By Kevin E. Noonan —
Our opinions are always (perhaps inevitably)
informed by our experience. And
when our experience is limited, particularly when those limitations are coupled
with passion, those limitations equally inform our opinions.
These realities come to mind when reviewing a
letter from two medical students in the journal Science in response to an
article by Sherry Knowles regarding patent law and the pharmaceutical industry. In a "Policy Forum"
article in Science entitled "Fixing the Legal Framework for Pharmaceutical Research," Ms. Knowles (at right) discussed two aspects
of such "takings" regarding branded drugs as a consequence of changes
in patent law (see "'Takings' by Congress and the Courts"). Ms. Knowles, who
until recently was Chief Patent Counsel at GlaxoSmithKline, set out legal
arguments why changes in patent law occasioned by several Supreme Court and
Federal Circuit cases (including KSR International Co. v. Teleflex, Inc.,
In re Bilksi, and Ariad Pharmaceuticals, Inc. v. Eli Lilly and Co.),
as well as the (perhaps unforeseen and unintended) effects of the Hatch-Waxman
generic drug regime could constitute a "taking" of property that
could raise constitutional liability under the Takings Clause of the Fifth
Amendment to the U.S. Constitution. Specifically, Ms. Knowles questioned the legal effects and consequences
of such government action regarding the investment drug companies:
An issued patent is property just like
a piece of land or a house (citing Consolidated Fruit-Jar Co. v. Wright,
84 U.S. 92, 96 (1872) and Patlex Corp. v. Mossinghoff, 758 F.2d
594, 599 (Fed. Cir. 1985)). When a federal judicial decision dramatically
changes the law, such that a valid patent becomes invalid, has the federal
government taken private property in violation of the federal
Constitution? Application of the Fifth Amendment is not clearly limited
to legislative and executive action; nothing in its text bars extension of the
takings clause to judicial action.
Her
prescription to "justly compensate" private companies for the takings
effects of judicial decisions and the Hatch-Waxman Act was to increase the term
of data exclusivity under Hatch-Waxman from 5 to 14 years, and to give
appellate courts discretion to have a decision have prospective effect only,
should it overrule prior interpretation of patent law. She professed the
belief that these changes would "substantially increase the number
of drugs in the R&D pipeline, which would greatly benefit patients and
ultimately benefit generic drug companies."
Two medical
students, Laura M. Musselwhite and Jane Andrews take issue with these
arguments. (It should be noted
that while Ms. Knowles' article was directed towards the beneficial effects of
the changes she proposed, it was basically a legal argument, and there is no
evidence that either medical student has any legal experience.) In a June 11th letter to Science entitled "Protect Pharmaceutical Innovation" (access requires an AAAS subscription), the students argue that the changes Ms.
Knowles proposes "would likely narrow the drug development pipeline and
certainly increase drug prices." Their argument is based on a 2001 Public Citizen report that the cost of
new drug development is not $1.2 billion (in 2008) but about one seventh of
that figure. Without questioning
the validity of the Public Citizen analysis, it is almost ten years out of date
and contrary to every other estimate of drug development costs, across the
political spectrum public and private. They also cite a Kaiser Family Foundation study that pharmaceutical
companies have "garnered three times the profits of the average Fortune
500 company," one of those statistical arguments that are of little value
without context: without knowing
the range of profitability, it is hard to know whether that difference is
significant. They also repeat the
naïve statement that "governments and non-profits already fund the
majority of health R&D that generates [drug discovery]." Governments and non-profits support
basic research (as they should); drug discovery is overwhelmingly done by
pharmaceutical and biotech companies, and these efforts depend on investment
orders of magnitude greater than the monies spent by governments. (It is perhaps not surprising that
students who have spent their lives in academia would think that every
innovation begins there.)
They also cite
the benefits of generic drugs facilitated by the Hatch-Waxman regime since
1984, correctly citing statistics showing the percentage of prescribed drugs
that are generic and the reduced prices charged for them. However, their statement that "Hatch-Waxman
has been preserving the precarious balance between public welfare and industry
incentive for drug innovation by providing affordable medicine" is a
sentiment (or maybe a belief) unsupported by evidence cited or otherwise
(perhaps they thought it was self-evident).
