What’s the Right Policy for Biologics?
This is from a Larry Kotlikoff study:
The Drugs: “Biologics are protein-based, rather than chemical-based, medicines. When Americans take pills, capsules, and liquid medications, they are taking chemical compounds. But for many serious illnesses, they increasingly rely on injections and infusions of biologics.”
The Promise: “Biologics are now fighting arthritis, asthma, Alzheimer’s, heart disease, Crohn’s disease, several cancers, psoriasis, multiple sclerosis, Lou Gehrig’s disease, and AIDS. And if innovation continues, new biologics will be developed to battle the full range of cancers as well as a host of other diseases.”
The Cost: “The new drugs can be of tremendous help in relieving pain and suffering. In some cases they represent miracle cures. But their prices are staggering. Biologics cost, on average, 22 times more per daily dose than chemical medications; the most expensive biologics cost over $100,000 a year.”
The Remedy: “When it comes to promoting biologic competition Congress should stick with what works, namely Hatch-Waxman, with its very limited exclusivity. Economic theory speaks clearly here. So does the evidence. There are, quite simply, no compelling differences between the chemical-based and protein-based medication industries to justify deviating from a policy that has succeeded for over a quarter of a century in both dramatically reducing drug prices and stimulating innovation.”
Interesting study. This is a field that is very important but is usually ignored by the health care media.
I don’t know much about this myself, but everything I have seen from Kotlikoff (especially if it’s published by the NCPA) has been very good.
Current patent law already allows for competition once a biotech drug’s patent expires. However, a follow-on biologic must go through the same approval process — including drug trials — as a new drug. The resulting drug is “biosimilar” rather than an exact copy of the original drug. The debate is about whether follow-on biotech drugs should be treated as generics or biosimilar.
The real question is whether the government will continue to make it more and more difficult for innovator firms to profit from their discoveries.
Linda sez: “whether the government will continue to make it more and more difficult for innovator firms to profit from their discoveries”
It seems to me that the only way that an innovator firm can profit at all from their discoveries is from the patent and trade secret protection provided by the government. A truly free market wouldn’t impose those protections.
artk–the US Patent Office is in disarray, patents offering effective protection are beyond the reach of a lot of small companies (especially if they sell internationally), and a lot of countries actively pirate intellectual property in any case.
At least one manufacturer that I know of has concluded that secrecy protects its profits better than patents. Patents require public disclosures that can be read, and copied, by anyone in the world.
Obviously this route isn’t possible for pharmaceuticals in the current US drug regulatory environment, but nothing stays the same. If regulatory structures begin costing too much compared to the benefits of patent protection in the U.S. market, more of the innovator drug business will move offshore.
artk: are you saying that there would be no intellectual property rights in a truly free market?
The ever-more-expensive march of the health care industry.
I’m glad that we have the technology, but I’m not sure that it provides the benefit necessary to justify its use.
Larry, you tell me a free market mechanism to protect intellectual property, or physical property for that matter. Being able to misappropriate intellectual property give you a tremendous cost advantage, it’s much cheaper to steal then to develop, the free market will, in fact, encourage that sort of theft.
Oh, Linda, you’re way off in your analysis of patents and small companies. Patents are relatively cheap to file for. All you need to do is keep good records and have a decent lawyer. The US patent system based on date of invention, not filing. All you need is a numbered notebook and the occasional $10 for a notary to secure your rights as an inventor. I’ve helped found over a half a dozen venture funded high tech startups, and each one managed to patent a number of key aspects of their technology. Also, as for your example of using trade secret protection, that to me seems foolish, all it takes is a bit of reverse engineering and you’ve lost your rights.
artk–I sure wish the patents I’ve been involved with were as simple and inexpensive as yours. Reverse engineering isn’t necessarily straightforward, especially for algorithms. I am told that it is tough to reverse engineer a biologic which may be a complex protein molecule produced by cells cloned from a single individual.