Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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Lessons from 60 years of pharmaceutical innovation

An executive at Lilly, Bernard Munos, has written a very revealing and candid article in Nature Reviews Drug Discovery link here.

The article, "Lessons from 60 years of pharmaceutical innovation" confirms what many already know - that the productivity of the pharmaceutical R&D enterprise is declining and has been for some time. Stated differently, the cost per new molecular entity has increased rapidly. This has occurred despite mergers and consolidation in the industry, changes in R&D management structures and changes to the technologies used to discover new drugs.

He also admits that "in many organizations, short-term priorities encourage marginal innovation, which provides more reliable returns on investment, at the expense of major change." He recognizes, in other words, that the current incentive system rewards the development of me-too drugs over novel therapies. Finally, he admits that alternatives to the traditional patent system, including prizes, may be required to boost R&D productivity.

Very encouraging words!


Encouraging words indeed. The Economist has an interesting piece, "Potential Encapsulated", about medicines that can relay data to doctors after being swallowed by patients--"intelligent pills."

The subtext of the article is that pharmaceutical firms are starting to realize that selling services can increase their business. This could vault them beyond their traditional business model, and perhaps undermine their patent-focused approach.

Elsewhere, in "A Strand Apart", we read that "The notion that tumours are chaotic masses of anarchic cells has been falling by the wayside recently."

I responded in a letter to the editor:

Sir -

The Anarchist Antidefamation League has informed me of The Economist's latest vile slur, absurdity, and calumny against anarchy. In "A Strand Apart," January 16, you write: "The notion that tumours are chaotic masses of anarchic cells has been falling by the wayside recently." Tumours are not "anarchic" cells. Maybe they are out of control, but they do not "profess" anarchy, nor do they follow the precepts of anarchism, which are support for individual liberty and its offshoots--peace, free trade, and free markets, and opposition to the State and its works theft, property destruction, and mass murder on an unparalleled scale.

William Stepp

Manhattan Island, Planet Earth

I first realised the damage done by "intellectual monopolies" while working in fund management, analysing pharmaceutical companies (among others), and because of my personal interest in software.

I am not completely in agreement with you, principally because I think that short copyright terms can be a useful incentive without too much damage.

As far as pharma R & D goes, there are already non-patent incentives, such as orphan drug designation and subsidies (indirectly via university research that gets spun off, directly via tax breaks). If we added prizes, we could get rid of patents altogether very easily. Actually, I think we would be net winners abolishing pharma patents even without replacing the incentive, as it is often a bad incentive, and certainly an in efficient one.

I hope the links above to my own sites are OK - you could remove them but keep the comment intact if you feel that they are spammy.

Encouraging words? I think not. We should never be encouraged by reduced productivity of pharmaceutical companies considering that, regardless of whether a drug is patented, we are the beneficiaries of new drugs. I am NOT a fan of prizes (if you consider patents to be stupid, prizes are idiocy replacing stupidity), but we can only hope that pharmaceutical companies eventually realize that development of new, unique drugs is likely to be more beneficial than "me too" drugs (though development of me-too drugs is decreasing about as fast as development of other drugs, and will soon fall off a cliff; hard to have a "me too" drug when there is nothing to be "me too" from).
Ah, back to being an anonymouse, Lonnie?

But spouting the same old easily-recognized nonsense about me-too drugs.

I don't suppose it occurred to you that one can base a me-too drug off another me-too drug, or off an older drug.

I have my own doubts about prizes, but they pale in comparison to my doubts about patents. What's really needed is to lower the costs. Computer-simulated drug interactions with target molecules can go a long way here, by being cheap and winnowing down thousands of possibilities to a few promising candidates. Ultimately, though, the costs of clinical trials need to be brought under control.

A more competitive environment might well do that. Picture a drug industry without patents. You have drugs that have been on the market for a while, but for each one, so do some of your competitors so margins are thin. You really need a temporary monopoly, but you can't get a patent. What do you do?

Why, you develop a new drug, of course, or find out what a competitor is working on, and bring it to clinical trials. You streamline the process as much as is feasible. And then, if the results are good, you may be the first to market with this drug, while the competitors' copies (or even the original) are still wending their way through trials. Making trials faster and cheaper is an incentive here because the early bird gets the first-mover advantage now. On the other hand there's a strong incentive to keep the drugs safe and the trials accurate, too -- it wouldn't do for your version to get yanked by the FDA and lawsuits to be threatened while your rival's slightly-tweaked and safer version grabs all your market share.

Competition forces continuing innovation, so as to avoid being a late-to-market also-ran, and also forces keeping costs under control.

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