One of the reasons why Sovaldi, for example, costs so much is that competitors cannot copy the pill and just churn it out at a lower price. It is protected by patents. Clearly patents have costs, and this blog has discussed alternatives.
No alternative has demonstrated that it can do what patents do: Attract R&D capital investment to pharmaceutical development. Will Rinehart of the American Action Forum has written a primer on the role of patents in pharmaceutical innovation:
Clinical trials provide an example of the costs to develop a market ready drug. As the Tufts Group has shown, the average length of a clinical trial increased by 70 percent from 1999 to 2005. In that same time period, the average number of routine procedures per trial increased by 65 percent. To add to that, the average clinical trial staff work burden increased by 67 percent. To top it all off, enrollment criteria and trial protocols resulted in 21 percent fewer volunteers being admitted into trials and 30 percent more enrollees dropping out before completion of the tests.
Overall, the regulatory process of drug approval levies a heavy risk for manufacturers and innovators. For every one drug that passes through the regulatory approval process, manufacturers usually assess 5,000-10,000 substances.
Despite the increasing regulatory burden on R&D, investors keep plugging away: Pharmaceutical R&D spending is now almost $40 billion per year. Investors would not do this without patent protection.