On September 19, 2007, Senator Bernie Sanders (D-VT)* submitted a bill in the Senate that would prohibit any person or entity from owning the right to exclusively manufacture, distribute, sell, or use a drug, a biological product, or a drug or biological product manufacturing process. The Sanders bill, known as the Medical Innovation Prize Act of 2007, did not go anywhere. Nevertheless, it is still informative on his thinking relative to patent rights for pharmaceutical and biotechnology companies.
Sanders emphatically states on his campaign website: “Access to health care is a human right, and that includes access to safe and affordable prescription drugs. It is time to enact prescription drug policies that work for everyone, not just the CEOs of the pharmaceutical industry.” He then goes on to state: “Americans pay, by far, the highest prices for prescription drugs in the entire world.” The solution he offers on his campaign website includes negotiating a better deal on behalf of Medicare, as well as allowing individuals, pharmacists and wholesalers to import prescription drugs from licensed Canadian Pharmacies.
While Sanders’ prescription drug plan on his website does not mention the word “patent,” allowing the importation of patented drugs, which are the expensive drugs that people cannot afford, would require significant changes to the U.S. patent laws. Clues as to how a Sanders Administration may seek to accomplish his prescription drug plan can likely be gleaned from the Medical Innovation Prize Act of 2007.
The Medical Innovation Prize Act of 2007 would have effectively done away with patent rights for pharmaceutical drugs approved by the Food and Drug Administration (FDA). The bill would have allowed anyone in compliance with FDA requirements “to manufacture, distribute, or sell an approved medicine.” The bill says it would have continued to spur innovation by establishing a fund for medical innovation prizes. It would have required the Board of Trustees for the newly created Fund to award prize payments of unspecified amounts for medical innovations relating to a drug, biological product, or manufacturing process. In order to be an eligible award recipient one would have to be the first person to receive market clearance or be the holder of an issued patent.
The Medical Innovation Prize Act would have directed the Trustees to consider: (1) the number of patients who benefited from the drug, including non-U.S. patients; (2) the incremental therapeutic benefit of the drug to treat the same disease or condition, except that the Board shall provide for cases where drugs, biological products, or manufacturing processes are developed at roughly the same time so that the comparison is to products that were not recently developed; (3) the degree to which the drug addresses priority health care needs, such as global infectious diseases and neglected diseases that primarily afflict the poor in developing countries; and (4) the improved efficiency of manufacturing processes for drugs or biological processes.
In the findings section the Medical Innovation Prize Act explains that the total cost for pharmaceutical drugs in the United States was more than $274,000,000,000 in 2006, which was more than 2.2 percent of Gross Domestic Product. The bill explains that if funding for the medical prize fund were capped at 0.6 percent of Gross Domestic Product, the United States would have provided an incentive for innovation that would be more than $80,000,000,000 in 2007. That would have represented $194,000,000,000 less to the pharmaceutical industry under the Sanders plan.
Sanders plan, which effectively amounts to price controls under the guise of a cash award, proposed to cut payments to pharmaceutical industry by 71%. Nevertheless, the bill would have included a Congressional finding that “substitution of prize fund awards to companies for successful product research and development in place of marketing exclusivity for new medicines will lead to more competition, greater utilization of generic products, lower prices, and savings to Federal, State and local governments, private employers and individual consumers…”Further, the Trustees can only award prize payments for a maximum of ten years.
Certainly prizes would have been drastically cut; there is no doubt about that. But the claim that competition would be fostered is specious at best and intentionally misleading at worst. With such a dramatic cut in payments to pharmaceutical companies there would be virtually no incentive to engage in the highly speculative research, development and regulatory process required to take new drugs to market. With the Sanders Medical Innovation Prize Act competition would be increased immediately for existing patented drugs that would have their property rights taken by the federal government, but competition would cease for new drugs. Simply put, we would not get any new drugs, period.
The Medical Innovation Prize Act does not explain what level of prize an innovator could expect to receive, so any attempt to create a new drug would be purely altruistic and not motivated by any financial gain. Companies simply could not afford to engage in the byzantine Food & Drug Administration (FDA) regulatory process that tests efficacy and safety because they would have absolutely no way to recoup the vast sums invested. Sanders plan would guarantee an end to drug development and would be a huge step backward in the race to cure and treat a plethora of diseases, including cancer. You could say goodbye to President Obama’s cancer moonshot initiative if Sanders’ plan were to be enacted.
Under the Sanders plan the best one could hope for is that research and development companies would continue to work in laboratories to achieve breakthroughs. They could file for and obtain a patent, which they couldn’t enforce because generics would be allowed to enter the market immediately. The patent would, however, entitle the R&D company to apply for prize money. Of course no company would ever invest in the FDA processes, or even the preclinical R&D necessary between the breakthrough and Phase 1 clinical trials. See Phases of clinical research. But maybe there would be enough incentive to continue to create a backlog of useless and unused scientific knowledge that will go untapped until such time as some catastrophic event happens and Congress would come to their senses.
Nothing in life is free. The thought that price controls can be forced on an industry without consequence is not a form of innocent, wide-eyed optimism. It is nothing short of the type of dangerous indifference to history that allows generation after generation to make the same mistakes.
As Sanders continues to remain a viable candidate and his policy positions continue to become more detailed it will be interesting to see whether the pharmaceutical and biotechnology industries eschew their own self interest and back Sanders or whether they dramatically and enthusiastically embrace Hillary Clinton, or perhaps one of the remaining Republican candidates.
* Up to now IPWatchdog.com has always referred to Senator Sanders as an Independent. Given that he has elected to seek the Democrat party nomination for President calling him an Independent no longer seems an appropriate designation. Moving forward he will be referred to as a Democrat.