IPR and Medicines 17: Why are Drugs Still Expensive After Patents have Expired?

This is the question posed by a friend, Mhyanne, in her facebook wall. It's a question that has both valid and invalid presupposition because some off-patent drugs are really cheap (say, paracetamol that sells for only P2 or less per tablet) while some are still expensive. But before I discuss further, here are some comments and explanations to the question, "Why are drugs still expensive even after patents have expired?", from her other friends in fb.

1. Because government is corrupt. Companies, especially international, cannot just lower their prices because they have to pay some of our government officials before their products are allowed to enter (especially thru bidding) our market.

2. Because profit from patented drugs are to pay for the cost of research and drug development of drugs until marketing. after the patent expires, thats the start pa lang they get profit from it. Also depends if multinational drug companies are willing to produce the same generic to make the cost competitive.

3. Because it funds the pharmacetical company's post marketing research which generic seldom does, for advertisements, to fund new drug discovery to treat diseases, funds medical practitioners to go abroad for alleged conventions, funds pharm's parties, renovations of some government hospitals' wards, doctors lounge...they spend millions for lobbying in congress and senate...

4. It's not the post-marketing research that is expensive. The whole research from pre-clinical until post marketing. But if drug companies will not research new drugs, lots of people could be dying now. I think there is no money in drug business. Money is on electronics and computers. There are only a few who would invest on drugs coz the turn-over of money takes years. One drug research would take maximum 20 years. some don't even get patented and trash.

5. Wrong idea about the conventions abroad. Research people and doctors don't go abroad only for pleasure, most of us dont even sleep at night coz we respond to many emails. Research is usually global, so people meet in one country only, share notes and study, learn together about the drug, methodology and the treatments.

You cant blame also the multinational drug companies. Some doctors if you don't splurge money on them during postmarketing, they will not move. Even if the new drug is great.

My friend added her own observations and ideas:

Government will be looking into the issue of unethical promotion of the pharma companies. Yes there are cheaper meds but a regular employee earning 350 salary per day still wont be able to complete the full course of ceftriaxone vials if patient has pneumonia, it will be great if insurance system would cover even take home meds, pharmaceuticals must also look into their pricing schemes like for developing countries like the PH sana it'll be lower.

Centralized procurement can lower prices, less people to transact with. Companies who spend so much in research for new drugs are useful too, specially now that resistance to certain antimicrobials is rapidly increasing...

My own suggestions are:

‎1. Cut or remove the taxes on medicines (3-5% import tax + 12% VAT + local govt taxes), nearly 20 percent of the price is government contribution to expensive medicines. This will require a new law, amending the National Internal Revenue Code (NIRC), a public finance issue, not health.

2. Remove mandatory discounts (50 percent under drug price control for the 21 molecules + 20 percent for senior citizens and persons with disabilities, PWDs). Drug manufacturers and drugstores have to jack up the price of other drugs not covered by these to compensate for revenue losses. This will also require a new law, amending or abrogating the previous laws on those mandatory discounts. Not all senior citizens are poor; in fact, many of them are wealthy, getting good pension from their previous employers or from their well-off children or relatives. Thus, assuming that all senior citizens are poor that need subsidy -- not from the government but from private enterprises like drugstores, restaurants, airlines, shipping lines, etc. -- is wrong.

In the case of the existing drug price control policy, I have argued in several papers here, that the DOH should withraw that policy. See my latest paper for instance, Drug Price Control 21: Illegalities in the Implementation of the Policy, November 14, 2011.

3. Encourage the entry of more generic manufacturers, both foreign and domestic, and more innovator companies from the developed world. Competition among players is the best regulator of prices and product quality, not more government regulations and taxation.
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On a slightly different thread, my friend from Malaysia, Tricia Yeoh, posted this in her facebook wall: "A heated discussion continues today, this time on intellectual property rights, and the needs (or not) for such rights."

A number of Tricia's friends commented, I joined the fray. My debate with Yin below actually extended to climate alarmism, but I will not include that thread here, limit the exchanges only on IPR.

Leon: IP is needed - but people are overdoing it. IP should not protect ideas which will eventually emerge given time, but really original constructs.

Kia: Trish, ask them about the impact of IPR and FTAs on access to affordable medicines for the poor and those who need it.

Leon: your opening a can of worms. Do remember it cost USD1Billion to develop a block buster drug - IP is a good way to recover a profit and make it worth while. I have a solution though for the next gen of block buster drugs, but its an indirect approach.

Kia:  I have no problem with firms making their investments worthwhile...js don't stop generics from producing and no 'data exclusivity' conditions forcing generic producers to incur costs which are really unnecessary, given the test findings that are already there.

