Friday, January 21, 2005
The Pharma Industry
I have been reading a book by Marcia Angell, the former editor of the New England Journal of Medicine (the journal focuses on the causes and treatment of disease) titled 'The Truth about the Drug Companies'. In light of our earlier posts (I, II) on patents, some points raised in the book are relevant. She has actively publicized the problems in the industry and written in the New Republic (a piece that won the 2002 George Polk award for magazine reporting) and in Daedalus (Patents, Profits and American Medicine). Here are some points she raises:
Drug companies produce too many copycat drugs and too few innovative ones. Some reasons highlighted are the incentives of people working at patent offices and the FDA (they are paid on the basis on patent applications and drugs reviewed resp. Since it is easier to approve a drug than to reject it, more drugs are patented than should be.) Also, unlike what the companies claim, R&D expenditure is dwarfed by their expenses on marketing, administration and legal issues. Further, in research tests, the new drug is compared to a placebo rather than to an existing drug - this the author claims is a major problem and increases the number of me-too drugs out there. Crucial to these developments was an act, passed in 1980 (Bayh-Dole), that allowed tax-payer funded research at NIH (national institutes of Health) to be patented by small businesses and researchers and then grant exclusive licenses to drug companies.
In addition she highlights how drug companies have been producing profits year after year, how drug companies have too much influence in the FDA, clinical research of their drugs and even drug education in schools, how patents are too elastic and how prices are too high (prices typically fall to 20% of its value when patents expire).
I think the book does a great job in lifting the heavy rock that the pharma industry is - to reveal the worms beneath.
Drug companies produce too many copycat drugs and too few innovative ones. Some reasons highlighted are the incentives of people working at patent offices and the FDA (they are paid on the basis on patent applications and drugs reviewed resp. Since it is easier to approve a drug than to reject it, more drugs are patented than should be.) Also, unlike what the companies claim, R&D expenditure is dwarfed by their expenses on marketing, administration and legal issues. Further, in research tests, the new drug is compared to a placebo rather than to an existing drug - this the author claims is a major problem and increases the number of me-too drugs out there. Crucial to these developments was an act, passed in 1980 (Bayh-Dole), that allowed tax-payer funded research at NIH (national institutes of Health) to be patented by small businesses and researchers and then grant exclusive licenses to drug companies.
In addition she highlights how drug companies have been producing profits year after year, how drug companies have too much influence in the FDA, clinical research of their drugs and even drug education in schools, how patents are too elastic and how prices are too high (prices typically fall to 20% of its value when patents expire).
I think the book does a great job in lifting the heavy rock that the pharma industry is - to reveal the worms beneath.
