Ben Goldacre, 5 September 2009, The Guardian
How do patents affect science? This week in India, US drug company Gilead lost their appeal to stop local companies making cheap copies of their Aids drug Tenofovir. They are not alone: in 2007 Novartis lost a lengthy case trying to force the Indian government into strengthening their weak patent laws. India remains the free pharmacy of the world.
Cheap drugs may not be the only benefit of India’s approach, but the drugs are certainly cheap. The cost of Tenofovir in developed countries is $5,700 per patient per year: the Indian generic version is available in the developing world for just $800. Because of this price difference, 75% of the 4m people in the world taking medication for Aids are using generic copies. Almost all of these are made in India, and in fact, about 40% of the world’s aids patients are taking drugs made by one company: Cipla, which is now the biggest manufacturer of antiretroviral drugs in the world.
Ignoring patent and licensing issues has allowed Dr Yusuf Hamied, director of Cipla, to innovate: even though each drug is officially owned by a different company, he could put a common combination of three treatments (Stavudine, Lamivudine and Nevirapine) into one simple, single combination pill. This increases treatment compliance – it’s easier to take your medication correctly – and that keeps you alive longer, while reducing the emergence of resistant strains.
Hamied calls his pill Triomune (he also offers “Antiflu”, a copy of Tamiflu for the developing world, and many more). In 2001 he was selling to MSF clinics for $350 per person per year, more than 30 times cheaper than the official versions of these drugs. Triomune is now only $87 a year. This is amazing. Hamied is a hero.
Richard Sykes, head of GlaxoSmithKline (and now now retired rector of Imperial College London) disagreed. He called Hamied a “pirate” and described the quality of Indian generic drugs as “iffy”. Hamied says GSK is a “global serial killer“ for charging high prices for their medication. So who is right?
Drug patents are a fascinating trade off between the benefit of incentive, and the harm to innovation. It takes about $800m and 10 years to bring a drug to market: during this time you make no money, and your drug could fail at any stage. As a sweetener, after this, you have 10 years of being the sole manufacturer to recoup your costs and make a profit.
There are other benefits for all of us. Instead of relying on obsessive secrecy to protect your idea (which is how Coca Cola protect their recipe) patents allow drug companies to safely disclose more information in public, which helps other people innovate. Protecting ideas also allows a smaller company negotiate outside investment and develop their theories.
But patents can also retard innovation. Even though your competitors may have greater expertise in the relevant fields, they will be hindered from doing research into derivatives of your drug, or other uses for it, or improvements to it. Thomas Edison managed to get a broad patent on his improvements to the light bulb, and this forced his competitors – who had made subsequent technical improvements of their own – out of business. It took a World War to cajole the Wright brothers into finally agreeing licenses for everyone else over their patent on the airplane.
And the other downside, of course, is the monopoly. With patents you are the sole provider of a drug, you get to set the price in each country, and if your drug is lifesaving then everyone has to pay it, or die. In lots of places, they just die. There are 33 million people living with Aids in the world today. 2 million die every year, and at the moment, despite heroic improvements over the last 5 years, 70% of those who need treatment do not get it.
Patents weren’t devised out of a sense of natural justice. They are there to incentivise innovation, to “add the fuel of interest to the fire of genius”, as Abraham Lincoln said. So how much fuel can you get from the developing world? According to MSF, Africa, for example, accounts for a non-massive 1% of the world’s medicine market.
If the global $550bn pharmaceutical industry are trying to make an economic case for patents in the developing world, then they must argue that the benefit to drug development from the financial incentives in these tiny corners of the world market is so significant – so vital, the final link in the incentive chain – that it is more important than millions of unnecessary deaths. I am not a health economist, but I doubt that is a fair swap, and this is not what patent laws were invented for.
phayes said,
September 6, 2009 at 11:09 pm
@PM that wasn’t me quoting Nile, btw.
