One of the driving forces in the biotech economy is patent protection.
Without it, pharmaceutical companies would be averse to spend upwards of $800 million to develop a new drug for the market. Furthermore, universities and research institutes would have less economic incentive to invest years of effort in isolating human genes. Royalties for the patent holder of a successful drug can be significant. For example, when the obesity drug Redux® (dexfenfluramine) was pulled from the market because of the fen-phen debacle, MIT lost an annual royalty stream of over a million dollars.
The purpose of patents is to stimulate innovation by rewarding people for new inventions. The inventor agrees to place the details of the innovation in the public domain, in exchange for having a temporary monopoly on selling the invention. Though the initial monopoly raises consumer costs for the life of the patent, the idea is that the result is ultimately beneficial to society. In the case of pharmaceuticals, it means that low-cost generics will appear on the drug store shelves as soon as a drug goes off patent. However, some groups contend that the current practice of patenting human, animal, and plant genes is an abuse of the patent system because it increases the price of gene tests and allows companies to monopolize genes for yet-to-be-discovered applications.
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