[Pharm-policy] letter to Dr. Novotny regarding empirical basis for trade policy

[James Love]

This is a letter we sent to Dr. Thomas Novotny, asking that
DHHS provide an empirical basis for the claims that HIV/AIDS
drugs require $.5 billion to develop. 

------------------------
January 6, 2000

Empirical basis for review of US trade policy

Dr. Thomas Novotny
TNovotny@OSOPHS.DHHS.GOV

Dear Dr. Novotny,

This is a letter asking for information regarding the empirical basis
for reviews of US trade policy, as it relates to pharmaceutical drugs.

In particular, I am asking that you provide information regarding the
empirical basis for the often repeated claim that drug companies spend
$.5 billion or so to develop new drugs -- an assertion that is
considered an important basis for trade policy.  In particular, what is
the basis for this claim with respect to HIV/AIDS drugs?

In considering this request, please consider some additional
information.  

1.  From 1983 to 1993, HIV/AIDS was considered an Orphan disease.  
During this period, US human use HIV/AIDS clinical trials were eligible
for a 50 percent tax credit.  This tax credit is evidence of industry
spending on clinical trials over this period, for a group of drugs that
included HIV/AIDS drugs.  The US Department of Treasury can provide your
office with data on 50 percent of the industry outlays on Orphan trials
as a group.  Public statements about the private sector costs of
developing HIV/AIDS drugs should be reconciled with this empirical
evidence, one would think.

We believe the pharmaceutical industry recieved $107 million in orphan
drug tax credits over the 1983 to 1993 period.  This credit was for the
entire group of all orphan drugs, including but not limited to HIV/AIDS
drugs.  Note also that the orphan drug tax credit is earned for both
successful and unsuccesful products, and thus is evidence of outlays for
all clincial trials, including those for drugs that did not receive FDA
approval.  You may want to ask the Department of Treasury to
independently confirm this.  Once DHHS is aware of 50 percent of the
private sector expenditures on human use clinical trials, it should not
be difficult to determine what pre-tax and after tax outlays were, per
approved drug. Our own analysis is that 93 orphan drugs were approved
from 1983 to 1993, suggesting after tax credit private sector outlays of
$1.15 million per approved drug, based upon the tax return data.  We
recognize that this number is quite small, relative to current
assumptions regarding costs, and we further assume that there will be
various theories as to why this tax credit data is so different than
popular belief.  But it is, of course, real evidence that should be
explained in some way.  

2.  Our recent analysis of all 14 FDA approved HIV drugs indicates that
(a) the average time between filing for a patent and FDA marketing
approval was only 4.4 years.  This is far longer than the assumed delay
between invention and marketing approval assumed in the 1991 Tufts study
or the 1993 OTA study (the 1993 OTA study re-calculated the 1991 Tufts
study data using higher discount rates).

3.    Our own review of applications for FDA new drug approvals (NDAs)
for HIV drugs has found that these applications typically do not involve
large numbers of patients in clinical trials, and often key clinical
trials are sponsored by federal agencies.  

Those who are looking at these issues might want to look at the
following web page, which contains factual information on the invention
and IPR status of HIV/AIDS drug:
http://www.cptech.org/ip/health/aids/druginformation.html

Thank you.

James Love
Director
Consumer Project on Technology
http://www.cptech.org
love@cptech.org
202.387.8030


-- 
James Love
http://www.cptech.org
mailto:love@cptech.org
voice 1.202.387.8030