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12/12/2004

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» Crouch's December report on new academic research that I find interesting from Patently Obvious: Patent Law Blog
Here is a limited set of recent papers that I have found interesting. Bronwyn Hall [Read More]

» Becker proposes eliminating 2nd & 3rd stage trials from medmusings

Gary S Becker is a noted economist from U of Chicago, but posts today proposing eliminating 2nd & 3rd stage trials to cut costs on drug development. An extended argument in pdf form. Sounds dangerous. Without randomized trials, it's too diff...

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» Fixing the Drug Industry? from In the Pipeline
I had a post ready to go tonight, but we'll roll that one over to tomorrow. I'd suggest that if you're interested in patents and their place in the drug industry (and hey, who isn't, right? Uh, right?) that you... [Read More]

» On Drugs from Fool's Blog
Without comment of my own, I direct your attention to some thoughts on the pharmaceutical industry (including prices, safety and patents) from Becker and Posner. Enjoy.... [Read More]

» Becker-Posner on Drug Patents from EconLog
A good intro to the economic issues surrounding pharmaceutical patents, from Richard Posner and Gary Becker. Posner writes, Invention is... [Read More]

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Comments

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Jeremy

The idea of governments buying out patents sounds like a reasonable solution to this type of problem. Yes, we need patent protection to promote drug company innovation, leading to increases in the availability of treatments. This is fine if you can afford the treatment. However, given the huge number who cannot, government support for generic drug makers not only allows treatment accessibility but provides the economic reward for innovation. Sounds like a much better idea than simply allowing lower income people to be priced out of the healthcare market.

BillSaysThis

So American drug companies are spending some $600 million (=$30 billion/ 50) per new molecular entity.

Part of the huge cost is that many drugs never make it to the approval level even though they might get to Phase II or III and incur those large costs (recent example being Vaxgen's AIDSVAX). But there are many new tools coming out that will sort possibilities much more efficiently and so fewer will reach these expensive trials and fail, most likely. Meanwhile, the idea of eliminating the last stage of trials scares me based on the way the FDA and industry have handled the post-approval observations since the '93 rules change (ie, Vioxx).

William Tanksley

Two points.

First, I think you're right about the dangers of price control here; for an example of what happens there, see the recent flu shot panic. The reason there were only two suppliers was precisely that the US gov't had price controlled the shots.

Second, I don't think the auction idea can work. Its mechanics seem brilliant enough, but who decides which patents the government will buy? Surely some advisory board somewhere; and who will staff and inform that board? Who will buy its members expensive lunches? I'd bet that we'd wind up spending a LOT of tax money on a LOT of worthless or superceded patents. Even with a worthwhile patent, this would be a GREAT way for a company to protect itself from an upcoming rival with a similar medicine of its own!

-Billy

Ian Bicking

I think it's wrong to view the drug market as a free market, and assume that rational choices by patients will lead to some intelligent end. Consider, for instance, acid reflux drugs -- recent new batches of drugs have provided only the smallest advantages over older drugs, and for most people changes in diet could have a greater and safer effect.

These new drugs have still been popular and highly profitable because:

For many people the out-of-pocket prices are identical.
People do not rationally weigh the effectiveness of a drug (e.g., considering a cheaper options that may be entirely effective); there is a sense that any less effective drug is inferior and unacceptable.
Doctors are in an ethically compromised position which they choose not to address. Drug marketing targets doctors in ways that is not purely informative (and provides many direct and concrete benefits to doctors), and reflects potential profitability of a drug more than a drug's true effectiveness.


There is no body to make rational decisions in our medical system. HMOs or other organizations have a difficulty making rational decisions, because their actions are often viewed as profit vs. patient. There is no market, because people seldom have a choice in their healthcare plan, and it is quite impossible to change the nature of a plan once medical attention is needed.

Market-based alternatives don't mean much as long as consumers are acting rationally -- especially in this case where the "consumer" includes patient, doctor, health provider, and insurer.

Reg

I don't see why reimportation would be bad. Wouldn't price control countries be forced to pay their fair share of R&D or go without the drug? A drug company wouldn't sell its product to a country for such a low price if it could be reimported and prevent the company from recouping costs. Or is there some international patent law that would prevent drug companies from refusing to sell to price control countries.

Also, would it make sense to extend patents more so as to allow drug companies to recoup costs over a longer period?

