Pharmaceutical News 2.0

A worldwide campaign is now well underway to demonize pharmaceutical companies and champion generic drugs. Former Vice President Al Gore employed this argument in his last presidential campaign as do various organizations including Doctors Without Borders, Act-Up, the AARP and a host of others.

The supposition is that drug companies with a license to market a certain pharmaceutical use their limited monopoly to milk the public. That this isn’t the case is beside the point since the perception is gaining widespread acceptance.

The U.S. trade representative and the European Union have been at loggerheads over the United Nation’s role in regulating or influencing drug prices with European states eager to eliminate or ease the property rights of American drug companies so that they can enter the generic market. “Put lives ahead of profits” has become the calling card of the generic drug interests.

Overlooked in this glib assertion of humanitarianism is the extraordinary medical miracles wrought by the pharmaceutical industry. Since it takes roughly a billion dollars to take a new drug from the lab through trials and approval and into the market, company pricing invariably reflects a wish to recoup costs and generate some profit for its stockholders. Needless to say generic manufacturers have no expense in research and development; they merely produce formulas of known drugs when licensing provisions mature.

In addition, major companies often discount drugs in poor nations. Last year, five drug companies offered the U.N. World Health Organization and developing nations in Africa anti HIV retroviral drugs at prices reduced by as much as 90 percent.

As Pfizer spokesman Brian McGlynn noted, “Everyone—senior citizens, AIDS activists—always accuses us of being profiteers…they say we’d rather give a rich white guy an erection than help an African with AIDS.” Perceptions die hard. Last year the Pfizer company offered its AIDS drugs free of charge to Kenyan patients.

What the activists generally do not appreciate is that unauthorized copy cat drugs may reduce cost, but such practices amount to the stealing of intellectual property. Without the profit motive—critics decry—to fund new drugs, many sick diseased people could not obtain the miracle pharmaceuticals which reduce and often eliminate their misery. Pfizer—to cite one example—has a research budget of $4.7 billion and the company does not recoup its investment on about 30 percent of its medicines.

In order to bypass patent laws, activists have urged many nations to engage in parallel importation, which involves importing brand name drugs from countries where they are selling at a discount or importing generic drugs. In either case patent rights are being violated.

What the activists contend is that human rights should trump commercial rights. While this assertion doesn’t take into account the correlation between commercial and human rights, it has a global appeal.

In fact, many nations have been encouraged to engage in patent violations in an effort to deal with the AIDS pandemic, the anthrax and smallpox scares and other diseases. Yusef Hamied, owner of the Indian generic drug company Cipla, argues that medical discoveries should be free of patents. Of course, he would be the direct beneficiary of such a policy shift.

Read the rest of this article on drug patents here.

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Thursday, November 15, 2001
by Frank R. Lichtenberg

When the threat of anthrax became a widespread concern, the Canadian government said it had serious doubts that Bayer, the owner of the patent for the anti-anthrax drug Cipro, could meet Canadian needs. Canada ignored the patent and ordered generic copies. In the United States, Sen. Charles Schumer expressed the same concerns and proposed that the U.S. government do the same. After Bayer said it could meet the needs of both nations, and after other drugs that are effective against anthrax were identified, Canada reversed its decision, and the issue was dropped in the United States for the time being.

But the proposal to override patents is certain to come up again as other drugs are needed, and as the population ages and demands drug treatment for an increasing range of illnesses and ailments. While overriding a patent might lead to a temporary increase in the supply of a drug, a great deal of evidence suggests that this policy would lead, in the long run, to a lower supply of innovative drugs, and poorer public health.

Research and development investment in general, and pharmaceutical R&D in particular, has made enormous contributions to the economic well-being and health of Americans. To have the incentive to undertake research and development, a firm must be able to get sufficient returns to make the investment worthwhile. The patent system is one of the most important ways in which the government can provide this incentive. Weakening patent protection (e.g., by government violation of patents) may have a chilling effect on private R&D investment, and therefore reduce the health and wealth of future generations.

Value of Medical Research.

A host of academic studies speak to both the value of medical research and the important role of economic incentives. For example, a major project sponsored by the Mary Woodard Lasker Charitable Trust addressed the question, “What is the true economic value of our national investment in medical research?” and found, “It provide[d] a surprisingly dramatic answer: the returns are exceptional.” The pharmaceutical industry performs about one-third of U.S. biomedical research. Some of my own academic research has estimated the benefits to consumers from the introduction of new drugs at the patient level, disease level and national level. These benefits include longer life, better quality of life, and reductions in total medical expenditure.

Read the rest of this article on pharmaceutical patent protection.

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