New medicines are, unsurprisingly, a really good thing

So let's have more of them.

HIV and AIDS campaigners carry a giant balloon in the shape of a pill during a protest rally in New Delhi on February 10, 2012. Photograph: Getty Images

Via Marginal Revolution, a research paper which looks at the value of pharmaceutical innovation:

Pharmaceutical innovation is estimated to have accounted for almost three-fourths of the 1.74-year increase in life expectancy at birth in the 30 countries in our sample between 2000 and 2009, and for about one third of the 9.1-year difference in life expectancy at birth in 2009 between the top 5 countries (ranked by drug vintage in 2009) and the bottom 5 countries (ranked by the same criterion).

So having lots of new drugs is a very good thing for your country's health. While this may seem unsurprising, it actually goes against the grain of one of the criticisms of so-called Big Pharma, which is that novel pharmaceuticals are being invented more to game the patent system than anything else.

The argument goes that Pfizer, for instance, will shortly lose its patents on Viagra, which made almost £2bn for it in 2008. Rather than cede the market to generics, there's a strong incentive to slightly reformulate it, push for new patents on the chemically-different but practically identical creation, and then aggresively market it "viagra 2.0" or something. If that type of practice were common, we would see declining usefulness from pharmaceutical novelty.

Which means this is good news! Drug companies aren't ripping us all off by only pretending to have new, useful drugs. They actually do.

The next question, of course, is how to encourage pharmaceutical companies to do that more. Right now, we use patents. But is there another way?