[Ip-health] Wall Street Journal debate: Should Patents on Pharmaceuticals Be Extended to Encourage Innovation?

Thirukumaran Balasubramaniam thiru at keionline.org
Tue Jan 24 02:57:41 PST 2012


	• JANUARY 23, 2012

Should Patents on Pharmaceuticals Be Extended to Encourage Innovation?

The WSJ Debate

Pharmaceuticals have improved and extended the lives of millions of people. But the many advances over the past couple of decades haven't come without controversy, much of it centering on the massive profits the industry makes on blockbuster drugs.

The drug makers say those profits fund the research that produces breakthrough treatments. They warn that with patents expiring on several big-money drugs, their ability to develop new drugs will be severely hampered. Longer-lasting patents, they say, would protect the profits that they need to keep innovative products moving through the pipeline.

Critics question that assumption. There's no proof, they say, of a link between patent life and innovation. In their view, drug companies focus on developing the most marketable drugs instead of the most urgently needed medications. So extending patents would serve mainly to boost drug companies' profits, not to encourage the innovation needed to address the world's unmet medical needs.

Yes: Innovation Demands It

By Josh Bloom

The American pharmaceutical industry is seriously ill. And extended patent protection is just the medicine the drug companies need.

Pharmaceutical companies have long been demonized by many politicians and others as heartless behemoths that place profit ahead of people's well-being.

But that perception couldn't be more wrong. The profits these companies make on blockbuster medications support the research that produces such breakthroughs. And the scientists working in the labs are fervently committed to finding useful new medicines.

Unfortunately, there are far fewer of those scientists at work than there were 10 years ago, and their companies are in trouble.

What's the problem? A confluence of events in recent years has made drug discovery more difficult, expensive and time consuming. Most important, it has become less profitable, largely because longer development times mean companies have less time left under patents to exclusively market their discoveries. Now, the industry faces a financial crisis because of the recent or imminent expiration of the patents on many of its most profitable drugs.

Without extended patent protection for new discoveries, the industry won't be able to fund the current level of research. And the consequences are profound: decreased innovation, fewer new drugs and more job losses.

Ugly Numbers

Next time you hear about a drug making billions of dollars for its maker, consider this: Currently, bringing one new drug to market takes roughly 14 years, at a cost of about $1.3 billion. For every drug that makes it to market, more than 50 other research programs fail. After all that, only two of every 10 newly approved drugs will be profitable. Those profits must fund not only all the research programs that failed, but also all the drugs that are launched but lose money.

When the industry was producing a steady stream of blockbuster drugs, as it did beginning in the 1990s (for example, all the AIDS drugs), the math worked in its favor. But in recent years the numbers have turned against the drug industry, for several reasons.

For one, the Food and Drug Administration has become more risk-averse in the wake of the 2004 Vioxx debacle. Drug makers are now required to conduct more studies with many more subjects. That adds to costs and stretches out development times. And every year spent in clinical trials equals one year of lost patent coverage.

In 1968, when development time was much shorter than today, most drugs had an effective patent life of about 17 years. Now companies usually have only about 11 years of market exclusivity for their drugs. And this number is expected to continue dropping as development times grow even longer—approaching a point where the costs and risks of development outweigh the rewards and research will stop.

Many of the diseases addressed in the 1990s were simply easier to tackle. Since then, despite increased research spending, fewer breakthrough drugs have been discovered. Difficult conditions such as cancer, Alzheimer's, Parkinson's and obesity remain problematic.

Amid all these challenges, the drug industry is losing its financial cushion as patents from the 1990s expire. Since 2006, brand drugs have lost an estimated $60 billion in sales because of patent expirations; by 2015, this figure is projected to rise to $160 billion. This is the so-called patent cliff.

It shouldn't be surprising, then, that the industry is showing signs of stress. The share prices of the major drug makers have fallen sharply in the past decade, and weakened companies have succumbed to mergers and acquisitions, causing the elimination of 300,000 jobs during this time.

