Patenting Drugs: Is it Necessary or Is It Evil?

The premise that patents are responsible for increasing drugs price is very relevant for a country like India.

This premise that patents are responsible for increasing drugs price is particularly relevant for a country like India. (Photo: iStock)

The cost of medicines is on the agenda this week at the World Health Organization’s annual policy meeting at the World Health Assembly, in Geneva.

NGOs and certain middle-income countries continue to argue that market-based drug development – reliant on intellectual property rights (IPRs) as its primary incentive – makes medicines too expensive. It fails, they say, to provide cures for those most in need but who can’t pay, such as people in developing countries.

This premise that patents are responsible for increasing drug prices is particularly relevant for a country like India, with National Sample Survey Office (NSSO) survey pointing out 86% of the rural population and 82% of the urban population are yet to be covered by any health insurance scheme (public or private) and millions are pushed into poverty every year to meet their medical expenses.

70% of India’s population who still reside in rural India has to borrow more (25%) in comparison to their urban counterpart (18%) to meet their healthcare needs.

On the fringes of the assembly, NGOs and academics talk excitedly about a new model for drug development, in which research and development (R&D) costs are “de-linked” from the final price of a drug.

In practice, this would gradually erode intellectual property rights, and expand the role of academia and the public sector in drug R&D. The resulting taxpayer-funded drugs could be distributed free or very cheaply and policymakers could prioritise research on the most pressing diseases.

New Era of Cheap Medicine?

Would a world of publicly funded R&D usher in a new era of cheap medicines to solve the world’s biggest health problems?

The idea’s proponents say that most new medicines already come from the public sector.

In a 2015 commentary in The New York Times, Nobel Laureate economist Joseph Stiglitz wrote, “As it is, most of the important innovations come out of our universities and research centers, like the National Institutes of Health, funded by government and foundations.”

It is certainly true that in the United States, the federal government is the biggest funder of basic research, via the National Institutes of Health, which disperses grants to universities and other research institutions for early stage research.

But it is a leap to argue that because publicly-funded universities play an important role in early research, they also have the skills, resources and motivation to undertake the commercialisation of that research.

US$1.2 billion - US$2.6 billion

Taking a drug through clinical trials to regulatory approval takes on average 10 years and costs between US$1.2 billion and US$2.6 billion.

It’s a risky business: Only one in 10,000 promising drug compounds ends up as a marketed medicine.

Too Much Burden on Universities?

Universities simply don’t have the specialist skills and facilities – such as chemical formulation and toxicity testing – to navigate a drug through the clinical trials required by regulators to approve a drug as safe for the market.

Navigating the drug regulatory approval process is costly and demands broad technical and commercial skills, which are concentrated in the private sector.

Which is why around 80-90% of recently approved drugs were developed entirely in the private sector, according to a study in the New England Journal of Medicine.

Those drugs with publicly funded origins typically come from universities taking advantage of intellectual property laws (such as the Bayh–Dole Act in the United States) to license their early discoveries to the private sector for commercialisation.

Countries such as China now also have such legislation, hoping it will bolster local innovative industries, while similar proposals are under discussion in India.

But asking universities to move from basic research into fully-fledged drug commercialisation would require enormous subsidies to build technical and commercial capacity, and manufacturing and distribution systems. Universities would be diverted from their core purpose, to advance knowledge.

‘Patents Ensure A Continued Stream Of Investment’

As it stands, private industry rightly shoulders most of the financial burden and risk of drug development. IPRs – particularly patents – are the key incentive, because they give investors certainty that they can fund risky projects while standing a good chance of getting a return.

They are just important for small R&D companies as they are for large: evidence shows that the existence of a patent signals to venture capitalists that an early drug idea has potential, helping them to make more informed investment decisions.

Given that early stage biomedical research is highly risky, patents therefore ensure a continued stream of investment, enabling the best ideas to move up the R&D pipeline and eventually to market.

Removing patents from the innovation equation without a workable replacement would be hugely disruptive. 

The damage would be worse if policymakers committed to a “delinkage” agenda are pinning their hopes on an ill-equipped public sector and academia to conduct considerably more drug R&D.

In fact, the premise that patents lead to higher drugs price is unfounded. Researchers checked national patent registries in developing countries and found that 95% of the medicines on the list had expired. Patents are not relevant to the vast majority of the medicines typically prescribed by doctors in developing countries.

Instead of utopian attempts to effectively nationalise drug R&D, policymakers concerned about innovation and access to medicines should focus on more practical solutions.

The mandatory clinical trials process is where most drug development costs are incurred, for instance, but regulators have overseen an unwelcome increase in complexity in recent years.

Effective National Health Policy

Import tariffs and taxes on drugs remain high in many countries.

The higher cost of medicines can also emanate from inefficient supply chain management, cartelisation (lack of competition policy), and dysfunctional public healthcare systems.

Citizens from many countries, particularly in Asia and Africa, have to shoulder higher healthcare costs for these aforementioned reasons. Rather than blaming patent protection, a better health outcome can be achieved through an effective national health policy.

In India, for instance, government has implemented National Health Policy 2017 aimed at capping price of essential medicines (which are otherwise outside patent regimes) and increasing public expenditure on health from the current 1.4% of GDP to 2.5% of GDP by 2025. 

This is aimed towards providing free drugs, diagnostics and emergency care services in all public hospitals in India.

These are practical areas that could be reformed now. The delinkage agenda under discussion in Geneva this week, while well-intentioned, is a distraction.

(Nilanjan Banik is a Professor with Bennett University, and can be reached @banik_nilanjan. Philip Stevens is the Director of Geneva Network, UK. This is a personal blog and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)