Lot of important points to engage there, and generally agree with the spirit of the comments. I think many biotech startups would instantly take a deal that gave them and their patients the ability to opt-out of FDA, in exchange for some demonstration that they aren't using public funds (e.g. committing to not use some fraction of the research literature, ineligibility for all govt grants, etc.).

Regarding patents, they are a form of artificial scarcity on the sales end. Regulation is a form of artificial scarcity on the R&D end. That's why regulatory affairs and IP are the two most important departments in any pharma company.

It's useful to think about what the pharma industry would look like with no FDA and no IP protection. It'd look a lot like food, energy drinks, or supplement manufacturers, making commodity products with marketing as the primary source of margin. Generic drug manufacturers are a good first step towards this; we'll see more of this in the near future with the pharma cliff and end of many major drug patents.

Incidentally, the intersection between regulation and IP produces some extremely bizarre behavior:

http://www.fda.gov/downloads/Drugs/.../Guidances/ucm079342.p...

This guidance is intended to provide industry with
information on how the Food and Drug Administration (FDA)
is applying the 180-day generic drug exclusivity provisions
of the Federal Food, Drug, and Cosmetic Act (the Act) in
light of recent court decisions. The guidance
addresses the issue of the elimination of the "successful
defense" requirement, which required an abbreviated new
application (ANDA) applicant to be sued for patent
infringement and to prevail in the litigation to receive
the 180-day period of marketing exclusivity.

How crazy is that? For many years official FDA policy was that a generic maker had to actually be sued for patent infringement - and win in the lawsuit - as the condition for receiving a 180-day monopoly!

I can get into the duct-tape upon duct-tape that led to this bizarre state of affairs, but think about how perverse it is that the FDA was telling companies to break patent law (or at least risk a civil lawsuit) as a matter of policy. That's the kind of thing you uncover when you actually look at how regulations are implemented.

Finally, regarding funding, yes, NIH spends about $31B per year, which is a lot. However, drug companies spend $4B per drug approved[1], which is an incredible amount of money when multiplied across all drugs. I'm not sure exactly how one could stop drug companies from profiting from public domain research as you propose. Are you saying that NIH should get into the business of drug development and/or not allow its funded academics to publish papers or start drug companies?

If you are saying the former, I actually happen to agree that NIH would be reasonably good at drug development, as Francis Collins has proposed, because as a fellow .gov it would be able to play hardball with the FDA in a way that no normal company could. Among other things, it wouldn't fear going out of business, and would be able to appeal to the HHS secretary if FDA retaliated against it. On the other hand, this new NIH-to-FDA pipeline would lose a lot of checks and balances; it'd sort of be like HHS as the large drug co with NIH as the scientists and FDA as the regulatory affairs, without any real check by the market other than the nationalized drug companies of other countries.

Think about how the FDA fast tracked [2] things like TSA body scanners and you'll get a sense for what its actual commitment to safety is when it's a fellow .gov that is sponsoring a drug/device.

As a final point, if you meant instead that NIH should be abolished and academics should stop publishing papers, I think we will actually see the implosion of the US higher ed research establishment over the next 5-10 years due to MOOCs and budget cuts, so that may come to pass as well.

[1] http://www.forbes.com/sites/matthewherper/2012/02/10/the-tru...

[2] http://arstechnica.com/science/2010/11/fda-sidesteps-safety-...