Kelvin: That IP must be protected is a given. The actual discussion should center around where these protections cease to be useful and begin being detrimental to continued innovation. IF a drug company can't patent chemical compound, then they have no incentive to develop one. But if they can rest on their laurels indefinitely (patents last forever) then why develop a new compound if the current one works? Also, at what point does the protection of IP becomes an issue of ethics? Beware strawmen arguments, "We should shorten the period in which IP is applicable", "Research shows that the lack of IP would cease big budget innovation bla bla bla." - the argument is for shortening the period of applicable IP laws, not getting rid of them. Anyone who thinks that IP is purely detrimental and that all information should be free is an idiot. And anyone who thinks that the same IP laws should apply across all fields is a fool. Different industries have different rates of innovation and evolution. IP laws should reflect this accordingly. To hell with sweeping generalisations, we are not children and this is not a simple world. We need a nuanced approach, but a principled one.

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  Nonoy Oplas Hi Tricia, I wrote this a few months ago, 22 pages long -- Should IPR be abolished cheers. ?http://minimalgovernment.net/media/mg-20110530.pdf
  
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  Nonoy Oplas IPRs -- patent, trademark, copyright, etc. -- should be protected, not abolished. On drug patent, here's my latest argument why drug patents should be respected and encouraged,http://funwithgovernment.blogspot.com/2011/11/ipr-and-medicines-16-wikileaks-and.html.
  

  
  

  Government and Taxes: IPR and Medicines 16: Wikileaks and the Cheaper Medicines Law

  funwithgovernment.blogspot.com
  

  
  

  
  

Yin: IPRs and Climate Change Tech: www.twnside.org.sg/title2/IPR/pdf/ipr14.pdf

Patents and Compulsory Licensing for Drugs, www.twnside.org.sg/title2/IPR/pdf/ipr10.pdf

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  Nonoy Oplas double jeopardy by the TWN paper. Man-made warming and climate change is a huge scam, and second, TWN is an active campaigner against IPR especially in medicines, right?
  
  

  
  CL for important innovator drugs is wrong. CL says "the cost of yourexpensive R&D, your losses to non-successful drug molecules are yours and yours alone. But if you invent a successful and profitable drug molecule, hey it's also my invention",http://funwithgovernment.blogspot.com/2011/10/ipr-and-medicines-14-compulsory.html

  
  

  
  

  Government and Taxes: IPR and Medicines 14: Compulsory Licensing in developing countries

  funwithgovernment.blogspot.com
  

  
  

  
  

Yin: Are you implying that TWN's active opposition to a legal institution invalidates them from questioning the merits of that institution? Your implication appears to be that you shouldn't talk about IPR unless you are an advocate. That seems a rather authoritarian and anti-intellectual stance for someone who appears to support freedom and personal responsibility.

Nonoy: The linked TWN papers are lousy. Thousands of people are dying from dengue alone each year, and there are plenty (tens of thousands) of anti-biotic resistant bacteria that sprout each year, there are dozens and dozens of different types of cancer -- ALL with no existing drugs or vaccines yet. Demonizing drug innovation for political reasons is wrong.

An IPR like patent or trademark is a mini-monopoly, true. Amlodipine molecule (against hypertension) as discovered by Pfizer for instance many years ago, was a product monopoly for a limited period of time. But other companies also invented their own drug molecules against hypertension and called them by a different name. So no one really has a monopoly on a drug against hypertension as there are many molecules, mostly off patent, against the diseases. Demonizing patent and IPR for political reasons is wrong.

Yin: You are muddling categories (or shifting goalposts) with the IPR argument. The TWN paper is focused on the particular case of HIV retrovirals where large numbers of victims exist amidst superlative company profits which serve to restrict access to health and containment of the disease.

The other examples of health crisis you offer are based on different diseases which may or may not merit compulsory licensing, depending on whether pricing of a cure constitutes a major barrier to access for many poor victims. Even in your linked article you never address this humanitarian concern at all. So, don't shift the goalposts, address the humanitarian problem of HIV and retroviral access head on; or should victims do up their bootstraps, get a good job, earn more money and pay drug companies their 'fair due' for the drugs?

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  Nonoy Oplas On AIDS, some good data from The Economist magazine on declining AIDS death while spending on drug innovation rises, http://funwithgovernment.blogspot.com/2011/06/ipr-and-medicines-part-9.html.
  
  

  
  It's easy to justify CL for any diseases. Here in the Philippines for instance, hundreds die of dengue each year, affecting rich and poor alike, killing even doctors and other health professionals. Vaccine against dengue is still 2-3 years away, thus, there is nothing to crave for CL at this time because the innovator drugs are not available yet. Once it's available, the politics of envy and bleeding heart activism will come in, citing hundreds of deaths from dengue as reason to clamor for CL issuance. We will see later.

