Category Archives: Patents

Interesting take on drug prices in Health affairs blog– http://healthaffairs.org/blog/2009/11/24/drug-prices-and-health-reform/ –Donald Light commenting on his article “Global Drug Discovery: Europe Is Ahead” noted:

• “Europe outperformed the United States and also significantly increased its productivity of NMEs (new molecules) per billion invested. Regarding critical new drugs that are first in class, Europe and the United States were about even, but this means that U.S productivity decreased substantially and Europe productivity increased, as shown in Exhibit 4 of the article.”

He also observes:

• “European countries have also signaled more strongly that companies will be rewarded for significantly better drugs but not for marginally better ones, while U.S. purchasers tend to pay high prices for marginally better drugs as well as good ones. Although the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry trade association, champions high prices, they create an industry fat on easy profits and well-documented opulence.”

And:

• “The second, bigger point of my article for Congress, employers, and insurers is that regardless how productive pharmaceutical companies are, studies show that 85-89 percent of new drugs provide little or no advantage over existing drugs when measured by clinical improvements.”
  

Medicynic believes patent reform is one way to deal with the drug cost problem as outlined here and here. We should:

• “link the length of patents to reasonable pricing. As part of the FDA approval process the proposed price of the new medication would be compared with similar medications already on the market and with the same medication in other countries. The same process that the Canadian patent drug review board uses. If priced a significant amount over the comparator, the patent length would be decreased by some period of time to be determined by the review process–there are many ways such a link could be structured. For unique innovative drugs the cost of development could also be factored into the pricing length of patent equation. Price increases during the duration of the patent would be tied to the rate of inflation. If they exceed that rate the patent length would be proportionally shortened.”

Ten issues that can go away with Health Reform:

1. The approximately 47,000,000 uninsured: Virtually all will have access to coverage with incentives for provider efficiency and the most cost efficient interventions.

2. The profit squeeze on employers who provide health insurance to employees: It’s estimated that U.S. car makers have had expenses of over $1500/car related to health care coverage for employees. A national system, delinked from employer based insurance, allows employers to compete on the same basis as those in other industrialized countries.

3. Our disgraceful system of health care for GI’s and their families: Incorporating the VA and military health care systems is into a National Health Insurance program provides more and better options for care. These would be community based and thus provide more convenient access.

4. The administrative duplication and fraudulent behavior of multiple insurance providers, each with their own administrative overhead and fiduciary responsibility to generate profits: It’s estimated that we spend 30% of our expenditures for health on administration ($1059/capita in U.S. vs $307/capita in Canada). That could easily be halved or more with a national health program.

5. The conflict of interest between insurers, providers and patients.

6. The crisis in emergency rooms: With insurance people will have a place, other than ER’s, to go with non-emergent medical issues Our republican friends cite ER access as health insurance for all but guess who ultimately pays. ER care is the most inefficient expensive care imaginable. Is this the republican way?

7. The dance of the veils billing system: There is no set price for services. Those with leverage, i.e. large insurers, are given large discounts while the individual pays the full amount. If everyone has insurance there will be a consistent negotiated price.

8. Big PHARMA’s free ride: We pay more for medications than any other industrialized country. PHARMA’s mantra that they need profits to encourage creativity is bogus when one considers they spend more on promotion and advertising than research. In a national insurance scheme drug price negotiation will be the rule–as it is in the rest of the industrialized world. (see more below)

9. Bankruptcy due to enormous medical bills

10. Our mediocre health care outcomes: We spend more per capita than anyone, yet our outcomes (longevity, infant mortality etc) are in the middle of the pack. We do better with diagnosed disease but not significantly better than other industrialized countries paying half of what we do. With universal access we can expect this to change.

Medicynical Note: None of this will be automatic and actually having an efficient functioning system of care will require much due diligence and negotiation.

What won’t change is physician unhappiness with reimbursements and the continuing issues with intellectual property rights. No where in the world are physicians as well paid as here. We’ve made the profession entrepreneurial and money driven and in the current non-system reward procedures rather than primary care. It can be anticipated that a national health insurance scheme will want to flatten the disparities and redistribute, somewhat, the fees. One would hope this would guarantee all physicians reasonable reimbursement for their time and expenses. However, meeting the expectations of the profession will be almost impossible–as it is now.

We do need some type of protection for innovators in our system. We should not however delude ourselves that this is a “free market”. Patent protection creates monopoly and in health care that has resulted in a life threatening market distortion that we can no longer afford. We need to somehow require patent holders to price their products responsibly and to be efficient in their product development and marketing. Once again meeting the expectations of the industry and their stockholders will be almost impossible–as it is now.

