Pharmaceuticals have improved and extended the lives of millions of people. But the many advances over the past couple of decades haven’t come without controversy, much of it centering on the massive profits the industry makes on blockbuster drugs.
The drug makers say those profits fund the research that produces breakthrough treatments. They warn that with patents expiring on several big-money drugs, their ability to develop new drugs will be severely hampered. Longer-lasting patents, they say, would protect the profits that they need to keep innovative products moving through the pipeline.
Critics, however, question this assumption, and say there is no proof of a link between patent life and innovation. In their view, “drug companies focus on developing the most marketable drugs instead of the most urgently needed medications. So extending patents would serve mainly to boost drug companies’ profits, not to encourage the innovation needed to address the world’s unmet medical needs.”
Shedding further light on this discussion, a recent article in the Wall Street Journal included a debate over why drug companies should have longer patents. Taking the side that drugs should have longer patents was Dr. Bloom, director of chemical and pharmaceutical sciences at the American Council on Science and Health, a health-care education and advocacy group based in New York. Arguing against longer patents was Dr. Torreele, director of the Access to Essential Medicines Initiative of the Open Society Foundation’s Public Health Program, based in New York.
Drug’s Need Longer Patents
The American pharmaceutical industry is seriously ill. And extended patent protection is just the medicine the drug companies need,” Dr. Bloom argued.
Although “Pharmaceutical companies have long been demonized by many politicians and others as heartless behemoths that place profit ahead of people’s well-being,” Dr. Bloom asserted that this perception “couldn’t be more wrong.” He explained that the “profits these companies make on blockbuster medications support the research that produces such breakthroughs. And the scientists working in the labs are fervently committed to finding useful new medicines.”
One problem, however, is that “there are far fewer of those scientists at work than there were 10 years ago, and their companies are in trouble.” Dr. Bloom explained that a “confluence of events in recent years has made drug discovery more difficult, expensive and time consuming. Most important, it has become less profitable, largely because longer development times mean companies have less time left under patents to exclusively market their discoveries.”
Now, the industry faces a financial crisis because of the recent or imminent expiration of the patents on many of its most profitable drugs. “Without extended patent protection for new discoveries,” Dr. Bloom argued that, “the industry won’t be able to fund the current level of research. And the consequences are profound: decreased innovation, fewer new drugs and more job losses.”
While critics and media focus on blockbuster drugs making billions of dollars, Dr. Bloom told people to consider the following: Currently, bringing one new drug to market takes roughly 14 years, at a cost of about $1.3 billion. For every drug that makes it to market, more than 50 other research programs fail. After all that, only two of every 10 newly approved drugs will be profitable. Those profits must fund not only all the research programs that failed, but also all the drugs that are launched but lose money.
When the industry was producing a steady stream of blockbuster drugs, as it did beginning in the 1990s (for example, all the AIDS drugs), the math worked in its favor. But in recent years the numbers have turned against the drug industry, for several reasons.
One reason is that the Food and Drug Administration (FDA) has become more risk-averse in the wake of the 2004 Vioxx debacle. Drug makers are now required to conduct more studies with many more subjects. That adds to costs and stretches out development times. And every year spent in clinical trials equals one year of lost patent coverage.
In 1968, when development time was much shorter than today, most drugs had an effective patent life of about 17 years. Now companies usually have only about 11 years of market exclusivity for their drugs. And this number is expected to continue dropping as development times grow even longer—approaching a point where the costs and risks of development outweigh the rewards and research will stop.
Many of the diseases addressed in the 1990s were simply easier to tackle. Since then, despite increased research spending, fewer breakthrough drugs have been discovered. Difficult conditions such as cancer, Alzheimer’s, Parkinson’s and obesity remain problematic.
Amid all these challenges, the drug industry is losing its financial cushion as patents from the 1990s expire. Since 2006, brand drugs have lost an estimated $60 billion in sales because of patent expirations; by 2015, this figure is projected to rise to $160 billion. This is the so-called patent cliff.
It shouldn’t be surprising, then, that the industry is showing signs of stress. The share prices of the major drug makers have fallen sharply in the past decade, and weakened companies have succumbed to mergers and acquisitions, causing the elimination of 300,000 jobs during this time.
As a result, Dr. Bloom argued that, “Extension of patent life for the most innovative drugs would, at the very least, postpone the rush toward the patent cliff, providing drug companies with extra time to discover the next cycle of new, innovative therapies.”
With U.S.-based drug companies scaling back their research, there will be fewer discoveries to fill the gap and keep new treatments coming to market. Academic researchers are very good at studying the basic biology of a disease, but this is just the very beginning of the discovery process. The lion’s share of the work—progressing from basic biology to an actual drug—requires the expertise and resources that academic and government labs simply don’t have.
