Money  /  Book Review

Unreasonable Terms

How American drug companies have exploited government contracts to pursue profit over public interest.

Yet for all its flaws, Owning the Sun is an arresting provocation. Since World War II the pharmaceutical industry, aided by the federal government and philanthropic foundations, has produced an enormous arsenal of drugs against a variety of fearful diseases and disorders, but Zaitchik persuasively argues that it has also single-mindedly pursued profit maximization by engaging in price gouging, blocking the availability of cheaper generics, and exploiting the patent and regulatory systems to harass and suppress competition.1

In 1793 Congress updated what qualified for a patent: “any new and useful art, machine, manufacture or composition of matter, or any new and useful improvement [thereof].” (Except for the substitution of “process” for “art,” the definition of patent eligibility today remains essentially the same.) In keeping with British precedent, Congress limited exclusive rights to fourteen years. Most European nations allowed patents on the processes used to produce medications, but they had long associated medical knowledge with God’s blessings and held that it should be freely available, not under monopoly control.

While the United States did not prohibit patents on drugs, most of the “patented medicines” sold by entrepreneur apothecaries were not actually patented; that would have required the disclosure of ingredients that fabricators preferred to keep secret. In 1847 the founders of what became the American Medical Association (AMA) adopted a code of ethics that declared it “inconsistent with beneficence and professional liberality” to patent a medicine or prescribe a medicine that was patented. After the Civil War the pioneers of the American drug industry—rapidly growing firms such as the Squibb Corporation, Eli Lilly & Co., and Parke, Davis & Co.—aligned themselves with this code. These “ethical” firms also refrained from branding or trademarking their products. Trademarks, which have the potential for infinite renewal, could, Zaitchik writes, glossing the view of the Parke-Davis physician Francis Stewart, turn the “temporary monopoly [of a patent] into a permanent one by cementing the association between a brand and the medicine for all time.”

In the late nineteenth century, however, trends in both science and the market prompted drug companies to abandon this high ground. Scientists and physicians, many based in academia, were expanding the knowledge of disease, and drug companies were opening their own research laboratories to devise novel medications. To protect these drugs from competitors, they began patenting not only their processes but also the drugs themselves. Stewart contended that this practice was consistent with the ethical obligation to circulate medical knowledge: “A thing patented was a thing divulged.”