The UN’s Misguided Focus on Patents as the Cause of Drug Shortages

By Joseph Allen
May 15, 2016

lags of the world outside of The United Nations Building in New York City.

Flags of the world outside of The United Nations Building in New York City.

A growing drum beat tuned for the election year is advising the government to override patent protection as the quick and easy way to make drugs more accessible. The patent system is being roundly condemned as a barrier to public health which must be brought to heel. Efforts range from urging the NIH to misuse the march in provisions of the Bayh-Dole Act to control drug costs to A simple way for government to curb inflated drug prices in The Washington Post advising that the “government patent use” authority be invoked to take drugs deemed too expensive. The next step in the campaign is coming from the United Nations.

Improving access to needed medicines for those suffering the ravages of disease in developing countries is a serious issue. There are many factors contributing to the problem including poor transportation systems, lack of available health care and education, endemic poverty, trade barriers, systematic corruption and, of course, the cost of drugs. Yet the U.N. Secretary General’s High-Level Panel on Access to Medicines is focusing on the patent system as the source of the problem. The report is due next month.

The Panel received predictable statements from both sides of the debate, with one notable exception. The U.S. Department of State undiplomatically pointed out the crucial flaw in the study: ” We question the premise that the rights of inventors, international human rights law, trade rules, and public health are “misaligned”…

State offered a devastating indictment:

The Panel has been tasked with examining only two pieces of the larger puzzle, and will be doing so in isolation, pursuant to terms of reference which are based on a description of the problem stated in a way that suggests predetermined outcomes. The United States is concerned that by  conducting such a narrow review, the report issued by the Panel may be imbalanced and of limited use, or even counterproductive in building consensus among stakeholders and national governments.

The Panel’s recent press releaseProtests, Patents and Patients Dominate Debate In Johannesburg” shows that the Department’s concerns are justified. According to the release, the Panel is to “address the policy incoherence between intellectual property laws and access to medicines.” Participants praised several “alternatives and/or changes to the current patent based system” being considered. One of the “new ideas” prominently cited is having government, not industry, pay for R&D. “This means no monopolies on medicines that are financed with public money. In order to realize this, we need to find a way to work together as a global community so that all governments will contribute fairly to developing R&D costs.”

[Joe-Allen]

It’s hard to think of a worse idea than putting a consortium of governments in charge of drug development–unless it’s putting the UN in charge.

The statement from the Biotechnology Innovation Organization illustrates why the focus on intellectual property as the source of the problem misses the mark:

At the outset we note that the scope of the call for contributions appears to be narrower than the apparent mandate of the Commission. In fact, the call presupposes that the concept, and advances that notion that IP protections are inconsistent with public health. We disagree with this assessment and we believe that the facts prove this assertion to the contrary. For example we note that while 95% of essential medicines, as defined by the WHO, are off patent, still one third of the world’s population does not have reliable access to them and, in parts of Africa and Asia, that is true for half the population. And despite all the current mechanisms in place to facilitate no-or-low costs access to non-patented HIV medicines, only 15.8 million of the estimated 36.9 million people living with HIV globally (about 43%) were accessing treatment in 2014.

Moreover, despite the wide availability of no-or-very low cost non-patented HIV medicines, in at least 14 African countries, 80% or more of people who were estimated to be eligible for treatment under the WHO guidelines were not receiving antiretroviral therapy as of 2013. First-line treatments for killer diseases like malaria and TB are available as generic products at very low cost, and yet many people are denied access to them. And finally, according to the WHO, and estimated 649 million people, or about 50% of the population in India do not have regular access to the hundreds of non-patented drugs on India’s EML. Despite its large domestic generic drug industry, India’s investment in health as a percentage of its GDP has averaged around 4% for the last decade. India’s current level of 4.5% is one of the lowest figures in the world ranking it below such countries as Haiti and Ethiopia.

The solution to these problems isn’t destroying the system the world depends on for creating new drugs. And it’s not an accident that most come from the United States.

