IPR and Medicines 30: R&D and Innovator Companies

Interesting  data here. Out of the top 10 biggest firms in the world in terms of R&D spending, five are pharma (Roche, Novartis, Merck, Pfizer, J&J), three are IT (Samsung, Intel, Microsoft), and two are automobile firms ((Volkswagen, Toyota). Latest data March 2014. 

Source: Raconteur, Intellectual Property 2014

But in terms of top 10 firms in terms of number of patents held, zero from pharma, almost all of them are IT companies.

From this article:

"It’s estimated that currently up to 80 per cent of stock market values are based on intangible assets. This compares to just 20 per cent in 1975, the year before Apple was founded. This remarkable difference reflects the fact that many companies in 2014 operate in industries with very little machinery or other fixed assets. Accordingly the observed company value must be attributed to intellectual assets such as brand value and other IP...

"The importance of IP is particularly apparent in the pharmaceutical sector, where the expiry of dozens of critical patents has wiped billions from the value of the industry over the past few years.

"On March 12 for example, Pfizer’s stock was suspended for 20 minutes on news that its blockbuster pain drug Celebrex would lose its patent protection 18 months earlier than expected. Pfizer stock closed down almost 3 per cent, a meaningful number for a company with almost $200 billion in market value...."

Yes, people simply want to live long -- against cancer (there are about 200+ different types of cancer), against Alzheimers, against various infectious diseases (dengue, malaria, HIV, MERS-CoV, ebola, etc.). There are ethical and economic issues, some people think the cost of R&D by innovator pharma should be neglected, the fruits of their successful drug inventions should be shared to all. This is a wrong argument.

More interesting infographics here, http://raconteur.net/.../ranking-the-worlds-most...

10 Most innovative nations in the world, 2014 (Raconteur)

1. S. Korea (and #3 by R&D intensity, #2 by patent activity)

2. Sweden (#4 by R&D intensity)

3. US (#10 by R&D intensity, #5 by patent activity)

4. Japan (#5 by R&D intensity, #3 by patent activity)

5. Germany (#9 by R&D intensity, #6 by patent)

6. Denmark (#6 by R&D intensity)

7. Singapore

8. Switzerland (#8 by R&D intensity)

9. Finland (#2 by R&D intensity)

10. Taiwan (#7 by R&D intensity, #1 by patent)

That's 4 from Asia, 5 from Europe and 1 from N. America..

Israel is #1 by R&D intensity, China is #4 by patent; both though are not in the top 20 most innovative nations in the world.

Samsung spent big time money in R&D because it wanted to topple Motorola, Nokia, other previous heavyweights in mobile phone and electronics. The innovator pharma spent big time money on R&D because the demand by patients, rich and poor, for new, more revolutionary, more disease-killing medicines, is high.

If governments are involved in many countries in pharma, it is more of helping the generic manufacturers, not the innovators. See policies like drug price control, compulsory licensing (CL), special CL, etc. All these are aimed and targeted at innovator pharma, never at generic pharma.

In the case of medicine innovation by innovator pharma, all of their new medicines that start out as patented, more expensive drugs "for the rich" for about 8-10 years (the various regulatory approvals, multiple clinical trials, take about 10-12 years out of total patent life of 20 years) ultimately become off-patent, the generic manufacturers come in and multiply the production at cheaper price, benefiting the poor. Government has zero role here except as drug regulatory agency via FDA and still the poor will benefit.

Here's a good chart. It shows that out of the 20 years patent life of a newly-invented medicine, up to 13 years are gobbled by R&D, pre-clinical, clinical trials, registration. Each stage must get regulatory approvals from government FDAs.

Source: IFPMA, 2012. The New Frontiers of Biopharmaceutical Innovation.

Exploratory stage: 2 to 4 years identifying antigens to prevent or treat a disease. Selected candidate vaccines will continue the process.

Pre-clinical stage: 1 to 2 years assessing antigens’ safety in animals and selecting the best candidate vaccine to continue the process.

Clinical development: 6 to 7 years Testing the candidate vaccine in humans.

Phase I: test of safety on 10 to 100 volunteers.

Phase II: Evaluation of the immune response in 100 to 3,000 volunteers.

Phase III: Large-scale tests of the vaccine’s efficacy and tolerance on 3,000 to 40,000 volunteers.

Registration: Synthesis stage from 12 to 18 months

Another good chart, the vaccine development cycle. Same source above, IFPMA.

Innovation and IPRs like patent, copyright, trademark, should be protected. Not all ideas are the same. Stupid ideas are numerous and endless, readily available anywhere, they do not need protection. Bright ideas are scarce, they need protection.

Governments should fully appreciate and recognize this, and not be easily pressured by populist demands to confiscate or disregard IPRs and give to some (very likely, crony) local firms.
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See also:
IPR and Medicines 26: Novartis' Glivec and India's IPR Ruling, April 01, 2013, 
IPR and Medicines 27: More on Glivec and India's SC Decision, April 02, 2013
IPR and Medicines 28: Politicizing Innovation, Rewarding Rent-Seeking, April 06, 2013
IPR and Medicines 29: Parallel Importation and Patent Linkage, August 19, 2014