RJM said,
September 7, 2009 at 4:55 am
The pharmaceutical industry’s “research and development” is contentious too…
– in terms of actually how much is spent on R&D, and why the figures are kept so top secret; and
– how much of the innovative research is actually done/paid for by the pharmaceutical companies (vs government funded institutions)
IMHO, this book is very definitely worth a read:
www.bmj.com/cgi/content/full/329/7470/862
I don’t live in the States, but unfortunately Australia is not far behind…in all manner of badness…
Filias Cupio said,
September 7, 2009 at 5:01 am
@Omnis (#30): “It’s very easy to get emotive on the subject when you’re discussing existing drugs that could save lives right now if they were available more widely. But the fact remains that without those patent laws they would never have been developed in the first place and no lives would have been saved at all.”
I.e. “Using patents as an incentive is better than having no incentive”, which is true. But we can look for alternative incentives which do not have the major drawbacks of medicine patents.
@ Sili (#18) “I think it makes sense to start giving exclusive rights to drugs from the point when the testing is done and they’re brought to market.”
This would lead to its own, probably worse problems. Companies would be encouraged to take a long time in the pre-clock-ticking stage to set up extra well to be able to sprint though any formalities between clock-start and market, and to develop variants on a new drug while competitors are still unable to compete. This could lead to a much longer time periods between drug discovery and the drug entering public domain.
The time from patenting until market is a problem however. Maybe a compromise would work: instead of 17 years of patent you only get 12, but years between patenting and market only count for half time.
msjhaffey said,
September 7, 2009 at 7:42 am
Good grief.
Most (pretty much all) other columns in this blog read like a good bit of analysis. This, including the comments, reads like a Militant Tendency rant.
It is enormously expensive to develop drugs. Patents give companies an opportunity to recover those costs. Look at big pharma’s profits. They’re not excessive and the reason is that so much money is sunk into R&D.
The talk of getting government to do the R&D is also fantasy thinking. Why should Britain (or any other government) invest? We’ll just wait for the USA (Switzerland/Norway/ …) to do so and then grab the results.
What a load of woolly-headed nonsense.
boro_dave said,
September 7, 2009 at 8:54 am
@phayes
“I’m well aware of that of course but then so is the USPTO! So whatever jcmacc’s problem has been with their officers I don’t really think it can have been anything to do with that.”
– I totally agree! I don’t understand where jcmacc’s confusion has come from.
By the way, the other patents do is guarantee publication 18 months after filing. This is an important part of encouraging innovation – you see what competitors are doing so can a) avoid going down avenues that will be soon have a monopoly of OR b) find prior art which would invalidate your competitor’s patent and press on regardless. Or a legitimate strategy is to ignore all patents (thereby saving a fortune in legal fees) and put the money aside for when you get sued.
Early publication also means that competitors can work on an improvement which could be even more valuable to the original patent holder. The new invention mught still infringe the first patent, but the improvement could be so desirable that the original inventors want to pay you a royalty to license it.
This is how patents are supposed to drive innovation. The patent system works well in lots of industries but not where you have aggressive, highly resourced companies who find a small technical benefit for one chemical feature, but then apply for patents covering dozens of versions of a parent molecule. If you’re being aggressive then you apply for a patent on your idea, on the ideas that your competitors might like to use to get around your first idea and on every conceivable future development you’d like to make in the future – the ‘patent thicket’. I can say from personal experience that other people’s thickets are a nightmare to get around, but give you a very secure feeling when you create your own thicket!
CampFreddie said,
September 7, 2009 at 9:54 am
My view is that India has saved big pharma.
India makes cheap drugs that can only be sold in developing countries, which make up a trivial market share (measured in money). Developed countries can’t buy the indian drugs, because of stricter patent law enforcement.
If india didn’t do this, then big pharma has 2 options.
1) Charge full price everywhere, poor countries can’t afford it, millions die, big pharma gets very bad PR.
2) Sell cheap drugs to poor countries, get parallel (grey) imports into to developed countries, big pharma loses lots of profit in their major market. Some developing countries still can’t afford the cheap drugs, so big pharma is still seen as evil.
