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The Patent Cliff

That’s what it’s being called in the industry, and what Instapundit is reporting on currently. The good news is that drugs are indeed going to get much cheaper as patents on the hot drugs expire. The bad news is there isn’t much in the way of new drugs following up to take their place. The reasons for this are complicated, but part of the problem is how insane the FDA has gotten with their expectations on side affects and adverse reactions. If Obama takes credit for this, it will be kind of laughable. This kind of achievement isn’t something I’d like to preside over, because it essentially spells the death of innovation in this industry.

I’ve worked in pharmaceuticals pretty much my entire career, and in my current job search, I’m biased against taking jobs in that industry. Unfortunately, it has farther to fall before it hits bottom, and starts becoming receptive to new business models and new ideas. As much as I’d like to blame it all on the FDA, it is not the case. All the easy targets have been exploited, and the industry is not prepared to accept the kinds of innovations necessary to target the harder ones.

For me, in the IT part of the business, it’s not a huge deal; my skills are in demand in other industries. I feel for my former colleagues, who are going to have a much tougher time, because their skills are not transferrable.

8 Responses to “The Patent Cliff”

  1. There are two motivations for developing new drugs to replace the ones whose patents are expiring:

    1. The new drugs will be more effective or have less serious side effects than the drugs they replace. This was one of the motivations for the development of the second and then third generation of anti-psychotic medications.

    2. To hype trivial improvements in the hopes that doctors will prescribe the new, much more profitable drugs.

    #1 is a really good reason to develop new drugs; #2 really is not.

  2. Mobo says:

    Lovastatin does a great job with my cholesterol, and I pay four dollars cash for a month’s supply. I get a three month supply of over the counter niacin pills for $20, and they work every bit as well as Niaspan, which costs over $300/month. A simple, inexpensive diuretic works well to control blood pressure for most people.

    I believe that most R&D goes into figuring out ways to charge more money for basically the same thing as cheaper, equally effective alternatives. Clayton’s #2 scenario is likely where most of the “innovation” is coming from IMO.

    Government should grant patents selectively, and only as absolutely necessary for the production of important, necessary things that wouldn’t otherwise be produced without patent protections. And the length of patent protection should vary based on R&D costs and margins. I see no reason for a uniform patent standard.

    Remember, it’s hardly a free market principle to use the force of government to hobble your competition!

  3. Bill says:

    Lovastatin works great for some people, as does OTC niacin, also for some people.

    Of course Penicillin works great for some Pneumonia variants, too.

    However, Lovastatin doesn’t work for everyone, nor does OTC niacin, nor does Penicillin work for every cause of pneumonia.

    We have lived through a golden age of pharmaceutical development, allowing a major increase in longevity for the average person. We essentially doubled life expectancy of Americans in the lifetime of my grandmother, 1894-1998.

    BUT….the well is dry. That whole revolution is over. There is NO new generation of antibiotics in the pipeline…NOT ONE.

    We already have bacteria resistant to every known antibiotic, and that resistance is now being transferred to other, more common, bacteria.

    Without the ability to make huge profits off the few drugs that actually pan out after research, the drug companies have no incentive to keep looking. So what will happen is that they will try to get buy on volume margin, making lots of cheap drugs at ever decreasing profit margins.

    What that means to us is that we will gradually see less and less innovation, and increasing morbidity and mortality. In fact, we are already starting to see it, as diabetes, asthma, and other chronic disease become ever more rampant.

  4. “A simple, inexpensive diuretic works well to control blood pressure for most people.”

    Sufficient exercise works even better, and it is free. But that takes effort.

  5. “Government should grant patents selectively, and only as absolutely necessary for the production of important, necessary things that wouldn’t otherwise be produced without patent protections. And the length of patent protection should vary based on R&D costs and margins. I see no reason for a uniform patent standard.”

    The reason for a uniform patent standard is to avoid the corruption that would otherwise happen. I confess that while the drugs that make a 3% improvement don’t seem worth it, in practice, while they might only make a 3% improvement on average, there may well be some people for whom the improvement may be more dramatic. I just get a bit upset by how much doctors let good marketing influence them.

    My own experience with the Patent Office has not left a great deal of love in me for them.

  6. “Remember, it’s hardly a free market principle to use the force of government to hobble your competition!”

    Yes, and this is an important point that worshippers of the free market sometimes forget when idolizing the Framers. They generally supported free markets, and there was considerable argument about whether the granting of “monopolies” as patents and copyright were called, was a good thing. Pragmatically, it is, as long as it doesn’t get too carried away.

  7. Alpheus says:

    “They generally supported free markets, and there was considerable argument about whether the granting of “monopolies” as patents and copyright were called, was a good thing. Pragmatically, it is, as long as it doesn’t get too carried away.”

    It’s the “getting carried away” part that ruins the whole show, though, so I’m completely against patents and copyright. But then, I’m also against the FDA, which is one of the reasons drugs cost so much.

    I’d replace the FDA by removing its power to ban drugs, and then to require untested drugs to be labeled as such, or certified by outside agencies, both State-level and private, to certify that certain levels of testing have been done on the drug. While I understand the need to test drugs for safety and effectiveness, we also need to allow individuals to choose for themselves how to best balance safety and effectiveness. (For example: individuals should be free to choose between arthritis relief and increasing the risk of heart attacks and strokes.)

  8. Alpheus says:

    Correction: “which is one of the reasons drugs cost so much” should read “which is one of the reasons drugs cost so much to produce”.

    (I’ll also take a moment to emphasize “one of the reasons”, because based on comments and posts I’ve previously read here, I think Sebastian is right–the pharma industry could also use a bit of innovation in funding and exploring new drugs.)

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