As the debate over the cost of medicines intensifies, a nonprofit group argues the patent system for pharmaceuticals should be re-examined as one way to attack persistently high drug prices.
At issue is the ability of drug makers to win additional patents that provide added years of protection against lower-cost generic competition, even when those extra patents may not, arguably, constitute a sufficiently new invention, according to The Initiative for Medicines, Access, and Knowledge, a public interest team of attorneys and scientists.
To make its point, the nonprofit looked at the 12 best-selling medicines in 2017 and found that for each drug, there were 71 patents issued, on average, and each had been sold in the U.S. market for 15 years. And when including the time from when patent applications were filed, average patent protection could extend up to 38 years. Meanwhile, the average price hike amounted to 68 percent since 2012.
About the Author Reprints
Rational Drug Pricing
Nothing about healthcare is simple. Consider the exorbitant pricing of prescription pharmaceuticals. We know something is wrong with the current system, but we don’t understand why we’re getting gouged at the pharmacy counter.
As a pharma entrepreneur, I’d like to share my insights into how we might significantly moderate the cost of new drugs while maintaining incentives to innovate. The central issue concerns statutory (i.e. dictated by law) exclusivity for new drugs. Meant to incentivize pharmaceutical companies to do the financially risky work of developing new drugs, it perversely encourages these companies to plunder for profit while the getting is good.
Below are my suggestions for how patients can get a fair deal. My solutions would maintain the pace of innovation while opening the bathroom cabinet to free-market competition, driving down costs for patients.
Statutory Exclusivity
The U.S. system of providing market exclusivity for new drugs has outlived its usefulness. While it was intended to reward innovation while encouraging cheaper generics, it has instead led to price gouging.
Currently, if a pharmaceutical company develops a new drug or reformulates an older drug for a new indication, the FDA grants it three-to-five years of market exclusivity. This means no other company is permitted the sell the drug during this period, regardless of the validity of patents held by the innovator. Taking advantage of this monopoly, pharmaceutical companies are compelled to price new drugs at outrageous premiums—typically, more than 20 times sometimes as much as 100X the cost of manufacturing the drug. Why? They need to reward the investors who’ve funded expensive and financially risky clinical trials.
After the statutory period of exclusivity, the ability of the pharmaceutical company to fend off rivals, meaning inexpensive generics, becomes a dog fight over patent protection. The outcome of litigation in the U.S. Patent and Trademark Office and the circuit courts is extremely unpredictable. When generics enter the market, typically priced at just 2X their manufacturing cost, patients pay dramatically less.
I have a suggestion for fixing this system: passing federal legislation that limits the price of a new drug to no more than 10 times its manufacturing cost, making it more affordable for patients. As part of audited financial statements, the cost of goods is already a line item. This means a gross margin of about 90% which is a very good margin for any industrial sector, but remember there was substantial expense and risk in drug development. To further reward the pharmaceutical companies, I would propose extending the period of statutory exclusivity up to 12 years. This is the same period of statutory exclusivity now enjoyed by new biologics. Those biologic products should also be required to limit their pricing to a 10X multiple of costs. After 12 years, if a pharmaceutical company wants to duke it out with a generic-drug manufacturer over any remaining patent protection, so be it.
As patients, we get affordable innovations. For the pharmaceutical innovators, they get an assured, extended period of exclusivity with very good margins and a great rate of return for their investors over a guaranteed twelve year period. The pharma companies no longer need to price exorbitantly in order to be sure that their investors will be rewarded during a limited period of exclusivity.
Reforming the Patenting would be a really good start. They really need to evaluate how much tax payer funded research contributed to any of these so called “Breakthroughs.” Cue the Industry funded “Research’ and Industry funded News outlets, throwing shade on any attempt at accountability. The For profit system is killing us, while draining healthcare funds, for public health. They created a monster here, and they keep feeding it. It should ave been a clue, when they put industry insiders in charge of government regulatory boards. Even the number of deaths is censored.
did it ever occur to you that genuine breakthroughs such as car t-cell therapy for cancer, sofosbuvir for hepatitis c, or voretigene neparvovec for retinal blindness would not exist were it not for the for-profit health system?
as with any system, there are certainly abuses (e.g., daraprim, epipens). but the reason that we have such novel treatments is because of the potential financial returns.
if such returns did not exist, who would invest the $billions to develop new therapies?
kerry king,
Of course we would not have any of those products without tax payer funded research, and investment in Science, Education, and Public Welfare. All of those “Breakthroughs” would have been impossible without our tax payer funded system. It is very likely that the current patenting system is stifling any new research. Investors want a sure thing, they want a really good return on their money, so trivial things like antibiotics are no longer a priority. In Fact without public investment soon, none of those products are going to make much of a difference. Our current system is unsustainable and dangerous. This country can’t even count the number of Maternal Deaths, Suicides or Adverse Events from these drugs anymore, because some industry insider thought, it could cut into profits. We have fallen down the rabbit hole, here in Post Fact America.
@mavis, you’re confusing basic research with clinical research.
turning basic research discoveries into FDA-approved therapies takes years of clinical trials and costs $billions. further, the process is risky and only a small percentage of therapies that enter phase 1 eventually reach the market.
if you’re not convinced, think about it this way…if it were so easy to bring therapies to market on the back of basic research discoveries, wouldn’t everyone do it?
Answer is plain simple NO.
Changing the patent system is going to be fought tooth and nail by the industry as well as the patent attorneys. If the subject is brought for discussion, it could take about 15-20 years to bring to the Congress to consider. If it is brought to the legislators to vote they will abstain or vote no.