You all do know that these industries are made up of Scientists, Janitors, IT People, Managers, Stock holders et al at this companies who need to get paid to feed their families and make their investment in education worthwhile, right? If these people are not paid well, simple economics tells me less students will go into these fields or if Stock holders don’t deem the company be a good investment they won’t invest in the company.

Sometimes people get too carried away emotionally don’t really see that everyday people make up big corporations, there is no mythical Big Business that is trying to keep the poor and weak down.

http://www.citizen.org/publications/release.cfm?ID=7065

However, there are a few caveats when it comes to prescription drugs.

Most drugs produced by pharma are licensed from universities – compounds discovered by publicly funded research. Therefore, it is not unreasonable for the public to assume some guarantee of access to these discoveries. Now how to define “access” is another matter.

Also, the $500 million – $1 billion figure provided as the cost of bringing a new drug to the market is a myth.
We are part of a research group bringing a new drug to the market, and the cost for the pharma company which licensed it to bring the medicine to market will be ~$40 million, though this is on the lower end of the spectrum. We worked with the company to ensure equitable access provisions for certain populations as the drug has the potential for a large impact in developing countries.

We believe: Our labs, our drugs, our responsibility. and there’s an entire movement dedicated to promoting socially responsible licensing.

“But two months after the uproar began, there are signs that Thailand has gained the upper hand. Its aggressive stance could be paving the way for other developing countries to extract lower drug prices from pharmaceutical giants in Europe and the United States.”

http://www.iht.com/articles/2007/04/11/news/pharma.php

Some countries do take exceptions and take control in their hands. It has also recd. encouragements from independent observers.

He has got some very valid points
Especially the one about regulatory capture/ regulatory failure. (wine and dine and then agree to everything wink wink)

My info is that brand name drugs get 20 year protection (that about 1/3 of a lifetime, probably enough for the drug to be stale by the time the generic hits the market)

Now about local variants . Rituximab , the drug i am cribbing about has got a local competitor. Dr Reddy’s has come up with a bio-generic or bio-similar (terminology differ between Europe and US) that is priced at exactly half of Roche’s price. Most probably the pricing is still psychological pricing (junta still getting robbed of money and life) and actual costs might be much less (what invention??.. this is copy.. so the costs might have been more legal costs than research costs)

I also have a point about India specific and relevant drugs ( I mean i have nothing against drugs for erectile dysfunction… but get a perspective man .. we are talking life and death). Drugs for lifestyle diseases may make monetary sense for big farma but may not take care of chikenguniya and dengu in India. The western R&D preferences may not align with our needs… so we need Indian public money in India specific research (which thankfully is cheaper if done in India .. and also much better than many wasteful utilizations of our taxpayer money …. which incidentally is paid by rich and poor at the same rate (as we have many indirect taxes – e.g sales tax is paid by the both poor and the rich though it might make a bigger percentage of the poor man’s earnings )

I have many lines of thought running to come up with convincing arguments against patent protection for life saving drugs… These thoughts will take a little time to crystallize.. cause I am not a PhD in eco…
I will post them on my blog when the arguments get more solid

Here are some of my broad approaches -

Free markets are the most efficient (is this true from an economists perspective???). I mean shouldn’t these guys be selling medicines to any dying man as long as the man can cough up more than their marginal costs. In reality these guys are not even trying price discrimination to reach the whole of the market. (the airlines can do it.. the software guys can do it… why can’t the pharma guys). On top of that the demand is totally inelastic (for obvious reasons – life is typically more precious than any alternative), given a free hand pharma firms can ask any crazy price, and they are doing that.

I get it that in the case of heavy investment in capital,infrastructure or R&D the free markets breakdown (as you said people would have no incentive to invest in R&D).
So the governments distort the market and gives patent rights. But look ..even for natural monopolies governments have regulators…. Why not for the artificially created ones?

Question – Is patent the best way of distorting the market to provide public good ? ( if R&D costs are high .. shouldn’t the incentive be proportional to the R&D cost involved …where is the pressure to do R&D efficiently? ..like moving it to low cost centers in India).

What is the point in getting these drugs invented by patent protection when most of our population can’t afford to use them?

A 20 year limit is arbitrary, it does not take into account the cost of R&D, efficiency in R&D, . Companies can spend wasteful amount on marketing and then recoup it from customer because of government given monopoly.etc etc

Second broad argument… Do not look at the moral stand of paying the inventor for his efforts. Its not a fair world. India should be driven by its own selfish interest. We on a whole are not a nation of inventors…but net consumer of inventions… We should subtly oppose any move to give too much value to the inventors… (like patent protections).. if you let the opposite side bend the rules to their advantage.. the opposite side would rob you naked.

We can conveniently change this stance if/when we become a net producer of inventions

(besides many inventors/creators don’t invent for money’s sake.. take linus trovalt of Linux … i am sure the penicillin guy discovered penicillin for reasons other than becoming an millionaire …besides most invention are serendipitous… “oh look these X-rays are exposing photographic films.how strange”… Take the case of great painters… as a rule their painting become expensive long after they die .. where is the monetary incentive to create beautiful paintings?)