Stretch Some, Cut Others

Extension of patent life for the most innovative drugs would, at the very least, postpone the rush toward the patent cliff, providing drug companies with extra time to discover the next cycle of new, innovative therapies.

With U.S.-based drug companies scaling back their research, there will be fewer discoveries to fill the gap and keep new treatments coming to market. Academic researchers are very good at studying the basic biology of a disease, but this is just the very beginning of the discovery process. The lion's share of the work—progressing from basic biology to an actual drug—requires the expertise and resources that academic and government labs simply don't have.

Of course, longer patents would mean that important drugs would remain relatively expensive for a longer time. But the expense of new drugs is preferable to not having them at all. The fact that drug companies thrived in the past without patent protection is irrelevant. Companies didn't face the regulatory and competitive environment of today. For example, generic competition was  minimal until the 1980s.

Remember that manufacturers of generic drugs contribute nothing to innovation. Yet they take up to 90% of sales away from the comparable brand-name drugs whose makers risked the time and money to bring breakthrough treatments to market.

There are some drugs that deserve less patent protection. These are the so-called line extensions—where companies simply tweak existing drugs enough to earn a new patent. Virtually identical to the original compound, these provide little real innovation. When companies are under economic stress, line extensions may become an attractive way to keep revenue flowing, drawing resources away from innovative, more important work.

To discourage that and to keep drug companies focused instead on innovative treatments, patents for line extensions should be shortened, perhaps by three years or so, while patents for high-risk, first-in-class drugs and those that address unmet medical needs should be extended significantly—five more years could be a starting point for discussion. (Most drugs now get 20 years of protection from the time a patent application is filed, which is effectively about 11 years after accounting for development time.)

One alternative that has been suggested is that in order to gain FDA approval, new drugs should have to demonstrate superiority to existing ones. This would be unrealistic because that standard could hardly ever be met in clinical trials—in nearly all cases you can't tell the real differences between two drugs until they are in the marketplace and being taken by millions of people.

A well-planned extension of patent protection, especially for innovative drugs, is both reasonable and necessary to keep what is left of the American pharmaceutical industry healthy enough to continue its crucial work. In the absence of a remedial measure like patent-life extension, the industry will continue its decline, resulting in incalculable losses to the U.S. economy and poorer medical care for its citizens. This would be a national disgrace.

Dr. Bloom is the director of chemical and pharmaceutical sciences at the American Council on Science and Health, a health-care education and advocacy group based in New York. He can be reached at wsj.com/reports.

No: It's More of a Bad Thing

By Els Torreele

Extending patents on pharmaceuticals will do nothing to increase medical innovation. As Einstein famously said, we can't solve problems by using the same kind of thinking we used when we created them.

Consider how that formula has failed already. Since the late 1980s, patent duration and scope have increased steadily world-wide. Despite this, and an increase in research-and-development spending, the number of "new molecular entities"—or totally new drugs—reaching the U.S. market slid from around 45 per year in the late 1990s to only 30 last year, according to the Food and Drug Administration.

Moreover, scientific reviews of new drugs released between 1996 and 2006 show that very few represented therapeutic innovation; most were no better than existing products or were actually inferior. Meanwhile, we have a severe deficit in innovation for urgent medical needs, such as antibiotic-resistant infections, rare diseases and diseases that primarily affect people living in the developing world, such as tuberculosis and tropical diseases.

The problem is that drug companies are more focused on developing the drugs with the greatest market potential than they are on developing truly innovative treatments that address critical health needs. And the patent system encourages that approach. The previously stringent  criteria ensuring that patents applied only to real innovations have gradually been eased. Nowadays, companies can secure a 20-year monopoly by either making minor changes to an existing drug or inventing a totally new drug—so why take the risk of failure associated with the latter?

The suggestion that the system can simply be tweaked so that innovative drugs get longer patents and drugs that offer minor advances get less protection perpetuates the fallacy of a link between patents and therapeutic innovation—and that distracts us from thinking about alternative policy tools to promote real health innovation. It's perfectly possible to achieve a major medical breakthrough with a product that isn't patented, while the fact of obtaining a patent doesn't say anything about a compound's actual medical value. Moreover, the patent office isn't equipped to judge therapeutic benefit.

