If the U.S. patents are enforced, the vast majority of South Africans infected with AIDS will not be able to get treatment, and millions will die. But the industry says if South Africa is allowed to produce AIDS drugs without respecting U.S. patents, then drug manufacturers will have less money to finance future research. Furthermore, if South Africa can get away without honoring U.S. drug patents, other developing nations will surely follow suit, reducing drug company profits even more. In short, if the U.S. patent laws aren't enforced everywhere, the research process could grind to a halt. The domino theory on patent evasion may overstate the case, but the industry does have a valid point.
Patent protection makes research profitable.
If firms can't anticipate making a profit, they won't do it. While this argument would never justify policies that condemn millions of people to death, it does suggest that the issue of financing research and development needs greater attention. The patent system is just one method of supporting pharmaceutical research. In many ways, this system is a textbook example of bad economics. It leads to enormous inefficiency in the distribution of drugs, creates perverse incentives in directing research, and results in exactly the sorts of market distortions and corruption that economists expect when the government creates a state-sanctioned monopoly.