We realized that both of us are on different sides of the table on several issues surrounding the pharmaceutical industry, such as drug pricing, access to drugs for the uninsured or, in developing countries, patent recognition, etc. We make our individual cases in this column and let the readers decide for themselves.
Rajeshree’s premise rests on her belief that although the pharma companies are for-profit organizations, they still have a social responsibility, and that nobody with life threatening conditions should be denied medication on grounds of affordability. Bharat, on the other hand, believes that any amount of capital that goes into medical research is too little—there are far too many diseases that we continue to be clueless about—hence, it follows that attracting private capital is as much a responsibility of the pharma companies and, of course, private capital tends to first look at return on investment.
• An age-old issue that’s dogged pharma companies is whether they invest adequately in research and development (R&D).
Rajeshree: Various studies have shown that pharma companies spend as much on marketing as they do on R&D. In fact, some recent studies suggest that marketing budgets of these companies might even be outstripping their R&D budgets. Practices such as Phase IV “seeding” trials confirm my belief that these companies aren’t paying as much attention as they should to R&D. A phase IV “seeding” trial is one carried out by the marketing department after the clinical trials are over and aims to understand market approval of the new drug by focusing on aesthetics.
Bharat:We have been seeing that innovative new drugs and therapies have increasingly been coming from smaller biotech firms even as the product pipelines of the large pharma companies have become a regular business debate. However, these small biotech companies need their larger counterparts to bring their drugs to market and end up often partnering with the larger pharma companies on production and marketing—so perhaps the traditional model of the pharma companies is changing. As we write this article, a small biotech firm, Dendreon, announced outstanding results with its novel pancreatic cancer therapy and that it will likely partner with a large pharma company in Europe to bring the product to market there.
• Pharma companies are believed to really milk blockbuster drugs with excessive pricing.
Rajeshree: Margins of big pharma—most of them have fat operating margins of around 30%—tell a lot about whether they milk their blockbuster drugs or not. Just by the very definition of blockbuster drugs, these either tend to be high volume drugs or very niche, unique treatments. Consequently, it’s not difficult to conclude that these drugs either affect a large number of people, or patients with life threatening conditions who have very few other choices. Raising already astronomical prices on such drugs is also not unheard of.
Bharat: A lesser known fact about drug development is that most of the money spent on drug research does not even result in a phase I clinical trial. That itself implies that pharma companies have to make their returns on drugs that are in demand or fairly unique.
Of course, earning a return on the research spend also has a limited time frame as drug patents have a finite time length. In addition, it’s not uncommon for global pharma companies to offer their expensive drugs for free in developing countries.
• Do patents protect the intellectual property or do pharma companies misuse patents?
Rajeshree:A common practice among pharma companies is something called patent “evergreening”. This refers to irrelevant tweaking of an existing drug—not a major improvement—for which the pharma company can turn around and demand another patent, thus effectively lengthening the original patent. Evergreening has been found to be illegal in several countries. Countries such as Thailand and Brazil have been desperately trying to negotiate cheaper access to patented life saving drugs, but to no avail.
Bharat: Novartis’ experience in India underscores the irreverence to intellectual property. Its game-changing leukemia drug, Gleevec, which is marketed as Glivec outside the US, was denied patent recognition in India. Indian officials seem to be clinging to straws by claiming that Glivec wasn’t a major improvement over Gleevec and the patent shouldn’t be recognized, when, in fact, Novartis itself does not claim that these are different compounds. Incidentally, a majority of patients in India receive this drug free of cost from Novartis as also in several other poor countries. One wonders whether generics themselves are the ultimate solution when India, supposedly the biggest source of HIV/AIDS generics, can’t provide these drugs to more than a sliver of its patients.
• Role of public sector, educational institutes.
Rajeshree:Arguably the motivation behind the work most scientists put in for drug development is seeing their discovery available to as many patients as possible. The brilliant Dr Brian Druker, the main scientist behind the above mentioned leukemia drug, has been a vocal critic of Novartis’ pricing strategies. Public sector funding for new drugs is actually far larger than the private sector. Also, government programmes have been responsible for several drugs that ordinarily wouldn’t have seen the light of day. Some of the best research minds, especially in the US, tend to be affiliated with medical colleges. Having said that, return on investment shouldn’t matter as much to this investor base as much as public welfare would.
Bharat: At the end of it, drug development requires deep pockets; public sector funding is a phenomenon of the developed world and has seen to it that infectious diseases that affect the developing world go neglected.
Rajeshree Varangaonkar and Bharat Indurkar have day jobs with US-based hedge funds. They write every other Thursday. Send your comments to firstname.lastname@example.org