Drugs are only made in a handful of countries with strong patent systems. The reason is simple: the costs and the risks of bringing a new drug to market are enormous. If you’re looking to get rich quick, drug development isn’t for you. Developing a drug takes more than 12 years, costing an average of $2 billion per drug. For every 5,000 drugs tested, perhaps 5 will proceed to clinical trials, and one may reach the market. Of these, perhaps 20% will turn a profit, and they must pay for the whole system. This effort can only be justified if resulting products are patent protected so they cannot be freely copied around the world. And unlike other countries, many of our new drugs come from small companies and start ups. Patents are crucial for them to receive risk capital and to compete against well established competitors.

The US enjoys an unparalleled university and federal laboratory research system, an important source of new treatments. However, publicly funded inventions are more like ideas than products. The task of turning these discoveries into drugs that can alleviate human suffering falls on the private sector, which spends many times in development what the government spent supporting the underlying research. If the product is unsuccessful, the company alone takes the hit. Without a strong patent system, no business can afford to assume this burden.

Before passage of the Bayh-Dole Act, federally funded drug discoveries simply wasted away in the laboratory, benefitting no one. It’s no coincidence that after Bayh-Dole injected the incentives of the patent system into the process that federally supported inventions suddenly became drivers of new therapies, new companies and even a new industry– biotechnology– in which we lead the world.

Blaming the patent system for the problem of access to drugs is more than misguided, it’s destructive. The poster boy of bad behavior, Martin Shkreli, who raised the cost of Daraprim 5000% overnight wasn’t using the patent system for his misdeeds. Shkreli knew that rival companies would not go through the lengthy, expensive FDA approval process for a drug with a limited patient population. When the UN launches a study on the costs of regulation, please let me know.

The Department of State offered some important points to ponder:

The High-Level Panel’s mandate is too narrow to address the many and often inter-related barriers to access to safe, effective, and affordable medicines. The World Health Organization (WHO) identifies four main factors contributing to access to medicines: l) the rational selection and use of medicines,  2) affordable prices,  3) sustainable financing, and 4) reliable health and supply systems.  None of these factors are being directly studied by the Panel. With regard to affordable pricing of medicines, the WHO has identified numerous considerations, including pricing and procurement policies, taxes, markups and tariffs, and other national policies (or lack thereof) that ultimately result in higher costs for consumers and for health systems.2 In fact, even common, essential, off-patent medicines often do not achieve their intended health impact due to supply and manufacturing issues…

State “strongly” advises the UN to “incorporate all relevant factors into a meaningful analysis of why people in low and middle income countries do not have the access to medicines that we all believe is desirable and necessary.”

Good advice. Let’s hope it’s taken. It’s advice we should incorporate into our own debate on how to make important new therapies more accessible for those who need them.

 

EDITORIAL NOTE: For more information on this topic please see UN Panel on Access to Medicines Should Ensure Innovation by Preserving Market Incentives, by Dr. Kristina Lybecker, published on IPWatchdog.com on February 15, 2016.

 

The Author

Joseph Allen

Joseph Allen is a Featured Contributor on IPWatchdog.com, and a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications.

Joe served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act. He is our resident Bayh-Dole expert, and will write frequently about Bayh-Dole and issues surrounding the commercialization of university research.

In 2008, Joe founded Allen & Associates, through which he offers consulting services assisting clients in technology transfer issues, including developing effective communication strategies with national policy makers.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 15 Comments comments.

  1. Anon May 15, 2016 3:00 pm

    The solution to these problems isn’t destroying the system the world depends on for creating new drugs. And it’s not an accident that most come from the United States.

    One caveat not addressed here (and I really wish this aspect would be addressed when the topic is world wide “responsibility” for drug development) is the outsized portion of development costs directly subsidized by US citizens.

    Yes, patents in play do intersect with the price. Of that there can be no doubt. But that is just not the driving factor – which is the business decision to charge different prices for the exact same product in different parts of the world. That type of price/business structure should be outlawed.

    Have patents? Sure. Allow the predatory practice of geo-sensitive pricing? No.

