Patents Not Enough Of A Monopoly, According To Biotech Firms

from the say-what? dept

Apparently, a bunch of big biotech firms feel that the patent monopolies they already have over certain drugs aren't enough, and they are demanding Congress enact laws that also stamp out any competition from similar drugs (known, back here in the real world, as competitors). You would think that after centuries of understanding how bad monopolies are for the market that the gov't wouldn't kowtow and simply hand over such things -- but it is. Of course, the biotech firms already have patents, so it's questionable why they also need an additional gov't granted monopoly period to block out "biosimilar" drugs, other than the fact that they don't like competition.

They claim, of course, that they need this exclusivity to recoup their costs in developing the drug. However, the deeper you look at the details, the less true that really is in practice. Much of the really core biotech work is done under gov't grants anyway, and often at research institutes. These private firms pick up the trail later in the game in a lot of cases -- but still get full patent rights. The actual cost of developing these things has been massively overstated, often lumping in marketing costs to R&D. It is true that clinical trials are crazy expensive and a huge burden on biotech and pharma companies, but that's a separate issue. There are numerous proposals about ways to take the clinical trial burden expense away from pharma. Lumping those mandatory gov't induced expenses into basic R&D is misleading. Furthermore, even in the face of competition, time and time and time again, we've seen that the original provider still commands a large and noticeable premium, from which it can easily recoup its costs. This is nothing more than blatant monopoly rents with a Congress too clueless about basic economics to resist.


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  1.  
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    bikey, Jul 24th, 2009 @ 1:08am

    As long as lobbies determine laws, deep pockets like pharma will have their way with legislators. It's not rocket science. Yo, consumer (formerly 'citizen'): if you were the concern, you would have health insurance.

     

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    Marcel de Jong (profile), Jul 24th, 2009 @ 1:35am

    Competition is bad m'kay

    because it makes us lower our prices, and we can't have that. We want to be able to pay off our 5th house in Malibu and our third Mercedes.[/joke]

     

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  3.  
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    NullOp, Jul 24th, 2009 @ 3:08am

    Purpose of congress...

    Its sad that some companies believe that congress exists to pass laws that make/keep them rich. The really sad part is congress can often be convinced, bought, creating a monopoly is the right thing to do.

     

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    Mike, Jul 24th, 2009 @ 4:56am

    This is a bit misleading

    I love Techdirt and always really appreciate the high quality of posts here, I'm disappointed in this one because it really distorts the issue here. In full disclosure: I spent over 8 years working in early-stage R&D in one of the larger pharmas. I've seen how they work from the inside and while I'll be the first to admit the industry has its share of problems, the policy debate is not well served when people are not well well informed. That said, let me be clear that I agree that the present patent and IP landscape for drugs is defective and I'm open to new ideas to spur innovation. My issues with this post are some of the other assumptions and generalizations:

    1) "Patent monopolies they already have over certain drugs aren't enough, and they are demanding Congress enact laws that also stamp out any competition from similar drugs (known, back here in the real world, as competitors)"

    This is a huge over-simplification. What is at issue here are a class of drugs called "biologics". Most drugs people are accustomed to are made through chemical synthesis and are often collectively called "small molecule" drugs. For the most part, precisely identical versions of small molecule drugs can be made easily because the chemical structure of drugs must be made known. The FDA recognizes this and doesn't require generic companies to show their version is effective, only that it is identical to the existing, approved drug. This is completely appropriate. The issue with generic versions of biologics is that you can't demonstrate you have made the same drug. Only that you have made something sorta, kinda like the same drug. The reason is that these are complex drugs made in a very convoluted process that involves living things. They may be made by inserting genes into cell cultures and the cultures are coaxed into producing the molecule. The molecule is frequently some sort of protein. Proteins are funny things, two labs can express a protein and get and end result with completely different properties and never figure out why. It's more like cooking than it is chemistry. The end result might be similar, but sometimes the dish just doesn't taste the same as it did the last time. In the case of drugs, it may flat out not work at all, or have some nasty side effect the original doesn't have. This is why many in the industry are very much in favor of requiring the biosimilars to go through clinical trials (see below for more on that). Recent legal rulings make the original drug manufacturer liable if someone is injured by a generic version of the drug (if the injury is an inherent property of the molecule). If a court were to extend that to biosimilars, there would be a potentially massive liability. Now, as to the intellectual property issues, exclusivity of patents, etc... I'm happy to concede that it's crazy for companies to get too much exclusivity for drugs. Having seen this from the inside, hearing the thump of generic footsteps as you approach a patent cliff is an excellent motivator. However, the high level of regulation and liability associated with drugs makes them different from something like a computer. So, I think there's probably a minimum amount of exclusivity that can lead to optimal competition, but it's hard to know what that time period is.

