Sam - I hope that I was able to retain your original intent and meaning with my revision. I enjoyed reading your paper -- my dad actually owns a biotech company with aspirations of entering the pharmaceutical market -- so I was really interested in the topic.

-Brandon

A Patent Waste

-- By SamWells - 17 Apr 2010

Scene 1

Last year, I developed a serious ear infection and lost hearing on that side. Because I did not have medical insurance and could not afford prescription drugs, I decided to wait it out.

When the infection lingered for two months, I hounded a friend in medical school to find out the proper prescription treatment. I ordered the drug cheaply online from an illegal India-based website. On the brown paper envelope that came, my address was hand-written to avoid customs scrutiny. Inside were instructions and a plastic bag with a handful of pills. I took them, risking ingestion of a placebo, or worse, a mysterious drug with harmful side effects.

My ear infection seemed to improve for a few days, but returned. I did not recover for another three months. Inexpensive access to the treatment from a trustworthy source could have saved me months of anxiety. Why are drugs, so small and cheap to manufacture, so expensive?

Scene 2

At my moot court session, I met an alumni judge who was a general counsel at Purdue Pharma, a Connecticut-based drug company. He was a polished, soft-spoken guy who told us that his job involved handling thousands of lawsuits at any given moment. Most of the suits sprang from side effects of OxyContin? , a highly addictive and frequently abused painkiller that Purdue manufactures. Despite the nature of the drug, the company always wins. According to a 3L judge, he is an evil man.

I went up to the "evil man" and asked him why he thought drug patents are needed, especially when researchers get their funding from public sources. I also explained that, theoretically, it is possible to incentivize the whole drug development process without limited-time monopolies, making patents superfluous and drugs cheaper for all.

He said that he, too, thought that drug prices are too high, and that in Africa this is especially true. There are anti-retroviral (HIV) and anti-malarial drugs that could save millions of lives if they were more affordable. So he said, we have to ask ourselves if that is something that we can tolerate. He then told me that I should look into the price reductions that the World Health Organization has forced on drug companies in recent years, providing low-cost AIDS drugs to much of Africa. Interesting, I said, but that did not answer my question.

I asked again, don't drug companies usually just buy licenses from university researchers, rather than develop new cures themselves? After much diversion, he admitted it.

The Process

University researchers invent useful, potentially lifesaving compounds. These compounds are then patented, and the patents are assigned to the university as part of the researcher's employment contract. The university eventually licenses the patents to pharmaceutical companies via auction, and the pharmaceutical companies sell the drugs to the public.

I asked the general counsel what, if anything, the pharmaceutical companies really do. He said that they run the clinical trials for drugs, and pay for marketing. He said that the real problem with a system without drug patents is that no one would be willing to spend the $100 million needed to bring a new drug to market. Patent rights, providing a limited monopoly, ensure that these outlays are recouped in profits. He also said that patents are in the Constitution, so they cannot be abolished.

Bullshit. The Constitution reads: "The Congress shall have Power To... promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Nowhere are patents mandated; they are permitted. The relevant law, Title 15 USC, can be changed by a majority of Congress.

In the present system, patent revenues at drug companies do not motivate actual drug discoveries. Most pharmaceutical revenues do not pass through to universities, but go to marketing, clinical trials, and litigation, with the rest being profit. The real brains behind the operation, the researchers, are incentivized by competition for NIH and NSF grants, which allow the construction and staffing of university labs. The money is scarce, so researchers are motivated to produce real breakthroughs. The GC, surprisingly, admitted that Pfizer's team of 200 lab scientists has been unable to come up with any useful discoveries in the last two years.

Clinical trials do have to be paid for by someone, and they are admittedly complex processes. One possibility is to have the government run publicly funded clinical trials. Drug formulas that thread the gauntlet would be available to any manufacturer interested in bringing them to market. In this way, cost sharing among the entire class of benefited persons -- that is, the public -- would make manufacture and marketing of drugs affordable for private firms. The success of generic drug manufacturers demonstrates that this is fiscally possible. The savings in patent litigation would be tremendous, and passed on to consumers. Another benefit would be the elimination of perverse incentives that now cloud the clinical trial process, resulting in falsified trial data and analytical abuses.

A second option for decoupling clinical trials from individual drug companies is to create a publicly available pool of useful therapeutic formulas. This shared resource, drawn from universities and tied to them through licenses, could be governed by a private overseeing body that runs clinical trials for all drugs in the pool. The clinical trials could be supported by fees collected through a mandatory licensing scheme, again making drugs available to all manufacturers. Both options are feasible.

When I first began the conversation with the general counsel about drug production without patents, he said, with sincerity and a little trepidation, "Well, boy, wouldn't that be an ideal world." So it would.

-- SamWells - 26 May 2010

COMMENTS

Interestingly, GlaxoSmithKline? , a major pharmaceutical company, has recently promised to implement "a more flexible approach to IP in the Least Developed Countries. IP’s primary objective is to incentivise and reward research. However, there are plenty of neglected tropical disease where there is a severe lack of research. We need to see if we can use IP to help address that gap. One idea we are proposing is a Least Developed Country (LDC) Patent Pool for medicines for neglected tropical diseases. We would put our relevant small molecule compounds or process patents for neglected tropical diseases into the pool, allowing others access to develop and produce new products. The pool would be voluntary so as to encourage others to participate and any benefits from the pool must go in full and solely to LDCs." There is now a publicly viewable, functioning online database containing thousands of compounds potentially useful in curing malaria. But licenses for use of the pooled IP will be limited geographically, and drug therapies promising high profits, such as cancer treatments discovered while researching malaria, will not be available for licensing. Nevertheless, while the scope is limited, I'm excited to see the idea gaining some traction.

-- SamWells - 26 May 2010