  
  

  
  

  Government and Taxes: IPR and medicines, Part 9

  funwithgovernment.blogspot.com
  

  
  

  
  

I like this quote from Kelvin:

"Anyone who thinks that IP is purely detrimental and that all information should be free is an idiot. And anyone who thinks that the same IP laws should apply across all fields is a fool. Different industries have different rates of innovation and evolution."

I have read a number of activists attacking IPR because formulas in algebra, calculus, chemistry or dance steps should not be patented. I wondered where they get that idiotic idea that such formulas and dance steps are patentable? Perhaps from plain paranoia.
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See also:
IPR and Medicines 14: Compulsory Licensing in developing countries, October 04, 2011
IPR and Medicines 15: New Vaccines and Public Health, November 05, 2011
IPR and Medicines 16: Wikileaks and the Cheaper Medicines Law, November 08, 2011

IPR and medicines, Part 9

There's a good graph from The Economist in its Daily Chart section last June 3, 2011 issue. It's about the declining trend in deaths due to AIDS.

The Economist wrote, "... A decade ago, half of the people in several southern African countries were expected to die of AIDS. Now the death rate is dropping. In 2005 the disease killed 2.1m people. In 2009, the most recent year for which data are available, the number was 1.8m. Some 5m lives have already been saved by drug treatment. In 33 of the worst-affected countries the rate of new infections is down by 25% or more from its peak. Even more hopeful is a recent study which suggests that the drugs used to treat AIDS may also stop its transmission (see article). If that proves true, the drugs could achieve much of what a vaccine would."

Now, there are three issues and possibilities here. One is that the anti-HIV drugs and vaccines were indeed successful, even partially, in keeping the AIDS virus at bay, which allows the patients to improve their immune system. But the drugs and vaccines are not yet totally successful in killing the disease.

Two, previous estimates of actual deaths and future deaths due to AIDS were bloated and exaggerated. Thus, when a "recount" was made at the later years, the mistake of exaggeration was discovered. I remember it was the WHO and/or another UN office focused on AIDS, that made really scary scenarios about the AIDS epidemic in the future. Meaning they wanted more money if the world did not want their scenarios to happen.

And three, it could be a combination of the two above. The end result is that there are less people actually dying of AIDS, and the alarmism about AIDS has also gone down.

Last May 27, 2011, there was another good chart also from The Economist. It's about Drugs in development, or drugs not yet marketed, are patented, and are still in the research laboratories.

Caption in the chart said, "...in 2010 America spent $125 billion on cancer treatment. By 2020 that number may rise to $207 billion, according to the National Institutes of Health. Drug companies are scurrying to become leaders in cancer research. This month Roche submitted an application to the Food and Drug Administration (FDA) for a new melanoma drug, vemurafenib. Pfizer boasted that the FDA had granted “priority review” for a drug, crizotinib, that treats some types of lung cancer. Other firms are hawking progress ahead of an important conference in June. Theirs is a risky, two-part strategy. First, create drugs that work. Second, charge a fortune for them."

Those 900+ different new drugs against cancer, still in various R&D stages, are proof that the claims by the anti-IPR people that "IPR like patent kills innovation and competition as whoever invents a new product like a new drug, automatically shuts off the door to other researchers and inventors to produce another product, another drug."

The opposite happens. Someone invents a new drug against breast cancer, more powerful than existing and old drugs against the same disease, he patents it. Another corporation or group of researchers invent a new drug, from different raw materials, forming a different molecule, to treat or control breast cancer. Several hundred companies or research institutes compete with each other in producing a more powerful drug or vaccine against a particular disease, and all of them have their discoveries and inventions patented. No one is excluded or disenfranchised from pursuing their own research and innovation work. Rather, everyone is encouraged to pursue such as there is a system of laws that recognize and protect them as the original inventors.

Here in the Philippines, there are very few patented drugs in the market. It is noticeable for instance, that the biggest pharma here, a local one, Unilab, is less noisy now in running after the patented drugs of Pfizer and other multinationals. Patent of Norvasc is expiring this year I think; that of Lipitor (anti-cholesterol; UL's brand is Avamax) is also expiring next year or the next, I think. These will make the provisions of the Cheaper Medicines Law (RA 9502) on compulsory licensing (CL), special CL, and parallel importation of patented drugs, become moot and academic. There simply are very
few, and possibly, NO MORE, patented drugs here in the Philippines soon.

It is possible that the policy of some multinational pharma of delayed launching, or non-launching, of patented drugs to countries with laws authorizing price control, CL and related IPR-busting policies, has come to us. Some of the newest, more disease-killer, more expensive, patented drugs, are available in Singapore, Hong Kong, Taiwan, S. Korea, Japan, US, etc. but not available in the Philippines, other countries. I am not sure about this as I do not have data yet.

If this is happening now, then desperate patients in the Philippines, rich or non-rich, may have to travel abroad to get these more powerful drugs and boost their chance of survival from certain diseases. But that will make treatment even more expensive.

