NanoPundit -Where Society, Science and the Law get really, really small.

Monday, July 11, 2005

More on Drug Costs

The problem of high cost drugs in the US will not be solved by FDA approval or tort reform. The problem is that the drugs are astronomically expensive to develop and the U.S. carries the development costs for the rest of the world.

Typically it costs over a billion dollars to produce the first pill sold; subsequent pills may be produced for pennies. The billion dollar cost is spread out over every pill that is sold during the life of the patent on the drug compound. You get what you pay for and if there is no profit for the pharmaceutical company their investors will find better uses for their money.

The Canadian Government limits its drug costs by buying in bulk with the threat of a (low cost) mandatory license of patents that protect the pharmaceutical company’s intellectual property rights if the price is too high. The reason a generic drug is cheaper than a branded drug is because the generics do not invest billions of dollars in research and development. Intellectual property rights (the patent system) were developed to protect and encourage R&D Investments, and benefit each of us.

The Canadian Drug Distribution system is not a free market system. It receives cut rate prices by threat of government action. When this happens in the U.S. we call it a 'taking' when it happens in China we call it piracy.

If the people of the United States want to have new drugs available for the cure of everything from viral infections and leukemia to impotence we need to realize that we will pay the development costs. Immense developments are on the horizon and now is not the time to hobble the U.S. pharmaceutical industry.

China is in the process of developing a legal system which respects the intellectual property rights of foreign nationals. Why is it unreasonable to expect Canada and Western Europe to do the same?

Why US Drugs are so Expensive

The Chicago Tribune reports Brazil just transferred their drug costs to U.S. Citizens. And no, this has nothing to do with nanotechnology. In an action that has been watched by patent geeks for some time Brazil just shook down Abbott Laboratories for lower prices on Kaletra (Generic lopinavir) a protease inhibitor useful in fighting HIV, the virus that causes aids. Kaletra works for those with HIV that is resistant to other protease inhibitors and doesn’t require a complicated cocktail of anti-HIV drugs.

In the U.S. Kaletra costs about $7,000 per patient prior to this agreement Brazilians paid $2,562 a year for the same treatment. Brazil’s government has just strong armed into a lower price (Abbott isn’t saying what the new price is).

Abbott Laboratories’ Heather Mason, Vice President, Specialty Operations Pharmaceutical Products for Abbott Laboratories recognizes that prices have to cover " “It’s allowing us to make investments in future innovations — novel therapies, drugs with less side effects — and to bring those to market so patients have access to more and better medicine.” This quote is out of context and referred to an increase in the price of Norvir another protease inhibitor, but I am pretty sure she would say the same thing about the pricing of Kaletra.

Perhaps Ms. Mason should have added, “We had to raise prices to subsidize citizens of Brazil who refuse to pay their fare share for the development of life saving therapies.

Hing Sham, Ph.D. is one of the coinventors of Kaletra and a pretty smart guy. He could probably work on any project he wants to. I would guess that he works for Abbott because he has interesting projects and makes a pretty decent living. Abbott can pay Dr. Hing because they sell the drugs he invents.

Brazil doesn’t care if he quits and goes to work at the car wash. I care because I want him to invent the next life saving drug. Andrew Sullivan
cares because he needs the next lifesaving drug:

It has been imprinted on an entire generation that Big Pharma is the source of all evil. But the only reason I'm writing this blog at all is because of Big Pharma. They're not angels in America. They're capitalists. But the profit motive has been the most progressive force in pioneering specific medical breakthroughs that we have yet found.

Brazil is as Mr. Sullivan says “pursuing policies that will consign many people with HIV to earlier deaths.”

Brazil is not a third world backwater, it has GDP of about $1.5 trillion (2004 estimate) and a per capital GDP of $8,100. Abbott already is subsidizing the cost of Kaletra in Africa. The Republic of Congo has a GDP of $2.3 billion and a per capita GDP of $800. The Congo also has an AIDS rate of about 5% (more than five times Brazil’s 0.7%). Brazil should be able to buy AIDS drugs without forcing the cost onto US citizens and without reducing Abbott’s ability to help those truly in need.