    Will this affect availability? Perhaps. But if you want to talk about some type of “world” concern for pricing and you do not even bother to include the fact that US citizens are basically footing the bill for the price of medicines elsewhere, well, you are not coming to the table of equity with clean hands (as that saying goes).

  2. nat scientist May 15, 2016 4:08 pm

    There you go again begging for insane amounts of dough for life-saving drugs. In fact, it’s scientists that actually think of the products you represent, but it is revealed preference that the incentives are paid in the single digits to the humans who think science. while 90% and above go to lobbyists and marketing planners to make absolutely certain things remain as they are. We have a scientifically challenged Vice-President who qualifies to be a director of research directors because he lost a family member to a disease. It’s quite likely the author gets paid an extra 6-figures a year to write one piece a month like this in the trades.

    http://caps.fool.com/Blogs/why-on-average-do-scientists/756810

    https://www.quora.com/Why-dont-scientists-get-paid-a-lot-more-money

    http://www.payscale.com/research/US/Job=Research_Scientist/Salary

    https://www.drugwatch.com/manufacturer/

    http://www.globalresearch.ca/the-evils-of-big-pharma-exposed/5425382

  3. Gene Quinn May 16, 2016 12:25 pm

    Nat scientist-

    Obviously, this article touches a raw nerve. Not sure how to respond exactly. So I’ll just point out a few things.

    First, your rant is clearly false on its face. 90% does not go to lobbyists and marketing, which only goes to show how uninformed you really are. You can start to educate yourself a little here:

    http://www.ipwatchdog.com/2016/05/12/clinical-trials-ip-biologic-medicine/id=69014/

    Why you and others are upset that Vice President Biden is in charge of the government effort to fight cancer is a real mystery. Once again you are wrong, which I’m sure you know. Vice President Biden has not stepped down as Vice President of the United States to take a position as Scientific Research Director. Your comment on this point is quite asinine. To think that a government program with government money wouldn’t have a government official involved and taking advice from substantive experts is beyond naive. You would know that if you would only remove your tin foil hat.

    Finally, as for your comment about the author. This type of conspiratorial commentary that essentially alleges someone is on the take or is a paid shill or is being bribed is beneath the dignity of this forum. More is expected of those who seek to participate in dialogue here and if you are incapable of raising your discourse you are invited to go elsewhere.

    -Gene

  4. Edward Heller May 16, 2016 2:59 pm

    The opening paragraph suggested that this topic is of importance to presidential election. I agree. But do we know what Trump, Hillary and Sanders, the three remaining candidates, have to say on this topic?

    On this topic, assume new drugs are like Manhattan skyscrapers. Would they be built at all without a land patent?

  5. Edward Heller May 16, 2016 3:55 pm

    Also, might I add, the assumption made by the UN and by the Washington Post is that patent on drugs are like patents on a gold mine, they take from the public the resources of all mankind and give them to the one. The same thinking is behind the government’s position in MCM Portfolio LLC v. Hewlett Packard with its the contention that patents are public rights. The thinking is that patents withdraw from the public the right to resources that were previously available to all an give them to the one.

    Hopefully, anyone and everyone who sees the fallacy of this kind of thinking, and how literally harmful it is not only to the patent system, but to our very civilization, needs to oppose the UN position on this, the Washington post, and the government’s position that patents are public rights.

    The time to file amicus briefs in MCM v. HP ends May 31. Let us sincerely hope that anyone and everyone who might oppose the UN position, perhaps even the State Department, files an amicus brief opposing the government position that patents are public rights in the MCM v. HP petition for writ of certiorari.

  6. Lawrence Lockwood May 16, 2016 4:05 pm

    I have known and worked with the author for several years on patent matters to improve the patent system. He is probably the most ethical person I know, as well as having a sincere desire to see American innovation succeed. Having filed my first of a dozen patents in 1980 and continuously interacting with PTO and courts for the past 35 years, with a case to SCOTUS, from my perspective the comments of Nat seem uninformed and totally misguided.

  7. Simon Elliott May 17, 2016 6:54 pm

    A big conceptual problem is that they only see current shortages created by price due to patents, and not long term shortages created by lack of innovation.