    2) "They claim, of course, that they need this exclusivity to recoup their costs in developing the drug. However, the deeper you look at the details, the less true that really is in practice. Much of the really core biotech work is done under gov't grants anyway, and often at research institutes."

    This is a meme that has persisted for quite a while and it comes from a naive view of what happens in drug development. Yes, it's true, drug research is based on basic biological research, often done in research institutes. However, so is pretty much all scientific research. This is one reason why the government funds basic research. It's supposed to spur new avenues of research that can lead to economic development. That aside, finding a starting point for a place where a drug MIGHT work is a tiny part of the puzzle. Coming up with a chemical entity that does what you want and doesn't kill the patient is the hard part. I'll defer to chemist blogger Derek Lowe on the details of this because he has a truly exceptional piece on this topic: http://pipeline.corante.com/archives/2004/09/09/how_it_really_works.php

    3)"It is true that clinical trials are crazy expensive and a huge burden on biotech and pharma companies, but that's a separate issue. There are numerous proposals about ways to take the clinical trial burden expense away from pharma. Lumping those mandatory gov't induced expenses into basic R&D is misleading. "

    This is a pretty egregious misrepresentation. Clinical trials aren't just some trivial bureaucratic speed bump on the way to market. Most drugs that go into clinical trials fail miserably. How much depends on the disease area. Cancer is particularly brutal, which if memory serves, has a failure rate of >90%. The clinical trial is a SCIENTIFIC process designed to show whether or not a drug is effective and safe. The ONLY way to know for CERTAIN is to give a drug to people. And even then, as it turns out, sometimes you're still not sure (see: Vioxx, Avandia). There is no way around this fact currently. You just can't know what a drug is going to do in the human body. That doesn't mean drug companies don't try. In fact, that's where the bulk of their actual scientific research goes: trying to predict and enhance a compound's odds of "making it". It's horribly complex and all the model systems we have from computer-aided tools to good old mice and rats are laughably primitive compared to what we really need. Biology is freakishly complicated and science is still playing catch-up here. I frequently sat in rooms with well-respected, top notch biologists and clinicians staring at data trying to figure out what it meant. On more than one occasion, I found myself depressed on how little we actually know about biology.

     

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    ..., Jul 24th, 2009 @ 5:09am

    Just say no to drugs

     

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    toastiejoe, Jul 24th, 2009 @ 5:56am

    Re: This is a bit misleading

    Agree completely with this post. As someone dependent on biologics for a reasonable life, at great cost, there is nothing I'd like better than more players helping reduce costs - but this must be done with proper safety and efficacy tests. That doesn't seem possible without clinical trials.

     

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    ChurchHatesTucker (profile), Jul 24th, 2009 @ 6:36am

    Re: This is a bit misleading

    "The issue with generic versions of biologics is that you can't demonstrate you have made the same drug. Only that you have made something sorta, kinda like the same drug. "

    I must be missing something. How does the original company know that *they* are making the same drug each day, then?

     

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  8.  
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    toastiejoe, Jul 24th, 2009 @ 6:51am

    Re: Re: This is a bit misleading

    "I must be missing something. How does the original company know that *they* are making the same drug each day, then?"

    That's confusing knowing if you have copied correctly with knowing you have a process that works consistently. The point was that getting to that process is extremely difficult. Once you have a process that's consistent, the question then is, does the stuff do what it's supposed to?

     

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    Chronno S. Trigger (profile), Jul 24th, 2009 @ 6:52am

    Re: Re: This is a bit misleading

    Reading threw the articles, they don't say anything about removing clinical trials for the similar drugs, in fact one part speaks of increasing them. What the article is about is removing those similar drugs entirely for anywhere between 7-15 years. So now instead of having two or more similar drugs that have both gone threw the FDA trials you now have one original. What will stop companies from charging $200,000 a year for the first 7-15 years instead of the $50,000 they charge now?

     

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    toastiejoe, Jul 24th, 2009 @ 7:00am

    Main post misses the point

    MM's basic post missed the point. This legislation is an attempt to provide a path that does not exist today, to allow biologic follow-ons. The sides in the debate are those that want this process with no holds barred, those that want to ensure the end product is effective and safe, and those that oppose it from self-interest. For once, Mike miss read the issue.

