[Ip-health] MIT: Solving the drug price crisis by separating drug discovery from drug marketing

[Judit Rius Sanjuan]

Thanks to Pharmalot for this story where two MIT professors recommend
separating drug discovery from drug marketing to reduce prices.

How To Solve The Crisis Over Drug Prices
http://www.pharmalot.com/2008/03/how-to-solve-the-crisis-over-drug-prices/
March 17th, 2008 1:00 pm By Ed Silverman

Well, this is one suggestion, anyway. Two professors from the
Massachusetts Institute of Technology propose separating drug
discovery from drug marketing - and then establishing a non-profit
company to oversee funding for new meds.

=93Drug prices in the United States are higher than anywhere else in the
world. Right now, the revenues from those drugs finance research and
development of new drugs. We propose to reduce prices, not at the
expense of innovation, but by changing the way innovation is
financed,=94 says Peter Temin, an economics professor and co-author of
=93Reasonable Rx: Solving the Drug Price Crisis,=94 in a statement.

=93Nationally, if we keep the current structure, in 50 years only hedge
fund managers will be able to afford prescription drugs. Drug
development will focus on therapies for those small groups of people
who can pay a thousand dollars a pill. With income distribution
widening and insurance carriers already refusing some coverage, this
would be a disaster,=94 he continues. (Actually, fewer fund managers may
be able to afford their meds this month).

So Temin and Stan Finkelstein, a senior research scientist in MIT=92s
Engineering Systems Division, propose eliminating the linkage between
prices and the cost of discovery. As they see it, dividing drugmakers
into separate entities would be akin to the division of electric
utility firms into separate generation and distribution companies in
the 1990s.

Following the utility model, Finkelstein and Temin propose
establishing an independent, public, non-profit Drug Development
Corporation (DDC), which would act as an intermediary between the two
new industry segments - just as the electric grid acts as an
intermediary between energy generators and distributors. The DDC also
would serve as a mechanism for prioritizing drugs for development.

=93It is a two-level program in which scientists and other experts would
recommend to decision-makers which kinds of drugs to fund the most,
=93says Finkelstein. =93This would insulate development decisions from the
political winds.=94

In their view, societal needs for medicines are swiftly extending
beyond national boundaries: Diseases affecting the developing world -
afflicting people too poor to make drug development attractive for
businesses - will soon affect health inside the US.

=93Global travel and climate change both require that U.S. drug
development and innovation policy rethink the way drugs are developed,
and for whom. Air travel, migrations, a global workforce=96all these
mean unusual diseases could become usual here,=94 Temin says, adding
that climate change also may affect drugs their proposed DDC would
select for funding.

=93Especially in the southern states, tropical diseases are likely to
increase with global warming, and people will need treatments for
them,=94 he says. =93In our plan, the DDC would encourage research in
advance of the market - and, we hope, in advance of disaster.=94


Solving the drug price crisis
Sarah H. Wright, News Office
March 17, 2008
http://web.mit.edu/newsoffice/2008/rx-crisis-plan-0317.html

The mounting U.S. drug price crisis can be contained and eventually
reversed by separating drug discovery from drug marketing and by
establishing a non-profit company to oversee funding for new
medicines, according to two MIT experts on the pharmaceutical industry.

Stan Finkelstein, M.D., senior research scientist in MIT's Engineering
Systems Division, and Peter Temin, Elisha Gray II Professor of
Economics, present their research and detail their proposal in their
new book, "Reasonable Rx: Solving the Drug Price Crisis," published by
Financial Times Press.

Finkelstein and Temin address immediate national problems--the rising
cost of available medicines, the high cost of innovation and the
'blockbuster' method of selecting drugs for development--and predict
worsening new ones, unless bold steps are taken.

"Drug prices in the United States are higher than anywhere else in the
world. Right now, the revenues from those drugs finance research and
development of new drugs. We propose to reduce prices, not at the
expense of innovation, but by changing the way innovation is
financed," said Temin, also the author of "Taking Your Medicine: Drug
Regulation in the US."

"Nationally, if we keep the current structure, in 50 years only hedge
fund managers will be able to afford prescription drugs. Drug
development will focus on therapies for those small groups of people
who can pay a thousand dollars a pill. With income distribution
widening and insurance carriers already refusing some coverage, this
would be a disaster," said Temin.

"Prescription drugs have been left out of previous efforts to reform
the delivery of health care. New initiatives to expand coverage must
include a plan to reduce the high cost of drugs," Finkelstein added.

The book, which draws on the researchers' expertise in the realms of
medicine and economics, proposes eliminating the linkage between drug
prices and the cost of drug discovery while financing innovation and
addressing the needs of society.

Their first bold step is conceptual, recognizing that we all have a
critical stake in the products of pharmaceutical research.

Next, drawing on recent history, they propose dividing drug companies
into drug discovery/development firms and drug marketing/distribution
firms, just as electric utility firms were separated into generation
and distribution companies in the 1990s.

Following the utility model, Finkelstein and Temin propose
establishing an independent, public, non-profit Drug Development
Corporation (DDC), which would act as an intermediary between the two
new industry segments -- just as the electric grid acts as an
intermediary between energy generators and distributors.

The DDC also would serve as a mechanism for prioritizing drugs for
development, noted Finkelstein.

"It is a two-level program in which scientists and other experts would
recommend to decision-makers which kinds of drugs to fund the most.
This would insulate development decisions from the political winds,"
he said.

Finkelstein and Temin's plan would also insulate drug development from
the blockbuster mentality, which drives companies to invest in
discovering a billion-dollar drug to offset their costs.

An example of the blockbuster mentality is developing a new drug for
hypertension, one that varies only slightly from those already on the
market, but that can bring in huge profits if aggressively marketed.

For Finkelstein, a physician, and Temin, an economist, societal needs
for medicines are swiftly extending beyond national boundaries:
Diseases affecting the developing world--afflicting people too poor to
make drug development attractive for businesses--will soon affect
health inside the United States.

"Global travel and climate change both require that U.S. drug
development and innovation policy rethink the way drugs are developed,
and for whom. Air travel, migrations, a global workforce--all these
mean unusual diseases could become usual here," Temin noted.

Climate change also may affect drugs their proposed DDC would select
for funding.

"Especially in the southern states, tropical diseases are likely to
increase with global warming, and people will need treatments for
them. In our plan, the DDC would encourage research in advance of the
market - and, we hope, in advance of disaster," he said.


Judit Rius Sanjuan
Attorney at Knowledge Ecology International
www.keionline.org / www.cptech.org
Phone: +1.202.332.2670, x18
Email: judit.rius@keionline.org