Against Intellectual Monopoly

countries.
So, we may ask, Did the strengthening of intellectual property protection
trigger a golden age of innovation in the Italian pharmaceutical industry?
    During the period 1961-80, a total of 1,282 new active chemical compounds were discovered around the world. Of these, a total of 119 came from
Italy (9.28 percent). During the period 1980-83, a total of 108 compounds
were discovered. Of these, eight came from Italy (7.5 percent) .2' Although
we do not have data covering the most recent decades, the very clear impression of the informed observer is that things have become worse, not better.
Professors Scherer and Weisburst, in fact, took the pain of carefully studying
the evolution of the Italian pharmaceutical industry after the adoption of
patents. Here is the summary verdict, in Scherer's own words: "Research by
Sandy Weisburst and mentored by me showed, for example, that Italy, with
a vibrant generic drug industry, did not achieve any significant increase in
the discovery of innovative drugs during the first decade after the Italian
Supreme Court mandated the issue of pharmaceutical product patents."21
    A number of historical and empirical studies make evident that, absent
patents, the Italian pharmaceutical industry did not suffer particularly until
1978. On the one hand, foreign companies holding patents abroad entered
the Italian market, via direct investment and the establishment of local
production units, in order to protect the market share of their own products.
On the other hand, the possibility of freely imitating products patented
elsewhere favored the creation of a large number of Italian imitative firms, which improved upon existing products and, at the same time, allowed for
their diffusion at much lower prices. In spite of this, the forty largest Italian
firms (out of about five hundred, until the late 1970s) did not simply imitate
but also developed their own products and innovated extensively, either by
using existing products as ingredients (25 percent of products developed)
or by using products that were not patentable or with expired patents (31
percent of products developed).22

    In other words, a thriving pharmaceutical industry had existed in Italy
for more than a century in the complete absence of patents. That is point
one. Point two is that neither the size nor the innovative output nor the
economic performances of that industry have improved, to any measurable
extent, during the thirty years since patents were adopted. Every indicator
one can look at suggests that, if anything, the Italian pharmaceutical industry
was hurt, not helped, by the adoption of patents, and every expert who has
looked at it has come up with this same conclusion.
    Since 1978, India has taken over as the primary center of pharmaceutical production without patent protection. The growth and vitality of the
Indian industry is similar to that of the pre-1978 industry in Italy. In fact
it is much more so, as the sheer size of the national market has turned
Indian generic drug producers into big players in the global pharmaceutical
industry. Within the framework of the WTO-TRIPS agreements, India has
now been forced to introduce product patents on pharmaceutical products, which have become progressively more stringent (2005 was the formal
deadline for complete compliance). Although a variety of researchers have
speculated, partly on the ground of the Italian experience, about the consequences of this legislative shift for the Indian pharmaceutical industry, we
are aware of very few studies that directly address the Indian situation.23
Only one study focuses directly on India and asks the important welfare
question: are Indian consumers going to be better or worse off after pharmaceutical patents are fully adopted in their country? By concentrating on
the market for a specific drug - quinolones, for which very good micro
time-series data are available - Chaudhuri, Goldberger, and Jia reach the
following conclusion (apologies for the jargon; sometimes it is unavoidable):
    We... carry out counterfactual simulations of what prices, profits and consumer
welfare would have been, had the fluoroquinolone molecules we study been under
patent in India as they were in the U.S. at the time.... We estimate that in the
presence of price regulation the total annual welfare losses to the Indian economy
from the withdrawal of the four domestic product groups in the fluoroquinolone