While “longer patents would mean that important drugs would remain relatively expensive for a longer time,” Dr. Bloom asserted that, “the expense of new drugs is preferable to not having them at all.” Moreover, the success of patents for drug companies in the past is irrelevant because companies did not face the regulatory and competitive environment of today, especially since generic competition was minimal until the 1980s.
Importantly, Dr. Bloom recognized that, manufacturers of generic drugs contribute nothing to innovation—they are just copycats. Yet they take up to 90% of sales away from the comparable brand-name drugs whose makers risked the time and money to bring breakthrough treatments to market.
Realistically, Dr. Bloom noted that some drugs deserve less patent protection, such as “line extensions—where companies simply tweak existing drugs enough to earn a new patent. Virtually identical to the original compound, these provide little real innovation. When companies are under economic stress, line extensions may become an attractive way to keep revenue flowing, drawing resources away from innovative, more important work.”
To discourage that and to keep drug companies focused instead on innovative treatments, Dr. Bloom asserted that “patents for line extensions should be shortened, perhaps by three years or so, while patents for high-risk, first-in-class drugs and those that address unmet medical needs should be extended significantly—five more years could be a starting point for discussion. (Most drugs now get 20 years of protection from the time a patent application is filed, which is effectively about 11 years after accounting for development time.)”
One alternative that has been suggested is that in order to gain FDA approval, new drugs should have to demonstrate superiority to existing ones. However, Dr. Bloom maintained that “This would be unrealistic because that standard could hardly ever be met in clinical trials—in nearly all cases you can’t tell the real differences between two drugs until they are in the marketplace and being taken by millions of people.”
Ultimately, Dr. Bloom asserted that “A well-planned extension of patent protection, especially for innovative drugs, is both reasonable and necessary to keep what is left of the American pharmaceutical industry healthy enough to continue its crucial work.” In the absence of a remedial measure like patent-life extension, “the industry will continue its decline, resulting in incalculable losses to the U.S. economy and poorer medical care for its citizens. This would be a national disgrace.”
Patents Should Not Be Extended
Dr. Torreele argued that extending patents on pharmaceuticals will “do nothing to increase medical innovation.” To support her claim, she asserted that despite increases in patent duration since the 1980s and an increase in R&D, the number of “new molecular entities”—or totally new drugs—reaching the U.S. market slid from around 45 per year in the late 1990s to only 30 last year, according to FDA. She also asserted that “scientific reviews of new drugs released between 1996 and 2006 show that very few represented therapeutic innovation; most were no better than existing products or were actually inferior.”
The problem, Dr. Torreele maintained, “is that drug companies are more focused on developing the drugs with the greatest market potential than they are on developing truly innovative treatments that address critical health needs. And the patent system encourages that approach.” Dr. Torreele pointed to the line extension patents as an example of how real innovations in patents has decreased and that “companies can secure a 20-year monopoly by either making minor changes to an existing drug or inventing a totally new drug—so why take the risk of failure associated with the latter?”
Dr. Torreele argued that, “It’s perfectly possible to achieve a major medical breakthrough with a product that isn’t patented, while the fact of obtaining a patent doesn’t say anything about a compound’s actual medical value.” Moreover, the patent office isn’t equipped to judge therapeutic benefit.
Instead, she argued that FDA require “new medicines to show a therapeutic benefit over existing treatments before giving market approval.” Without such a prerequisite, she argued that companies will continue to focus on pharmaceuticals with the highest market potential, rather than innovating to address medical need.
Dr. Torreele also maintained that extending patent protection on “high-priced drugs” would only worsen costs and would be contrary to the purpose of the patent system—to benefit society through innovation. Dr. Torreele argued noted that, “while patent monopolies are powerful tools to maximize return on investment, they fail to provide effective incentives to encourage innovation that addresses priority health needs. Extending patents in this broken innovation model will merely increase sales of those same market-friendly drugs.”
Dr. Torreele also maintained that tougher FDA requirements does not justify extending patents because “the FDA is fulfilling its primary mandate by requiring more rigorous studies to document the safety of new medicines in the wake of cases like the Vioxx disaster.”
Instead of patent extension, Dr. Torreele said America should institute a regulatory environment that prioritizes health innovation instead of market opportunities, by making approval of new drugs contingent on therapeutic advances that address unmet health needs. In parallel, “we should mobilize public and private resources to finance research and development independently of patents, so that we can stop relying on pharmaceutical sales as the primary source of funding for research. A pharmaceutical business model based on these premises would ensure that research on critical health needs is prioritized, and that medicines resulting from this research are affordable.”