R&D costs actually make up a pretty small portion of the pie. It's unclear what if anything patents are doing to recoup those since they're all just copying each other with designer drugs that are just slightly different enough to not violate someone else's patent. The pharma industry is probably a better example than the software industry for why patents suck. http://www.dklevine.com/papers/imbookfinal09.pdf
It costs ~$1B to bring a pharmaceutical to market because of the amount of testing and clinical trials required to make sure you're doing more good than harm. Of course some are copycat drugs, but that's going to be inevitable.
There are real advances too, and those wouldn't happen without some ability to generate a return on the $1B or more you spent on the drug (let alone the hundreds of millions on drugs that didn't make it).
R&D being a small part of the budget doesn't change that. The fundamental business is still based on the patent system.
Their solution seems to be that the government should fund the expensive part of drug development.
That sounds like a terrible idea though: now you'll have the govt "picking winners" that can go to market. As with anything in the government, that will be subject to tons of lobbying, earmarking, waste, and endless debate.
But if you think about it, Pharma drugs are actually similar to SW or movies or music. In each of those, a large investment produces a good which is cheap to replicate (knowledge of efficacy/safety of a compound, or in SW / movies / music, bits arranged a certain way).
Each of these need protection on the investment to create it, so that there can be a return.
In SW, music, and movies/etc, that protection is essentially copyright law.
The only difference with Pharma is that copyright law doesn't buy them anything. So they need some other mechanism of protection.
Maybe it doesn't have to be a patent: how about an exclusive government license to sell a pharmaceutical tied to the FDA approval. Kind of like a pharmaceutical-specific patent.
The key is that financing still happens via private means, and there isn't a fixed quota of budget or # of drugs... Let the market decide the right amount for our society to spend on drugs.
The government should step in when there is a market failure (e.g. unpriced externalities, or tragedy-of-the-commons, etc). But just the fact that there's a large investment that needs protection for an ROI isn't a market failure.
It doesn't matter if it's a better example for why patents suck. They are spending more than we are lobbying congress to keep the current patent regime in place.
