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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Filed Under: biotech, competition, drugs, exclusivity, monopolies, patents, pharma


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  1. identicon
    Mike, 24 Jul 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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