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September 15, 2010 (Vol. 30, No. 16)

Open-Source Model for Biotech

Current Patent Policies Stymie Innovation and Are Detrimental to the Well-Being of Societies

  • Biopharmaceutical Innovation

    There is also increasing frustration with the existing innovation model for biopharmaceuticals in the developing world. In order to justify the considerable expense of developing drugs, pharmaceutical firms require a customer with the ability to pay on a scale sufficient to justify the investment.

    Thus the poor in developing countries or even individuals in rich countries with diseases such as Parkinson disease that do not afflict large numbers of people find that there is not a lot of innovation in treatments for diseases that afflict them.

    Due to this dilemma, the open-source movement has been gaining impetus in the developing world as people struggle with restrictions to their ability to innovate and adapt existing technologies to address critical issues.

    There are several ways in which an open-source model can facilitate innovation in biotech. Due to the time and financial expense involved in biotech innovation, companies are increasingly seeking means of defraying costs through distributed innovation mechanisms.

    Clearly, the market must be incentivized such that it is in the best interests of firms to make these investments. However, the argument here is that a more structural impact upon the innovation process can be had by adapting the open-source model to empower healthcare providers and scientists across a global network and allow developing country entrepreneurs to make improvements upon existing technologies.

    Specifically, this model entails:

    • having the results of government-funded research remain in the public domain and be freely available through the Internet so as to allow generic manufacturers to produce it,
    • greater government support for the bioinformatics and biological database tools that are essential to promoting global collaboration and reducing drug development costs by virtualizing the process,
    • creating an open-source license that allows users to patent what they create from their investments but does not restrict others from using the original shared information to make improvements and develop similar technologies, and
    • having the development of drugs from government-financed research be awarded to a firm based upon competitive bids.

    Such a model would allow companies to continue to derive financial benefits from their investments but create incentives for further innovation and also make low-cost production part of the criteria for being able to license government-funded pre-commercial R&D.

    It would also enhance social returns by empowering more people to participate in the innovation process—particularly users of pharmaceutical technology such as healthcare providers and patients themselves.

  • Bioinformatics

    In the realm of bioinformatics, and especially in biological databases, open-source collaboration is essential to innovation. These tools are critical because as biomedical research becomes more dependent on managing and interpreting large quantities of genomic information and less centered on conducting physical experiments, computational science will be ever more valuable to biomedical science.

    To the extent that restrictive property rights over scientific information would create inefficiently high transaction costs to follow up on innovations, free infrastructure is desirable.

    Pharmaceutical companies of all sizes are likely to need information about many different single-base variations in order to tailor drugs to individual genotypes. The public availability of biological databases is also critical to supporting collaboration among academics by facilitating distributed annotation and reducing the transaction costs associated with improving the information product. 

  • Ethics

    Lastly, an open-source model in biotechnology is also appropriate for ethical reasons. In biomedical research, social returns must be measured not just in private profits but in the degree to which the health and well-being of society as a whole is improved.

    More so than any other industry, biotechnology has a social obligation because its successes are dependent upon billions of dollars of precommercial R&D provided by the general public, and its failures have life and death consequences.

    The economics of healthcare and biotechnology involves far more than just dollars; it also involves the overall welfare of society. Moreover, there are billions of poor and disease-stricken people who stand to benefit immensely from being able to adapt innovations in the biotechnology sphere to address socially debilitating crises such as AIDS, hunger, and malaria.

    By inhibiting innovation, the status quo in biotechnology is not only hurting these people but also firms that are afflicted with skyrocketing research and development costs.

    The purpose of patent policy is to enhance innovation. This has been warped so as to produce less innovation and greater rents for those able to manipulate the process. Removing patent restrictions on improvements to existing biotechnologies is not an abuse of intellectual property policy but rather would enhance innovation as the policy was originally intended to do.

    Democratizing access to innovation through open-source modalities is increasingly critical for the general prosperity and well-being of societies.

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