I wouldn’t be suprised if parralel imports caused an ‘irish famine’ effect, where the cheap drugs weren’t given to the needy, but instead exported for profit.
phayes said,
September 7, 2009 at 10:25 am
“In any case, the empirical economic evidence strongly rejects simplistic arguments that patents universally spur innovation and economic growth. … On the other hand, we can also reject the view that patents uniformly stifle innovation … Of course we have asked and answered an intentionally narrow question here. We have not asked whether the patent system is the /best/ way to encourage innovation. Nor have we even asked whether the total net effect of the patent system is positive.” — Bessen & Meurer.
🙂
gentleben said,
September 7, 2009 at 11:24 am
how come the comments section always ends in petty squabbles between different readers.
When you start putting @ at the the begining of your reply, writing in CAPITALS or using lots of !!!! you should chill out and go do something else.
Stoove said,
September 7, 2009 at 1:15 pm
@gentleben – I do NOT need to chill out!!!!!!!!!! OR DO something ELSE!!!!
Joking aside, and my apologies for not taking that seriously initially. I believe it’s important to have some form of feedback from the readers, and this particular blog generally has constructive and beneficial conversation on the topic. Most of the posters here seem to realise that there are two sides to the argument, and they cannot be solved by either a solely monetary or a solely passionate argument.
It seems to be an unfortunate consequence of Human nature that we do sometimes lose sight of the main issue in debates such as this, but I’d like to say I think this community has the best collective eloquence of any I’ve been part of on the internet. So please don’t despair too much 🙂
Back on topic: I agree that there needs to be a valuable and rigourous evaluation of patent law compared to other incentives to encourage innovation in this field and in general. I’m afraid I have neither the expertise to carry this out, nor the money to fund such a venture… but I will lend my moral support if that counts for anything. Interest free, of course 😉
Stoove said,
September 7, 2009 at 1:25 pm
Further, I believe that CampFreddie made a good point in his post number 56. I wasn’t aware that patents prevent import as well as manufacture, and so the production of such drugs in 3rd world countries has little economic argument against it. The production of these drugs will not damage the main part of the drug companies profits, as long as patent enforcement is strong in developed countries.
The issue then becomes whether patent law is an effective incentive for the development of the most needed drugs. In fact, the best way to solve this is to start from the beginning and define how to determine what the “most needed” drugs are. Most profitable? Highest number of potential lives saved? Highest number of potential people treated?
The issue of patent law is a domestic one, and the drug companies are wasting their time pressuring the Indian government to change their laws. They should instead be joining the debate over how best to incentivise the drug development process.
Andy Graham said,
September 7, 2009 at 2:06 pm
Further to gentleben’s comment, I thought I’d suggest a few general patent areas that don’t seem to have been addressed as yet and will hopefully avoid the SHOUTING.
Fritz Machlup has been mentioned very briefly and without reference. Find his economic review of the patent system here:
mises.org/etexts/patentsystem.pdf
This paper is old (1958) so arguably no longer to applies to the modern world, although his points are sufficiently general that in my opinion the paper is still relevant. His conclusion was that the patent system may harm and may help but it would be nigh on impossible to tell. Therefore, already having a patent system we should keep it to be on the safe side, but if we didn’t have one we may not want it.
I would add that this is a sufficiently complicated question that it’s a bit like asking if any given law is worth it. You know, rich people often get away with stuff and laws are expensive to police so why bother? There is no likelihood of a verifiable answer to the question, whichever law you choose, because the implications of such a general social construct as a patent system or a law are too widespread and indirect. So, we avoid the question and try to solve the perceivable problems (like making sure the law is applied fairly and that patents don’t kill people) instead of chucking it altogether.
Next point: we’ve done some of this already with patent law. Look up the Doha agreement, which allows suspension of patent rights in countries in the grip of a medical emergency (which is sufficiently poorly defined in the agreement that swine flu, malaria or AIDS could well constitute one). Or the UK provisions which allow a competitor to apply for a compulsory license (at a reasonable, independently adjudicated, tariff) for any patented product the demand for which is not being satisfied by the patentee (first three years excluded to give the patentee time to get going).
I am not, of course, suggesting that all is fair in the world of patents. The Doha agreement is extremely rarely exercised. Perhaps this is due to economic pressure from first world countries not to do so. Moreover, and more to the point, many poor countries only have patent systems in the first place so as to comply with the requirements of WTO membership, which allegedly confers many benefits. I can find no requirements for human rights laws in the WTO membership package but I’d be glad to hear if there are any.
