The classic argument goes that pharmaceutical patents encourage the development of new drugs and then reward such innovation by temporarily allowing the drug to have the market all to itself. It is the carrot that keeps us going forward.
Yet, this model of how the pharmaceutical industry works is beginning to seem like a fairytale.
In reality, poor countries are struggling to afford patented drugs, drugs that actually improve on their predecessors are painfully slow in coming, and the whole thing is painted over by billions of dollars spent on promotion.
Where the money really goes
A study published in January 2008 in the journal PLoS Medicine found that US pharmaceutical companies are spending double on marketing what they are spending on the research and development of new drugs. An estimated 57.5 billion dollars was spent on drug promotion in 2004, while 31.5 billion dollars was spent on industrial research and development.
Though some would claim the imbalance is not this extreme, the findings correspond closely with earlier independent estimates – most notably data presented in 2001 by the consumer health organisation Families USA.
Faced with statistics such as these, the argument that patents are needed to sustain new research begins to unravel. If anything, patents are needed to fund the promotion of medicines.
It is worth taking a step back and asking what the role of promotion is in medicine. After all, you wouldn't want your doctor to prescribe a pill just because the drug's maker sent him or her some samples, or paid for a ticket to an overseas conference. As a patient, you want your doctor to write prescriptions based solely on scientific, evidence-based grounds.
A recent report from the UK's Public Accounts Committee claims that one in five UK doctors are more influenced by drug company reps than they are by official advisors. As a result, The Guardian newspaper reported, the UK's National Health Service spends more than 200 million pounds per year more on drugs than is necessary.
So-called "me-too" medicines are a perfect example of how marketing muscle can override actual benefit to patients. "Me-too" drugs are new medicines that differ only marginally from a drug that is already on the market, but is patented and marketed as a new drug.
In many such cases, the "new" drug doesn't offer any advantages over the older drug even though it is newly patented and significantly more expensive. This "new" drug is then the subject of a massive marketing campaign aimed at getting doctors to prescribe it.
Probably the most widely quoted example of this kind of thing is the pharmaceutical company AstraZeneca marketing of their heartburn drug Nexium. Nexium is virtually identical to an older AstraZeneca drug called Prilosec and has not convincingly been shown to be any more effective than that drug.
However, since the patent on Prilosec expired in 2001, AstraZeneca has spent a fortune on promoting Nexium - which is still under patent – as being superior to Prilosec. According to a study published in the New England Journal of Medicine, Nexium was the most heavily direct-to-customer marketed drug in the US in 2005.
In response to this phenomenon, it has been suggested that only drugs that significantly improve upon previous drugs, or offer significant cost-savings, should be eligible for approval by regulatory authorities such as the US Food and Drug Administration. At the moment though, outperforming placebo is good enough for the FDA.
According to the authors of the PLoS Medicine article, their paper "provides an important argument to petition in favor of transforming the workings of the industry in the direction of more research and less promotion."
Yet, even though severe restrictions on drug promotion seem to be an obvious solution, it remains unlikely that significant regulatory changes will be made any time soon.
Patents failing the poor?
Whereas the debate about patents is a global one, it is particularly relevant in developing countries such as South Africa, where we are faced with massive public health problems.
A study published in the journal Applied Economics found that prices of antiretroviral drugs are significantly lower in countries where pharmaceutical countries cannot apply for patents. "We find that on average cocktail therapies are more expensive when they include big pharma-licensed brand products," the authors wrote in their conclusion.
An estimated 64c in every Rand spent on antiretroviral drugs in South Africa is spent on the first-line HIV drug Efavirenz. While Sonke Pharmaceuticals claims they can sell Efavirenz at 20% less than the patent holder MSD/Merck is currently charging the South African government, they are barred from doing so by MSD/Merck's patent. Read a more detailed account of this case here.
The available tools
Developing countries do, however, have the option to grant compulsory licenses. In such cases generic manufacturers are allowed to sell the drug in question irrespective of whether the patent holder approves or not.
According to James Love, Director of the Consumer Project on Technology (CPTech), "developing countries should avoid granting patents on trivial innovations, or second uses of products, and make liberal use of compulsory licensing for the patents they actually grant."
Apart from Brazil and Thailand though, few countries have exercised their right to award compulsory licenses.
Apart from compulsory licenses, "the solution is price discrimination with the existing intellectual property rights," says Dr Joan-Ramon Borrell of the University of Barcelona.