Anonymous

why not offer prize money for research achievements? the obvious downside is that the gov't is poorly positioned to make a determination as to what medical research is best funded by such a system. but it seems like the fight against certain conditions (AIDS, for example) is going along a predictable path. so why not offer a gov't prize of X dollars to the first team to come up with a drug that does Y (where Y is determined by the appropriate experts) in exchange for waiving all patent rights? perhaps this is, in essence, the same idea as having the gov't buy out the patent. but it seems sensible.

Rob

Would you be in favor of a universal health care system in the United States, where people would not have to pay for medication outside of a government tax?

Could it be said that the idea of the government's buying of patents to help reduce the cost of medication on average would be a step towards universal health care?

Andrew Boysen

Doesn't anyone think it's wrong to extend patents to make the problem of a faulty approval system less costly to drug companies? It seems to me that the approval system should be fixed (or more likely eliminated). An SUV is more dangerous than Vioxx, yet Vioxx is what is pulled from the market. We need more and better information, not a big (mentally disabled) brother making decisions for us. My girlfriend has a rare disease which can be treated with Vioxx. It's so rare that no drug company will EVER develop a medicine for the purpose of treating it. By chance something came out that helped, but now she can't use it. An AIDS or cancer patient may have 6 months to live, and there may be a medicine that has a 50% chance of curing them, and a 50% chance of cutting that life span to 5 months, but the patient will never have the option of taking that medicine.

Not only does our big (mentally disabled) brother do a bad job of getting drugs out there, it does an even worse job of keeping track of drugs that are already out there.

Private entities could do a much better job of protecting the public. It could even be the UL who does the testing - just as nobody would buy Christmas lights without UL approval, nobody would buy a drug without UL approval (unless it was a last ditch effort to stay alive). Consumer watchgroups are also more reliable than the government because they have competition. Profit motive can corrupt government researchers as easily as private researches (with offers of future jobs, per diems, and so on), but when a private group gets corrupted, consumers will turn elsewhere for information. When the government system goes bad, there's nobody else to turn to for information on safety (and it can still keep you from getting competing drugs that might even be safer).

Ron Wright

I just posted this comment to Judge Posner piece. I think this is relevent here too:

****

So right yu are that companies may race to the finish line to claim the prize.

Unfortunately we consumers/patient lack the knowledge to be informed consumers. Everyone has some knowledge of what a car is.

In the field of medicine the consumer has to put their trust in the doctor, the drug companies, and the regulatory system.

However when ethics lapse there can be significant consequences.

See this breaking story on our site:

ANTHRAX VACCINE - Had additive agent that may be injurious to the health of those service people inoculated.

Several days ago I posted and linked to a book review on our site, "Vaccine-A." We've since transferred this piece from the HSPIG Forum Site,
"Book Reviews" to the new HSPIG blog site:

http://www.hspig.org/MT/weblogs-hspig/archives/2004/11/anthrax_vaccine_1.html

HSPIG has a keen interest in things related to bioterrorism and bio-chemweapons both in their use and our response and counter-measures.

The book, Vaccine-A, has far reaching ramifications from the manufacture of such weapons to mounting creditable defenses against their use.

This is something to watch. This story is continuing to evolve.

This is still under the radar of the MSM. The MSM is probably wary of Uncle Sam I suppose. The MSM has been burned badly lately on not objectively reporting the news. One can argue almost that they have markedly been rooting for the enemy.

Mr. Matsumato doesn't appear to be an alarmist and has considerable credentials with a strong research/investigative background. Mr. Matsumoto
is a well respected and experienced investigative journalist both in print and the TV media. Mr. Matsumoto was the Chief Investigative Correspondent for the FOX News Channel and a foreign and national correspondent for the NBC Nightly News. For his other distinctions and awards see his bio at:

http://www.hspig.org/hspig-board-bios-gmatsumoto.htm

This story has the potential to dwarf the Rathergate scandal and could even rival Watergate. This Country is at war and those who would allow this to happen to our brave men and women need to be held accountable for their actions.

Since the original post Tom Barnes, Co-Founder of HSPIG and Persian Gulf War vet - military intel, has talked many times with the author, Mr. Matsumoto.

Mr. Matsumto has agreed to come on the Board of HSPIG. Mr. Matsumoto is staking his professional reputation on his book. As he says,"I took a page
from my old employer's play book at Fox News Channel - 'We Report. You Decide.' I reported; now you decide." Mr. Matsumoto backs up his book with
exhaustive research he has done over the last several years.

