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Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Possible hepatitus C cure stymied by deadlocked patent owners

The downside of drug patents is once again evident in this example.

As Andrew Pollack reports in the New York Times, "A combination of two pills proved extremely effective in treating hepatitis C in a small trial, raising hopes among researchers that the disease will be curable without an injected drug that has debilitating side effects." link here

The two companies "owning" the drugs, however, are refusing to enter serious negotiations. Instead, they seem to be guarding their current patent monopolies and the profits generated thereby, while offering the public pablum justifications for not getting on with a deal that seems obvious and hugely in the public interest.

The clinical results are admittedly preliminary, but the implied criticism of current law and practice once again is strong evidence that major modifications of intellectual property law is urgent even as the current political climate offers little likelihood that it will be changed.


Comments

John Bennett:

You have this post that is highly critical of intellectual property and blaming it for...what? I refer you to the final paragraph of the article to which you linked:

"Dr. Bischofberger said that once both 7977 and daclatasvir won approval, doctors could use them together, so patients would not be shortchanged if the companies did not collaborate."

So, even if the two companies do not colloborate, if the cure works, it will be readily and immediately available. Where is the problem?

On the other hand, let's discuss the 213 generic drugs that are in short supply. The downside of generic drugs is that few manufacturers want to make them, causing severe shortages. How many patented drugs are on the shortage list for North America? Zero. How many generic drugs are on the shortage list? 213. Many of the 213 drugs are a matter of life and death for those needing them. Yes, there is some criticism needed, but let's put it where it will do some good.

The only drugs in short supply are ones with very tiny markets. There's no shortage of, say, aspirin. Small market size is the problem, not lack of patents, Lonnie.
Beeswax:

You said:

"The only drugs in short supply are ones with very tiny markets. There's no shortage of, say, aspirin. Small market size is the problem, not lack of patents, [erroneous ad hominem deleted]."

My comment:

Classic erroneous presupposition. There are dozens of patented drugs having tiny markets, yet there is no shortage of these patented drugs. Size may be one problem, but it is clearly not the only problem or the same problem would afflict patented drugs.

Beeswax:

You said that the only drugs in short supply are ones with "very tiny markets." How do you define "very tiny markets"? Right now there is a shortage of hepatitis A vaccine, which is used by millions of healthcare workers, certain other at-risk individuals in law enforcement, fire departments, and first responders, and others who may come into contact with infected individuals. The number of people receiving hepatitis A vaccines per year numbers in the hundreds of thousands, at least, and more likely in the millions. The shortage is causing issues in a number of industries and should be an embarrassment to capitalism. How can we have a critical, non-patented drug that any pharmaceutical company can produce in short supply? There is a failure of the system somewhere.

Alonniemouse wrote:

Classic erroneous presupposition.

On your part, Lonnie.

There are dozens of patented drugs having tiny markets, yet there is no shortage of these patented drugs.

There are dozens of generics with tiny markets and no shortages too, Lonnie.

Size may be one problem, but it is clearly not the only problem or the same problem would afflict patented drugs.

Classic erroneous presupposition. You have made two elementary statistics errors, Lonnie: generalizing from too small a sample size and assuming that variables are independent that actually aren't. Perhaps companies are less likely to seek a patent in the first place if the market is too small, unless the members of that market are wealthy, Lonnie; in which case which drugs get patented would be biased away from ones likely to have tiny markets, and that would in turn cause the small sample size problem that got you.

You said that the only drugs in short supply are ones with "very tiny markets." How do you define "very tiny markets"? Right now there is a shortage of hepatitis A vaccine, which is used by millions of healthcare workers, certain other at-risk individuals in law enforcement, fire departments, and first responders, and others who may come into contact with infected individuals. The number of people receiving hepatitis A vaccines per year numbers in the hundreds of thousands, at least, and more likely in the millions. The shortage is causing issues in a number of industries and should be an embarrassment to capitalism. How can we have a critical, non-patented drug that any pharmaceutical company can produce in short supply? There is a failure of the system somewhere.

But it is not in the absence of patents, Lonnie. There is probably a barrier to entry caused by the complexity of vaccine preparation, compared to synthesizing a compound like aspirin, Lonnie, resulting in insufficient market competition, and then if the one factory making the stuff develops a problem, or the few companies manufacturing it underestimate a future demand spike, shortages ensue.

Beeswax said:

"The only drugs in short supply are ones with very tiny markets. There's no shortage of, say, aspirin. Small market size is the problem, not lack of patents, [erroneous ad hominem deleted]."

