Patents that kill | Hacker News Reader

Patents that kill

economist.com

61 pointsgraeham52 comments

The simplest solution would be to significantly shorten the patent duration for pharmaceuticals, and start it the day a drug gets FDA approval. This would uncouple two things that should have never been coupled in the first place: development time and window of exclusivity in the market.

Companies would (justifiably) still want provisional patent protection for the very long period between the idea's conception and FDA approval, to reduce the risk on their huge investment.

Thus, wouldn't this idea exacerbate the already rampant abuse of provisional patents?

Or if long provisional patents weren't allowed, then companies probably would avoid products with long FDA approval times, which is the very problem you're trying to solve.

Early-phase development would be better funded through a different mechanism. (For example, prizes for key achievements.)

It already is, because the way many drugs are developed is that the NIH funds the basic research behind it, and early-stage in-vitro trials and maybe some mouse trials.

Usually it is only when the drug is ready for clinical trials that pharma steps in (doing 20% of the work and claiming 100% of the profit).

I imagine the costs of trials, and who paid them, are well documented. In the event of a dispute about which company discovered which drug, could a company not point to its investment in research or funding of a specific trial as evidence of its discovery, rather than trying to spam system with provisional patent applications? (By the way, there's no such thing as a "provisional patent" http://en.wikipedia.org/wiki/Provisional_patent#cite_note-1)

>> By the way, there's no such thing as a "provisional patent"

Right. But its just shorthand for "provisional patent application". Maybe its sloppy, but I don't think its a big deal.

Actually, I guess what I meant is that there can be a massive delay between the time that the patent is filed and when it is granted (or rejected), during which time you are protected, and it doesn't count against the patent life.

My boss, who is a biomedical researcher, has had a patent in this kind of limbo for 11 years. He's long since moved on (he doesn't even work at that institution any more), but the university's IP lawyers have been playing ping-pong with the patent office for over a decade.

If he can achieve this without caring at all, imagine what well-funded pharma lawyers could do.

> Companies would (justifiably) still want provisional patent protection for the very long period between the idea's conception and FDA approval

I disagree. For drugs this wouldn't be a problem.

The company that invented it is forbidden from making money off a drug that is not approved, so they have every incentive to get the approval as soon as possible.

Other companies would not be prevented by patent law from producing the drug during the time, but they would be prevented by FDA regulation. And they would not be inclined to invest since they would know that the patent would issue as soon as the drug was approved.

Well, the international enforceability of US patents is already sketchy at best, and if the phamaceutical doesn't even have a patent at all, there's absolutely nothing stopping a company from producing and selling it in a country that doesn't have standards quite as tight as the FDA.

Also, your comment

> The company that invented it is forbidden from making money off a drug that is not approved

raises another interesting issue. In the current system, a company CAN in fact make money off of such a drug, by selling the patent to someone else. Actually, many drug patents originate in universities, and then are sold to drug companies. I doubt the university lobby would be keen on losing that major revenue stream.

Or prizes. If the NPV of treating, say, stomach cancer is $5 billion, the parties involved can offer to pay a prize of $4.7 billion to someone who shows up with a cure. Every party is better off in that scenario.

Cures aren't really binary things. Something like "stomach cancer" is probably a whole bunch of (perhaps at present indistinguishable) diseases. Add to that that event amongst cures for the exact same malady, there can be differences in side effects, efficacy, and treatment length.

http://www.huffingtonpost.com/2012/05/19/bernie-sanders-pres...

"Sanders has introduced legislation that would offer companies a big up-front prize for developing new, innovative AIDS drugs. In return for the big payday, pharmaceutical firms would agree to allow generic versions of their medicines to hit the market immediately. The fund would total $3 billion for its first year.

"'Moving from a patent system to an effective prize system, using the power of the competitive marketplace to ensure the efficient dissemination of medicines, is a critical step in creating [a] more efficient innovation system,' Nobel Prize-winning economist Joseph Stiglitz said at Tuesday's hearing."

here is the original paper in case anyone's interested: http://www.nber.org/papers/w19430

