Drugs, Economics and Fairness

Modern society has a drug problem and we are not quite sure who we can blame for it nor whether we can solve it. Pharmaceutical companies today thrive on the flaws of the patent system, created to protect innovation and promote research, but their efforts seem to have had far reaching effect. In light of information relating to Turing Pharmaceuticals and other drugs companies, the impact and considerations associated with medicines of all kinds is coming under intense scrutiny. Whether the drugs companies are at fault, or out of date law systems which are far too easy to exploit for companies is an important question to keep in mind when discussing recent events in the industry. However, we need to confirm that the present situation is a problem and that requires being empathetic with those in and around the industry.

While the manufacturer and trading of drugs seems to be a very lucrative industry, that is only to reward the effort to make drugs. A naturally occurring molecule that holds some benefit to human (or other) life can be found in any number of places but mother nature is not kind to the biologists looking for drugs as they will often be found in remote locations or hidden right under the noses in the most obvious but previously unchecked places. On most trips they will have little to no idea of the molecule they are looking for but the active ingredient must be found. A flower petal may have a medical effect it is not economical to produce a pill containing all molecules present, as the research required to know how to mass produce a drug would quickly escalate R&D expenditure and it is likely some chemicals would have side effects. If a new source of a molecule is found, the biological material must be collected, its chemicals separated and tested to find out what molecules causes the medicinal effect. Once scientists know that the active ingredients are both useful and safe (or they have a method to make it safe), the consideration is then how to synthetically recreate the molecule at pace to match the anticipated demand and make the drug profitable. Chemistry has many ways of adding and removing parts of molecule to achieve many combinations of atoms with different isomerism – a different structure of atoms on the chain or spatial arrangement – but the cost and waste must be kept to a minimum. Once a viable process is found, the drug can be made, marketed and sold.

Testing is a significant factor in making a drug and should be understood in more detail. An average of 8 years may be spent trying to find, test and certify a specific drug [1] because the stakes are incredibly high. It is raw that an initial active ingredient will have no flaws but the important stage is to find them and fast, in order to reduce the time to market. Computer modelling, human and/or animal trials may be considered to certify a drug and the latter two can be fairly costly due to the risk involved. Iteration after iteration of the active ingredient and derivatives may be tested in order to find the correct one that will be marketable (genuinely having an advantage over competitors or cheaply available alternatives) and will pass the different levels of localised regulation that governments across the world have. It is due to the time and cost that patents are so important to the drugs industry.

Patents are there to protect the investment and the income of a manufacturer for a relatively short amount of time. Without it, it would seldom be worth the effort to find, test and manufacture the drug. With a patent, the pharmaceutical company can lock a certain chemical and certain derivatives to exclusively be made and sold by the company. Profits during this time are near certified as there will be no direct competition and these profits can go back to investors through dividends, left as they are or reinvested back into research and development of future drugs. Reinvestment is a significant defence of the patent system as many of the very important drugs that we have today can only be paid for, with respect to the research, by the profits secured with patents on other drugs and it is one that should not be brushed aside. Patents allow for predictability for drugs in terms of how much revenue and profit can be made is demand is correctly estimated. Drug companies also have much less incentive to continue with drugs that are not showing early signs of being easy to test, manufacture or market, which would stop potentially lifesaving drugs from being fully developed.

Patents and related regulation are flawed and it is trivial for a company to abuse them. Patents remove one thing a market thrives on and is used for self-regulation; competition. As there is no direct competition for a drug, the price can be changed at easy and depending on the inelasticity of demand, customers, whether consumers or health institutions may just follow like sheep. With the widespread use of patents, the barrier of entry is raised significantly, making only the established companies successful and making most other attempts as competing resulting in an acquisition or closure, leading to low competition as a standard within the drugs industry. This is where Turing Pharmaceuticals comes in, as the drug Daraprim was increased in price by 750%, with the CEO Martin Shkreli responding that is was for reinvestment into making a new version, but ultimately effects would only harm citizens who would pay for the increase through insurance or taxes. This wouldn’t be a problem if there was competition, but it was only when Imprimis Pharmaceuticals stepped in to offer the pill for a $1 that there was real competition for the drug [2].

Actions like those of Turing Pharmaceuticals are rare (as they would in any industry) but they can happen through holes in the regulation in place to protect us. The societal cost of the actions of companies and the weak regulation is best seen on a micro level. It leads to a work force that needs to put more of their income into healthcare, whether private or public, which could be spent better elsewhere. Governments need to spend more time on a case by case basis looking at problems and trying to make fair solutions that take into account current legislation and the ruling in the past. For those that cannot afford the drugs, a lower quality of life awaits and if the drugs would have dealt with a contagious pathogen, those around them would also suffer.

There aren’t many solutions to the problems in the pharmaceuticals industry. One potential solution is a certified period of exclusivity immediately followed by competition being allowed, which would prevent the re-application of patents and would still allow drugs companies to understand and calculate the return on investments in research [3]. Some say, and governments are looking into, fixing a ceiling price for a drug dependent on certain factors, the most important being the need and effectiveness of the drug, although markets rarely accept price regulation lightly and simply coming up with an economically viable and ethical solution could take a lot of time[1, 4]. Solutions may not come around in our lifetime, but they will need to be found for pharmaceuticals to be a sustainable industry that can bother benefit society and financially sustain itself.

[1]: Amid debate on drug prices, California leads way on cost controls – San Jose Mercury News
[2]: Imprimis Pharmaceuticals Inc offers same $750 AIDS medication Daraprim for $1 – Daily Mail Online
[3]: Solving The Drug Patent Problem – Forbes
[4]: Expert Panel Pushes Back On ‘Outrageous’ Prescription Drug Prices – Reuters

Contributed by Kojo Amoasi Science and Technology Editor

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