My comment:

Classic erroneous presupposition. There are dozens of patented drugs having tiny markets, yet there is no shortage of these patented drugs. Size may be one problem, but it is clearly not the only problem or the same problem would afflict patented drugs.

Beeswax responds:

On your part, [erroneous and vicious ad hominem deleted].

My comments:

Yes, there are dozens of patented drugs having tiny markets, and there is no shortage of these patented drugs. Perhaps it is telling that of the approximately 216 drugs in short supply in the United States, not one is protected by a patent. Perhaps just as telling is that most of the drugs in short supply were once protected by a patent.

Furthermore, what does your comment have to do with either the topic or with monopoly, beeswax?

I said:

Size may be one problem, but it is clearly not the only problem or the same problem would afflict patented drugs.

beeswax responds:

Classic erroneous presupposition. You have made two elementary statistics errors, [erroneous and vicious ad hominem deleted]: generalizing from too small a sample size and assuming that variables are independent that actually aren't. Perhaps companies are less likely to seek a patent in the first place if the market is too small, unless the members of that market are wealthy, [erroneous and vicious ad hominem deleted]; in which case which drugs get patented would be biased away from ones likely to have tiny markets, and that would in turn cause the small sample size problem that got you.

My comments:

First, what does your irrelevant and inappropriate ad hominem have to do with monopoly, beeswax?

Getting beyond your classic statement of irrelevance, note that the vast majority of the drugs that are in short supply were once patented. During the time they were patented, there were no reports of shortages. So, what is your point?

An anonymous individual said:

You said that the only drugs in short supply are ones with "very tiny markets." How do you define "very tiny markets"? Right now there is a shortage of hepatitis A vaccine, which is used by millions of healthcare workers, certain other at-risk individuals in law enforcement, fire departments, and first responders, and others who may come into contact with infected individuals. The number of people receiving hepatitis A vaccines per year numbers in the hundreds of thousands, at least, and more likely in the millions. The shortage is causing issues in a number of industries and should be an embarrassment to capitalism. How can we have a critical, non-patented drug that any pharmaceutical company can produce in short supply? There is a failure of the system somewhere.

beeswax replied

But it is not in the absence of patents, [irrelevant ad hominem deleted]. There is probably a barrier to entry caused by the complexity of vaccine preparation,

My comment:

Classic presumption without basis in fact.

beeswax said

compared to synthesizing a compound like aspirin, [irrelevant ad hominem deleted], resulting in insufficient market competition, and then if the one factory making the stuff develops a problem, or the few companies manufacturing it underestimate a future demand spike, shortages ensue.

My comments:

I am not sure why you are adding some anonymous person's comments in with mine. You should have addressed them separately.

However, since you insisted on tacking this comment in with mine, I must ask, what is the relevance of this to your original comment? You claimed that the problem with that the market is "tiny." Perhaps 100k to 1 million people is not "tiny," by your definition. In which case, you should have said that instead of dancing around the issue with irrelevancies.

The discussions of drug shortages caught my eye. I have seen people in various web sites blame a lot of different reasons for the shortages. Low market size (which may be related to some shortages, but not those shortages that occur when there are multiple sources for generics).

Sadly, there are no single, comprehensive summaries detailing all the shortages, but multiple studies have indicated that the problem is related to purchasing power of buyers of generic drugs in combination with increasing demand. See, for example:

http://www.nejm.org/doi/full/10.1056/NEJMp1112633

What seems to be happening is that once a drug goes off patent, a generic manufacturer builds a manufacturing process to produce the drug. Many of the drugs that are on the generic list have been off patent for 10 to 20 years or even longer. With changes in population and access to medical care, the demand for many of these drugs has increased beyond the capability of manufacturers to make the drugs.

Two other factors impinge. First, as has been reported in multiple sources, there have been euphemistically termed "problems," which are in reality quality issues with the production of not one, two, or a few, but dozens of generic drugs. These quality problems extend from incorrect formulations to bacterial contamination to chemical contamination. If these "problems" were isolated they would hardly be disastrous. Unfortunately, these "problems" are increasingly systemic and seem to be related to the nature of generic drugs.

The other factor is the purchasing power of buyers. In terms of percentage, the buyers of generic drugs are bulk negotiators, who drive the prices of generic drugs down to a level where the profits range from approximately 4-6%.

The confluence of these factors leads to problems. Once a manufacturing line is set up to produce a particular drug, the line remains static because the profits for that line are insufficient to continually improve or upgrade the line. That inability to spend more money on a line that is marginally profitable leads to two potential problems, the effects of which are being felt.