A basic law, the "Law of unintended consequences", almost always produce undesirable, non-anticipated negative result, whenever governments come in to intervene supposedly to protect the public.
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See related articles

1. IPR and medicines, Part 8 last March 31, 2011
2. IPR and medicines, Part 6 last March 15, 2011

CSOs and State 1: AIDS and Perversion of Welfare

There was a very disturbing news from the Wall Street Journal last April about AIDS. It was entitled,

"Dangerous DecisionIn South Africa, Poor AIDS Patients Adopt Risky Ploy"
To Get Disability Payments, Some Skip Medications, Putting Lives in Peril
Aiming to Be 'Very, Very Sick'
By MICHAEL M. PHILLIPS April 7, 2006; Page A1

The South African government gives advanced anti-AIDS drugs for free to patients. The pills, antiretroviral "cocktails", would boost one's immune system, relieve symptoms and restore his/her health. In addition, the government gives out a $130-a-month disability grant, if one is really sick.

The results were rather sickening. Some poor people who have bad AIDS situation and receive the allowance from the government stopped taking the anti-AIDS medication so they will remain sick and can continue drawing the allowance. While those who have better or improved conditions have stopped taking the medicines, find ways to be infected further, to get sick further, so they will qualify for the government allowance!

According to Mr. Phillips' report, patients who do this would rather endure terrible sickness just to get the allowance so they will have extra cash to feed their kids, or pay rentals and debts, or start a small business. There are estimated 5.3 to 6.3 million HIV carriers in South Africa.

In economics, you call that behavior of choosing to be sicker to get allowance as "moral hazards" problem. If people know that there are some form of rewards or protection (bail out, subsidies, allowances, stipends, other forms of protection) if they misbehave, then they will misbehave. Well, at least for those who are desperate enough and consider the rewards for irresponsibility better than the pain (physical, emotional, whatever) of such irresponsibility.

In the Philippines and other poorer countries, there are similar behavior.
Here for instance, we have a law that squatters cannot simply be removed from the lands they're squatting on, unless the owner/s of the land (government or private) will find a relocation site for those who will be evicted, facilitate their transfer. In some government relocation sites, government even gives the relocated squatters land titles.

Result? Squatters mushrooming in many places. They just occupy private lands, or government lands. Many private land-owners are more determined to evict the squatters and guard their lots. Government, the biggest landowner in the country, even confiscating some private lands if landowners did not pay the real property taxes plus the high penalties for delayed payment, is more tolerant of squatters. Government leaders for one (from mayors, congressmen, governors to the President) often protect the squatters from eviction so long as the latter will vote for them, and support them if they are experiencing political crisis.

There are also the so-called "professional squatters". When government gives them land titles, they sell that title to other people, get the money, then hop to another lot or location and squat the area, waiting for another round of new land titles to be given to them.

So, people really respond to incentives.
If there are incentives for irresponsibility and misbehavior, or the penalties are too light for misbehavior like stealing, then some people will abuse any government welfare and remain irresponsible.
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A friend sent me also an awful news from The Washington Times (date not indicated), entitled
"AIDS INCENTIVES COSTLY TO AGENCIES"
by Karen Palmer.

The disturbing news is that in Malawi and other parts of Africa, people who are potential victims of AIDS, if not already suffering from it, now require "allowance" fees and per diems (effectively, bribes) before they will attend AIDS meetings and seminars that will directly benefit them. The going rate, according to the report, was 1,500 kwachas, or about $10 equivalent per day. And the international NGOs, or UN agencies have started the practice of distributing money to people and local government bureaucrats to entice them to come to their seminars. The report said, "Some blame UNICEF, others blame Oxfam, but no one remembers who first offered envelopes of cash in exchange for attendance. The point, they say, is that now everyone does it. And people say, 'If you don't give us pocket money, sorry, we're not interested.'"

In addition, government officials and civil servants also require payments, "sitting fee" they call it, for them to attend meetings and seminars. Continued the report, "The result is that some HIV workers use training sessions as a lucrative source of income, floating from one workshop to another, shopping around for conferences where participants stand the greatest chance of making a bit of cash."

So if the international NGOs will not give money, no one will come to their AIDS seminars, so what? The NGOs are afraid that they will have no picture and real reports to show to their donors? Then why bother to help people who don't bother to help themselves either, why put in your money (or other people's money)? And the national or local government bureaucrats, why bother to invite them if all they need is "attendance fee"?

It's bad that tax-funded government foreign aid has corrupted the concept of "national development" of many poor country governments. It's equally bad that private-funded NGO foreign aid has corrupted the concept of "personal welfare" of many poor country citizens.

Maybe we should consider the fact that if nature is killing people (AIDS, malaria, TB, and so on) and people don't want to help themselves, then let nature take its course.