Note that these apparent failures are down to politics and not national or international patent law. Surely it is at least possible that the broad problem here is just rich countries/companies using economic and political advantage over poor countries to gain yet further advantages. In that case, the patent system is merely a stick to beat the poor countries with, and without that stick they could readily find another. Ask yourself this, if there were no patents tomorrow and country A allowed generic pharma to set up on a large scale within its borders, how long would it take for country A to fall to the bottom of the USA’s favoured trading partner list? Or aid list?
Andy Graham said,
September 7, 2009 at 5:21 pm
Addendum:
The problems mentioned earlier in relation to Doha and exporting to least-developed countries is in the (inexorably slow) process of being solved by amendment. In the meantime, I understand there is a temporary waiver in place which allows country B (with industrial capability) to issue compulsory licenses for the manufacture of drugs exclusively for export to country A (without such capability) in the event that country A is in the grip of a medical emergency. More info on the acceptance of the amendments is here.
Rune said,
September 7, 2009 at 6:54 pm
Pharma nets a hefty profit margin, but they are doing nothing that other businesses are not doing (“corporate social responsibility” notwithstanding). If we think that drug development is too serious a matter to be handled purely as business – and I agree that it is – then something else is needed. As someone mentioned earlier in the discussion, the Health Impact Fund of Thomas Pogge seems a good proposal. It works like this: developed countries contribute to a 6bn dollar fund. Drugs enrolled in the project would be sold at cost, with the developer being compensated out of the fund in proportion to the impact of the drug on global health. It’s nicely summed up by Peter Singer here www.guardian.co.uk/commentisfree/2008/sep/16/health.pharmaceuticals .
Arthur Dent said,
September 7, 2009 at 11:03 pm
The big issue for Pharma companies is parallel importing either legal or illegal. Thos posters who comment that the law should be upheld are, I am afraid living in cloud cuckoo land.
There is currently a shortage of some medication in the UK because of a change in pricing policy introduced by the DoH. This means that drugs supplied to UK pharmacies can fetch higher prices in other EU states, and surprise surprise a large volume of said drugas have been re-exported (perfectly legally) thusleading to a shortage of supply.
After the South African Patent case in which Big Pharma got its CR fingers wll and truly burnt, GSK began to supply retroviral drugs at cost price in Africa. It then found that the number of patients receiving treatment had not changed; those low cost retrovirals were being exported with the knowledge (or direct connivance) of the governements concerned. You can earn a very large amount of dollars exporting low cost retrovirals to the USA. As a result GSK stopped the supply of low cost retrovirals and instead began to operate clinics of their own so that the drugs actually got to the patients.
Those people who think that the problem can be solved by the state taking on drug development should see a doctor. Can anyone mention any activity that the state runs effectively? History also shows us that the USSR and China under Mao were unable to develop any useful drug therapy under such a state controlled system. Can you just imagine the discussion at the UK Treasury: Mr Brown, the State Drug Company has requested another $800m dollers to develop their latest drug. They think it is going to be really useful and there is at least a 1 in a 100 chance that it may reach the patient in 10 years time.
jodyaberdein said,
September 8, 2009 at 6:55 am
At the risk of being accused of being a communist: Can anyone mention any activity that the state runs effectively?
Might I suggest healthcare, education, and most recently banking?
PsyPro said,
September 8, 2009 at 9:05 am
Wow!
The comments contain a lot or politics but not much on Ben’s polemic. I thought Ben’s point was quite simple: the point of patent protection was (and still is?) to encourage innovation *from the patented source* not to provide a guaranteed or any necessary profit to the patent holder, only the possibility of same. Big Pharma was highlighted as an example in which that model was challenged strictly in the interests of stockholder profit, NOT the innovation originally advanced, and Ben argued in favour of the original intention of patents and patent law: subsequent innovation. I suspect Ben may respond at some point to make clearer his original polemic, but the comments here have just twisted it beyond recognition.