The first potential problems is the growth of sales of a particular drug. As the markets for these generic drugs has grown, the markets have outpaced the ability of producers to respond. Essentially, the manufacturing lines that produce some generics are producing at a maximum volume, and the amount of profit from these generics is insufficient to generate additional investment in the manufacturing line.

The second problem is that drug manufacturers, in their effort to make money from marginally profitable generic drugs, appear to be spending less time on quality control than in the past, since some of the generics having "problems" have been produced for three decades or more.

Sadly, too many people are anxious to point fingers and lay blame, which is ultimately unproductive. What is needed is not finger pointing, but a practical solution.

The immediate response of the medical industry is to find alternative sources of medicine. Conservative estimates are that it is costing the medical industry $200 million per year to find alternatives to generic shortages, and some estimates are running much higher. Obviously, these are short-term solutions.

What is gaining more favor is a two-fold approach. Perhaps the most important part of the approach is permitting the prices of generics to rise. The largest generic suppliers are working with Medicare and other large insurance companies and bulk buyers to permit the prices of generics to increase to a level that permits spending money to upgrade manufacturing lines, to increase quality control, and the permit carrying a supply of generics, which is currently not done for many generics.

Almost ironically, as the prices of generics have risen because of the shortage of supply, the former patent holders of some drugs have expressed interest in supplying the generics. Ultimately, it will be the rising prices of generics that solves the problem of shortages. As some pundits have pointed out, while generics are the bulk of prescriptions with about 75% of all prescriptions for generics (2009 data), they are also significantly less expensive than patented drugs. Permitting the cost of generics to rise is unlikely to have a significant effect on the cost of medicine.

As an unrelated side note, at the rate that drugs are coming off patent, and at the current rate of increase in generic prescriptions, which is greater than 3% per year, it appears that generic prescriptions will likely form 90% of all prescriptions by 2020 (though it may reach this level even sooner for a variety of reasons), with the percentage gradually declining thereafter.

Because drug companies developing new drugs have been unable to find so-called blockbuster drugs to replace similar drugs coming off patent, and unless something changes in the next five years, patented drugs may provide much less than 10% of all drugs sold in the United States by 2020. Drug companies have responded to this reality by laying off more than 100,000 people in the last five years (in comparison, GSK, the third largest pharmaceutical company, employed about 100,000 people in 2009). The result is that so-called "Big Pharma" is not only not so big, but is poised to go through a period of consolidation and further downsizing. In another 10 years, the pharmaceutical industry may still have "Big Pharma" companies, but there will be fewer of them.

I'm not sure if shortages are an appropriate way of assessing the issue at hand, because a shortage is only defined as not having enough supply to meet demand. The public concern, however, is that not enough people are getting the drug. That can be the result of not enough of the drug existing or people not being able to afford the drug.

Let's say that there are a million people with a disease that has only one treatment. The price of the drug ensures that only 5,000 people can afford that drug, but enough to treat 10,000 is produced. There isn't a shortage of this drug by definition. Then, the drug comes off patent. Multiple companies start to manufacture generics, and they produce enough to treat 500,000, although 900,000 could have afforded it at the normal market price. However, when this occurs, we end up with what we call a shortage, despite this shortage being a clearly better situation than when we didn't have a shortage.

I'm not going to claim that this is the situation in all cases, but rather, that looking just at shortages doesn't fully cover the numerous factors involved. As I understand it, there are also some regulations that affect the pricing of generics, stopping the prices from recovering after the initial dump to compete in the generic market once a drug goes off-patent.

It would also be interesting to see how things work out with a drug that is never patented, like in a case where all of the research was funded by the NIH. Such a case might have serious advantages in the initial production of generics, because there is less of a gold rush going on. A new drug won't have a large amount of patients with existing prescriptions like a drug going off-patent, so there is far less of an incentive to have unsustainably low initial pricing to capture that market.

Last Anonymous:

Irrespective of the "public concern," the problem at hand is that there is an insufficient supply of drugs to meet the demand. The drugs are, mostly, highly affordable, just not available.

As for the intermediate situation, where there is unlimited supply, but only certain people can afford the drug, I have never seen any numbers showing how many people are not getting a specific drug because they are unable to afford it. I have seen lots of anecdotal claims, but that's all they are, stories. Is it better to provide to have the potential to provide 100% of the people, but only 80% can afford to pay, or have the potential to provide 50% of the people because there is an insufficient supply? In terms of absolute numbers, more people seem to be harmed by the supply shortages than are being harmed by failure to pay.

