystem,” or even in the long run the best one, but it was the one that formed, and had money behind it, and intended itself to persist, and there we are.
But their influence went further than this, including the trajectories that commercially oriented scientific investigation followed. If it was patentable it was likely to be commercially interesting. If it was not patentable, or the patent situation was more uncertain, it became much less interesting.
It may be that our perceived lack of innovation–for all the expenditure of research funds–in matters of public health may be because so much money finds its way to what is patentable and what is patented, with a policy demand that everyone should find things that are commercially interesting. A more volatile, less directed approach would appear to the administrative mind to be counter productive–given that productivity is cast in terms of how best to gain the interest of the established companies in the field.