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« This is How We Mash, 2011 Business Models | Main | Vicarious Infringement in Corporate Settings »

June 6, 2011

Drugs, Prices, and Patents

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Posted by Alan Wexelblat

I'm working on a longer piece about a sea change in drug pricing. Long-time readers will know this is a perennial favorite topic of mine, as I worry about the intersection of intellectual property law and policy with life-or-death situations.

Meanwhile, I wanted to point to three recent stories that touch on this topic. First, there was a big announcement today that GlaxoSmithKline (GSK) would be lowering the prices on certain vaccines sold in developing countries down to something like 5% of their US cost. On one level this isn't all that big of a change - GSK has long had what it calls "tiered pricing" and vaccines outside the US can be had for half or less the cost we pay here. A 95% reduction then means that the drug will be more affordable to more countries, particularly in the poorest parts of Africa. One of the vaccines involved in the new announcement protects against rotaviruses that are said to be responsible for half a million child deaths annually across Africa.

Technically the virus itself isn't fatal; it causes diarrhea and dehydration that do the killing. This matters a good deal in the developed/developing world divide. In the US if you get a rotavirus you'll probably be miserable but you can get treatment and won't likely dehydrate. But in the developing world where access to medical care on-demand is rare and parents may not be as well educated to recognize symptoms early the results are much more often fatal.

The reduced prices for the drugs will be paid by foundations and grants led by the Gates Foundation. In an interview on NPR (which I can't find the link to as of this writing) the GSK spokesman said that the 5% sale price was essentially at-cost, covering manufacturing and distribution. The drug companies then will not be losing any money on the production and presumably the other costs associated with the drug are covered by the higher prices paid in the developed world. The free good PR probably doesn't hurt either.

Speaking of higher prices for US patients, Reuters has a story on how the increasing costs for cancer treatments are pricing them out of reach of many Americans. The picture painted by this story - of people driven to bankruptcy, people giving up on treating cancers that should be treatable - stands in stark contrast to the rosy picture of the vaccine story. Reuters' piece focuses on a study by a Dr. Lee Schwartzberg that looks at new oral means of administering medicines. In theory oral medication should be cheaper for the patient than the traditional IV since it involves less equipment and fewer skilled personnel. However, since the new therapies are all under monopoly (patent) protection there are no generic equivalents, no price competition, and the result is that people are unable to afford the drugs that would save their lives, or their childrens' lives. In a parallel study by a Dr. Yousuf Zafar at Duke, it was shown that the people struggling with these bills are not the poor and uninsured. 99% of these people have insurance, with 83% having some kind of prescription coverage. Still, the prices are too high. It's a shame that this story isn't getting the same prime-time airplay that the first one is getting.

Finally, a nod to a Volokh Conspiracy post by Eugene Volokh about Mayo Collaborative Servs. v. Prometheus Laboratories, Inc.. This is a fantastically important case debating the question of the scope allowable for patent claims that deal with observable "correlations between blood test results and patient health". The case has been to SCOTUS twice and been remanded down for further argument both times. (See also the SCOTUSblog page.) It's up for certatori again and if you're the praying type, pray that this one gets cert. The way the law stands now, a set of patents (in this case owned by Prometheus) can constitute a huge and very broad monopoly, effectively preempting any number of uses or observations of naturally occurring phenomena. If that is allowed to stand, not only will competition be stifled but whole lines of research and investigation will be snuffed out because they're based on observing naturally occurring phenomena.

And more people will die.

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