If R&D Ain't Broke, Why Break It?
BY PHILIP STEVENS
There is a long list of complaints against the current system of drug development:
â€¢ Patents and profits have failed to produce new medications for the diseases of poor countries.
â€¢ There are not enough groundbreaking new therapies.
â€¢ Profiteering companies routinely make tiny changes to drugs to extend patents and shut out competition.
â€¢ Not only that, the patent system allows companies to charge astronomical sums for the drugs they do produce.
These allegations come from a powerful group of ideological nongovernmental organizations, or NGOs, that abhor profit in medicine and are pushing the World Health Organization toward a global treaty that would completely change the way drugs are researched and developed.
But before taking their medicine, we should take a close look at the label â€” and the nasty side effects.
This Medical Research and Development Treaty, proposed by Brazil and Kenya, would have a central U.N. bureaucracy deciding what diseases to research while allocating funds, contracts and prizes accordingly. Its expert scientists would ensure that all diseases are given appropriate resources, including the handful of "unprofitable" tropical diseases in poor counties.
NGOs, including humanitarian groups such as Medecins Sans Frontieres, hope this scheme will solve the failings of the current system at a stroke.
Because intellectual property would be owned by governments, drug prices would plummet. Less would be spent on frivolous ailments such as erectile dysfunction and baldness, and more on malaria and HIV/AIDS. Resources could be concentrated on groundbreaking "blockbuster" drugs, instead of the small molecular changes that are routinely patented now.
When the WHO first mooted the treaty in May 2006, MSF called it a "breakthrough" that "would ensure that patients' needs rather than profits drove innovation."
If the aim is to punish Big Pharma's stockholders, it will probably work. But as a way of producing cheap innovative drugs for the poor, it fails on several counts.
First, giving such discretionary power to bureaucrats would politicize R&D. In a centrally directed system â€” as in Britain's health service â€” resources tend to go to the loudest pressure groups. Other diseases would be neglected in favor of politically high-profile diseases such as HIV/AIDS.
Neither is it clear how an unelected body in Geneva would be better at setting priorities than the thousands of scientists and businessmen whose livelihoods depend on getting these decisions right.
Second, using state-funded prizes as the major incentive for R&D is problematic. The prize committee can never know the true market value of the drug it is hoping to create. If the prize is too low, companies will be reluctant to compete for future prizes, leading to fewer new drugs. If the prize is too high, the new system will squander taxpayers' money and divert effort from other areas of research.
Prizes were much favored in the Soviet Union, but they never resulted in much innovation.
Third, the treaty would turn drug manufacturers into utilities, living off government contracts. Removing the freedom to decide what to sell and at what price will discourage companies from risking capital to reap rewards, which is how innovation happens.
This is a clear lesson from regulated utilities such as water, electricity, telephones and gas. In a minimal-profit sector, companies do the bare minimum to fulfill their contractual obligations.
Most fundamentally, the treaty does not solve the greatest health care problem in poorer countries: how to actually get the drugs to patients in the face of crumbling hospitals and chronic shortages of doctors and nurses.
In 2006, the director of the World Health Organization's HIV division, Kevin De Cock, said "it is very obvious that the elephant in the room is not the current price of drugs. The real obstacle is the fragility of the health systems. You have health infrastructure that is dilapidated, and supply chains that don't exist."
If prices are an issue, why not scrap taxes and tariffs on medicines, which can increase the manufacturer's price by up to 11 times? These taxes on the sick are levied by many poor countries, including Kenya.
Removing commercial incentives will make companies retreat from the difficult and expensive work on cures for cancer and the like, and try to regain lost profits in politically safe "lifestyle" ailments. And governments have yet to demonstrate that they can produce drugs themselves.
All this is worrying for the U.S., which has already allowed the draft treaty to progress too far. There are echoes of the Clinton administration's hapless negotiation of the TRIPS agreement in 1994, which is now coming back to haunt America.
That agreement on Trade-Related Aspects of Intellectual Property Rights includes a clause designed to allow emergency production of essential medicines in poor countries. In practice, its wording is so vague that it allows any government to override the patent on any drug it likes. Middle-income Brazil and Thailand are now doing exactly that.
If the negotiators from the Department of Health and Human Services do not firmly reject the proposals at the WHO's Intergovernmental Working Group on Public Health, Innovation and Intellectual Property in Geneva this week, there won't be any pharmaceutical patent rights worth the name. This will be a body blow to innovation.
The current patent-based R&D model has produced most of the drugs that exist. It has a few problems, but there is no point junking it for an ill-conceived NGO fantasy. The biggest losers will not be stockholders, but patients.
Well said, Philip.