By Marus Low, Business Day Live | August 23, 2016
IT IS often argued that weakening patent monopolies on pharmaceuticals will lead to fewer new medicines being discovered. Whether this is indeed the case, and to what extent, is one of the key questions that must be addressed by a UN high-level panel convened to consider the “policy incoherence between the justifiable rights of inventors, global human rights law, trade rules and public health”.
One of the difficulties faced by the panel, and by any policy maker, is the lack of transparency in relation to drug development. Firms generally disclose little detail about what they spend on research and development (R&D) for new medicines.
In this information vacuum, widely varying estimates flourish: the Drugs for Neglected Diseases Initiative (a nonprofit group) says based on its experience, a new drug on average costs less than $200m to develop (including cost of failures), and at the other end of the spectrum the Tufts Centre for the Study of Drug Development claims $2.6bn.
In 2013, GlaxoSmithKline CE Sir Andrew Witty called the then prevalent $1bn figure “one of the great myths of the industry”.
These are large absolute numbers, but the multinational pharmaceutical industry only deals in large numbers. The more informative statistic is the percentage of revenue pharmaceutical companies spend on R&D (of which we get a pretty good idea from the US Securities and Exchange Commission filings). This usually falls between 8% and 18% of revenue, much less than what is spent on marketing, and typically also less than profits. It seems clear that only a small percentage of the high prices we pay for patented medicines is invested in R&D.
Even the Financial Times has been critical, writing in an editorial last year: “Pharmaceutical innovation has been one of the great successes of the past century, improving the lives of people immeasurably round the globe. But if the current dispensation is to continue, the industry must learn to price with greater restraint.”
The social contract underpinning the patent system allows companies to have patent monopolies and make reasonable profits in exchange for the development of new medicines. In other words, when we pay high prices for medicines, we do so in the belief that there is a link between high prices and R&D. But the available evidence suggests strongly that this link, and the social contract that underpins it, have been severed.
We are working with incomplete information. In most cases, we do not have access to how prices are set or how much a company has invested in the development of a specific drug.
It is both reasonable and appropriate that as part of the deal when granting pharmaceutical firms patent “rights”, governments should demand transparency on how these are exploited. If the industry refuses to share more information on its R&D spending and price-setting, governments should force it to.
There has been a substantial industry backlash against the UN panel in the media. This is understandable. The panel threatens to bring transparency, and transparency and accurate information will ultimately be the catalyst to making reasonable changes in the public interest. Governments must stand firm against industry pressure and its expression through entities like the US trade representative.
While few will object to pharmaceutical companies making reasonable profits and no one wishes to slow the discovery of new medicines, this does not mean we have to be kept in the dark. The goose will keep insisting that it is laying golden eggs and that any changes to its diet of caviar will be fatal, but at some point, we have to stop taking its word for it and take a look for ourselves.
If there are policy, regulatory or legal interventions that will increase people’s access to medicines without threatening new discoveries, we must consider it. Public interest demands it, and lives depend on it.