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Home Publications Blogs Beat the Press New Drugs Competing With Sovaldi Is Evidence of the Inefficiency of the Patent System

New Drugs Competing With Sovaldi Is Evidence of the Inefficiency of the Patent System

Sunday, 03 August 2014 08:35

The NYT tells us the good news on the cost of giving people Sovaldi for treating Hepatitis C. First, the annual costs are likely to fall in the years ahead as the backlog of people with the disease are cured and the numbers needing treatment declines sharply. Second, new effective drugs will come on the market and compete with Sovaldi, driving the price down.

In a context where the government gives Savaldi a patent monopoly it is good to have multiple drugs that can provide competition. However from the standpoint of the efficiency of the drug development process this implies an enormous amount of waste.

Once an effective treatment for Hepatitis C has been developed, there is little medical benefit in having a second or third effective treatment. The resources to develop these alternatives to Sovaldi could have been much better utilized researching treatments for diseases which do not presently have a cure. However the incentives provided by the massive patent rents being earned by Gilead Sciences (the patent holder for Sovaldi) give a huge incentive to other companies to carry through duplicative research. If anyone cared about efficiency in the health care system this point would be widely publicized.

Comments (9)Add Comment
Competition is Not Wasteful When It Comes from the Consumption Side
written by Last Mover, August 03, 2014 1:50

Don't forget about competition from the consumption side. Remember how seniors became adept getting past the donut hole by taking partial doses of a drug to stretch them out?

Some got really skilled at this and set up a cottage industry of pill stretchers. It's win-win. They are still employed and bringing down the cost of drugs as well with a low tech solution.

Word is out the best ones can slice a single $1K Sovaldi pill into a 3-month treatment regimen. Patients with Sovaldi prescriptions are getting rich from reselling their pills as they keep only one pill for themselves, which also knocks out the backlog of patients in no time.

Now that's innovation America. We can thank Big Pharma for the patents that provided the incentives to cannibalize itself with this wonderful idea.
written by AlanInAZ, August 03, 2014 5:39
Sovaldi is not a perfect treatment. Cure rates during the trials varied from 50% to 90%. Side effects are greater than we are led of believe by the hype. The next generation of treatments due out soon will be better and provide higher cure rates for a wider set of genotypes. Dean Baker is off base with his conjecture that a government program would have been so prescient years ago that they could predict the molecule that turns out be the wonder pill. Bristol Myers thought they had the wonder drug when they bought Inhibitex - of course the government researchers would have have known better.
Do you have a point, AlanInAz?
written by ifthethunderdontgetya™³²®©, August 03, 2014 5:45
Private drug companies try to create drugs and fail.

So therefore, would (and has) the government.

But there's no reason to think that private companies are innately able to do it better (and cheaper), except for followers of the Church of Ayn Rand.

The same goes for our private health insurance system versus single payer.
written by AlanInAZ, August 03, 2014 6:50
@ ifthethunderdontgetya™³²®©

One of my points is that Dean Baker's claim that there is little benefit from additional treatments [now in trials] beyond Sovaldi is wrong. It is the wrong example to criticize me-too drugs. Many patients will benefit from the next generation of treatments. An objective observer would say that this is one instance of the patent system working reasonably well as an innovation incentive. Long term costs will be way down with an array of effective treatments. I think the drug companies are a nasty bunch but this is a bad example to prove it.
I don't agree
written by ifthethunderdontgetya™³²®©, August 03, 2014 7:38
People would benefit more if Sovaldi were cheaper.

And if less of the vast amounts of money we spend on drug research, health insurance, and other aspects of our for-profit health care system were devoted to actual health care and not bottom lines (marketing, lawyers, paying doctors to recommend the expensive drugs, etc).

Other countries do it that way. But for some reason (lobbyists, corporate payola to our politicians, ad dollars for our corporate press), it can't happen here.
Effective drugs
written by Squeezed Turnip, August 03, 2014 9:59
Aspiring is cheap. So, after the patent expirations, are some other non-steroidal anti-inflamatories, such as tylenol and ibuprofen. Aspirin had its drawback as an anti-coagulant, so some patients were still in need of alternative therapies, depending on a variety of factors. Aspirin wasn't always effective nor always appropriate. Hence the arising of other anti-steroidals, which attempted to compete with aspirin as pain reliever of choice, but that could only happen when the cost came down to the level of the unpatented aspirin.

I'm not up to speed yet with what the side-effects of Sovaldi are, so maybe there is indeed some room for improvements or me-too competitors. But not only will they have to do it cheaper than Sovaldi's protected price, but they would have a shorter window to hold their protected price (once the Sovaldi patent runs out, then there will be cheap competitors everywhere), so they better have something to show for it, and it's not clear what that extra would be. With ibuprofen and tylenol, there were clear situations that they offered something in situations (any surgery) where aspirin couldn't be used.
A Bit Too Much Pharmaceutical P.R. Spin....
written by Aaron, August 03, 2014 10:47
There is a distinct difference between the posts I see to these Sovaldi threads, and those I usually see on this blog, leading me to suspect that we have some pharmaceutial company P.R. workers following Baker's posts.

Yes, certainly, there can be improvements as additional "me too" drugs come on the market, but let's be honest about it: The primary purpose drug companies develop "me too" drugs is not to find small, incremental improvements. The primary purpose is to chase the huge revenues that can be generated by a blockbuster. Pharmaceutical companies are also very much aware of the benefits of oligopoly pricing, so you can't count on competition to drive down the price of drugs that remain under patent -- and you can count on pharmaceutical companies to play games to try to extend the lives of their patents and to beat back generics with expensive lawsuits in order to pad out their profits for a few more years.

The notion that "stretchers" magically overcome the flaws in the market by helping people take smaller-than-prescribed doses of their medication, or by selling medications that have been cut to the point that they may be ineffective -- if they even include the pharmaceutical that somebody hopes they are buying is... unconvincing, even before we examine the legality of such drug sales. As should go without saying, buying the same drug overseas at a much lower price then importing it for use in the U.S. would make much more sense.
written by AlanInAZ, August 04, 2014 8:07

company P.R. workers following Baker's posts

I am flattered that you think some company might pay me for my opinions. I am 10 years retired and have no connection to any company. One family member aged 86 has hep C and I decided to learn a bit about the drug and its development. I read the stories on forums of people undergoing treatment, and as usual, the side effects are worse than reported by drug company PR. Also, the drug doesn't work so well for some genotypes. The development of the so called me-too drugs was started many years ago - long before they could be called me-too.
silly talk
written by pete, August 04, 2014 9:33
Look, all our bodies are different and respond differently to different drugs. When you guys get older you will find that there is negotiation with doctors, and trial and error, regarding drugs and dosage, not simply Symptom X => drug Y. These drugs are not competing like Toyota vs. Honda. I am doing fine on two older drugs, totalling $2 a month! The real competition is in the generic market. Informed consumers can make choices in collaboration with their doctors, and if there is skin in the game, can choose least cost alternatives, even if some are not covered by patents anymore.

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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.