The pharmaceutical and biotech industry would be almost non-existent without intellectual property protection.
If someone else 'owned' the drug, then there was no point in pursuing it because the true "owner" would crush us if the drug ultimately proved useful in treating disease.
Interestingly, the people writing the drug patents use the same types of techniques mentioned by Joel...especially making claims as broad as possible.
The chemists that I worked with considered it an art form to be able to make broad claims that did not intersect with those of competing pharma companies.
There's a lot of bullshit that can go on w/ pharma patents, too, but the VCs would never fund a biotech startup if we couldn't defend "our" drugs.
I think it's the opposite. Since it costs so much $ to fund clinical trials and apply for regulatory approval, the lack of patents would stifle innovation because the pharma company that discovered the drug wouldn't be able to recoup their development costs if other companies were waiting in the wings, ready to sell a generic version of the same drug.
If development costs (especially regulatory approval costs) go down significantly, then I think you can argue that drug patents are an unnecessary evil. But if things stay as they are, then they are a necessary evil.
You sink all of that money in, with the hopes that your drug gets approved. And then, once you've done the heavy lifting, every generic manufacturer can come along and sell the drug because you don't have it patented?
No rational person/company will do that.
In a patent-free world, those regulations wouldn't hold weight. What would happen (I imagine) is independently sponsored r&d produces drugs for trial that the FDA itself puts through clinical trials on taxpayer money. You can't sell a drug without FDA approval still, but since drug companies aren't operating as super-for-profit businesses on chemical compounds to help people live, they would foot the bill to make sure its safe.
It would be interesting to see if your scenario would end up doing a better or worse job with respect to drug development.
Systems (legal, computer, etc.) need to be developed with the full expectation that people will do everything in their power to exploit them.