There is probably a good reason that supply shortages are more harmful. In terms of numbers of prescriptions, more than 75% of all prescriptions are for generics. Many of the most important drugs have not been covered by patents for a long time. Many of the patented drugs are alternatives to drugs off patent, and many doctor try hard to prescribe generics if they are available. Apparently, the 5-10% of the people not able to afford patented drugs make much less noise than the 50% of the people unable to obtain generics.

I look forward to your citation of a drug that was 100% funded by the government or never covered by a patent so we can see how it compares, assuming the drug is no longer funded by the government.

"In terms of absolute numbers, more people seem to be harmed by the supply shortages than are being harmed by failure to pay. " We both seem to be in agreement that the more people that need the drug that get the drug, the better. I'm asking for actual data on that. I would think the best methodology would be using the absolute numbers of drugs dispensed for a disease that has fairly stable numbers and is the best solution for treatment by a significant margin (so prescription of generics would have been the result of the cost being too high), and looking at that before and after the drug went off patent. If the number of people affected by a disease was growing or shrinking dramatically, then it would be a drastic change that could taint the data.

"I look forward to your citation of a drug that was 100% funded by the government or never covered by a patent so we can see how it compares, assuming the drug is no longer funded by the government." The only one I can think of off hand was the polio vaccine, for which Jonah Salk famously said "There is no patent. Could you patent the sun?." However, I will acknowledge that the polio vaccine was treated very different than the average drug, making it not the best test case. For better data, I would suggest that the NIH fully fund a drug or two for the sake of comparison, instead of the partial funding they typically do that results in a pharmaceutical company reaping the vast majority of the benefits. Then, we could have better data that could help shape our policies and address the issue here.

Last Anonymous:

You are going to have to dig for those numbers yourself, because I am not absolutely sure what you are getting at. I do know that some of the generics have suffered from growth-related issues, but apparently these issues have taken some time to develop.

Independent of your point, I have never seen any figures on the number of people who are unable to afford drugs on patent because of cost. You would think that such numbers would exist, but part of the difficulty is that there are many programs available to help people get such drugs when they have limited or no ability to pay. In my local community, we have a "free" or very low priced clinic where people with limited ability to pay can get drugs covered by patent either free or for little cost. I suspect there are many such programs in the U.S.

As for your last comment, about NIH developed drugs, I keep hearing that the NIH is developing all sorts of drugs, but I have yet to find any data indicating which drugs they supposedly developed. If a drug was truly developed by the NIH, it would be illegal for a pharmaceutical company to obtain a patent on the drug. While such situations have been alleged, I have yet to see any actual evidence that such has occurred.

I don't know where to find the numbers, and apparently you don't either. Without those numbers, it's tough to conclusively say what situation is better.

"As for your last comment, about NIH developed drugs, I keep hearing that the NIH is developing all sorts of drugs, but I have yet to find any data indicating which drugs they supposedly developed. If a drug was truly developed by the NIH, it would be illegal for a pharmaceutical company to obtain a patent on the drug. While such situations have been alleged, I have yet to see any actual evidence that such has occurred" I'm not saying it occurred, I'm saying that it SHOULD occur for the sake of comparison. Right now, it costs about a billion dollars to get a drug from creation to obtaining FDA approval, and NIH pays around half of that overall. The way they are currently operating, they pay part of the money, and the pharmaceutical company gets all of the benefits except for the small concessions Bayh-Dole demands. I'm saying that if the NIH were to spend a billion to fully fund a drug or two, we could get a patent free drug to see how the economics would work out with drugs never being patented.

Last Anonymous:

The NIH has an annual budget of about 31 billion dollars. About 80% of that money is distributed to 300,000 researchers at 2,500 research institutions. Doing the math, that works out to around 9.9 million dollars per institution. I am not seeing any particular pharmaceutical company being a beneficiary of NIH funds.

Regarding your first statement about which is better, we know conclusively that there are 218 drugs that are in short to critically short supply, which means that these drugs are not available in adequate quantities to purchase. These 218 drugs are all generics and represent about 13% of all generic drugs. We also know that there are no drugs covered by patent that are in short supply.

We also know that many of the 218 drugs are threatening the health of tens of thousands of people, per complaints to the FDA. On the other hand, there do not seem to be any complaints to the FDA about the availability of patented drugs.