They end their
letter by calling for a Congressional ban on reverse payments (which they call "unethical"),
which they say would "deincentivize compensatory agreements" and "refocus
brand name companies on constructing novel therapies that may address presently
unmet medical needs." Lofty
sentiments untethered to reality: first, because several appellate courts have determined that reverse
payment agreements can be procompetitive and permit generic drugs to enter the
marketplace faster than they would otherwise (see "Reverse Payments in Generic Drug Settlements" — Part I, Part II, Part III, and Part IV). Second, the existence of reverse payment agreements is
irrelevant to development of new drugs except in ways exactly opposite to the
students' argument: reverse
payments permit pharmaceutical companies to obtain additional revenues to pay
for drug development
In her
response (also published in the June 11th issue of Science), Ms. Knowles, now a private consultant, cites several studies
contradicting the assertions in the medical students' letter. These include a National Academies
study that recommends an increase in the exclusivity period (from 5 years to
12-14 years) under the Hatch-Waxman Act, based on more recent assessments of "the
complexity and length of drug development today" and a Congressional
Budget Office study showing that the number of new molecular entities by
innovator drug companies "spiked in the mid- to late 1990's and have been
decreasing since 2000."She
points out that the Public Citizen study was not peer-reviewed and would predict
outcomes not reported in any study of the pharmaceutical industry, and notes
analytical deficiencies in the Kaiser Family Foundation study. She also cites economic statistics that
contradict the Kaiser study, including that "the share prices of many of
the largest global pharmaceutical companies have declined dramatically"
since 2000, some by as much as 60%, and attributes much of this decline to the
effects of generic competition on investment in new drugs. She rebuts the argument that
governments and non-profits fund "the majority of research" on drug
development with another CBO study. Finally, with regard to reverse payment agreements, she cites the
facts: that since 2004 every
settlement agreement must be filed with the Federal Trade Commission, and that
of the 152 settlements only a "very small number" of these have been
challenged by the FTC (and that the government has lost more of these
challenges than it has won).
It is
understandable why these students have the beliefs they profess in their
letter: Ms. Andrews is a member of
the 2009-2010 Coordinating Committee of Universities United for Essential
Medicines, has an undergraduate degree in political science, and received a Fulbright grant for research in
Tanzania on barriers to rural antiretroviral access. Ms. Musselwhite, another UUEM member, has similar views as
espoused in the Winston-Salem Journal as a Guest Columnist:
Earlier this year, as a medical student
at Duke University, I saw a patient with Crohn's disease, an inflammatory
intestinal disease associated with substantial disability and mortality that
affects more than 500,000 individuals nationwide. This patient required
hospitalization for a flare that she attributed to not being able to afford the
month's Humira, a biologic medicine used to treat severe, active Crohn's
disease.The drug is
priced by Abbott Laboratories at a staggering $22,000 a year. This patient
would clearly have benefited from the availability of an affordable, generic
version.
This is their
experience, seeing firsthand the consequences of the dysfunctional U.S. medical system that lets
private insurance companies rather than doctors determine who gets care and how
much they can afford. This
experience is not the same as understanding how such medicines actually get
developed, the subject of Ms. Knowles' piece. It is unfortunate that the politics of medical care provides
an incentive for individuals providing care to oppose individuals providing the
new drugs that improve our ability to treat and cure patients (which should be
the goal for all of us). But
acting on the incentive to demonize biotech and pharmaceutical companies is
self-defeating. Generic drug
companies, for all their benefits, do not invest the time and resources to
produce any new drugs; without
innovator biotechnology and pharmaceutical companies, generic drug makers would
have nothing to copy or sell. It
would be well for the medical students and others on their side of the debate to
consider where novel therapies will come from without companies with experience
in obtaining (and financing) regulatory approval of such drugs, protecting them
with patents, and having the business resources to bring such drugs to
market. It is certainly the case that these companies are for-profit (it's
capitalism, after all), but the costs of R&D and regulatory approval, as
well as scale-up, production, and distribution are realities that cannot be
ignored. That is where experience, specific experience with drug
development, is invaluable. Frankly,
it is precisely this experience that the medical students lack.
Patent Docs 
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