And here is the abstract: Patents award innovators a fixed period of market exclusivity, e.g., 20 years in the United States. Yet, since in many industries firms file patents at the time of discovery (“invention”) rather than first sale (“commercialization”), effective patent terms vary: inventions that commercialize at the time of invention receive a full patent term, whereas inventions that have a long time lag between invention and commercialization receive substantially reduced - or in extreme cases, zero - effective patent terms. We present a simple model formalizing how this variation may distort research and development (R&D). We then explore this distortion empirically in the context of cancer R&D, where clinical trials are shorter - and hence, effective patent terms longer - for drugs targeting late-stage cancer patients, relative to drugs targeting early-stage cancer patients or cancer prevention. Using a newly constructed data set on cancer clinical trial investments, we provide several sources of evidence consistent with fixed patent terms distorting cancer R&D. Back-of-the-envelope calculations suggest that the number of life-years at stake is large. We discuss three specific policy levers that could eliminate this distortion - patent design, targeted R&D subsidies, and surrogate (non-mortality) clinical trial endpoints - and provide empirical evidence that surrogate endpoints can be effective in practice.

It keeps annoying me that nearly everyone (including Richard Posner [0] and notch [1]) says that 'medicine makes for the best case for patents'. I'm not convinced that patents are necessary for pharmaceuticals, and I'm trying to prove that's the case [2].

[0] http://www.theatlantic.com/business/archive/2012/07/why-ther...

[1] http://notch.tumblr.com/post/27751395263/on-patents

[2] http://indysci.org/projectmarilyn

I don't know if you're familiar with Dean Baker:

"Patent monopolies are one mechanism to provide an incentive for innovation, however they are a tremendously inefficient mechanism."

http://www.cepr.net/index.php/blogs/beat-the-press/health-ca...

http://www.cepr.net/index.php/Publications/Reports/financing...

thank you for those links. Incidentally Drew Curtis also outlines the dichotomy in policy pressures really well.

http://www.ted.com/talks/drew_curtis_how_i_beat_a_patent_tro...

I'm surprised that the first link of yours doesn't show the fact that Pharma companies make upwards of 10-16% margin which is high for the healthcare sector, versus Generics companies which make ~5%, in line with "companies in general"; and insurance companies which pre-ACA were making negative-~2% margins. It's hard not to believe that the ACA was just a bailout for insurance companies, in exchange for mild vilification.

>I'm surprised that the first link of yours doesn't show the fact

https://encrypted.google.com/search?hl=en&q=medical%20patent...

Dean Baker has written a lot on patents in medicine, and in other fields as well. It would probably be interesting for you.

notch didn't mention that in the link you provide. He said:

"but I do understand why some people thing(sic) patents are good in these areas"

I didn't mean for that to be an exact quote, and certainly I think it's likely that notch disagrees, but he is saying that the most convincing case for patents is in medicine.

Well lets quote the whole paragraph, because I think you are misreading.

"I will say that there are areas which are very costly to research, but where the benefits for mankind long term are very positive. I would personally prefer it to have those be government funded (like with CERN or NASA) and patent free as opposed to what’s happening with medicine, but I do understand why some people thing patents are good in these areas."

No where there does he say what you are claiming. In fact, he specifically says that he thinks there should be no patents in medicine.

I think it's likely that notch disagrees = he thinks there should be no patents in medicine.

he is saying that the most convincing case for patents is in medicine = I do understand why some people thing patents are good in these areas.

No, he is not saying that, stop trying to twist his words to whatever you want to believe.

That's a worthy venture, but if your project needs $5 billion (or some other large sum) and takes 10 years, are you going to be able to get people to donate steadily for so long? Giving it away is laudable for sure, but most people consider patents the tradeoff to attract the huge sums of capital over a medium investment term that are required for drug development.

The development of an oncologic (from preclinical through clinical) typically costs more like 10-20 million dollars. I'm not sure where you got 5 billion from. Now, pharma companies inflate the cost of a single drug by creatively rolling in a lot of failures as the 'cost of getting there', sometimes warranted, often maybe not so much. As it is big pharma spends more money on advertising than R&D anyways.

Generics manufacturers, incidentally, do just fine, and I can imagine a more sustainable model of pharmacological research where a generics builds up an R&D war chest and periodically discharges it on new research.

The hard part is the political intractability of getting big pharma to let go of 20% margins and settle for 5% margins.

Edit: error, 10mm only for preclinical, not both.

At 5% margins, I would think there are a lot of better places to invest your money.

10-20 million is nowhere close. A single moderate size monkey study costs around $900,000 at a CRO (because most pharma companies don't have their own NHP facilities). This paper [1] places it between $500 million and $2 billion, but it apparently uses a source of self-reported data from the industry. Phase 3 studies are often in the hundreds of millions of dollars range, because they have to basically pay for a thousand or more subjects to have Rx-quality drug and intermittent medical care for several years.