But in both cases the status quo is not working.

Marcia Angell former editor of the NEJM (New England Journal of Medicine) and thoughtful author on the health care mess has concerns about the house bill and several suggestions.

Her concerns are that the bill will do little to control excess spending and while “budget neutral” will:

• “throw more money into a dysfunctional and unsustainable system, with only a few improvements at the edges, and it augments the central role of the investor-owned insurance industry. The danger is that as costs continue to rise and coverage becomes less comprehensive, people will conclude that we’ve tried health reform and it didn’t work. But the real problem will be that we didn’t really try it. I would rather see us do nothing now, and have a better chance of trying again later and then doing it right.”

She suggests:

• “Drop the Medicare eligibility age from 65 to 55. This should be an expansion of traditional Medicare, not a new program. Gradually, over several years, drop the age decade by decade, until everyone is covered by Medicare.”
  
• “Increase Medicare fees for primary care doctors and reduce them for procedure-oriented specialists.”
  
• “Medicare should monitor doctors’ practice patterns for evidence of excess, and gradually reduce fees of doctors who habitually order significantly more tests and procedures than the average for the specialty.”
  
• “Provide generous subsidies to medical students entering primary care, with higher subsidies for those who practice in underserved areas of the country for at least two years.”
  
• “Repeal the provision of the Medicare drug benefit that prohibits Medicare from negotiating with drug companies for lower prices.”
  

Medicynical Note: Read the article for more detail.

To these suggestions Medicynic would add that we should also reform our patent system to reward responsible pricing of new advances and penalize companies that gouge.

After 20 years on the market and tens of billions of dollar/year spent on erythropoietin-stimulating agents (ESA’s) a large study in the Journal of the National Cancer Institute (Dec 2,2009) will report:

• “These agents were approved to reduce the risk of blood transfusions by 50 percent,” Hershman said. “There was absolutely no difference in the transfusion rate over the 10-year period from when these drugs hit the market,” she said. “The majority of patients are getting these drugs and receiving transfusions.” (emphasis Medicynic)
• “The researchers found that 14.3 percent of patients receiving ESAs developed thromboembolism (deep vein thrombosis or pulmonary embolism) compared with 9.8 percent of those who did not receive an ESA.”
• “ESAs stimulate red blood cell production and are intended to reduce the number of blood transfusions needed during chemotherapy. However, the rate of blood transfusions remained the same for both groups (22 percent). Survival in both groups was also similar, the researchers noted.”

Medicynical Note: These drugs (ESA’s) did not decrease the need for transfusion, did not improve outcomes, increase complications and cost us tens of billions of dollars/year.

When EPO came onto the market oncologists were skeptical of the benefit and were very slow in their acceptance of the drug. The manufacturers mounted an unprecedented, at the time, direct to consumer campaign focusing on fatigue and chemotherapy. It was remarkably successful in getting physicians to use their agent.

Can you guess why the U.S. is number 1 in health care expenditures, by a wide margin?

As the NY Times notes it will be difficult to reach the cost cutting goals offered by doctors, hospitals, drug makers and insurance companies. ($2 trillion in cost reductions over 10 years)

Medicynic didn’t hear that drug companies were cutting prices rather they volunteered to decrease the rate of increase. Huh? If your drug costs more than you car, or more than your salary such cost cutting will have little impact. Nor did they come out and support the notion that comparison of different approaches would improve care and cut costs.

Medicynic didn’t hear insurance executives volunteer to match the administrative efficiency of other industrialized nation’s insurance plans. Rather they promised to “end certain underwriting practices, like refusing to cover individuals with pre-existing conditions or charging women higher rates than men.”

According to Mckinsey we spend in the range of 30% of health care expenditures on administration. This is nearly $500 per capita, “five times the average level across 13 other countries.”

Medicynic didn’t hear hospitals promise efficiency and cost consciousness. There was nothing noted about geographical differences in costs and utilization but hopefully that will be on the table.

Medicynic, a retired physician, has great sympathy for physicians. They are part of the problem but an essential part of the solution as they control health care resource usage. Unfortunately, in the past, physician fees have been the simplest way to cut costs and many have been unfairly squeezed by previous cost containment efforts. Seeing patients at a loss as primary care physicians do for Medicare and Medicaid patients distorts the fee system–they need to make more elsewhere in the system to compensate. A system that pays more for procedures encourages over-usage.

