Multinational Monitor

JUL/AUG 2004
VOL 25 No. 7


Monopoly Medicine: The Built-In Inefficiencies of a Patent-Based Pharmaceutical R&D System
by James Love

It’s in the Genes: Patent Barriers to Genetic Research
by Lee Drutman

Buy the Numbers: Publishers Seeks Special Database Monopoly Protections
by Robin Gross

The Great Global R&D Divide
by Gunnar Westholm, Bertrand Tchatchoua and Peter Tindemans


The Rise of the Free Software Movement: Freedom from Proprietary Control
an interview with Richard Stallman

A Conspiracy of Silence: The Suppressed Evidence About Anti-Depressants
an interview with Charles Medawar


Behind the Lines

A Healthcare R&D Treaty

The Front
Rigging the System - Lay Does Perp Walk - Remembering Paul Klebnikov - "The Shame of Humanity" - Grief for the Reefs

The Lawrence Summers Memorial Award


Names In the News



A Healthcare R&D Treaty

The healthcare research and development (R&D) system is badly out of whack.

In the private sector, healthcare R&D is driven by the marketing monopoly created by patents.

The patent-based system gives us too much of what we don't need -- high prices for drugs that bear no cost to the low price of manufacture, me-too drugs with little therapeutic benefits over existing therapies, incentives for massive investments in marketing, suppressed safety and efficacy test data, patent barriers to cutting-edge research, and an obsession with confidentiality that precludes collaborative research projects -- and too little of what we do need: innovative and affordable solutions for serious health problems.

For all that, the system is not efficient in generating private sector investment in R&D. According to self-reported figures from Big Pharma's trade association -- and these surely include investments that should be categorized as marketing rather than research -- the major U.S. pharmaceutical companies spent $33 billion on R&D in 2003, between 15 and 16 percent of their revenues. At least twice that share of revenues goes to marketing.

Unfortunately, instead of recognizing the cause of the evident crisis in healthcare R&D, Big Pharma and the U.S. government -- two separate entities that are often hard to distinguish -- are trying to export the worst elements of the U.S. system.

In the guise of promoting cost-sharing of R&D costs, the United States is increasingly demanding that industrialized countries remove the price control systems that maintain a decent level of affordability for medicines.

Throughout the developing world, the United States is demanding enhanced patent and related monopoly protections for brand-name pharmaceutical companies. Here, the U.S./Pharma agenda constitutes a double blow: They want poor consumers to pay monopoly prices for pharmaceuticals (or simply go without drugs they cannot afford) to pay for R&D that is focused on the diseases of the rich countries. Because consumers in poor countries do not have enough buying power, the brand-name companies perform virtually no research on the diseases of the poor, such as malaria, tuberculosis, Chagas disease, leishmaniasis, sleeping sickness.

There is a better way.

The key is to recognize that patents are a means, not an end. The real goal is to generate research and development.

It is appropriate for countries to agree to invest in healthcare R&D, and to obligate themselves to bearing a share of the global cost burden of R&D.

But countries should be free to choose whatever mechanism they prefer to satisfy R&D obligations that they take on.

That's the idea underlying the growing interest in a Global Healthcare R&D Treaty, intended to displace international agreements requiring patents and other monopoly protections for healthcare inventions.

Under such an agreement, countries would agree to invest a share of gross domestic product in healthcare R&D. Rich countries would take on a higher percentage obligation than poor countries. Weights could be given to reward desirable kinds of R&D -- for example, research into neglected diseases of the poor countries, or open collaborative research where newly acquired raw information is made publicly available immediately.

Under such an agreement, some countries might choose to fund R&D through a patent system.

But many others would likely experiment with other models. There are lots of ways to fund R&D.

Direct government spending on R&D is one option. In the United States, the National Institutes of Health spends $27 billion (and growing) on research, much of it on pharmaceutical-related R&D.

Another approach would be to pay drug R&D companies directly for their innovations -- even billions of dollars for really important inventions -- but not to grant marketing monopolies. With one variant of such a system, the innovator would be compensated for the invention at the time it gains marketing approval, and then the drug would immediately be made available as a generic product, manufactured by any firm that could meet safety standards.

There are endless permutations on how countries might pay for R&D.

But huge gains in efficiency can be obtained over the current system, simply by separating R&D from the marketing process. Rewarding R&D through a mechanism other than a marketing monopoly removes the incentives for a wide range of pharmaceutical industry practices that are not only socially undesirable, but wasteful.

Spending $200 billion a year on drugs to obtain $30 billion in R&D is just a bad investment.

And, as a not-so-incidental benefit, redesigning the funding system for R&D makes it possible to direct R&D towards purposes and approaches (such as cures rather than treatments, public health options rather than pharmaceutical interventions, openness and collaboration, and neglected diseases) that are disfavored or shunted aside in a patent-based system.

Obtaining agreement on a global healthcare R&D treaty and replacing the patent-based system are not objectives that will be easily obtained -- but they are not as out of reach as they may first appear.

The healthcare R&D system is in crisis. Poor country consumers who are deprived of treatment under the current system may not have much political clout. But rich country consumers do. They will not continue to accept ever-escalating drug prices under a system that is patently unjust



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