In 2012 alone, there were 36.5 million hospital stays in the U.S.* If you’re in healthcare management or healthcare administration, you are well aware of the wide number of diseases that can land people in the hospital. You’re also likely aware that some chronic diseases have many more—or much cheaper—options for treatment than do others. Why is this? One answer is that some diseases are simply easier or more cost-effective to treat. But there’s another factor affecting the variety and cost of treatment patients receive. That factor is patent protection.
What is patent protection?
When a company in any industry develops a new, unique product, they can register that product with the United States Patent and Trademark Office (USPTO). If the USPTO concludes that the product is sufficiently unique, the office will reward the company with a patent, which gives the company exclusive rights to manufacture and sell the product, preventing all other companies from selling something similar. Patents remain in effect for a limited time, typically for 20 years. Once they expire, they cannot be renewed.
How do patents work in the healthcare industry?
In the healthcare industry, patents are awarded for new pharmaceuticals and new medical devices. These patents expire after 20 years. However, receiving a patent for a pharmaceutical or medical device doesn’t mean the product can be sold immediately. Before pharmaceuticals and medical devices can enter the market, they must receive approval from the Food and Drug Administration (FDA). This requires a rigorous period of testing and review that determines safety, efficacy, and side effects. The patent is considered to be in effect even during the testing, review, and approval phase. In most cases, companies manufacturing pharmaceuticals or medical devices cannot begin selling their product until multiple years have elapsed on their patent, reducing the number of years they have until competitors can manufacture and sell something similar.
How does patent protection benefit the healthcare industry?
The global pharmaceutical market is expected to reach $1.12 trillion by 2022.† While that might sound like a viable business to be in, it’s also a costly business to be in. A new pharmaceutical drug that receives market approval typically costs more than $2.5 billion to develop.‡ Without patent protection, there would be little to no incentive for private companies to spend financial resources developing pharmaceuticals and medical devices. Patent protection gives these companies some assurance and protection that, should their product receive FDA approval, their patent will be protected and the effort will be monetarily worthwhile. Without patent protection, any new pharmaceutical or device would be quickly commercially copied, which would reduce or eliminate any possibility that the company that invented the product could recoup its initial investment in research and development and make an acceptable return on investment. Without the incentive of monetary reward, there would be far fewer entities focused on finding treatments and cures for diseases.
How does patent protection hinder the healthcare industry?
Patent protection can raise healthcare costs. When one company owns the exclusive right to manufacture and sell a drug, they can typically price that drug as a high as the market will bear. Given that many drugs and medical devices are a necessity to keep patients healthy and even alive, many providers, patients, and insurers are willing to pay quite a lot for pharmaceuticals and medical devices. Only when a patent expires and competition enters the market do costs come down, typically decreasing by 38% to 48%.§ The higher costs incurred during the patent period can burden all parts of the healthcare system.
Conversely, the lack of patent protection can also pose problems. There are currently a number of so-called dormant therapies, which are new pharmaceuticals or medical devices that meet an unmet medical need, improve medical outcomes, or reduce risks of existing treatments but lack sufficient patent protection. The lack of strong patent protection discourages companies from developing these treatments and getting them to market.
How should we handle the downside of healthcare patent protection?
A number of organizations are working to solve the issues inherent in the current healthcare patent protection system. There is not yet an agreed-upon solution, meaning the issue is still in need of new ideas. If you want to help find a solution, you could begin by earning a degree in healthcare.
There are several degree options to consider and, thanks to online education, there are more ways than ever to enroll in a program. You can turn to an online university to earn everything from a BS in Healthcare Management to a Master of Healthcare Administration (MHA) to a Doctor of Healthcare Administration (DHA). These online healthcare management programs can give you the knowledge and core competency skills you need to make a real difference, while giving you the convenience and flexibility you need to earn your degree while continuing to work in your current job.
Our patent protection system is both a benefit and a deterrent to healthcare. We need professionals working in healthcare management and healthcare administration who can discover and implement real solutions. You can put yourself in a position to be one of these professionals by earning an online healthcare management degree.
Walden University is an accredited institution offering both an online Doctor of Healthcare Administration degree program and an online BS in Healthcare Management degree program. Expand your career options and earn your degree in a convenient, flexible format that fits your busy life.
*A. Weiss and A. Elixhauser, Overview of Hospital Stays in the United States, 2012, Healthcare Cost and Utilization Project Statistical Brief No. 180, on the Internet at www.hcup-us.ahrq.gov/reports/statbriefs/sb180-Hospitalizations-United-States-2012.pdf.
†Pharmaceutical Commerce, Global Pharma Market Will Reach 1.12 Trillion in 2022, on the Internet at http://pharmaceuticalcommerce.com/business-and-finance/global-pharma-market-will-reach-1-12-trillion-2022.
‡Scientific American, Cost to Develop New Pharmaceutical Drug Now Exceeds $2.5 Billion, on the Internet at www.scientificamerican.com/article/cost-to-develop-new-pharmaceutical-drug-now-exceeds-2-5b.
§L. Gorman, Patent Expiration and Pharmaceutical Prices, The National Bureau of Economic Research, on the Internet at www.nber.org/digest/sep14/w20016.html.
Walden University is accredited by The Higher Learning Commission, www.hlcommission.org.