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January 01, 2017

Comments

Good write-up, Kevin. It's disappointing, but unsurprising, that the NYT allowed this vido out, with its various half-truths and unreported facts.

Hey Kevin,

A very thoughtful article on the drug pricing issue, as well as the unfortunate politics in it. In particular, let's not forget the shameful efforts by certain members of Congress to improperly "twist the arm" of NIH to exert "march-in-rights" under Bayh-Dole as a means to control drug prices, something that Birch Bayh in particular has said is not permitted by the statute that bears his for the very reasons you've noted in this article.

Some recent huge price increases in old widely-used UN-patented (but sole-source) drugs or drug delivery systems, especially by purchasers of such companies, are publicly tarring the entire industry, and thus ignored at its peril.

There is some gouging going on in the drug industry: Witness Epipen (a consumer-friendly injector for epinephrine) and Asacol (a simple anti inflammatory for treatment of IBD) which both are off patent but approximately 15 times as expensive as they were 20 years ago. Both present opportunities for profitable generics with nothing but a trip through the FDA approval process standing in the way. Are there generics in the pipeline? if not, why not? Answer: The bureaucracy of the FDA.

The FDA should lighten up on efficacy of new drugs. While avoidance of dangerous toxic substances being sold to the public is a valid government function, proving efficacy in the target population with the high statistical significance required by the agency is very expensive, and I believe counterproductive to public health. The FDA should not ignore efficacy lest we return to the era of elixirs sold from street carts, but even the best drugs don't work on everyone. Why not let the market - doctors and patients - decide on efficacy? Note the essentially unregulated "nutraceutical" products sold at GNC stores help many people every day and are profitable yet far less expensive than drugs.

One of the remedies, I suggest, would be a greatly increased term for patents in the medical and vetinerary field, and indeed in other fields subject to regulatory approval of the present type. That would give patentees a longer term within which to recover their research and development investment, and would permit lower prices especially in the early post-launch period. Such a longer term might permit a greater overall cost recovery for the patentee whilse not subjecting the public at any particular time to excessive prices, whereas the present regime effectively provides only a brief post-approval recovery period and high prices as a practical necessity.

A side benefit of longer patent protection would be that the patentee would "own" the drug for a longer period and would during that time have a continuing incentive to monitor safety and efficacy. It is a common experience in the UK of those receiving generic medicaments to receive different products from the various generic suppliers each time a prescription is given, the supplier on each occasion being the cheapest, which is not necessarily confidence inspiring.

Given the level of investment to bring a drug to market, a 50-year term would not be unreasonable.

Kevin -- really enjoyed this perspective, and think your third course proposal is worthy of serious consideration. Thanks for keeping the focus on potential solutions.

I think that this is a well-reasoned post and I agree with it in almost every respect, but there is one point in here that I find confusing.

"[T]hese drugs will not be developed in the U.S., due to... further erosion of patent eligibility by the Supreme Court..."

Why would a company make its decisions about where to *develop* a drug based on patent eligibility? Patents control one's rights to *sell*, not rights to *develop*.

I can well believe that a company might decide "if we cannot get patent protection in the U.S., it is simply not worth developing this drug at all, because the U.S. is such an important market." In other words, I can believe that the Supreme Court's erosion of patent rights could cause a company to scrap a given project altogether.

I cannot understand, however, why a company might think "it is worth developing this drug, but let's do the R&D in Europe, because we can get patents there." One can get patents in Europe even if the development work is done in the U.S. (or Mexico, or Canada, or China, etc).

You do the R&D where the scientists live, or (in some cases) where the law allows you to do the work (e.g., small Caribbean islands in the case of human cloning work, U.S. instead of EU in the case of transgenic crop research, etc). What rational reason is there for patentability concerns to enter into the calculus of where to site the R&D?

"I suggest... greatly increased term for patents in the medical and vetinerary field, and indeed in other fields subject to regulatory approval of the present type."

I think that this is a very worthwhile suggestion. It would work best with international coordination, however. Something to consider very seriously next time we are negotiating one of these international trade/IP agreements.