Read what Ben actually wrote (yes, there was one infelicitous, backwardly-worded phrase, so what?), and ignore most of the comments.
phayes said,
September 8, 2009 at 9:47 am
Wow!
This thread’s full of rude and ironic “OMG what stupid comments” metacomments.
Ignore them, ignore them all I tell you!
AbyssUK said,
September 8, 2009 at 2:09 pm
The pirate party of Sweden have a decent proposal for how drug patenting can be abolished Europe wide.
www.piratpartiet.se/an_alternative_to_pharmaceutical_patents
Also the UK pirate party is now a fully paid up licensed political party in the UK. Patent law reform is one of its core policies.
www.pirateparty.org.uk
jodyaberdein said,
September 8, 2009 at 6:01 pm
I think I got confused and interpreted the piece as having some political intent rather than just being a comment on the proper use of patent protection. I guess it was the final paragraph about millions of unnecessary deaths that swung it that way. Still all is clear now, if rather silent.
Arthur Dent said,
September 8, 2009 at 8:13 pm
Ben’s clearly doesn’t think that Pharma can justify patent protection in the third world when comparing sales to unnecessary deaths. What he fails to recognise is that without patent protection in the third world income from patents in the developed world will severely erode due to parallel trading. This is not a theoretical possibility but a practical reality.
We (society) need to find a way around this problem, but simply eliminating patent protection will lead to unitneded consequences
phayes said,
September 8, 2009 at 8:50 pm
@Arthur Dent
The situation w.r.t. parallel imports is largely orthogonal to the question of patent protection in the third world. Patenting cannot stop legal arbitrage. It’s also a rather more complex situation in other ways:
www.wipo.int/about-ip/en/studies/pdf/ssa_maskus_pi.pdf
jodyaberdein said,
September 9, 2009 at 7:06 am
And presumably the unintended consequences would be worse than millions of unnecessary deaths.
Arthur Dent said,
September 9, 2009 at 10:23 am
The unintended consequences would include a further reduction or even cessation of innovation in drug development across the world. So for an immediate reduction in unecessary deaths you might end up with no further drug development at all. Remember that the current imperfect system means that new drugs are available to all 10 years post launch
Currently investors put money into drug development because, although it is a risky business (only 1 in 100 potential drugs actually makes it to the market) there are considerable rewards to be made from the few successful drugs in their first 10 years of sales. After 10 years all drugs are patent free and relatively cheap.
If there is no patent protection there is no incentive to invest (that was Ben’s point). My point was that if patent protection is not global, then for easily exportable high value products like pharmaceuticals, patents are almost worthless.
The system is by no means perfect and alternative mechanisms are needed to ensure maximum availability of new medicines whilst preserving appropriate rewards for those who risk the necessary finance. I don’t think governments would be willing to take the risks.
tielserrath said,
September 9, 2009 at 11:24 am
tangential (if not OT):
Ben, there seems to be a rash of Guardian articles about the swine flu vaccination that are bringing up the whole GBS thing again. Even Dr Crippen is referring to the vaccination as ‘untested’, when it’s simply a slight variation on the standard flu vaccination issued every year. I have nurses using these articles as justification for not having the vaccine, putting patients in my emergency department at serious risk.
I know it’s rehashing old territory, but any chance you would consider a rebuttal to this crap? i am running out of patience and I’m going to start screaming soon…
jhnycmltly said,
September 9, 2009 at 2:10 pm
This is an example of HOW the pharmaceutical companies .. **hide** .. the WHY the drug works.
They are protecting their **investment** .. just like any good capitalist would and does.
“Someone might steal the drug” ..
When in FACT .. ? .. all it is is a .. ? .. phytol .. ?
” m-chlorocres-ol ”
They tested one of the drugs which is very good in malaria and found
almost ALL of its’ efficacy was due TO .. ? .. the preservative they
added.
Out of TWELVE substances IN the drug what did they find .. ?
“Virtually all activity was m-chlorocresol included as a
preservative”
Antileishmanial activity of sodium stibogluconate fractions.
Antimicrob Agents Chemother. 1993 Sep ;37 (9):1842-6 8239593
(P,S,G,E,B)
W L Roberts, P M Rainey
Department of Laboratory Medicine, Yale University, New Haven,
Connecticut 06510.
