Today, AlterNet published a provocative story by Mark Weisbrot , co-director and co-founder of the Center for Economic and Policy Research, about the emerging battle between Big Pharma and the developing world.
Some large pharmaceutical companies are “up in arms,” Weisbrot notes, because “developing countries are importing less expensive generic versions of drugs for which these companies hold a patent monopoly.”
But “the procedure is perfectly legal, even under the World Trade Organization’s pro-pharmaceutical-monopoly rules. The only question is whether these huge corporations –who used their political muscle in Washington to prevent our government from lowering the price of Medicare prescription drugs—will intimidate governments that are trying to provide essential medicines to their citizens.”
Weisbrot points to Thailand as “the latest target of this bullying last winter when it issued ‘compulsory licenses’ for three drugs. Two were anti-AIDS drugs (efavirenz and lopinavir/ritonavir) and the third is used to treat patients with cardio-vascular disease (clopidogrel). A compulsory license allows for the production or import of a generic version of a patented drug, without the permission of the patent holder. It is completely legal, and in fact the United States has used compulsory licenses many times.
“But the U.S. government has sided with the big pharmaceutical companies and put Thailand on a special ‘Priority Watch List,’ which could potentially lead to trade sanctions against Thailand. Actual sanctions are unlikely, but Washington and its pharmaceutical allies have made a serious threat. Now that pressure is reportedly being used to block similar licenses for three cancer drugs”
Below, I’ve reprinted the rest of Weisbrot’s story. He makes a powerful argument that countries like Thailand are trying to do what is right for their citizens.
As for the counterargument—that drug-makers need the revenue from their patented drugs in order to continue their research, the truth is that, these days, Big Pharma rarely comes out with a truly innovative drug.
Instead drug makers are focusing on “me too” drugs that are easy to develop and provide only minor benefits. Last month, Niko explained that this is one reason why Big Pharma’s clinical trials are so expensive. If the drug is going to offer on only a minor variation on drugs we already have, you have to test it on thousands of people to see any benefit.
“When drug companies tell you that, unless we pay exorbitant prices for their products, they won’t be able to afford to research develop new drugs, you might keep this fact in mind,” Niko wrote, “it costs far more to develop a drug that represents only a tiny improvement over less expensive drugs that are already on the market."
Merrill Goozner sums up the argument: “Why does industry spend $20 billion a year on clinical trials? Is it because the cost of trials has skyrocketed? Or is it because the new drugs that industry is bringing to market are such minor innovations or no innovation at all compared to previous drugs that it takes trials with literally thousands of people in them to prove something works.”
(For further evidence suggesting that drug makers are not making optimum use of research dollars, see this proposal by Dean Baker, of the Center for Economic and Policy Research, proposing public funding of drug trials).
Finally, keep in mind that, today, drug companies spend twice as much on marketing and advertising as they spend on research. If they cut back on those expensive television ads, they wouldn’t have to complain when Thailand imports generic drugs in a desperate effort to save the lives of AIDS patients.
Here’s the rest of Weisbrot’s story:
Thailand is a developing country of 65 million people, with income per person of about $10,000, or less than one-fourth that of the U.S. The government estimates that the use of generic efavirenz will enable it to provide this anti-AIDS medicine to an additional 20,000 people, as compared to using the pharmaceutical giant Merck’s branded version (called Stocrin).
The vast majority of developing countries have not exercised their rights to compulsory licensing, because of the pressure from PhRMA (the U.S. trade association of the big branded pharmaceutical companies) and the many politicians that are under its influence. This is a tragedy. Former President Bill Clinton, speaking in support of the governments of Thailand and Brazil in issuing compulsory licenses, noted that "no company will live or die because of high price premiums for AIDS drugs in middle-income countries, but patients may."
The pharmaceutical companies argue that they need to protect their patents in order to fund the research and development that produces new drugs. This is partly true — although the majority of pharmaceutical research goes to produce "copycat" versions of other drugs that already exist. These copycat drugs can generate big profits but don’t necessarily provide any advantage over existing drugs.
The system is so inefficient that Americans are currently paying about $150 billion dollars through monopoly pricing to the companies, in order to get about $25 billion worth of research – much of which is not especially helpful.
So big PhRMA is really making an argument for more comprehensive reform: if the economic and social costs of funding research through private monopolies is so high, maybe we should put more into public and non-profit research (which already accounts for a substantial amount of the research these companies use). [This is a very good point—mm.] In fact, if our own government were to fund the research that the branded pharmaceutical companies now carry out, and allow the results to be used for generic drugs, the research would more than pay for itself. The government would save more than the cost of this research through lower prices for the drugs it buys through Medicare and Medicaid. And the drugs would be available immediately as generics to the rest of the world.
Such economically sensible reforms may be some years off, given the power of the pharmaceutical lobby. But the least we can do right now is to stop this lobby from bullying other governments that are trying to do the right thing for their citizens.
Wow, that makes no sense. So if companies cut back on advertising they save money? You make it sound like advertising has no effect on revenue. Quite the opposite. Advertising makes revenue go up, which means more money for R&D. Cutting that expensive advertising “saves” money, but just means the companies have less to spend. Pointless.
David–
The Wall Street Journal and other papers have been reporting that drug makers themselves realize that they have been spending too much on marketing and advertising.
Pfizer, for one, has cut way back on its sales force.
The drug companies realize that they don’t have many innovative new drugs in the pipeline–and see very few coming online in the near future.
Thus, they are tightening their belts, cutting back on TV advertising while trimming their sales forces.
Advertising brings in revenues only if there are exciting (and truly different) products to advertise. Doctors and patients are becoming much more aware of how many new drugs are simply more expensive “me too” drugs.
David–
The Wall Street Journal and other papers have been reporting that drug makers themselves realize that they have been spending too much on marketing and advertising.
Pfizer, for one, has cut way back on its sales force.
The drug companies realize that they don’t have many innovative new drugs in the pipeline–and see very few coming online in the near future.
Thus, they are tightening their belts, cutting back on TV advertising while trimming their sales forces.
Advertising brings in revenues only if there are exciting (and truly different) products to advertise. Doctors and patients are becoming much more aware of how many new drugs are simply more expensive “me too” drugs.
So all those Levitra ads lost money? If so, they need some new MBAs in the marketing department. But I’ve never heard of a business that survived by eliminating advertising and relying on word of mouth.
To David — there is an enormous difference between the quite new phenomenon of direct-to-consumer advertising of prescription drugs, of high-pressure/conflict-of-interest advertising to clinicians, and reasonable informative advertising to clinicians.
AFAIK, the US is the only country that allows DTC advertising. It does have a medical effect — most DTC ads raise my blood pressure, as being right on the edge of being dangerously misleading.
It’s not as if physicians have no way to find out about an effective new drug. Often, specialists have been following new drugs since they were in early clinical testing. When a drug still being tested offers a significant benefit in a severe conditions, clinicians can and do request supplies under a “compassionate use protocol”.
Physicians, and knowledgeable patients, will consider “off label” indications for drugs, which the manufacturer legally can’t advertise or promote. Off-label indications, with science behind them, may involve significant sales of drugs.
David’s theory about advertising driving revenue can hold true in a purely consumer-driven market, but prescription drugs are not primarily consumer-driven.
HC Berkoitz–
Thanks much. As you know, I’m always happy when readers talk to other readers, and bring more facts to the dicussion.
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