Anti-Innovation Chorus Continues Over Biologics

A press release issued earlier today by the Pharmaceutical Care Management Association (PCMA) explained that a new article published in the New England Journal of Medicine (NEJM) urges Congress and the White House to revisit pending biogenerics legislation that would grant biotech companies an a 12-year exclusivity period for biologics. The press release explains that the experts, who are Harvard researchers and unidentified patent experts are adding “to an emerging consensus, including the Federal Trade Commission, which has concluded that 12 years of market exclusivity for biologics is unnecessary.” I suppose anyone can say anything in a press release. I am still troubled by the arrogance on display by PCMA though. Either they do not know what a “consensus” is, or they are simply intentionally misrepresenting the facts in order to further their own agenda. In either case it is appalling that the discourse relating to patents and exclusive rights has devolved to the point where the truth no longer matters and the masses are mislead by things that simply are not true.

First, lets put to rest the obviously fraudulent idea that there is a “consensus.” To do so let us actually define the word and try and interject at least some objectivity into the craziness of this debate.

Consensus [kuhn-sen-suhs] – majority of opinion; An opinion or position reached by a group as a whole; general agreement or concord; harmony.

Note to PCMA, when there are more people opposed to your point of view that does not create a “consensus.” Congress as a whole, both Republicans and Democrats, do not support this point of view.  Biotechnology companies, pharmaceutical companies and other innovators do not support this view.  This view is not supported within the patent community either.  So the fact that the FTC is pandering with an obviously incorrect and flawed report, and a few in Congress and a few former Congress members hold this view does not mean there is a consensus.  Additionally, and I know this is going to hurt and almost be heretical in the view of some, the fact that our beloved leader and Nobel Prize winning President has a certain view does not mean there is a consensus, it means he has an opinion, nothing more, and Presidents are allowed to be wrong in America.  President Obama is very wrong on this issue, proving the point.

[Bio-Pharma]

PCMA touts the Federal Trade Commission Report that 0 years of exclusivity is plenty fine to encourage the massive investment (i.e., hundreds of billions of dollars) needed to bring biologics to the market. No one in their right mind could ever logically tie any intellectually honest argument to a report that reaches such an obviously flawed, irrational and ridiculous conclusion.  Nevertheless, PCMA is propping up their entire argument on 0 years of exclusivity being enough to encourage innovative companies to invest hundreds of billions of dollars so that others will be able to copy (i.e., steal) their work immediately. I guess a ridiculous conclusion that is echoed by a beloved President and researchers who would rather copy than innovate is supposed to be persuasive.  Sorry, it is not persuasive to me because I like to live in a fact based reality.

TO demonstrate the lengths that the anti-patent and anti-innovation crowd will go we need to look no further than the remarsk of PCMA President and CEO Mark Merritt:

Consumers, employers, and taxpayers would save hundreds of billions in health spending if expensive biotech drugs faced the same generic competition as traditional brand-name drugs. Giving biologics 12 years of monopoly pricing power is costly and unreasonable.

Lets take these statements one at a time. He is, of course, 100% correct when he says that consumers, employers and taxpayers would save hundreds of billions of dollars in health care costs if biologics, which are definitively NOT drugs by the way, encountered immediate competition. There is absolutely no disputing what Merritt says here. The problem is he is making this flawlessly correct statement to support a proposition that cannot logically be reached by the statement. The reason that hundreds of billions of dollars will be saved is because the biologics will not be made unless there is appropriate exclusivity provided. So if biologics are not made they cannot be purchased, and if they cannot be purchased then there is savings.

Second, when Merritt says giving 12 years of protection is “costly and unreasonable” he is wrong on the facts and is contradicting the FTC Report that he otherwise seems to want to rely on. The FTC Report explains:

FOB entry is likely in biologic drug markets of greater than $250 million. Only two or three FOB manufacturers are likely to attempt entry for a given pioneer drug product. These FOB entrants are unlikely to introduce their FOB products at price discounts any larger than between 10 and 30 percent of the pioneer products’ price.

So generic biologics can only be expected in lucrative markets, even in those markets we will still be dealing with oligopoly pricing and the savings will be as little as 10% and as much as 30%. If you want to rely on the FTC Report you really need to rely on predictions and not just the conclusions. This is becoming far more important in Washington, DC, these days because in several instances what is happening is the conclusions reached are not actually supported by the facts and predictions contained with reports. This is one case in point, another is with respect to SACGHS Final Report on Gene Patents. In this case the report concludes that 0 years of exclusivity for gene patents is plenty fine despite concluding that “patents covering genetic tests and related licensing practices do not appear to be causing wide or lasting barriers to patient access.” Do you see a pattern? No exclusivity or exceptionally short exclusivity compared with the investment required is appropriate despite there being NO evidence to suggest that patents bar access or the abolition of patents would promote significant savings.

What Merritt wants to say is that 12 years of exclusivity is overkill because generic biologics would save consumers, taxpayers and employers hundreds of billions of dollars.  He doesn’t actually say that, coming close to the conclusion and then allowing the reader to take the leap.  I suspect he doesn’t say this and reach that conclusion because he knows it is provably false and completely lacking in any factual support.

The reality is that it costs money to innovate.  Without money there will be very little innovation.  Sure, in some areas such as software there will be meager advances made by those who enjoy doing something for recreation or as a hobby without the need to be paid, but that is not a model to build an innovation society upon.  Even if there are those in some industries who would innovate for the sake of innovation and so so for free, those folks either need to be independently wealthy or they need to have a paying job to keep a roof over their head and food on the table.  If they do need a paying job then there is far less time for them to innovate, so we would expect far less innovation even in areas where there are little or no up front costs associated with innovating.  If we are going to rely on the generosity of those who are independently wealthy, we likewise better brace ourselves for little or no innovation.  Even if every rich person on the planet were to invest in a philanthropic manner regarding innovation we would quickly run out of philanthropic rich people, and we would have very little innovation to show for it.

Greed is the motivating factor that causes large amounts of money to be invested with respect to speculative endeavors.  Greed coupled with exclusive rights is what spurs innovation, and that is something that our founding fathers understood quite well.  Incentive needs to be provided because if there is no incentive there will be little or no activity.  In the case of biotechnology, and specifically in the situation of biologics, there is massive investment necessary.  This area of innovation is not in any way similar to the computer programmer who has a computer and can innovate without cost and only devoting available free time to the project.  This innovation costs a lot of money and if we want it we need to provide the appropriate incentive.  The Federal Trade Commission is flat out wrong and everyone who is intellectually honest knows that.  Zero years of exclusivity is not enough to provide any incentive, let alone an appropriate incentive.

The question cannot be whether patents or other forms of exclusive rights are required for there to be innovation.  The question must be what is the level of innovation we want and what low levels (or nonexistent levels) of innovation are unacceptable.  Make no mistake about it, without strong exclusive rights there will be far less innovation in the future than there has been in the past.  I personally want innovation and advances, particularly medical advances.  There is no greater good to killing an industry, putting people out of work and preventing the development of life saving, life altering drugs and treatments all because of some irrational fear of patents.  The greater good argument is clearly, squarely and inarguably on the side of strong patent rights.  This provides incentives to create and eventually the creations will be off patent and available for the masses.  That never happens without strong exclusive rights because the advances will not be made.