When considering proposals to weaken patent monopolies, drug development seems like the main type of innovation that would be hurt.
Most of drug development cost seems to be verification of safety and effectiveness, which doesn’t look like the kind of novelty-creation patents are designed to help, but that doesn’t mean it’s easy to implement an alternative.
It turns out we have an example of a company making monopoly-style profits from an unpatented drug (Questcor Pharmaceuticals, Acthar).
Questcor bought Acthar for $100,000, suggesting the seller expected it would hardly make any money. Sometime later Acthar was designated an orphan drug, and Questcor raised the price from $1,650 to 28,000 per vial, without causing competitors to sell it. It now gets profits of roughly $300 million per year off of it.
So something must be restraining competition, probably something connected to the orphan drug laws, suggesting that if protections for patents in general were weakened, it would only take small changes in existing rules to maintain existing incentives for drug development.
Yes, the FDA grants monopolies in many situations, usually pretty short. One that seems pretty stupid to me is that the first company to file for permission to make a generic gets a duopoly for six months.
The whole point of orphan drug laws is to unify monopoly and permission in one place. I think that’s probably a good idea in general, or at least for people to talk more about how the two functions interact. A small advantage of the current system is that a ticking patent clock encourages companies to talk to the FDA. If the monopoly period is fixed starting at the date of permission, as is true with orphan drugs, they may spend too much time polishing their application.
If the FDA were granting monopolies around drugs, it would probably only grant them for the drug itself. In theory other patents could be valuable for innovation, but in practice I think the patents actually issued make things worse.