I was talking to my dad last night about US Healthcare and the course of the discussion lead to pharmaceutical companies that hold patents on US drugs for X number of years. This allows the company to set the price of certain drugs prevents cheaper generics from being made.

What if instead of wating 5 or 10 years for the formula to be released, companines lose there patent after the cost of research + 25% was made? Or a certain amount of time has passed? Which ever one happens first.

I'm just throwin' around the idea and thought I would share it here...

There's no reason why a company can't benefit from the research, hence the added profit and the patent system itself.

The number can be changed... but I just picked 25% as an arbitrary number.

No.

Then there's no incentive for companies to produce these medicines.

You have to include a profit.

The cost of innovation

Drug discovery and development is very expensive; of all compounds investigated for use in humans only a small fraction are eventually approved by the FDA. Each year, only about 25 truly novel drugs (New chemical entities) are approved for marketing. This approval comes only after heavy investment in pre-clinical development and clinical trials, as well as a commitment to ongoing safety monitoring. Drugs which fail part-way through this process often incur large costs, while generating no revenue in return. If the cost of these failed drugs is taken into account, the cost of developing a successful new drug (New chemical entity or NCE), has been estimated at about 1 billion USD[4](not including marketing expenses). A study by the consulting firm Bain & Company reported that the cost for discovering, developing and launching (which factored in marketing and other business expenses) a new drug (along with the prospective drugs that fail) rose over a five year period to nearly $1.7 billion in 2003.[5]

These estimates also take into account the opportunity cost of investing capital many years before revenues are realized (see Time-value of money). Because of the very long time needed for discovery, development, and approval of pharmaceuticals, these costs can accumulate to nearly half the total expense. Some approved drugs, such as those based on re-formulation of an existing active ingredient (also referred to as Line-extensions) are much less expensive to develop. The consumer advocacy group Public Citizen suggests on its web site that the actual cost is under $200 million, about 29% of which is spent on FDA-required clinical trials. For me-too-drugs and for generics, the cost are even less.

Calculations and claims in this area are controversial because of the implications for regulation and subsidization of the industry through federally funded research grants.

http://en.wikipedia.org/wiki/Pharmaceutical_company

If you take out profit or ability to recoup expenses....where will the money come from for the next several generations of pharmaceutical discovery?