    If you make new drug R&D non-profitable, or only marginally profitable, you remove the incentive to invest in new drug R&D. The result is less new drugs, and more money being spent on apps for cat videos.

    You already see this in vaccines and antibiotics: they have been less profitable than other lines of business and there was less R&D by big pharma. Now we see growing problems of antibiotic resistance and emerging infectious disease. There was little money to be made treating diseases in poor developing countries, and so there were no drugs or vaccines when we have epidemics of Ebola or Zika.

    For example, Brazil was one of the leaders in getting cheap access to generic drugs, and railed against patents and foreign pharma companies in c 1999. That’s a policy matter that presumably helped current patients, but did nothing to incentivize the development of drugs and vaccines to battle Zika. Now Brazil and Brazilians are suffering.

  8. Anon May 18, 2016 6:44 am

    Simon,

    I find your comment of “A big conceptual problem is that they only see current shortages created by price due to patents, and not long term shortages created by lack of innovation.” very interesting.

    However, I see a dark cloud to the silver lining with Pharma patents, and how the Pharma industry has been able to manipulate the view of “gee, new drug development is SOOO expensive.”

    NOT saying anything against a standard view of patents, but Pharma seems to want more (and wants to be treated differently) than the standard view of patents.

    Frankly, if your problem is that development is expensive, the answer is NOT to shield the expensive development process and enshrine the expensive process. Rather, open the process up to competitive forces and move the expensive process itself into the realm of competitive (and innovative) market forces. “Because it is so expensive” has become a bizarrely “good thing,” and that is a twisted version of reality that needs to change.

  9. Simon Elliott May 18, 2016 2:50 pm

    Anon: I agree that the “its so expensive” argument can only go so far. But Pharma doesn’t get to dictate a price solely by their costs, and insurers won’t pay “whatever.” Pharma must justify the benefits of the drug at a given price, and compare that price/benefit to the alternatives. I am yet to see a pharma company that believes “expense” is a feature.

    I also do not understand your solution to “open the process up to competitive forces and move the expensive process itself into the realm of competitive (and innovative) market forces.” What do you call the thousands of drug companies competing on every level? What about the billions in failed investments, layoffs, etc? Its a brutally competitive process.

  10. Edward Heller May 18, 2016 3:33 pm

    Simon, bacteria-eating viruses are potentially a new weapon against superbugs. I read somewhere that the US drug companies have no interest in these remedies because they cannot be patented. I assume they would still have to be approved by the Federal government before they can be marketed and used. Without patent protection, who would even bother with such expense?

    Care to comment?

  11. Edward Heller May 18, 2016 5:22 pm

    Might I add, that if patents are public rights and not property, then the government can force compulsory licensing of a patent without compensation required by the Takings Clause. I would think that the drug companies, and bio, might be especially concerned with the Federal Circuit’s holding in MCM Portfolio LLC that patents rights were public rights.

    MCM has petitioned the Supreme Court. Amicus briefs are due May 31. But notice that a brief will be filed is required by May 21.

  12. Anon May 18, 2016 8:22 pm

    Sadly, Simon, I have seen exactly that.

    On multiple occasions.

  13. Anon May 18, 2016 8:26 pm

    Mr. Heller at 10.

    Be aware of (and beware of) the “trap” of depending on the “but for” expense rationale.

    Yes, that is one acceptable rationale – but it is a rather slippery one, and there are better rationales – something as simple and elegant as Quid Pro Quo, for example.

  14. Simon Elliott May 19, 2016 10:58 am

    Ed at 10: bacteriophages have been known for over 100 years, and were used as antimicrobials until the advent of chemical antibiotics. The upside of phage is that they are very fast and specific killers of bacteria. The downside is that you need exactly the correct phage, that resistance emerges quickly, and that people develop immune responses to the phage. From a cost perspective, its a lot more management.

    Anon: care to cite an example?

  15. Anon May 19, 2016 6:08 pm

    Simon,

    I cannot give an explicit example, as the cases remain active.

    But I can direct you to read some of the published statements from the industry: try PhaRma and BIO…