The largest cost in drug development is the clinical trials and accompanying regulatory review. Another large cost is the risk of law suit for adverse effects that were not identified in the clinical trial. These costs are within the control of the government.

A quid pro quo could be reduced profits for a given drug in return for the government paying for clinical trials and indemnifies pharma companies selling the drug. We already have government funded clinical trials, and a clear societal benefit in increasing medical knowledge. We already have indemnnification for vaccines.

But to make this work for the entire pharma industry would be a multi-billion dollar process, such as doubling the entire NIH budget. At least, the costs of drug development would be very clear to all, and the government would have a clear interest in ensuring pharmaceuticals obtained a profit overseas.

Dear GrzeszDeL: Didn't mean to be opaque but here is the thought. If the U.S. is not an attractive market for developing new drugs (due to patent or regulatory changes that disadvantage drug development in a capitalist system of free enterprise), then they will be developed in other countries where, for example, the state is more involved in drug development. It doesn't have to be China but that is one possibility. Especially if we posit state action and investment, such drugs would then be able to be developed without needing the ROI that makes biologic drug exclusivity so important. And of course most if not all of these countries would prevent Western companies from developing competing drugs (or, these companies will offshore their development efforts).

I understand that we in the U.S. think that our scientific establishment is world class but there are many countries (China, India, Indonesia, Korea, Singapore, Malaysia) where the science is also world class. We saw under the Bush administration that stem cell research went abroad when no Federal money was available (except for mythical half dozen or so "approved" cell lines).

These are preliminary thoughts - I think my point was to address the ever-increasing costs of breakthrough drugs that threatens to defeat further development when fueled by one-sided attacks such as the video in the NYT.

Thanks for the comment.

"A quid pro quo could be reduced profits for a given drug in return for the government paying for clinical trials..."

At the risk of seeming like a niggling pest, I would rephrase this slightly. The quid in the quid pro quo would presumably be reduced *revenues*, not reduced *profits*, no? That is to say, if the gov't is picking up the tab for clinical trials, then a company's expenses go way down. The quo in the quid pro quo is that the revenues also go down, because drug prices fall. When those reduced revenues are washed against the reduced expenses, it might well be that the *profits* are the same as in the baseline (current law and policy) scenario.

I wish to emphasize this point because the proposed policy change would presumably look at lot different to the relevant industry if *profits* go down than if *revenues* go down. There is little reason why the industry should get on board for a promise of reduced profits, but I expect that they would be much more interested in a scheme where profits stay the same, but both revenues and expenses fall.

I can see the advantages of the proposal. It would likely lower drug prices, and everyone prefers lower prices, all other things being equal. The down side of having the gov't fund clinical trials, however, is that it means that only politically palatable diseases will see new drugs come to market. In other words, cheaper new drugs for breast cancer or pink eye, but no new drugs at all for birth control or Kaposi's sarcoma.

It is rather a matter of taste as to whether that is a net plus or a net minus.

"The quo in the quid pro quo is that the revenues also go down, because drug prices fall."

Whoops, that was an editing mistake. I meant to say that the quo in the quid pro quo is reduced expenses, because the gov't is picking up the tab for the clinical trials.

"[M]y point was to address the ever-increasing costs of breakthrough drugs that threatens to defeat further development when fueled by one-sided attacks such as the video in the NYT."

Indeed, and you made it well. Thanks for the well written essay and the thoughtful response.

I guess when it comes to drugs for less politically favored diseases the old rules could apply (the government doesn't pay, and then the public pays). Which might then proceed political pressure for that disease to be favored.

Clearly lots to think about. Thanks for the discussion.

"I guess when it comes to drugs for less politically favored diseases the old rules could apply (the government doesn't pay, and then the public pays)."

I am sure that you could contrive a system with such rules, but somehow I doubt it would make much difference. If there is a list of diseases for which the gov't is willing to pay the clinical trials, I expect that somewhere between 90% and 100% of private R&D capital will be directed to research on those diseases. It will be too hard to justify the risk of going "off list."

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