Physicians have traditionally not considered cost when recommending therapy. This obviously needs to change and comparison studies offer the best way to evaluate cost efficacy.

What I saw was a photo-op, what I heard was rhetoric without commitment; a NIMBY- like approach that is not likely to crowd any of the participants bottom line–except, I would guess, physicians.

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Drug companies claim the U.S. patent system encourages development of new drugs and that the high prices are a necessary corollary. (see this) Others have questions regarding the monopolistic practices legalized by the system. This FDA Backgrounder, and this chapter from Against Intellectual Monopoly by Michele Boldrin and David K. Levine offer more background information.

Wikipedia defines a patent as a “set of exclusive rights granted by a state to a person for a fixed period of time in exchange for the regulated, public disclosure of certain details of a device, method, process or composition of matter (substance) (known as an invention) which is new, inventive, and useful or industrially applicable.” The right to produce the product protected by the patent is subject to further regulation by various regulators.

The regulator of drug patents in the United States is the FDA. Over the years the rules governing drug patents have evolved. Some milestones include:

1938 Federal Food, Drug, and Cosmetic Act : For the first time it was required that a drug be shown safe.

1962 Kefauver-Harris Drug amendment: Required that the drug be proved effective before marketing.

1980 Dole-Bayh– Prior to this products developed under federal grants were in the public sphere. To encourage commercial development of these advances individuals and institutions were allowed to patent these developments and even license or sell the patent to private companies.

Products developed to a major extent with public funds, such as imatinib (Gleevac) and bevacizumab (Avastin), are taken private and the public then gets to pay whatever the drug company or developer wishes for the technology. The result of Dole-Bayh has been medical progress at a tremendous cost. Basic research has suffered as workers are continually looking for something to take private-akin to hitting the lottery. We’re talking tens to hundreds of millions of dollars in fees to the individuals and the sponsoring university of such research. This has literally changed the landscape of medical research and not all for the better. See this article for the rationale and the unintended consequences.

In part because of Dole-Bayh, prescription prices in the past 25 years have increased astronomically. The price of newly patented oncology medications has increased to 50-100 times the level of the seventies, 15-20 times that of the 80’s. Between 1990 and 2001 the average price of all types of prescriptions tripled. Not surprisingly drug profits, after paying all costs of development including research and drug promotion, are at the unprecedented level of 18-20 % of revenue. Some think Dole-Bayh as currently applied is a giveaway to the industry. They further maintain that the law has provisions calling for reasonable pricing of government financed inventions. It’s never been enforced.

1984 Hatch-Waxman act–extended the length of patents up to 5 years (normal patent length is 20 years) to make up for the time the drug took to be approved by the FDA. It also provides for accelerated approval of generic drugs by not requiring generic companies to repeat the original research that proved them safe and effective.

Drugs that are clearly effective and safe are FDA approved and marketed promptly and do not qualify for additional patent time sanctioned by Hatch-Waxman. On the other hand many of the drugs needing additional time for approval and wanting patent extensions have marginal efficacy and/or questions regarding toxicity. That’s what delayed their approval. Ironically, the terms of Hatch-Waxman will extend patents most for drugs that may deserve it least.

The law is gamed by patent holders through legal loop holes and payments to generic manufacturers that actually delay the marketing of competing generics. It’s been a boon to lawyers. A company with a patented drug for example has been able to delay a generic by 30 months simply by raising an objection to marketing it-this was done multiple times in some instances. In addition it allowed hundreds of millions of dollars in payments between the patent holder and generic companies to delay the release of generics. There has been some attempt to control this. The Greater Access to Affordable Pharmaceuticals law passed the Senate in 2002 and was reconsidered in 2003. The FDA revised the rules of Hatch Waxman to address this issue, but the affect of these changes remains unclear. This article from the July 1 2006 Times and this from the July 3, Washington Post indicate that the pharmaceutical industry continues to game the system.

Among the criticisms of patents is the notion that patents create monopolies which almost always result in inefficiencies, stifle competition (by definition), cause higher prices, lower quality and shortages.

It’s clear that our system of care has problems with inefficiency and pricing from the patent monopoly. We have the most costly health care system in the world but have mediocre results. Prices of pharmaceuticals have reached unprecedented levels. Medicynic has previously noted pricing of new cancer drugs/year exceeds the median and average incomes in the U.S. and more. The issues of lower quality and shortages apply because of aggressive marketing of mediocre patented drugs and because people lack access because of price–a pernicious form of health care rationing.

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