I'm sure w can find a better way to handle the cost and risks of trials.
As an aside: it seems history seems to agree that having no patent protection seems to work better for the pharmaceutical industry, see for instance, here:
http://righttocreate.blogspot.com/2005/12/why-drug-companies...
You could even allow retrospective patents on some orphan drugs, if a company is willing to invest in testing it.
Most people think it's fine to patent stuff to cover the costs of bringing a new drug to the market.
They peg the cost of bringing a new drug to market at about $800m on average. It's a roughly 40%/60% split between pre-clinical and clinical phases. So even without any testing at all you're still looking at several hundred million dollars of expenditures. And testing at a lower standard than the FDA currently requires can only save you so much. The paper shows that about 50% of the clinical costs are just from the cost of capital (having expensive capital lying around while waiting to go through testing). It's hard to imagine any practical sort of testing that doesn't incur these costs, even if you deviate from FDA standards and involve less patients, etc.
Also, you have to look at the cost avoided through rigorous testing. Human lives are expensive, purely from an economic standpoint. Say the average 50 year-old makes about $50k/year and has another 15 working years. That's about $750k in income alone. Since an employer would never hire someone that wasn't worth at least their salary, the economic value of the worker is probably well over $1m.
Now you have a study here about a new cholesterol drug: http://www.npr.org/templates/story/story.php?storyId=6577591. On a test of 15,000 people, with half taking the new drug and half taking Lipitor, the new drug resulted in 60% more deaths, or about 0.41% as a fraction of the overall test group. And this was a drug already deep into human trials.
Now, consider that a popular drug like is prescribed to tens of millions of people. What is 0.41% of 10 million? About 41,000. At $1m a pop, that's $41 billion.
Now, I'm just throwing some numbers around. The point is that even extremely small variations in the effectiveness of drugs can have huge economic impacts when you consider how widely prescribed these drugs are (to a demographic, I might add, that's often at the peak of their earning power). And there is just no way the market would be able to uncover this information without rigorous clinical testing. A 0.4% difference in efficacy can have billions of dollars in impacts, but if you're talking about a sample group where 2-3% might die in a given sample period anyway, nobody would ever know about that difference.
Has this regime resulted in (a) an absence of innovation, (b) an epidemic of horrific quack surgery disasters, (c) both? I'd love to hear someone argue for applying the drug/device regulation regime to surgical procedures. The argument for the converse sure seems pretty obvious.
Clearly, you can't have the FDA process without patent monopoly protection. If you kill one, you need to kill both. Bearing in mind, of course, that Washington being Washington, nothing short of a revolution can kill either...
For a moment, let's apply the realities of "medical innovation" (researchers across private and public fields) to internet innovation. Imagine that every app you published took four years and $100M to get to a testable product. Keep in mind, this is still unusable. You go out and spend millions more testing it on "fake users" (animals). If this works, you need to go raise hundreds of millions more to test it on your first batch of real users... then a second... then a third.
Billions of dollars later, you realize that your app doesn't work as it was intended. You've just spent 6 years and billions of dollars figuring that out. There is no fail fast, in this world.
Lets say your product actually makes it to market. Congrats, now you need to compete against copy cat app developers who can replicate your app at a fraction of the price. How do you defend yourself? Innovative marketing? Large email list? Good SEO? SEM? None of that works in medicine, because the switching costs are positive for a patient.
This is why we need patents. Without them we would see a significant reduction in medical innovation. When markets don't create enough risk-adjusted incentives to promote innovation, the government must step in to create those incentives. I'm not saying our system is perfect, but it's better than nothing (at least in medicine).
I spent a long time working on a medical startup and it's orders of magnitude more complex than most of the apps we see celebrated in our hacker community. I would bet that the typical FDA application is longer than the entire printed code base of most web apps.