What’s the really big issue here?
When capitalists are always banging on about free markets, why do they like the patent system which means the state gives drug companies a 20 year monopoly – and helps them defend it? Try here, for some good definitions to get you started. Question 2: Why can’t pharmaceutical companies sell drugs as cheaply as generics firms?
Why allow patents when they’re a licence to print money?
It costs around $800 million and 7 years’ works to get the average new drug to market. Most patents run for 20 years, including development time. So Big Pharma firms have maybe 13 years to make their money back and often less. Generics companies make money because they have no research costs and lower testing costs than the research-based pharmaceutical companies. They thrive by offering drugs at a small discount compared to patent-owners with their high costs. They tend to be cheap only when there is lots of competition. Here’s some powerful UN evidence on the workings of the generics and patented markets.
Why don’t rich firms donate drugs to poor people?
It took ten or 20 years of campaigning, but they are beginning to. Foundations such as those run by Bill Clinton and Bill Gates have organised good deals from the pharmaceutical companies, and then rich-world governments and NGOs can donate the drugs to governments and NGOs in poor countries.
Is the patent system really innovative?
For years now, each Big Pharma firm has worried that its “pipeline” of new drugs has slowed down. And every year, the patents on billions of dollars-worth of drugs expire. Still, research investment has boomed, and more and more drugs go into development. So we do seem to have a vigorous and innovative system.
Patents guarantee profits, don’t they?
Absolutely not. Getting a patent is only the start of the process. Firms then have to go on to prove that their patented drug is safe and effective – and nowadays, they have to prove that it is cost effective. And then they have to sell it – and customers may not want it. Big Pharma is one of the most regulated industries on earth: at every stage their products are controlled by governments – and often their prices too.
What is the biggest obstacle to firms being more generous?
Apart from being hungry for profit, they worry that often drugs they give free – or at a discount – leak from where they are intended to be used and find their way into markets where prices are high. Only if recipient governments agree to enforce the patents system (and ensure that drugs intended for poor people are used only by them) can Big Pharma do deals to work round it in some cases. This isn’t just about the Third World: Big Pharma strikes low-cost deals with governments all over the world. It’s the basis of most drug supply in Europe, for instance
How does the patent system help poor countries?
The distinctions between poor and rich countries are beginning to break down. Big Pharma is finding it cheaper to research and test drugs in developing countries, and they see a big market for drugs in such places, as people get better off
Does Big Pharma hate its generics competitors?
Maybe in the past. But one of the big changes recently is that Big Pharma is investing in generics firms. They seem to sense that they’re in for a long period when their profits from patents will be squeezed, so they want to be where they think the action will be
Why does leakage of drugs from poor to rich markets matter?
Because a firm might be quite glad to gain new revenue from the “poor” market, however small, or even to do good, but it is bound to resist approaches which mean it loses the chance to make as much money as possible from rich markets. In short: a firm might not mind very low profits in some markets, but overall – there have to be profits.
Have campaigners been important in disciplining the pharmaceutical companies?
Yes. Corporate managers cannot get too interested in poor people (who don’t often make good customers). The trick is to find ways of bullying selfish firms (and incentivising the kinder ones) to do good without destroying their ability to stay in business. Campaigners keep the heat on politicians and businessmen to work out those tricks.
Why do firms sometimes give medicines to poor people?
Because they are under intense political pressure to be seen to be doing good (and because they are not staffed by nasty people).
Why do pharmaceutical companies seldom give medicines to poor people?
Because the firms need to make all the money they can to satisfy their shareholders. They spend a lot on research and marketing in a capitalistic system which involves huge gambles with other people’s money. That’s why the clever way to help Big Pharma to do good is to make sure that it doesn’t lose money on the deals.
So why do firms like patents?
Firms like the patent system because it makes it more likely they’ll get their investment in research, production and marketing back. But as to whether the system is “right”, it’s a matter of opinion. It comes to this: Are patents a matter of defending a firm’s natural right to its property? Or are they a privilege “the people” grant them, and which firms should pay dearly for? In practical, political terms, firms are nudged, bullied and forced to allow their patented drugs to be sold in some markets at discounted prices (sometimes to poor countries, sometimes to poorer patients in rich countries). Push the firms too far, and they’d be less profitable and at some point people won’t invest in them.
Is the patent system to blame for health inequalities?
Not really. Most drugs in use in the rich and poor worlds alike are off-patent, and this is especially true of most of the drugs which deliver the most patient-years of health. Besides, drug-costs are often not the sole problem. Overall medical services can matter more.
What about the AIDS/HIV case?
It’s a tough one. Many useful drugs which would relieve a huge amount of suffering are on-patent, and expensive. But international pressure, and international intervention, is setting up mechanisms whereby countries are allowed to bi-pass patent laws in some cases.
Are research-based pharmaceutical companies rich?
Not really. They handle huge sums of money, which isn’t the same thing. They take big gambles with research and marketing strategies. Taken altogether, the sector has made large profits. But the fortunes of any particular Big Pharma firm have been very varied.
Should Big Pharma use rich country profits to subsidise poor countries?
Maybe. But there are problems. One is that their rich customers might not like being “taxed” in that way. Another is that even in poor countries there are rich customers. Why should they get things cheap? A good lead: in Evidence: “UN Commission examines pharma patents”
Public money pays for Big Pharma research. How is this fair?
One might argue that it’s good that state-funded work researches medicines (though a strict free-market point of view thinks the state should keep its nose out of such matters). If the state is involved, we would presumably want the public bodies to sell or licence their work to the highest-bidding private firms. (Check “federal” in our search device)
Big Pharma pays universities to do research: isn’t that bad for academic freedom?
University scientists do have to make sure they remain bold and honest, irrespective of where their money comes from. (See AHRP view in Opinion section.) Actually, though, the academics who do make a fuss when they believe there is interference seem to survive and thrive in the controversy. (Dr David Healy is the most famous example.)
Big Pharma spends a lot on marketting – isn’t that a waste?
It’s true that competiton has led to there being many drugs with quite similar qualities. Arguably, it is right that firms should spend a lot explaining to doctors and patients the subtle distinctions between them all. There has been a lot of debate about how much firms should be allowed to spend on this activity, and the rules have been tightened up. But it has been the case until recently that firms felt the more they spent on marketing, the more they got back. Now, bosses are wondering if there aren’t cheaer and clever ways of getting people to understand and like their products.