[1] http://content.healthaffairs.org/content/25/2/420

Sorry I made a mistake. ~10mm for preclinical ~100mm for clinical. (I'm used to thinking only of the 10mm number because I only intend to do preclinical stuff) Oncologics are individually cheaper to develop because the sample size can be smaller for efficacy studies but are reported as higher because there are reportedly more failures. I'm not sure how to judge these things though... How much can be saved by working smarter not harder?

It seems to me that your argument relies very heavily on survivor bias. Expensive failures are an entirely necessary part of the research process. I picked $5 billion because I think that's the minimum cost of developing a general broad spectrum anticancer drug, which seems like the overarching goal. I should have distinguished between that and the more limited purpose of developing 9DS in particular.

Generics manufacturers, incidentally, do just fine

Well obviously, they are in the business of manufacturing something already proven to work. Some of them do move towards doing their own R&D but they have to deal with the same success:failure ratios as existing pharma companies.

I feel like you think bi pharma just wants huge margins out of greed and that the failures or research that goes nowhere is somehow costless. There's not only a direct cost of losses incurred on a drug that doesn't work out at the clinical trial stage, there's also the opportunity cost of options foregone which might have brought successful therapies to market faster.

I don't own any pharma shares and am not a particular fan of the industry, but it seems to me that your criticisms involve a huge amount of hindsight bias. If it was as easy as you suggest the market should be awash in pharama startups. Instead, the number of biotech startups (a reasonable proxy, though not an exact mapping) is about half of what it was a decade ago due to a dearth of funding: http://www.xconomy.com/national/2013/11/18/biotech-startup-c...

I suggest to you that this to a large extent reflects the risk in this sector.

A biotech startup has one similar thing to a hitech startup - and that's that the predominant exit strategy is to 'get bought out by a big player'. In my opinion, the market isn't awash in pharma startups, because of three factors. 1) high capital costs. 2) most pharma startups are started by professors; the selection process for professors is in many ways orthogonal to 'success in developing pharmaceuticals'. 3) Labor talent. Because of the now about decades-long (over/mal)investment in STEM, there has been a glut of PhDs with questionable qualifications, that flood the labor market.

I don't generally argue the 'greed drives things' argument. No, pharma companies don't want big margins necessarily out of greed, but the momentum, machine, and in certain cases legal infrastructure (requirements of companies to provide returns to investors, etc) align in such a way that dislodging big pharma from its position of legal entitlement is politically intractable, because they will fight for it, whether dominantly greed-motivated or not.

Speaking to #3, and this is highly anecdotal - I spent 6 years in grad school that was highly ranked (I loathe the ranking system, but that may be irrelevant). And had about 70 students a year. Over my 6 years, I saw maybe 20 good thesis defenses (my own was not very good). One particular lab was a serial offender; exactly zero of the defenses I saw I thought were worthy of a PhD (although I recall two projects there that I thought were good that were not concluded when I finshed). One of these defenses had a presentation where the introductory slide bulleted six topics of study that the student completed; he presented only four of the six and all of them failed, two of them, as admitted by the student himself, for trivial reasons that could have been solved by merely sauntering over to his committee member's and chatting for five minutes.

This person still has a PhD from a top institution. His boss has several startup companies, all completely rediculous (one of which seeks to eliminate cocaine addiction through something which will probably only make the cocaine addiction worse - it then pivoted to "an emergency drug to administer to accidental cocaine overdoses"). My experiences witnessing thesis defenses as a postdoc at a "mid-tier" research university were not much better.

> Generics manufacturers, incidentally, do just fine, and I can imagine a more sustainable model of pharmacological research where a generics builds up an R&D war chest and periodically discharges it on new research.

Why would the generics manufacturers want to do that instead of treating that money as profits for the shareholders?

As long as they can keep their manufacturing facilities humming along at capacity cranking out the generics we already have for numerous chronic conditions, do they really care if new generics are being developed?

Really?

http://www.equitymaster.com/detail.asp?date=09/04/1999&story...

For example.

Do you think crowdsourcing $300B/year is going to be (A) feasible, and (B) more capital efficient than having a bunch of experts attempting to extract maximum value from their revenue stream?

I think crowdsourcing can certainly play a role (and in effect the NIH is a big crowdsourced entity, and accounts for a huge amount of pharmaceutical research), however it does not seem like a full replacement.

