A NEW WAY FOR DRUG DEVELOPMENT?
By Russell Mokhiber and Robert Weissman
Whether you think the pharmaceutical industry is a success or failure
depends crucially on how you measure performance.
Although some leading firm's share price has declined over the last
year, from an investor point of view, the industry does remarkably
well. It consistently earns a 15-20 percent return on investment.
Last year, a down year, the U.S. industry return was 15.7 percent,
according to Fortune magazine, ranking it fifth among 50 industry
From a public health perspective, however, the situation is rather
different. Thanks to the patent system, Big Pharma companies invest
not to address priority public health needs, but to take advantage of
potential markets. These are not the same thing.
For example, Big Pharma tends not to invest in diseases that
primarily afflict people in developing countries. Between 1975 and
2004, according to Doctors Without Borders, only a tiny fraction of
new drugs -- only 20 of the 1,556 new chemical entities marketed
globally, just over 1 percent -- were for tropical diseases and
tuberculosis, diseases which account for 12 percent of the total
global disease burden.
In the rich countries, too, R&D efforts are badly skewed. The
brand-name drug companies tend to invest in drugs for which there are
big markets -- like erectile dysfunction -- as the expense of higher
priority health needs. And, Big Pharma emphasizes "me too" drugs --
pharmaceuticals which pretty much do what existing products can do --
because they are easier to develop and have demonstrated markets.
Three quarters of new drugs fall into the me-too category.
The patent-conferred monopoly lets drug companies charge astronomical
sums for their products. Prices have no relationship to the cost of
manufacture, and virtually none to the more substantial cost of R&D.
As New York Times reporter Alex Berenson noted in a recent story,
"After years of defending high prices as necessary to cover the cost
of research or production, industry executives increasingly point to
the intrinsic value of their medicines as justification for prices."
Thus some new cancer treatments are now being priced around $100,000
The patent system also gives brand-name drug companies a major
incentive to invest heavily in advertising and other forms of
marketing. This is because the companies are able to charge so much
over marginal cost, and because there is no direct competition during
the period of patent protection.
In short, under the patent system, we get lots of heavily marketed
treatments for erectile dysfunction or male pattern baldness, but way
too few for sleeping sickness or dengue fever.
The situation could be different.
When the member countries of the World Health Organization met this
past May, an interesting and somewhat unexpected thing happened.
Shunting aside objections from Big Pharma, they recognized the
shortcomings of the existing drug development system, and they
committed to developing plans to "secur[e] an enhanced and
sustainable basis for needs driven, essential health research and
development relevant to diseases that disproportionately affect
What precisely this means will only be worked out over time, but it
may be a major breakthrough.
"The global trade framework will be transformed by this initiative,"
says James Love of the Consumer Project on Technology, pointing to
the central role of expanded patent and other monopoly protections
for Big Pharma in many trade agreements. "No longer will countries
see trade agreements about intellectual property rights or drug
prices as the only mechanism for sustainable funding of R&D, or the
only possible outcome of a bilateral or multilateral trade
Through the WHO initiative, countries may be expected to give greater
attention to new public-private efforts to develop medicines, like
the Gates Foundation-backed International AIDS Vaccine Initiative. It
may also inspire more support for nongovernmental efforts like the
Doctors Without Borders-sponsored Drugs for Neglected Diseases
Hopefully, it will also lead governments in both rich and poor
countries to invest more directly in needs-driven medical research
and development. The United States is the global leader in this
regard, through the National Institutes of Health. But a key problem
with the current NIH model is that the fruits of public investment
are licensed away on an exclusive basis, with no price restraints --
meaning the public has to pay exorbitant prices for the drugs that
taxpayer dollars financed. (For an altogether different and more
sensible approach, see the Free Market Drug Act, introduced in the
U.S. House of Representatives in 2004 by Representative Dennis
The WHO initiative should also spark debate over alternatives to the
patent system. Organizations like the Consumer Project on Technology
have suggested moving away from the award of a marketing monopoly to
drug developers, and instead paying them directly, based on the value
in public health terms of their product. Then prices to consumers or
public or private insurers could be set competitively. All drugs
would be generic. This approach could cut out the massive industry
waste on marketing and direct what is spent on R&D more efficiently
We could end up with a win-win-win: more money for R&D, directed more
effectively, and lower prices.
Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter, <http://www.corporatecrimereporter.com>. Robert Weissman is
editor of the Washington, D.C.-based Multinational Monitor,
<http://www.multinationalmonitor.org> and associate counsel for the
Consumer Project on Technology <www.cptech.org>. Mokhiber and
Weissman are co authors of On the Rampage: Corporate Predators and
the Destruction of Democracy (Monroe, Maine: Common Courage Press).
(c) Russell Mokhiber and Robert Weissman
This article is posted at:
Focus on the Corporation is a weekly column written by Russell
Mokhiber and Robert Weissman. Please feel free to forward the column
to friends or repost the column on other lists. If you would like to
post the column on a web site or publish it in print format, we ask
that you first contact us ([log in to unmask] or
[log in to unmask]).
Focus on the Corporation is distributed to individuals on the
listserve [log in to unmask] To subscribe, unsubscribe
or change your address to corp-focus, go to:
<http://lists.essential.org/mailman/listinfo/corp-focus> or send an
e-mail message to [log in to unmask] with your
Focus on the Corporation columns are posted at
Postings on corp-focus are limited to the columns. If you would like
to comment on the columns, send a message to
[log in to unmask] or [log in to unmask]