Fostering Cumulative Innovation in the Biopharmaceutical Industry: The Role of Patents and Antitrust

This Article addresses the question of how the tools of patent and antitrust law can best be used to foster the cumulative process that is biopharmaceutical innovation. This issue is of particular moment because we have begun in recent years to see a substantial amount of vertical and horizontal integration in the biopharmaceutical industry. The Article argues that although horizontal concentration may be useful for appropriating the value of a lengthy and expensive research and development process, a role for competition needs to be preserved. In the context of the biopharmaceutical industry, broad patents, particularly on upstream invention, represent the main threat to competition. Thus patent law needs to take the lead in preserving competition, primarily by limiting the scope of patents on upstream invention. Antitrust law, and especially the theory of innovation markets, should play a secondary role. In this secondary role, innovation markets theory will actually support certain market transactions that aggregate patent rights, in particular procompetitive patent pools. Innovation markets theory will, however, have an important impact in restricting market transactions if the transactions will give a single entity control over what appears to be a fundamental platform technology.