[corp-focus] A New Way For Drug Development?

[robert weissman]

A NEW WAY FOR DRUG DEVELOPMENT?
By Russell Mokhiber and Robert Weissman

Whether you think the pharmaceutical industry is a success or failure 
depends crucially on how you measure performance.

Although some leading firm's share price has declined over the last 
year, from an investor point of view, the industry does remarkably well. 
It consistently earns a 15-20 percent return on investment. Last year, a 
down year, the U.S. industry return was 15.7 percent, according to 
Fortune magazine, ranking it fifth among 50 industry groups.

 From a public health perspective, however, the situation is rather 
different. Thanks to the patent system, Big Pharma companies invest not 
to address priority public health needs, but to take advantage of 
potential markets. These are not the same thing.

For example, Big Pharma tends not to invest in diseases that primarily 
afflict people in developing countries. Between 1975 and 2004, according 
to Doctors Without Borders, only a tiny fraction of new drugs -- only 20 
of the 1,556 new chemical entities marketed globally, just over 1 
percent -- were for tropical diseases and tuberculosis, diseases which 
account for 12 percent of the total global disease burden.

In the rich countries, too, R&D efforts are badly skewed. The brand-name 
drug companies tend to invest in drugs for which there are big markets 
-- like erectile dysfunction -- as the expense of higher priority health 
needs. And, Big Pharma emphasizes "me too" drugs -- pharmaceuticals 
which pretty much do what existing products can do -- because they are 
easier to develop and have demonstrated markets. Three quarters of new 
drugs fall into the me-too category.

The patent-conferred monopoly lets drug companies charge astronomical 
sums for their products. Prices have no relationship to the cost of 
manufacture, and virtually none to the more substantial cost of R&D. As 
New York Times reporter Alex Berenson noted in a recent story, "After 
years of defending high prices as necessary to cover the cost of 
research or production, industry executives increasingly point to the 
intrinsic value of their medicines as justification for prices." Thus 
some new cancer treatments are now being priced around $100,000 a year.

The patent system also gives brand-name drug companies a major incentive 
to invest heavily in advertising and other forms of marketing. This is 
because the companies are able to charge so much over marginal cost, and 
because there is no direct competition during the period of patent 
protection.

In short, under the patent system, we get lots of heavily marketed 
treatments for erectile dysfunction or male pattern baldness, but way 
too few for sleeping sickness or dengue fever.

The situation could be different.

When the member countries of the World Health Organization met this past 
May, an interesting and somewhat unexpected thing happened. Shunting 
aside objections from Big Pharma, they recognized the shortcomings of 
the existing drug development system, and they committed to developing 
plans to "secur[e] an enhanced and sustainable basis for needs driven, 
essential health research and development relevant to diseases that 
disproportionately affect developing countries."

What precisely this means will only be worked out over time, but it may 
be a major breakthrough.

"The global trade framework will be transformed by this initiative," 
says James Love of the Consumer Project on Technology, pointing to the 
central role of expanded patent and other monopoly protections for Big 
Pharma in many trade agreements. "No longer will countries see trade 
agreements about intellectual property rights or drug prices as the only 
mechanism for sustainable funding of R&D, or the only possible outcome 
of a bilateral or multilateral trade negotiation."

Through the WHO initiative, countries may be expected to give greater 
attention to new public-private efforts to develop medicines, like the 
Gates Foundation-backed International AIDS Vaccine Initiative. It may 
also inspire more support for nongovernmental efforts like the Doctors 
Without Borders-sponsored Drugs for Neglected Diseases Initiative.

Hopefully, it will also lead governments in both rich and poor countries 
to invest more directly in needs-driven medical research and 
development. The United States is the global leader in this regard, 
through the National Institutes of Health. But a key problem with the 
current NIH model is that the fruits of public investment are licensed 
away on an exclusive basis, with no price restraints -- meaning the 
public has to pay exorbitant prices for the drugs that taxpayer dollars 
financed. (For an altogether different and more sensible approach, see 
the Free Market Drug Act, introduced in the U.S. House of 
Representatives in 2004 by Representative Dennis Kucinich.)

The WHO initiative should also spark debate over alternatives to the 
patent system. Organizations like the Consumer Project on Technology 
have suggested moving away from the award of a marketing monopoly to 
drug developers, and instead paying them directly, based on the value in 
public health terms of their product. Then prices to consumers or public 
or private insurers could be set competitively. All drugs would be 
generic. This approach could cut out the massive industry waste on 
marketing and direct what is spent on R&D more efficiently

We could end up with a win-win-win: more money for R&D, directed more 
effectively, and lower prices.


Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter, <http://www.corporatecrimereporter.com>. Robert Weissman is 
editor of the Washington, D.C.-based Multinational Monitor, 
<http://www.multinationalmonitor.org> and associate counsel for the 
Consumer Project on Technology <www.cptech.org>. Mokhiber and Weissman 
are co authors of On the Rampage: Corporate Predators and the 
Destruction of Democracy (Monroe, Maine: Common Courage Press).

(c) Russell Mokhiber and Robert Weissman

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