Patent protections for prescription drugs make getting medicine much, much more expensive than it needs to be. This particularly rankles some because at the end of the day an awful lot of the basic research that goes into pharmaceuticals is publicly financed. But even as I’ve become more hostile to strong intellectual property protections in general, I’ve come to appreciate that the nexus between patents, research, and actual medicine is extremely complicated.

Take this piece about promising research which indicates that Aromasin may be very useful as a preventative measure for women at high risk of developing breast cancer without the kind of problematic side effects associated with tamoxifen and raloxifene. This of course might not pan out, but if it does pan out it’ll be a huge win for many women around the world. And even better, the drug has now gone generic so it could be cheap! But to really be useful, we need regulatory approval and we need doctors to know about it. So who’s going to do that work if there are no windfall profits to be reaped:

One factor working against it is that aromatase inhibitors are now prescribed by oncologists. But for prevention, “They would have to be prescribed by gynecologists and family doctors,” said Dr. George W. Sledge Jr., a breast cancer specialist at Indiana University and the president of the oncology society. “These doctors are not comfortable with these drugs.”

Another factor is that the patent protection on the drug expired in April. Generic versions will mean much lower prices for women who decide to take it for the recommended five years.

But generic competition also means that Pfizer, which sells Aromasin, now has little incentive to seek regulatory approval for the drug for preventing breast cancer. Pfizer declined to comment on whether it would seek such approval. Pfizer helped pay for the study, and Dr. Goss has reported receiving honorariums from the company.

This isn’t, I think, a defense of the patent status quo so much as it is an illustration that it’s dysfunctional along multiple dimensions. But it’s a reminder that the only thing worse than a greedy pharmaceutical company extracting giant monopoly rents from people who need medicine is people who need medicine going without it since there’s no greedy pharmaceutical company on hand to step up and do the regulatory/educational legwork necessary.

I noted on Friday that firms sometimes engage in deficit spending as a useful way to increase profits over the longer term. My example was Groupon, which some investors certainly seem to think highly of, but it’s worth noting that the specific theory that there are important exploitable network effects in the online coupon space is actually questionable. For example, via Felix Salmon an analysis from David Sinsky looks at Boston, their second-oldest market, and finds that as Groupon grows revenue per customer declines:

And now that I think of it, my personal experience with LivingSocial has been to find myself buying their deals less and less frequently over time. I’m not really sure exactly why that is. But over the long run, the firms that are best positioned to do targeted discounting in an optimal way are firms like Google or Facebook that have managed to get their hands on lots and lots of your personal information. The more a company knows about you, the more it can broker win-win offers for customers and merchants based on the idea of price discrimination. But obviously lots of people aren’t going to be super-comfortable with that kind of thing.