"The NIH has an annual budget of about 31 billion dollars. About 80% of that money is distributed to 300,000 researchers at 2,500 research institutions. Doing the math, that works out to around 9.9 million dollars per institution. I am not seeing any particular pharmaceutical company being a beneficiary of NIH funds." They don't have to be given the money directly to be a beneficiary. The NIH gives money. That money helps the in the creation of new drugs and their FDA approval. However, pharmaceutical companies will contribute as well and get the patent. The pharmaceutical company doesn't do all the work, but they get virtually all of the benefit.

"Regarding your first statement about which is better, we know conclusively that there are 218 drugs that are in short to critically short supply, which means that these drugs are not available in adequate quantities to purchase. These 218 drugs are all generics and represent about 13% of all generic drugs. We also know that there are no drugs covered by patent that are in short supply. " Yes, and I said that this element alone is practically meaningless. You haven't given data on the gap between people that need drugs and people that are getting drugs for patented and off patent drugs, which is the main issue here. I think you haven't even provided data on the severity of the shortages.

Last Anonymous:

You said:

"They don't have to be given the money directly to be a beneficiary. The NIH gives money. That money helps the in the creation of new drugs and their FDA approval."

You have not provided any data to support your contention. Provide data on specific drugs that have received support from the NIH, and the nature of that support. Thus far, you have alleged the NIH provides money for something related to drugs, but you have provided no evidence.

You said:

"You haven't given data on the gap between people that need drugs and people that are getting drugs for patented and off patent drugs, which is the main issue here. I think you haven't even provided data on the severity of the shortages."

Watch the video here:

http://abcnews.go.com/Health/Wellness/fda-responds-critical-cancer-drug-shortage/story?id=15759300#.T8lD2LBYtio

At least 15 deaths have been blamed on a shortage of one cancer drug.

Read this article here:

http://www.kevinmd.com/blog/2011/05/asa-drug-shortages-continue-impact-anesthesiologists-patients.html

At least 90% of all anesthesiologists have reported shortages of anesthetics.

This article says there have been at least 7 deaths because of the shortage of anesthetics:

http://abcnews.go.com/Health/abc-news-exclusive-anesthesia-drug-shortages/story?id=16123792

The difficulty in providing combined numbers is that there is not a single reporting mechanism for drug shortages.

As for the gap relating to patented drugs, you need to provide that data. As I have pointed out multiple times, there is no evidence that I know regarding patented drug unavailability in the United States. It is hard to prove a negative. So, if you are aware of data relating to inability of people in the United States to pay for patented drugs, show it.

"You have not provided any data to support your contention. Provide data on specific drugs that have received support from the NIH, and the nature of that support. Thus far, you have alleged the NIH provides money for something related to drugs, but you have provided no evidence. " Here's a drug that got a NIH grant. Took me five seconds in Google. It's far from alone. http://ucsdnews.ucsd.edu/newsrel/health/2011_08nihGrant.asp

"As for the gap relating to patented drugs, you need to provide that data. As I have pointed out multiple times, there is no evidence that I know regarding patented drug unavailability in the United States. It is hard to prove a negative. So, if you are aware of data relating to inability of people in the United States to pay for patented drugs, show it. " I'm not aware of data, but I know not all people in the US can pay for their drugs. The data you present is useless without a baseline of comparison. You have attributed 22 deaths to drug shortages. I'm quite sure you would have no difficulty finding 22 people who died because they couldn't afford patented drugs. You could probably find that in a year in a major city. The data may not be easy to find, but my point has been that if you don't have a point of comparison, data from one side is meaningless.

Last Anonymous:

The problem with the link that you provided is that there is not drug yet, so we can not learn whether NIH money ended up in a patented drug. Have you any examples of a patented drug that was funded by NIH funds?

You said:

"I'm not aware of data, but I know not all people in the US can pay for their drugs. The data you present is useless without a baseline of comparison. You have attributed 22 deaths to drug shortages. I'm quite sure you would have no difficulty finding 22 people who died because they couldn't afford patented drugs. You could probably find that in a year in a major city. The data may not be easy to find, but my point has been that if you don't have a point of comparison, data from one side is meaningless."

More specifically, I attributed 22 deaths due to shortages of two of the 218 drugs for which there are shortages. In addition, others are deteriorating for the lack of the same two drugs. Now,I suspect that if I was to research all 218 drugs, which I do not intend on doing, that we would find hundreds, thousands, and possibly tens of thousands of people whose health has been jeopardized because of the lack of generic drugs.

I agree with you that without a point of comparison, the data is meaningless. Are you going to provide any sort of data for comparison? Thus far, you have merely speculated that inability to pay for patented drugs in the United States has led to some sort of harm, without any evidence to support your speculation.


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