Strong patent protection for pharmaceuticals drives medical progress by providing economic incentives for innovation. Without international respect for pharmaceutical patents, medical innovation would suffer. In fact, a 1988 study of 12 industries by Dr. Edwin Mansfield of the University of Pennsylvania estimated that 65 percent of pharmaceutical products would not have been introduced without adequate patent protection. If you try to imagine health care without nearly two-thirds of the medicines available today — chemotherapy drugs, clot-busters that save the lives of heart attack patients, AIDS medicines, drugs that save the lives of premature babies, and many others — you have a vivid picture of the importance of intellectual property protection to the pharmaceutical industry.
    The underlying reason why pharmaceutical progress is dependent on intellectual property protection is the staggering cost of drug development. It costs an average of $500 million to develop a new medicine. Perhaps in no other industry can an invention that costs so much to discover and develop be copied or reverse-engineered so inexpensively, at a small fraction of the innovator's research and development costs. Without strong patent protection, pharmaceutical companies could not attract the investment needed to conduct this expensive, high-risk research.
    The defining characteristic of the U.S. pharmaceutical industry is the enormous and sustained financial commitment to research and development. Between 1985 and 1996, the industry's annual investment in R&D; increased fourfold — from $4,100 million in 1985 to nearly $16,000 million in 1996. It is the most research-intensive of the high-technology industries in terms of R&D; spending as a percentage of revenues.

Although generally perceived as a benefit only for developed countries with large pharmaceutical industries, patent protection is perhaps even more important for developing nations. A strong pharmaceutical patent regime increases local pharmaceutical research and development, attracts foreign investment, fosters technology transfer, provides high-technology employment, and increases exports. Perhaps most important, patent protection for pharmaceuticals ensures the availability of modern medicines that improve health.
    In 1994, the World Bank polled a range of companies to find out what kind of environment they needed to be willing to invest in pharmaceutical efforts in countries where patent protection was lacking. The study found that 29 percent would be willing to invest in facilities to manufacture formulations. Only 13 percent would be willing to invest in facilities to provide bulk material to final product manufacturing. No companies indicated a willingness to invest directly in R&D; if there were no patent protections for pharmaceuticals.
    The results of this study have been verified by the actual investment behavior of U.S. companies. In 1996, Brazil adopted very good patent legislation. Since then, Brazil has gained between $1,700 million and $2,200 million in new investment in high-technology industries, particularly concentrated in the pharmaceutical sector. Japan, which did not protect pharmaceutical patents until 1978, has also seen a dramatic increase in U.S. pharmaceutical R&D; investment, from $135.8 million in 1985 to $505.5 million in 1994.
    Similarly, countries that have strengthened patent protection for pharmaceuticals have seen impressive growth in their domestic pharmaceutical industries. Italy, for example, instituted strong patent protection for pharmaceuticals in 1978. In 1978, there were only 123,000 million lira invested in local pharmaceutical R&D.; Only 10 years later, that investment had grown to 592,300 million lira, and it is still growing.
    Another indicator of the salutary effect of strong patent protection on the domestic pharmaceutical industry is the fact that the number of Italian pharmaceutical firms included among the top 100 firms worldwide grew from only one in 1978 to seven in 1987.
    Mexico provides yet another clear example of the benefits of pharmaceutical patent protection. Mexico strengthened pharmaceutical patent protection in 1991. As a result, investments in both R&D; and pharmaceutical facilities increased from a total of $41 million (U.S. dollars) in 1990 to $103 million just three years later.

The contribution of strong intellectual property protection to human progress goes beyond economics. By providing incentives for the development of new medicines, patent protection improves health and reduces both the economic and human toll of disease.
    Although the pain, suffering, and grief caused by disease is hard to measure, it is possible to quantify disease in terms of Disability Adjusted Life Years, or “DALYs.” This measures the years of loss per 1,000 inhabitants due to disease. In the developing countries, the years of loss due to communicable diseases is markedly higher than in the United States, Europe, and Japan. In Latin America, for example, there are 99 years lost per 1,000 inhabitants due to communicable diseases, compared to only 15 in the United States, Europe, and Japan. For these indigenous communicable diseases, drugs developed through local R&D; could be particularly significant.
    Although there should be no complacency that all the very real medical problems of the world can be solved simply by strengthening patent protection, the stage is set for an era of unprecedented progress. Scientists now understand what happens in the human body, what causes diseases, and how we can intervene to prevent, stop, or ameliorate disease. But in order to make the promise of medical progress a reality for all the world's people, we must remove the obstacles to investment in pharmaceutical research. Striking a blow against patent piracy is a good place to start.