     

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    ChurchHatesTucker (profile), Jul 24th, 2009 @ 7:35am

    Re: Re: Re: This is a bit misleading

    "Once you have a process that's consistent, the question then is, does the stuff do what it's supposed to?"

    So how do you do quality control? That seems to be placing a hell of a lot of faith in the process.

     

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  12.  
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    Wolfy, Jul 24th, 2009 @ 8:06am

    Someone made the comment on one of the other stories today, that it all boils down to "the Corporate raping of America"... after a glance at the topics today,it seems that this is the common thread in almost all of the stories on this site. We should be trying to re-educate top level execs and shareholders that there is a point when you have enough money. If Corporate culture doesn't change, they will suck the last drops of "life-blood" from the economy, and we'll end up being a third-world banana republic, complete with bribe-able politicians... oh, wait... we have those already.

     

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  13.  
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    staff1, Jul 24th, 2009 @ 9:10am

    stop the shilling!!!

    "You would think that after centuries of understanding how bad monopolies are for the market..."

    Normally monopolies are bad for the market. However, patents are granted as incentive for firms to innovate. The problem is that if you spend millions to create a new product or process with no patent protection, then anyone can copy your invention and beat you out of the market you created. That's why we have patents. Simple enough, but not simple enough for you.

     

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  14.  
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    Mike Masnick (profile), Jul 24th, 2009 @ 12:35pm

    Re: This is a bit misleading

    Thanks for the long and detailed comment. I think it provides some great additional info, but I want to take issue with one thing you said:

    This is a pretty egregious misrepresentation. Clinical trials aren't just some trivial bureaucratic speed bump on the way to market.

    I believe you're actually misreading what I wrote as well. I did not say that clinical trials weren't *important*. I agree that they're critically important. I'm just saying they're a gov't mandate and they put that mandate on the companies itself. That's a bad way to do it. I'm suggesting that there are better ways to handle clinical trials that are both safer and more efficient.

     

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  15.  
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    Mike Masnick (profile), Jul 24th, 2009 @ 1:00pm

    Re: stop the shilling!!!

    Normally monopolies are bad for the market. However, patents are granted as incentive for firms to innovate.

    Right. But can you explain why normal economics suddenly goes out the window for patents?

    The reason patents were put in place is exactly what you say: to create incentive for firms to innovate. The problem is that the evidence (dozens of studies) show that patents do not actually increase incentives to innovate.

    The problem is that if you spend millions to create a new product or process with no patent protection, then anyone can copy your invention and beat you out of the market you created.

    That's the theory. The reality is quite different. I like to live in the real world.

     

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  16.  
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    Anonymous Coward, Jul 24th, 2009 @ 3:05pm

    Re: Re: Re: This is a bit misleading

    Q. "I must be missing something. How does the original company know that *they* are making the same drug each day, then?"

    A. That's confusing knowing if you have copied correctly with knowing you have a process that works consistently. The point was that getting to that process is extremely difficult. Once you have a process that's consistent, the question then is, does the stuff do what it's supposed to?


    That did not actually answer the question and brings up more. FDA only approves the medicine and not the process or variation of one, so again, how is it any different for company creating the original drug or the company making a copy of it?

     

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  17.  
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    Lawrence D'Oliveiro, Jul 24th, 2009 @ 6:10pm

    Re: Who is being "a bit misleading"?

    Mike wrote:

    The issue with generic versions of biologics is that you can't demonstrate you have made the same drug. Only that you have made something sorta, kinda like the same drug.

    So why should a patent on the original drug also be able to stifle competition from “something sorta, kinda like the same drug”, then? That’s the point at issue here.

     

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  18.  
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    CleverName, Jul 25th, 2009 @ 12:03pm

    Re: stop the shilling!!!

    When I see your "stop the shilling" posts I am reminded of the person under the covers screaming "leave britney alone".

    Weird, but funny.

     

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  19.  
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    Josh K, Jul 26th, 2009 @ 10:56pm

    Strength of Patents

    I do not think that biotech companies are entitled to a special method of protecting their investments. They should work within the scope of the current system and create more unique methods to maximize the effectiveness of their patents. Stronger patents ensure a healthy patent system and encourages innovation.

    Also, they should work to avoid patent litigation which ends up costing them almost as much, if not more, than their R&D. For more on patent litigation see, http://www.generalpatent.com/patent-litigation

     

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