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Home Publications Blogs Beat the Press Can We Talk About Drug Patents?

Can We Talk About Drug Patents?

Wednesday, 25 June 2014 04:55

The NYT had a short editorial discussing the issues raised by the refusal of insurance companies to pay for many expensive drugs of questionable usefulness. It would have been useful to point out the reason that drug prices are high and that drug companies mislead the public about the degree of their effectiveness. 

If the government did not grant patent monopolies, most of these drugs would sell for less than 10 percent of their patent protected prices and possibly less than one percent. This would make their affordability a non-issue in almost all cases. It would also take away the incentive for drug companies to mislead the public about the effectiveness and safety of their drugs. 

There are alternatives to patent support funding for research, such as the $30 billion in direct funding that the government commits now through the National Institutes of Health. While this funding mostly goes for more basic research, there is nothing except the political power of the pharmaceutical industry that prevents the funding from being used for the development and clinical testing of drugs. If the government were to increase its funding then all drugs developed through this mechanism could be sold as generics and the research findings immediately made public. This way the results would be accessible to doctors, patients, and other researchers.

Comments (5)Add Comment
written by s ken brown, June 25, 2014 6:36
I'm very encouraged by how social media is reducing the rent-seeker's hold on progress. It's just a matter of time till medical research etc. becomes utilitarian. IMO Thad Cochran's primary victory is an example of social media at work for the greater good (Cochran's not my guy but McDaniels is plain dangerous). As we see positively how status quo organizations and enemies of progress act in their own interests to the devastating detriment of the greater good, there will be a correction.
Big Government Now, Big Government Tomorrow, Big Government Forever ...
written by Last Mover, June 25, 2014 7:01

Another big commie lie against free market fundamentalists everywhere who understand why big government interference is essential for free markets to exist.

It's simple. If you want to produce more of something price it higher. If you can't succeed then use the power of government to do it, as with patents for example.

It's the only way for America to recover from the socialism that has destroyed it. As George Wallace would say, big government now, big government tomorrow, big government forever.

Mississippi is not burning America. It just got singed a little by a free market fundamentalist who wanted too much government.
its all a lie
written by djb, June 25, 2014 7:19
see link below

goverment pays for majority of research costs for new drugs, plus most of the basic science it is based on

also, pharmaceutical corporations totally exagerate about how much research actually costs them per drug

so even in the current funding conditions they are way overcharging

What about Bayh-Dole?
written by Benedict@Large, June 25, 2014 3:01
There's the little matter of the Bayh-Dole Act, which has completely privatized the results of government-funded research in pharmaceuticals. This act creates drug profits to the tune of $100M per drug in some cases. No one in Congress is going to even try to tamper with that kind of wealth transfer system.
Phar-myth-y (e.g. prescription drugs are now the 4th leading cause of death)
written by Squeezed Turnip, June 26, 2014 2:45
This is a good resource if you want to a one-stop shop for the shenanigans big pharma has wrought.

From that site:



1."Most new drugs are 'life-saving' and must be rushed to patients who need them."

a. Most new drugs not for life-threatening conditions. Perhaps 10 percent.

b. Independent reviewers judge about 90% new drug products as little or no better against clinical measures of improvement or less harm. Consistent pattern for 40 yrs

c. Therefore about 1% new drugs would be “life-saving.” (10% x 10% = 1%)

d. Most R&D spent on developing minor variations. Most marketing spent on them.

e. Inverse Benefit Law of widespread marketing that dilutes benefits and proliferates risks of harms.

2."The FDA screens out unsafe and ineffective drugs. Approved drugs are safe and effective."

a.Better than placebo means new drugs may be less effective than existing ones. No useful evidence for prescribing or how new drug compares to others.

b. Non-inferior means new drugs are no worse than -20% the comparator drug. No useful evidence on how superior new drugs are, if they are.

c.Evidence on risks of harms in minimal. From company trials designed to minimize evidence of harms.

d.All evidence on a carefully chosen, ideal population most likely to benefit and not have adverse reactions. Real patients and real patterns of use usually less beneficial and more harmful.

e.Since 90% of new drug products are little or no better, they cannot be safe.

f.Aside from in-class choice, are the FDA and EMA flooding the market with ineffective, unsafe drugs?

3.An epidemic of harmful side effects (with few offsetting benefits).

a.the 4th leading cause of death. About 113,000 deaths just in hospitalized patients.

b.About 2.5 million serious reactions and 1.7 million hospitalizations.

c.About 50 million adverse reactions, mostly mild but impair performance & judgment

d.A major cause of falls, accidents, anti-social behaviors.

e.Risks of harm increase through cascade effect and take multiple drugs.

f.Harmful side effects generate more sales.

4.Market is flooded with new drug products of little or no advantage that consume 80% of increased pharmaceutical costs. Harmful side effects generate more sales.

a. A self-reinforcing syndrome: high prices, protected by government from free market competition, fund the development of these drugs and their costly marketing, which generate more revenues to develop more of these drugs.

5.“US prices have to be high to recover $1.7 billion in R&D costs per new drug and recover what lower prices abroad do not recover.”

a.The $1.7 billion figure is inflated from unverifiable R&D costs which companies have strong incentives to inflate from the start. Half the “costs” are estimated profits that companies would have made if they had not invested in R&D for new products vital for their survival. Another half are costs subsidized by taxpayers. Then the $1.7 billion estimate is based on the most costly 20 percent of new drugs but attributed to all drugs – a three-fold distortion. Just these three factors mean you divide by 12 to get $0.14 billion. Another third of the total comes from backing in a high amount for the unknown cost of discovery. And there’s more… See “Demythologizing the high costs…”

b.The BMJ article “Foreign free riders…” drew on data from the National Science Foundation, companies and government to conclude that companies earn back all expenses and make a profit at Canadian and European prices. US high prices simply make extra profits from government protections from free-market competition.

c.The USA is the primary market where drug companies raise prices each year on last year’s models because they are protected from free-market competition.

d.Pharmaceutical companies will make solid profits under bundled payments that rein in high prices.

e.Cancer drugs should be relatively cheap. First, most R&D is paid for by others, not companies. Second, trials are smaller and shorter than for other drugs. Third, in most cases we have no verifiable evidence that manufacturing costs are higher. Why, then, are cancer drugs priced higher than statin drugs? Most cancer drugs cause serious harms and provide little additional benefit, with exceptions.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.