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 
groups.

 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 
a year.

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 
developing countries."

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 
negotiation."

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 
Initiative.

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 
Kucinich.)

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: 
<http://lists.essential.org/pipermail/corp-focus/2006/000244.html>

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