Sodium stibogluconate, a pentavalent antimony derivative produced by
the reaction of stibonic and gluconic acids, is the drug of choice
for
the treatment of leishmaniasis.
It has been reported to be a complex mixture rather than a single
compound.
We separated sodium stibogluconate into 12 fractions by anion-
exchange
chromatography.
One fraction accounted for virtually all the leishmanicidal activity
of the fractionated material against Leishmania panamensis
promastigotes, with a 50% inhibitory concentration (IC50) of 12
micrograms of Sb per ml; that of unfractionated sodium stibogluconate
was 154 micrograms of Sb per ml.
Further analysis of this active fraction revealed that a major
component was m-chlorocresol, which had been included in the sodium
stibogluconate formulation as a preservative.
The IC50 of pure m-chlorocresol was 1.6 micrograms/ml, a
concentration
equivalent to that present in unfractionated sodium stibogluconate at
a concentration of 160 micrograms of Sb per ml. After ether
extraction
to remove m-chlorocresol, the IC50 of sodium stibogluconate was >
4,000 micrograms of Sb per ml.
In contrast, when L. panamensis amastigotes were grown in
macrophages,
the IC50 of ether-extracted sodium stibogluconate was 10.3 micrograms
of Sb per ml.
The 12 fractions of ether-extracted sodium stibogluconate obtained by
anion-exchange chromatography had IC50s of 10.1 to 15.4 micrograms of
Sb per ml.
We conclude that preservative-free sodium stibogluconate has little
activity against L. panamensis promastigotes but is highly active
against L. panamensis amastigotes in macrophages.
This activity is associated with multiple chemical species.
Mesh-terms: Animals; Antimony Sodium Gluconate :: chemistry; Antimony
Sodium Gluconate :: pharmacology; Antiprotozoal Agents ::
pharmacology; Cell Line; Chromatography, Ion Exchange; Cresols ::
pharmacology; Leishmania :: drug effects; Leishmania :: growth &
development; Leishmania :: metabolism; Macrophages :: drug effects;
Macrophages :: microbiology; Mice; Microbial Sensitivity Tests;
Spectrophotometry, Ultraviolet; Support, Non-U.S. Gov’t; Support,
U.S.
Gov’t, P.H.S.; Uracil :: metabolism
Minsx said,
September 9, 2009 at 4:13 pm
Sili said (#18):
“I have to say that there is something completely nuts about patents being limited to, what?, twenty years, while copyrights are easily extended for more than ninety. Doesn’t Disney hold rights to what is essentially public domain fairytales by now (H.C. Andersen for instance)?”
I made this point in a previous blog post. Unfortunately, as copyright terms are extended perennially, it makes a greater and greater case for potentialy extension of patent laws. After all, what is Congress supposed to say to the pharma company who brings up the point that Britney Spears’s work is protected for for 120 years from release – 12 x longer term than a lifesaving drug?
I know that most people think that because drugs are so important, laws would never be passed to extend the patent because it could hurt people. But what kind of ground is it to stand on to say that “we punish the scientists (relative to the musicians) because their work is so important”? It’s almost enough to make me throw The Fountainhead at somebody.
phayes said,
September 9, 2009 at 5:10 pm
@Minsx
Even the most misguided (but not completely ignorant and irrational) defenders of the patent system I’ve come across haven’t been foolish enough to try to argue that the appalling folly of copyright term extension makes or has made a greater case for (general) patent term extension.
Guy Chapman said,
September 9, 2009 at 6:59 pm
In general there is nothing really wrong with drug patents, for the reasons you describe but HIV is a special case – the existence of a massive pool of infected people increases risk to the whole world and increases the chances of new strains arising.
Volvo did not patent the three-point seat belt because they felt it would be invidious to do so. The transnational drugs companies come out of this looking like the bad guys – but I guess that is nothing new to them.
jodyaberdein said,
September 9, 2009 at 9:08 pm
Regarding motivation and innovation though: I think we’re going a bit around in circles here. I thought I gave a few examples of revolutionary medicines, not just me-too medicines, that weren’t produced with patent protected profit in mind. Alright this may well be cherry picking, but to push things a little further Stuart Sutherland’s chapter on appropriate use of reward and punishment in ‘Irrationality’ would suggest material reward is definitely not the best way to get the best out of people.