"Market segmentation and discounts for products in developing countries should make products already discovered and developed available worldwide. At the same time, those programmes should be put in place without hindering the incentives for further research in the future. Many economists support price discrimination as a welfare-enhancing device," Borrell said.
Tweaking the system
Whereas some suggest wholesale changes to the patent system, some minor changes may nevertheless make a major difference.
The period for which patents are granted is one such consideration. Today, patents are granted for as much as 20 years. According to figures quoted by Marcia Angell, writing in the New York Review of Books, "the effective patent life of brand-name drugs increased from about eight years in 1980 to about 14 years in 2000."
It is thought that this rise is in large due to the growing power of the pharmaceutical lobby.
Prizes not patents
One increasingly popular alternative to the current patent system is the idea of so-called prize funds. In an article published in the British Medical Journal, the Nobel prize-winning economist Professor Joseph Stiglitz of Columbia University in New York questions whether patents really do spur innovation.
According to Stiglitz, prize funds will be much more effective than patents in meeting public health needs. Such funds would give large rewards for cures or vaccines for diseases such as malaria that affect millions, and smaller rewards for drugs that are similar to existing ones, with perhaps slightly different side effects.
"The intellectual property would be available to generic drug companies. The power of competitive markets would ensure a wide distribution at the lowest possible price, unlike the current system, which uses monopoly power, with its high prices and limited usage," he writes.
In 2007 such legislation was tabled in the US by senator Bernie Sanders. According to Sanders' blog, such legislation would "eliminate market exclusivity for new drugs, but give developers large cash rewards from a "Medical Innovation Prize Fund" when products improved health outcomes."
"The medical prize fund would ensure that we make the best possible use of whatever knowledge we acquire, rather than hoarding it and limiting usage to those who can afford it," writes Stiglitz.
Creating a market
Another possibility is so-called advance market commitments, an idea promoted by the Harvard economist Michael Kremer.
The idea is that countries or donors make legally binding commitments to buy medicines before they are actually developed. This will then function as a kind of carrot, or "pull mechanism" to entice pharmaceutical companies to invest in researching the required medicine.
As explained by the magazine Scientific American, "a donor would commit to paying a certain sum, a few hundred million dollars up to perhaps $5 billion, on delivery of a viable vaccine. Once a vaccine is manufactured, the donor would purchase it at a high price per dose until the sum is exhausted; thereafter, the company would be obligated to supply the vaccine to poor countries at a low price."
This mechanism is thought to be particularly well-suited to stimulating research into vaccines for diseases associated with developing nations – such as HIV/Aids and malaria. Patents have so far proved to be an inadequate stimulus for such research.
Either here or there
Another mechanism, promoted by associate professor Jean O. Lanjouw of the University of California, Berkeley, involves forcing pharmaceutical companies to limit their patents to certain countries.
According to Lanjouw the so-called foreign filing mechanism effectively requires patent owners to choose either protection in the rich countries, or protection in the poor countries (but not both), whenever they have a pharmaceutical innovation related to a listed global disease.
According to Lanjouw, "given this choice, such patentees would choose to maintain protection in rich country markets and allow competition in the poor countries. Owners of patents related to non-global diseases, on the other hand, would be allowed protection worldwide."
Lanjouw uses the example of a cancer drug that would either have to be patented in the United States or India – but not both. Since the US is currently a much wealthier market, the drug patent would be enforced there and not in India, thus boosting access to the drug.
- (Marcus Low, Health24, January 2008)
NOTE: The summaries given here of the various alternatives to the patent system are highly simplified. Links to further reading are given below.
Sources and further reading:
The Truth about the drug companies - Marcia Angell in the New York review of Books. (Provides an excellent overview of the issues)
Lanjouw, Jean O. “Intellectual Property and the Availability of Pharmaceuticals in Poor Countries,” Innovation Policy and the Economy. Vol. 3, pp. 91-130. (MIT Press: Cambridge, MA). 2003.
The cost of pushing pills: a new estimate of pharmaceutical promotion expendatures in the United States - PLoS Medicine. January 2008.
Families USA press release on 2001 data
1 in 5 GPs put drug reps above advisors - the Guardian.
Stiglitz. Scrooge and intellectual property rights. 333 (7582): 1279. British Medical Journal. 2006.
Borrell J.R. 'Pricing and Patents of HIV/AIDS Drugs in Developing Countries', Applied Economics, 39:4, 505-518.
Danglin a carrot for vaccines - JR Minkel in Scientific American magazine. July 2006.
HIV drug exploitation?
EU raids drug companies
Huge drug company shock