Why is (well, should. Literal "is" is reasonably clear) drug exclusivity handled separately from drug approval? Since the one is needed to make up for the costs imposed by the other, shouldn't they be handled as a unit under the same agency?

"A clinical trial for patients with metastatic prostate cancer lasts only three years compared to an 18-year-long trial for those suffering from a milder, localised prostate cancer. Since a typical patent is in force for 20 years, firms only have two years of effective patent length left to commercialise a new drug against localised prostate cancer.

The data paint a bleak picture. The economists find that pharmaceutical companies conduct 30 times more clinical trials for recurrent cancer drugs than for preventive drugs"

How do you conduct a trial for a preventive drug? Just wondering.

Your control group during the trial gets placebos, and you compare how many contracted the thing you're trying to prevent in two groups.

In some ways simpler than the control group getting the best current treatment, in which case you have to compare the efficacy in both groups.

Presumably you would have to do a longitudinal study (could be an RCT or cohort or something else). If I think about it, it seems like studying how long a vaccine is effective for is a similar problem.

(While we wait for expert views) I would say it was no different from any other medical trial (you would have two populations, one getting a treatment and one not getting it, and you would observe them and see if there was a statistically difference) - With a preventative drug you would be looking for people getting cancer - this is a rare event (and so need more people under observation) and would take many years before you had a marked difference in the two populations.

Compare this with late stage cancer trial where you are monitoring people dying - this is going to, unfortunately for the people under observation, give you a much quicker 'outcome'.

Give a bunch of people the drug and a bunch of people a placebo, wait a long time (decade+), see if there is a statistically-significant decrease in the thing that it is trying to prevent.

It seems quite difficult to set this up. Who wants to take an experimental drug for decades? And if it's a rare disease you need a lot of people.

Vaccine trials are essentially this. You give some percentage of the population the vaccine, and you compare their survival rates to the rest of the population.

30 times more clinical trials for recurrent cancer drugs than for preventive drugs

How do the economists know that it's for economic reasons? Maybe it's a lot easier to theorize and conduct trials for one class of drugs versus the other.

On a logistical level, it's much easier to start a 3-year trial than a 30-year trial. Tracking people for 30 years is more challenging. Giving an experimental drug to healthy people for 30 years is challenging and ethically more delicate. But perhaps from the view of the scientists, motivating yourself to perform a trial that won't yield results for 30 years is quite an effort.

This is arguing for longer patents for drugs, since the 20-year-long patent causes the industry to only look for drugs where you can get through development and trials quickly enough that they enough years left on the patent to make revenue.

The solution to this is regulatory exclusivity. The big cost is going through the FDA process, companies could simply be granted a 15 year exclusivity once they've passed that bar. The FDA already has a process setup for granting this.

In general, regular capitalism is best for progress, since government-funded operations don't have the same incentive to succeed, to avoid waste, etc.

However, for something like developing drugs, it may be worthwhile to have more government involvement. The article mentions how drug companies can focus on their profits to the detriment of society. One might even wonder if the Hepatitis C cure was priced so that not everyone could afford it, so the disease wouldn't be eliminated...

1. The drug industry not creating a drug doesn't stop a charity from developing it. (Bill Gates once wanted a drug developed that didn't have enough of a market, so his foundation paid out of pocket for it.) It's not "to the detriment of society" for them to pursue their own ends, and more than it is "to the detriment of society" that I'm typing away on HN instead of being outside picking up trash.

2. Conspiracy theories about keeping diseases around are misfounded. a) The drug in only effective in EDIT 97% of people. b) The patent will eventually expire. c) The price for the drug is cheaper than the lifetime cost of treatment, making it a win-win scenario. (Plus the eventual expiration of the patent will make this very cheap in the long term.)

Nitpick: the sofosbuvir trials show ~97% effectiveness, not 80%.

1) For example, the polio vaccines, which were developed and even whose distribution by the private non-profit that is now (the somewhat corrupt) March of Dimes. Incidentally, the polio vaccines weren't patented, either.

97% is pretty high, but I agree that it's not too likely that's the drug company's plans.

Note that the government grants the drug company a monopoly to sell their drug, so it makes sense to place some limitations on pricing, or at least negotiate like other government do.

> it may be worthwhile to have more government involvement.

Perhaps it is less worthwhile if you consider the costs of the favoritism and inefficiencies that government involvement inevitably produces.

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