Can we eliminate the pharmaceutical side effect of the patent system?

Every year different patient groups and protesters around the world request funding for the treatment of their respective conditions.

October 5, 2015 22:14

Pills. (photo credit: INGIMAGE / ASAP)

Recently, excitement in the medical scientific arena was followed by media reports about possible advances in treatments that could cure some cancers or at least contain them as chronic non-life-threatening diseases.

Although there is a long way to go before it is proven that these treatments can achieve the desired goal, as we all hope, the major “side effect” of such findings will be the rising costs of the treatments.

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Costs can range from tens of thousands to over hundreds of thousands of dollars a year per patient. As cancer treatments transform the disease to a chronic condition, sustained for many years, the expenditure on such medicines will dramatically increase countries’ health costs.

The dilemma already exists today. Every year different patient groups and protesters around the world request funding for the treatment of their respective conditions.

But as promising drugs for major illnesses such as cancer reach a widespread patient population, extreme situations will arise where the budgets required will increase tenfold. This could result in a situation whereby a cancer patient might be refused a chance at life for mere budgetary reasons.

The “access to medicines movements” which currently operate mainly in the low- to middle-income countries might in future bring similar demands to the more developed countries. Recently the media reported that in the US over 100 oncologists call for new regulations to control soaring patient costs.

Development of innovative medicines is an expensive process which also has a high risk of failure. There is no doubt that firms that manage to bring important medicines to market should be rewarded for their success. Patent law provides a monopoly to developers and manufacturers of these new drugs, allowing them to charge significantly higher prices, with high profitability. However in the past decade this mechanism has been subjected to abuse by unfair strategies prolonging such monopolies, thus continuing to yield the highest possible profits.

Those drugs that reach the market are priced high to provide return on investment over a few years. The remaining monopoly term is used to obtain huge profits, higher than in most industrial sectors. Companies have learned over the years how to shorten the development time and expedite the launch of such drugs, so in many cases they benefit from a practical monopoly of approximately 14 years. Moreover, currently on top of the basic patent the pharmaceutical companies apply for additional follow-on patents (in many cases dozens of applications) which may provide them with an extension of their monopoly. This phenomenon is called “ever-greening” due to its aim of prolonging the monopoly “forever.”

In such situations, the law is used to fend off competition rather than protect genuine innovation. Even if a patent is considered weak, legal procedures to cancel it are lengthy and costly. For medicines with a global yearly turnover of a billion dollars or more (new drugs to treat cancer may sell at the high end of the turnover scale), each week of delay will generate tens of millions of dollars in sales, most of which is pure profit. In this situation there is no doubt companies will do as much as possible to extend their monopolies for as long as possible.

The innovator drug companies manage to extend their monopolies via legislative tools unique to the pharmaceutical industry that reward them for the time spent on developing the drugs (called PTE – patent term extension) and pediatric exclusivity (for conducting clinical trials to confirm suitability for the pediatric population).

Yet at the same time those companies have managed to reduce the time to market of the medicines and achieved a faster launch schedule, providing them with longer monopoly than afforded by the basic patent.

Indication of the profits generated by innovator pharmaceutical companies is easily calculated when comparing the sharp drop in prices following entry of generic competitors to the market. Such low generic prices still provide reasonable profitability, allowing major generic companies to be evaluated at high market values, as recent M&A activity in this sector indicates.

The high cost of drugs will not only burden the healthcare budgets of countries but also prevent access to these new drugs to many classes in society, because countries will never be able to pay for all the treatments for everyone.

The conclusion is that the patent system that should provide incentive for innovation is often misused, and as such is becoming a threat to health budgets and to availability of medicines to a wider population.

The solution is to find a mechanism that would limit the monopoly which drug companies obtain through patent law, awarding them adequate reward for inventiveness but nothing more. The companies may be required to submit information that will allow governments to examine the profitability with respect to these life-saving medicines and to determine the maximum monopoly that will be allowed.

To determine such mechanisms, a process must be applied to prevent abuse of patent law by legislating the imposition of penalties on companies found to be abusing it by filing inappropriate and simultaneous patent applications. The legislation should allow the public (health funds and patients themselves) to sue those companies to return the profits improperly generated by such monopolies after the patents have been be declared invalid.

This mechanism may be restraining those cases where patent monopoly negatively impacts public health.

If such measures do not provide the desired new balance between monopoly and availability, a thorough investigation into the patent system will be required, as well as the creation of alternative methods that will support and reward genuine innovation by reasonable means.

Such measures will not threaten the basic requirements of the population. Elimination of such “side effects” of the patent system is essential for maintaining, literally, a healthy society.

The author is the owner of Unipharm Ltd, a generic pharmaceutical company in Israel and a member of the presidential board of the Manufacturers Association of Israel and the council of the Pharmaceutical Society of Israel, acting for many years in both the pharmaceutical and IP arenas.

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