JerryW said,
September 10, 2009 at 9:15 am
To me the existing system seems close to ideal. The developed world gets its patent protection and innovation, and it also subsidises the developing world, which gets its cheap medicines via India. And it gets to have a good moan in the process. Where’s the problem?
The big pharmaceutical companies can scarcely complain, in view of their own success and their frequent lapses in moral standards. The most obvious drawback at present is that the Indian cloners are inefficient, or at least the distribution of their products is inefficient, since so many remain untreated. I suggest that GSK and others second a few production staff to them to pass on knowledge and help them improve…
Arthur Dent said,
September 10, 2009 at 4:15 pm
jodyaberdeen is correct that many revolutionary drugs were “invented” without the profit motive. Big pharma today still gets many of its new drugs from academic and government institutes. It doesn’t cost a lot of money to “invent” or “discover” a new drug. What costs the money is developing that invention into a licensed product. The recent EU study of competitiveness in the pharmaceutical industry showed that >90% of originator pharma companies R&D spend was in the D.
Look at the problem like this: I, as an academic, have discovered what may be a revolutionary treatment for AIDS. In order to turn that into a drug that can be given safely to patients and to prove that it actually does work I need to go through the preclinical, and Phase I, II and III clinical trials. I have to find a way of producing a drugable substance from my initial material i.e. one that can be ingested/injected and will ensure that the active ingredient gets to the target site. I also need to develop a manufacturing route of appropriate quality and consistency and then go through the long bureaucratic process of gettin gthe drug approved for sale.
I ask the bank for a loan (I will need about $500 to 800m for about 5 to ten years). The bank asks for the business plan, I tell them that if successful the product will sell $1b per annum whilst under patent (max 10 years)at possibly 15% margin but if unsuccessful (which might happen at any point in the development chain) all the money will be lost (every single $).
Currently there are investors out there that will take that risk. Now change the plan slightly and add – “Oh, by the way we may actually have to give the drug away at cost price for ethical reasons, or our patent may only last for 2 years not ten, or an Indian generic company may decide to break the patent and flood the market with cheap copies. The investors will drain away like water into the desert sand.
Remember that these costs & risks apply to any new drug regardless of who is involved academic, government or private company.
Andy Graham said,
September 11, 2009 at 12:07 am
A couple of points:
Copyright and Patents are completely different things. Copyright is a right not to have a specific work you have produced copied by anyone else. The term was decided upon so as to allow the right to be transferred to your grandchildren (as it was believed any heirs who actually knew you should be allowed to benefit from your work). Arbitrary I know, but not completely unreasonable. Patents on the other hand are a monopoly right. That’s not just copying. Even if someone else comes up with something independently which is within the scope of your patent they still infringe. I don’t know where the term for patents comes from but it may have something to do with the likely period you could keep an industrial secret for or the pace of innovation perhaps. Whatever it is, the breadth of the monopoly right means that it should always have a
much shorter term than copyright.
Second point, I feel I must challenge the “millions of deaths due to the patent system” comments made above. Overpricing of medicines is surely a reason why some people die in the developing world but it’s not everything. It would be difficult for the poorest countries to by even generics. This is a common problem when people talk about the world’s poor, a single problem is singled out and its impact is overemphasised. If we all feel so strongly about the 96% of the population of the earth who are poorer than us (no reference, might be made
up) then we need more general action to make the world fairer.
Incidentally, surely we have a valid argument in the UK against the price of certain medicines? We have the NHS, which has a finite amount of money, and big pharma, who are accused here of making money hand over fist from the same NHS. So when NICE has to decide which of two medicines to make available because they are both expensive, shouldn’t we blame the patentees? It seems to me that the general problem people have is that big pharma are making lots of money. If we want to stop them profiteering in healthcare in general then we should say so, but we should also suggest a genuine alternative to profit for stimulating innovation. I am not aware
of any good alternatives.
phayes said,
September 11, 2009 at 8:02 am
@Andy Graham “The term was decided upon so as to allow the right to be transferred to your grandchildren (as it was believed any heirs who actually knew you should be allowed to benefit from your work). Arbitrary I know, but not completely unreasonable.”