Mr. Matsumoto has answered several comments from concerned vets in posts subsequent to the initial article.

In a response on the HSPIG blog, Mr. Matsumoto says:

Dear GulfVet2: I obviously didn't think it was purely coincidental either. The trail of evidence is too complicated for TV, and almost too complicated for newspapers; hence the book. The DOD/FDA stonewalling on this issue - which has been documented by the GAO, Congressman Jack Metcalf, and the House Government Reform Committee - has been so formidable that I felt it necessary to write a book to lay it all out. Even pressure from Congress couldn't pry loose the facts that you've read in VACCINE A.

I took a page from my old employer's play book at Fox News Channel - "We Report. You Decide." I reported; now you decide.

What I reported in VACCINE A, you won't hear from the Department of Defense or the FDA. I think officials from DOD/FDA/NIH - the three federal agencies working in concert to "fast track" the second generation anthrax vaccine with squalene - will continue to stonewall, obfuscate and lie about squalene and its injurious effects until they are forced to testify about it under
oath. With the help of veterans like yourself - the people who arguably needthe most protection from unethical human experimentation - that could
happen.

Mr. Matsumoto


Ron Wright, Moderator
HSPIG Forums Site
www.hspig.org

Paul Rubin

Regarding patents: patents do not only provide an incentive for inventing a drug and getting it approved. They also provide an incentive for further development -- additional testing for new uses, promotional expenditures, etc. Any limiting of patents will also limit future possibilities for the drug.


Some points regarding promotional expenditures:
1. Critics of the industry distinguish between promotion and research. But they are not so different; both are information. Research obtains information about the properties of some chemical. Promotion spreads that information to potential users -- physicians and patients. If users cannot learn about the properties of a drug, then research is useless.

2. No one will advertise generics, because there is no way to recoup the investment. If there is valuable information about some class of drugs, this information must be spread by patent holders. Therefore, claims that advertising leads to substitution of more expensive patented drugs for less expensive generics are misguided. Consumers will not be in a position to learn about the less expensive generics, and so will not buy them. If the drug is useful, then it is hard to criticize promotional expenses that inform users of its benefits.

Lowly Grad Student

---- Some points regarding promotional expenditures:
1. Critics of the industry distinguish between promotion and research. But they are not so different; both are information. Research obtains information about the properties of some chemical. Promotion spreads that information to potential users -- physicians and patients. ----
You are trying to compare the information and knowledge gained by scientific research that has the aim of producing new drugs to the flim-flam campaigns of Madison Avenue. Are you arguing that the information consumers gain from purple-pill ads is the same as the information gained in, say, a clinical trial? The two are simply not even remotely comparable.
--- If users cannot learn about the properties of a drug, then research is useless. ---
That is true, but to argue, again, that Madison Avenue flim-flammery and disingenuous marketing campaigns aimed at rewarding doctors for using particular brands of drugs is a good way to go about providing information to consumers avoids the real problems asymmetric information raises in these markets. A far better system would be to set up a consumer reports for drugs that allows these firms to disengage from the marketing war they all have to engage in.
---- 2. No one will advertise generics, because there is no way to recoup the investment. ---
I disagree. No one advertises generics because the market for competitive drugs approaches being perfectly competitive. The products, aspirin for instance, are undifferentiated and it is difficult to create a stand-alone brand name for such items.
--- If there is valuable information about some class of drugs, this information must be spread by patent holders. Therefore, claims that advertising leads to substitution of more expensive patented drugs for less expensive generics are misguided. Consumers will not be in a position to learn about the less expensive generics, and so will not buy them. If the drug is useful, then it is hard to criticize promotional expenses that inform users of its benefits. ---
That is not the argument against advertising. The argument is that advertising directs firm revenues away from value-adding R&D to rent-seeking battles over market share. This would be unnecessary if information on drugs could be collected and distributed to doctors and patients in a manner that is relatively unbiased which is why I would trust neither an industry consortium nor a government agency to do this. Perhaps a private entity could make money by providing drug cost/efficacy research to interested consumers?

enoch choi

http://home.uchicago.edu/~gbecker/Businessweek/BW/2002/09_16_2002.pdf
is the url that was cut of in your next to last paragraph.

i've posted comments here:
http://www.enochchoi.com/thoughts/archives/001323.html

Vish Subramanian

Becker's idea of having the FDA regulate only safet y - not efficacy - is unlikely to work. It is an invitation to vastly spread the use of homeopathy, acupuncture and other ineffective treatments. Consider the example of "Berkeley Premium Nutraceuticals", in Cincinnati:

http://www.indystar.com/articles/0/196151-9260-223.htm

$200 million a year for selling sugar pills, merely with effective ads!