A real boost to innovation would be if the FDA required new medicines to show a therapeutic benefit over existing treatments before giving market approval—a judgment the agency is perfectly capable of making, but somehow doesn't now. Without such a prerequisite, companies will continue to focus on pharmaceuticals with the highest market potential, rather than innovating to address medical need.

The Benefit Test

It's important to remember the purpose of the patent system—to benefit society through innovation. It makes no sense to grant patent monopolies unless they produce the kind of innovation that will benefit society. Unfortunately, the increasingly high prices that companies charge for drugs that are under patent blunt the societal benefit of those medications, because many people can't afford the treatment they need. Extending patent protection would only worsen that situation.

The usual justification for patent monopolies and high medicine prices is that these are needed to recoup the high cost of research and development. While developing a new drug undoubtedly is expensive, it's clear that pharmaceutical companies easily recoup their investment and much more. Annual sales of blockbuster drugs range in the multiple billions of dollars, and the pharmaceutical industry has been among the most profitable industrial sectors for many years—despite a long-recognized innovation crisis.

Considering that each of the top 20 best-selling drugs has annual sales of more than $4 billion, it's easy to see why patent extensions are highly attractive for pharmaceutical companies. But while patent monopolies are powerful tools to maximize return on investment, they fail to provide effective incentives to encourage innovation that addresses priority health needs. Extending patents in this broken innovation model will merely increase sales of those same market-friendly drugs.

The fact that drug companies are now faced with significant declines in revenue because of the expiration of patents on blockbuster drugs is no reason to extend patent life. Patents are a social contract, meant to reward drug companies for innovations that benefit society. For the drugs in question, that contract has been more than fulfilled. So while extending patents now would indeed provide some financial relief to drug makers, there's no reason to believe that the result would be an increase in innovation.

The suggestion that patents should be extended because drug development times have been stretched by tougher FDA requirements also rings hollow. The FDA is fulfilling its primary mandate by requiring more rigorous studies to document the safety of new medicines in the wake of cases like the Vioxx disaster. The price of that consumer safety should not be the expectation that pharmaceutical companies should be compensated by even bigger profits for meeting the agency's standards and delivering medicines with proven safety and efficacy.

Past and Future

History has repeatedly shown that innovation can thrive without patents. Just look at penicillin or the polio vaccine. When asked who owned the patent for the polio vaccine, Jonas Salk answered, "There is no patent. Could you patent the sun?"

Another example of innovation without patents can be found in Switzerland, one of the global leaders in the pharmaceutical industry. In the early 1900s, the Swiss chemical companies Ciba, Geigy and Sandoz (all precursors of today's Novartis) began to produce pharmaceuticals such as aspirin, developed by the German company Bayer. Subsequently, Switzerland quickly developed one of the most innovative and successful pharmaceutical industries in the world, all while rejecting the idea of putting patents on chemical inventions. It was only in 1977 that Switzerland gave in to international pressure and introduced patents on medicines, long after it had become highly successful with innovative pharmaceutical research and development.

So, if patent extension isn't the answer, what is? I believe we should institute a regulatory environment that prioritizes health innovation instead of market opportunities, by making approval of new drugs contingent on therapeutic advances that address unmet health needs. In parallel, we should mobilize public and private resources to finance research and development independently of patents, so that we can stop relying on pharmaceutical sales as the primary source of funding for research. International experts are exploring such alternatives on behalf of the World Health Organization, while recent experience with not-for-profit drug development is showing that it can be done more cost-effectively than so far assumed.

A pharmaceutical business model based on these premises would ensure that research on critical health needs is prioritized, and that medicines resulting from this research are affordable. Twenty-first century science and technology have the potential to tackle many important unmet health needs. It would be a tragedy if we miss this unique opportunity.

Dr. Torreele is the director of the Access to Essential Medicines Initiative of the Open Society Foundation's Public Health Program, based in New York. She can be reached at reports at wsj.com.


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)

thiru at keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997

More information about the Ip-health mailing list