More and more economists are disavowing the conventional view that patents are essential for providing incentives to innovate.  A radical proposal is to eliminate patents for pharmaceuticals and to promote research and development through government funding rather than the promise of monopoly.  This article by Dean Baker (via The Browser) discusses the variety of lobbying and rent-seeking strategies pharaceutical companies use to secure and maintain monopolies.  Economic theory suggests that all of the value that monopoly offers may be dissapated wastefully through rent-seeking, undermining much of the benefits of patents.  Baker argues that once we recognize that the patent system is just one of many potential second-best solutions, government funding of research and elimination of monopoly is not necessarily any less efficient.

Public funding obviously involves the government in the research process, but demand for medical care is already determined in large part through the political process. The vast majority of health care costs are paid by third parties, either insurance companies or the government; costs are not distributed according to individuals’ willingness to pay. If the government and insurance companies cannot be forced to pay for a drug, the industry will not develop it. Since politics inevitably decide which drugs are developed, government and insurance companies should determine whether they will pay for a drug before it is developed.