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Home Publications Blogs Beat the Press U.S. Tries to Force India to Accept Medieval Patent Rules

U.S. Tries to Force India to Accept Medieval Patent Rules

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Monday, 30 December 2013 05:42

That would have been a reasonable headline for a NYT article on India's resistance to U.S.-type patent rights on expensive drugs. The focus of the piece is Herceptin, a cancer drug that costs $18,000 for a single round of treatment, which makes it unaffordable to almost anyone suffering from cancer in India. A generic version of this drug would likely cost two or three percent of this price.

As a result of the enormous price difference between patent protected drugs and free market drugs the Indian government is taking a very critical view of many patents. In this case, the manufacturer, Roche Holdings, has decided not to challenge the production of generics in Indian court since it believes it would lose the case.

The piece presents this issue as a problem because the widespread availability of low cost generics in India and elsewhere will reduce the returns to innovation and will mean that drug companies will have less incentive to invest in developing new drugs. While this is true if we rely exclusively on government granted monopolies to finance research, this is far from the only mechanism that could be or is used to finance research.

There are other more modern mechanisms for financing research than this relic from the feudal guild system. For example, Nobel laureate Joe Stiglitz has advocated a prize system whereby innovators are compensated for breakthroughs from a public prize fund and then the patent is placed in the public domain so that the drug can be freely produced as a generic. It is also possible to simply fund the research up front, as is already done to a substantial extent with the $30 billion a year provided to the National Institutes of Health.

If we eliminated monopolies it would both reduce the cost of drugs and also likely lead to better medicine. The enormous mark-ups provided by these government monopolies gives drug companies an incentive to mislead the public about the safety and effectiveness of their drugs. It is a standard practice to conceal or even misrepresent research findings (e.g. Vioxx). This leads to bad health outcomes, the cost of which likely exceeds the money invested in research and development by the drug companies by an order of magnitude.

For these reasons, a piece like this in the NYT should be highlighting the increasing difficulty that the United States and Europe are facing in imposing patent monopolies on prescription drugs in the developing world. It is wrong to imply that there is some inherent tension between affordable drugs and innovation. This tension only arises with the archaic patent system.

 

Comments (8)Add Comment
Why Reservation Prices Set by the State in College Sports are Marxist Commie Lies
written by Last Mover, December 30, 2013 9:15
For example, Nobel laureate Joe Stiglitz has advocated a prize system whereby innovators are compensated for breakthroughs from a public prize fund and then the patent is placed in the public domain so that the drug can be freely produced as a generic. It is also possible to simply fund the research up front, as is already done to a substantial extent with the $30 billion a year provided to the National Institutes of Health.


Actually this is a form of socialism practiced regularly in America known as college sports. Players compete to become winners but receive little or nothing compared to professional sports.

But college players still show up in droves to compete and produce points on the scoreboard, obviously forced by a centralized command and control system of statist state power. And the public loves it evidenced by the showering of monies paid out for such spectacles of marxist communism.

Wake up America. There is no such thing as a "reservation price" that can be set by government at which one is willing to produce voluntarily by competing with others.

Only private monopoly markets can set reservation prices. If free competitive markets set them, or if government sets them in a fashion to mimic what free competitive markets would have set absent market failure, then that's marxist communism, plain and simple.

If India manages to escape medieval patent rules with effective free market competition that actually results in efficiency, marxist communism will spread to places like the Veterans Administration.

The VA pays prices to Big Pharma as part of the socialist power to negotiate price paid with unfair competition by the countervailing monopoly power of government which has already wiped out many blockbuster branded drug and killed incentives to produce more of them.

Is that what you want America? Pharmaceuticals produced at the level of college sports? Where they are practically free at a zero reservation price?

Rather than safe, effective, high quality branded pharmaceuticals only available from true professionals who actually earn their high reservation prices, and therefore can command them like a super star sports player?

Go ahead America. Switch to drugs at the college level and seal your fate forever with marxist communism ... pay the true price ... drugs for which the price is driven to the free market cost of production ... at the reservation price.

You may be a commie but at least you will be healthy because you can afford it again.
Prize system successes
written by MarkJ, December 30, 2013 9:17
We already know that the public funded prize system works exceptionally well. DARPA has successfully used the prize system of development for many years and has spent comparatively little to foster ground breaking technical developments such as autonomously guided vehicles, robots and don't forget ARPANET, the forerunner to today's internet.
...
written by Kat, December 30, 2013 9:31
This conversation changer was worthy of Bill Clinton:
Some health experts say investing in earlier diagnosis of breast cancer and improved testing, surgery and access to radiation therapy is more important than access to expensive drugs. “Chemotherapy is not the major issue for cancer control in India,” said Dr. Richard Sullivan, a professor of cancer policy and global health at King’s Health Partners’ Integrated Cancer Center in London.

How caring! How sensible! Actually, women receiving Herceptin have an aggressive form of cancer that would be little helped by routine screening. They need Herceptin. Period.
Don't I recognize this argument from the entitlement reform debate? It's always either/or. We can spend on greedy seniors or we can have Head Start. We can allow generics or we can spend on radiation treatments (this choice actually makes even less sense). Those are your options.
Emeritus Professor of English
written by H. S. Rockwood III, Ph.D,, December 30, 2013 10:04
My wife, a former chemist with Parke-Davis came up with an idea that might help bring down health costs: ban commercials for medications. Many of these commercials mislead viewers, who pressure doctors to prescribe them, and, of course, commercials increase the price of the products (and probably decrease the taxes paid by the Pharmaceutical companies.
...
written by AlanInAZ, December 30, 2013 1:02
Given the 30 billion per year spent by the NIH, have there been any clinically important drugs come from or inspired by this research over the last two decades?
the mother lode for health care reform
written by Richard Genz, December 30, 2013 1:25
Excellent post. Dean, thanks for hammering on this patent/copyright theme. There's so much money at play. Wish there were dozens of economists and pundits working this territory. Unfortunately, it seems that almost no one is understanding and actively challenging the current regime.

Prof. Rockwood, your wife's idea to ban consumer Rx ads is so good that every other industrial nation except New Zealand and USA has already done so (according to Dr Avorn at Harvard Med School).
NIH matters
written by Melvin Lovewart, December 30, 2013 2:41
Alan in AZ, short answer = yes.

http://www.ascb.org/ascbpost/index.php/ascbpost-home/item/92-why-pharma-needs-the-nih
...
written by watermelonpunch, December 30, 2013 9:16

@ Kat
That quote doesn't even make any logical sense.

Some health experts say investing in earlier diagnosis of breast cancer and improved testing, surgery and access to radiation therapy is more important than access to expensive drugs.


This assumes that early diagnosis and screening would actually prevent cancer. It does not.
In fact, there's nothing that can actually prevent cancer - only reducing the odds of it happening to one degree or another.
Testing & screening, no matter how early, is not going to prevent cancer & the need to treat it.

I mean unless you count - Avoiding Chernobyl/Fukushima Type Radiation Exposure, as a form of prevention. But plenty of people who've never been irradiated get cancer.

Oh... maybe not being born in the first place, if a parent has the BRCA gene...

Yeah, this is ridiculous kind of double talk someone says to take attention away from the fact that what they really mean is only rich people, who can afford to make them rich too, deserve modern effective medical treatments to stay alive.

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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.

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