Third line – Defence does not need patent protections .. In fact most countries don’t mind stealing technology from wherever they can .. cryogenic engines.. nuke technology…sophisticated gyroscopes …anything… There is no reason why healthcare should have less priority than defense (moreover, one gets very few chances of using ones fancy weapons .. but ample chance to realize health care benefits )

Fourth line – Promoting trade is good.. but to what extent?… I am a good businessman… I can give you anything from my house if you quote a good enough price… but even i don’t sell my mother, sisters and children… Life saving drugs are these mothers,sisters and children of society .. they should not be used for promoting trade . …. I am sure the world would not stop trading with us if we deny patent protection to life saving drugs …

the list of possible arguments can go on an on… just like this comment has gone on and on..

But let me end with a comment, that i got on one of my blog posts, from a microbiologist pal of mine. (after hiding company name as it doesn’t matter)

“Dont feel sorry for CompanyX. You are right about the huge amount of R&D that leads to the product. But private companies come into the picture much later, when they smell a viable product. The very basic R&D is still funded by the public sector. You may have a better idea of how much profit they are making.I know this- if I have a bacterium, I can extract 10,000 units of a particular enzyme with a cost of ten dollars. CompanyX produce the same enzyme large scale(cost per unit is less), and sell it at 50 dollars per hundred units( of course with quality assurance!).You do the math.”

A very nice, cogent analysis as always. But yes, you have scratched the surface of this issue.

Drug firms generally apply for a patent at the IND (Investigative New Drug) application stage, when they seek permission to conduct clinical
trials. Once they are done with clinical development, they apply for marketing authorisation called NDA (New Drug Application). Typically, it takes about 7-8 years from the time IND is applied, for the drug to hit the market. So, the exclusivity rights are enjoyed only
for about 5 years (with 12 years being the standard patent protection timeline).

Since only one out of 10 drugs that hit the market is likely to be a blockbuster, and approximately $1 billion is spent in bringing each drug to market, there is a lot at stake.

The moment exclusivity ends, generic drugs enter the market at rates 1/8 or even less than the parent drug.

In UK, and many EU countries, these generic drugs are encouraged because of the obvious cost benefits. In most of these countries, there is a strong welfare system in place, and often, the National
Health Service is the biggest customer for all the drugs. So, the drug companies have to sell at subsidised rates to these organizations, if they have to access the market. Even then, the moment generic drugs
appear in the market, the Govt.s prefer to buy them.

The situation in India is different. The Indian generic drug makers do not want exclusivity rights to be renewed for ‘incremental innovation, where as the MNCs and some Indian companies that have tasted success recently (Reddys, Nicholas Piramal etc.) want incremental innovation
to be rewarded. There was a committee headed by Mashelkar to look into the issue, but the report has been criticized by both domestic and foreign companies. But the report seems to be siding more with the foreign companies, and one of the accusations against the committee
has been that instead of doing independent study, they copy-pasted findings from a study conducted by a UK think tank (funded by some global drug majors!).

In the US and even in EU, ANDAs (Accelerated NDAs) are allowed after
5-6 years, where by generic drug makers can show that they have developed a different molecule or the same molecule by a different process, and they are allowed to market the drug if they can show
bio-equivalence (same effect as the proprietary drug) and also comparably better impact on the disease condition. In addition, US and EU have Orphan Drug law, which allows for funding firms that work
towards discovering drugs that affect very few people. Orphan drugs also get preference in regulatory clearance. We badly need such laws and processes in India. The one reason Malaria has returned in a more resilient form, is the lack of research into anti-Malarial drugs.

We also need to understand that a lot of research is done collaboratively these days and Universities in US and EU play a key role in drug discovery as well, not to mention all the bio tech start-ups.

So, a possible solution to your friend’s question w.r.t India:

1.A very clear Patent Protection regime that allows drug firms to recover their costs and at the same time, ensures that drugs are not over charged.
2.The regime should also use the best practices implemented in EU and
in some cases in US, to allow generic drugs in the market after a few
years, if they can show better results in patient outcomes.
3.Funds to be made available for research on India-specific (tropical) orphan diseases like Malaria.
4.Implementing strict ethical controls on the conduct of clinical trials in India, and ensuring that drug firms need to test their drugs on Indian patients before seeking marketing approval for India. The
patients should continue to get the drug free of cost from the drug firm, even after it gets released into the market.
5.Where the cost of buying drugs is prohibitive, negotiating with the
drug firm about reducing the cost. Drug firms do it all the time reducing price) if the Health Care system allows the drug to reach all needy patients. It is a volume game.

The problem: The bureaucrats who make the policy do not know or delve into the issue with the right perspective. They get wined and dined by representatives of the drug companies, not by the citizens who get
impacted. And the MPs know and care even less.

Well, I think I have scratched only a bit more. This is a very contentious and complex topic.

Thats an excellent analysis. I want to add one more thing. If there was no patent protection, the drug company would no incentive in taking the risks and producing the drugs in the first place and the people would suffer more from Cancer if there were no drugs, then if there are expensive ones to cure. One thing the govt can do (and I am sure it is doing) is to invest heavily in R&D inside the govt funded labs and the incentive there should be academic prizes (rather than cash that comes from Patents), that way it can solve some of the patenting issues that goes with expensive drugs.

My 2 cents.

Pravesh