The current arrangement is not perfect, but beware of alternatives!

Vish

Palooka

Andrew Boysen,

Good points, and I'm sure the difficulty of that problem has hit you particularly hard.

I don't agree that we should abolish medical regulatory structures, but I do agree that many medicines deemed "unsafe" for public use should be available to the public. What is important is that the patient know the potential side-effects, and understand how those side-effects could negatively effect their life.

It doesn't make sense to outright ban any drug. Perhaps Vioxx is not a justified treatment for Arthritis, but would make sense for your gf's rare disease.

At the risk of complicating and worsening the problem, perhaps the FDA could provide limited approval of risky drugs, such as Vioxx.

John Kelsey

One effect of the high cost of getting drugs through the regulatory process (and more fundamentally, the high cost of getting strong evidence about the quality of new drugs) is that anything that can't be patented will almost never get through the process, because nobody can ever recover the cost of doing so. What would be a sensible solution to this problem? On one hand, I can't really see letting someone patent, say, fish oil, just because they spent a lot of money establishing it as an effective treatment for high cholesterol. On the other, it would be nice if *someone* had the incentive to spend money on this sort of thing.

--John

Eric H

I recall reading that a large percentage of marketing costs were in the form of "trial" samples. For anyone who has not been reading the new doctor column in the Wall Street Journal, these samples are frequently used by doctors either as a way to get the patient on a much-needed drug quickly, or as a way to provide medicine to patients who otherwise might not be able to afford it. In other words, a good deal of "marketing" consists of charitable donation, which is exactly what we would expect a gov't-run plan to provide, the difference being that the gov't plan would be involuntary and bureaucrats would replace salesmen.

Regarding people's skeptical views of marketing and market determination of efficacy, why is it that you want to both prohibit the companies from telling us what they have, and for us to determine for ourselves what works best? You are essentially saying that the FDA should hold a monopoly on information. In the absence of such a monopoly, it is reasonable to expect other 3rd party certifiers to take up that role. Think Underwriter's Laboratory or Consumer Reports. At present, no such organization exists because you can't make claims without FDA approval, making independent testing either illegal or redundant depending on whether the 3rd party results agreed with FDA results.

It is also worth considering whether regulatory control of drug marketing is supported by industry. You could expect sugar pills to come under whithering attack by their competitors if such behavior was allowed.

Mike

I was very much struck with the idea of the government buying out patents for important drugs and then releasing them to the public domain. It seems to me that this is similar in some respects to the re-selling of loans, which allows lenders to generate capital for making additional loans.

I have problems with some of the other ideas here:

"I have proposed elsewhere (http://home.uchicago.edu/~gbecker/Businessweek/BW/2002/09_16_2002.pdf )) that the FDA trust patients more, and allow them more freedom to use new drugs by granting approval without the efficacy and randomized stages..."
-- Becker

The phrase, "...trust patients more...", is a good sound bite, but is meaningless. This is not a matter of trust. The overwhelming majority of patients (even the majority of doctors) have neither the access to information nor the expertise to judge whether new drugs are safe and effective. Patients exercising their own judgment has led to the current multi-billion dollar resurgence of the snake oil industry (AKA, "alternative medicine").

"Advertising should not be so roundly denounced. Let us examine what it does. It reaches the intended audience, and informs there is a drug which could improve or even save their life. Is that a bad thing?"
-- Palooka

It is a bad thing when the intended audience is not presented with the information necessary to make that decision. Drugs ads never present such information. (If you disagree with me, please explain how Patrick Stewart reciting poetry provides you with the information necessary to know that Crestor will help your condition.) However, a large proportion (as others have said, perhaps the majority) of what we pay for drugs actually pays for information-free marketing.

Health care is not a market; it is a right. If you are dying of a terminal disease, or even have a chronic disease that "merely" reduces your quality of life, then you will pay any amount of money for relief. This demand is completely inelastic to price (neglecting people who don't have the money to buy the drug and die as a result). As the current situation shows, this leads to no constraint on pricing, just as would be the case in a monopoly. The only solution to this is governmental intervention.

seneca

Only in usa it is possible to find a nobel prize writing in a blog and to find so interesting comments, god save america, i am european and a proud friend of usa.

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