Yes completely unreasonable!¹ – and not actually the (sole) ‘reason’ given for any of the numerous term extensions since the Statute of Anne anyway AFAIK.
“I am not aware of any good alternatives.”
As far as pharma is concerned, nor am I, but I know other people have been thinking about it² and we certainly shouldn’t assume that we are getting a good deal the way things are now³.
¹ James Boyle’s book: www.thepublicdomain.org/ very good on copyright and copyright folly, poor on patents and patent folly.
² www.sanger.ac.uk/Users/th/
³ www.dklevine.com/general/intellectual/againstfinal.htm (Chapter 9. Sobering.)
Geeb said,
September 11, 2009 at 10:35 am
Ben, how confident are you in your source(s) for the assertion that “It takes about $800m and 10 years to bring a drug to market”?
Your article has been picked up over at Techdirt, where they claim that those figures have been “widely debunked”:
www.techdirt.com/articles/20090909/0412576143.shtml
Of course, they are as guilty as anyone else of readily believing “facts” that support their opinions and discounting those that don’t, so it would be interesting to get a feel for how authoritative/unbiased/reliable the figures are.
I guess the real answer is going to be “a lot”, regardless…
flexdream said,
September 11, 2009 at 1:20 pm
India can afford nuclear weapons, aircraft carriers and to develop military jets. China can afford nuclear weapons and a manned space programme. These countries can surely ‘afford’ to make some payments for the cost of drug treatments? Even South Africa is hosting the World Cup and buying Gripen fighter jets.
I think the point has been made, that the free market model will not deliver public benefit without private reward, and the greater good will require inter-government assistance. People profitting by copying patented medicines are not innovating. Maybe the WHO needs to buy out the patent and then licence production.
molyneux1000 said,
September 11, 2009 at 10:39 pm
Flexdream, the point you make is very interesting. It is a genuine shame that the way in which governments choose to spend their revenue can be to the detriment of the people for which they are suppose to serve. Although I concur with the overall sentiment of Ben’s article, what schemes governments pursue (nuclear weapons, military armament, whatever) are not predominantly the fault of the pharmaceutical industry.
DrJG said,
September 16, 2009 at 7:31 am
@ Fontwell
(Sorry, I’ve been away)
Call me cynical, but although we may have a situation where most people want drug research to be carried out as a public service, I reckon many of them would do some serious backtracking when faced with the potential tax bill for that research.
Consider the numbers of those who reckon that paying for private medical insurance should exempt them from the NHS portion of income tax, but would probably still expect an NHS ambulance to pick ’em up if the got run over, and would probably also expect the NHS to pick up the burden again when they reached retirement age and health insurance costs started to rocket, but they did not have to worry about the income tax side any more.
heavens said,
September 16, 2009 at 10:44 pm
Why doesn’t the phrase “black market” appear anywhere on this page?
Ben, the black market is the answer to your question. Differential pricing really doesn’t work. You cannot sell a lot of a medication in South Africa for a tiny price, and realistically expect none of those subsidized pills to appear in southeastern Europe, which is able to pay five times the amount, or in the UK, which able to pay ten times the amount.
If the price in the developing world is less expensive than creating a manufacturing facility to make generic version, the developing world simply gets all of its pills “stolen” by drug traffickers — traffickers that operate exactly like the meth makers in the developed world, who find that hiring someone to buy two boxes of Sudafed from each pharmacy in town is a perfectly profitable model. There will always be some poor woman who thinks that this week’s supply of pills is less important than this week’s supply of food for her children. Various schemes are being attempted to reduce this (including only dispensing a single day’s pills at a time, or marking the pills to look different), but it still happens.
I’m on a medication that runs US$10 per day. The “affordable”, “patent-free” price in most of the developing world would be much closer to ten cents. Don’t you think, that for a gross profit of US$9.90, you could figure out how to get a half a gram of pills from South Africa or India to the US?
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