Your narrative actually supports the opposite position. Why would big pharma companies buy "little, fleet-of-foot companies" if they could simply wait for those companies to develop a drug, copy the formula, then bury those companies using their huge advertising budgets? The winning strategy in a world without patents in an industry with high R&D requirements is to never develop anything new, but spend all your money on advertising and building an efficient outsourced manufacturing operation.

Just look at the PC industry, where the technology is all open and commoditized. Acer, Lenovo, Asus, etc, own the market, nobody makes any real money, and nobody tries to innovate because new designs are easily copied and margins are razor-thin.

Your argument only works when you have large lazy incumbents that the patent system created in the first place. In a world without laws that say you own ideas, these large lazy incumbents don't exist.

Manuel Navia[0] would likely disagree. To an extent, at least.

The fleet-footed companies you talk about, generate at best, lead compounds. Turning those leads to INDs (investigational new drugs) and then actual "medicine" is totally controlled by the FDA and is a multi-year, multi-million dollar endeavor, that is well beyond the ken of the fleet-footed operators. Many of these drug candidates fail late in the game, after 5-10 years of human trials, sinking the investment of time and effort with them. Meanwhile the patent clock is running and a drug that hits the market has far less than the 20 year patent term to recoup the costs and generate revenue to discover and groom the next life saving drug.

[0]http://www.oxbio.com/mnavia.html

I read some article a while ago explaining that a lot of these costs are inflated by the drug cartels, er, I mean big pharma. And that a lot of regulations are there to create artificial barriers to entry and are promoted by big pharma for this reason. It comes all of one piece: patents encourage lazy encumbancy which encourages regulation, which encourages patents.