Lliçons sobre política farmacèutica (3)

Regulation, Innovation and Competition in Pharmaceutical Markets

Si voleu un llibre introductori que descriu amb precisió el mercat farmacèutic aquesta és l'opció del moment. Els conceptes habituals necessaris per moure's bé en aquest entorn són explicats amb tots els detalls.

M'ha interessat especialment el tema de pagar per retardar l'entrada dels genèrics, els acords de pagament invers, perquè s'explica amb tota claredat una pràctica vergonyosa de la indústria que ja coneixia però que em faltaven peces.

Es tracta d'això:

‘reverse payment’ patent settlement agreements (also called pay-for-delay settlements), because they provide for the patentee to pay the alleged infringer, rather than the opposite (considering the standard expectation that a defendant would pay a plaintiff to settle), with the aim of delaying its market entry. In other words, in its typical scheme, the brand-name drug pharmaceutical company enters into an agreement with the generic competitor to settle the dispute and to limit its market entry in return for a transfer of value.1 Such transfer can take different forms, including either a direct monetary payment or another form of valuable agreement (eg an authorised licensed entry at a specific date, distribution agreements, favourable terms in a side deal in which the originator company grants a commercial benefit to the generic company), or both. 

Aquest és l'índex del llibre: 

Introduction 1

I. The Different Faces of Pharmaceutical Markets 1

PART I

1. Regulating Entry 15

I. The Main Features of Pharmaceutical Markets: The Supply Side and the Demand Side 15

II. The Product Life Cycle and the Costs of Innovation 20

III. The Access to the Market: Regulatory Approaches 23

A. The European Regulatory Framework 23

B. The US Regulatory Framework 27

IV. Concluding Remarks 33

2. Regulating Exclusivity 34

I. The Interplay between Regulatory Exclusivities and Intellectual Property Rights 34

II. Intellectual Property Rights in the Pharmaceutical Industry: An Overview on the Role of Patents 35

III. EU Supplementary Protection Certificate and US Patent Term Restoration 41

IV. Regulatory Exclusivity 48

V. Research and Bolar Exemptions 52

VI. Exhaustion Doctrine and Parallel Trade 59

VII. Concluding Remarks 63

3. Regulating Prices 64

I. Pharmaceutical Pricing and Reimbursement Systems in Europe 64

II. The US System 70

III. Concluding Remarks 76

viii Contents

PART II

4. Competition Law Enforcement in Pharmaceutical Markets: An Introduction 79

I. EU and US Antitrust Rules: An Essential Overview 79

II. Antitrust Enforcement in the Pharmaceutical Sector 87

III. Market Definition 95

IV. Concluding Remarks 100

5. Reverse Payment Patent Settlements 102

I. The Recurrence of Reverse Payment Patent Settlements in Pharmaceutical Markets 102

II. Reverse Payment Patent Settlements in the United States 105

A. Earlier Case Law and the Actavis Ruling 105

B. Critical Issues after Actavis 109

C. Further Developments 113

III. EU Case Law on Reverse Payment Patent Settlements 119

A. Lundbeck 120

B. Generics 123

IV. Comparative Analysis 127

A. Legal Frameworks 127

B. The Antitrust Assessment 129

V. Concluding Remarks 134

6. Product Hopping 136

I. Pharmaceutical Product Reformulations 136

II. Product Hopping before US Courts 140

III. The EU Experience 146

IV. The Antitrust Assessment of Product Reformulation 151

V. Concluding Remarks 155

7. Excessive Drug Pricing 157

I. The Resurgence of Excessive Pricing Cases in the Pharmaceutical Sector 157

II. Excessive Pricing under EU Competition Law 161

A. Aspen 165

III. The US Approach 169

IV. The Role of Antitrust Enforcement on Excessive Drug Prices 176

V. Concluding Remarks 178

PART III

8. Further Interactions: Pharmaceutical Markets, Intellectual Property and Human Rights 183

I. The Right to Health and Access to Medicines and the Relationship with Intellectual Property Rights: An Overview 183

II. Compulsory Licensing 191

III. Concluding Remarks 196

9. Public Health and Public Interest in Competition Law 198

I. Public Health and Competition Law 198

II. Competition Law and Non-competition Interests 203

III. Concluding Remarks 208

Conclusion 209

Bibliography 213

Index 233

Fasten seat belts

We have entered into an unknown new world: drug prices -for innovative drugs- are on track to disappear. The NHS has agreed a cap on expenditure for a hepatitis C (sofobusvir) new drug in €125m without disclosing the unit price. Some people may consider it an opaque strategy in times that politicians claim transparency.
In my opinion, such a situation allows to understand better that the pharmaceutical market for innovative drugs is mostly a monopsony (one buyer) in a monopoly (one seller), it is not a competitive market - and this is what I have always considered. Therefore, resource allocation is the result of a bargaining between both parties, and the unit price is irrelevant. The buyer wants to maximize health,  the seller is maximizing income, this is exactly the struggle.
The key question is: How much is NHS willing to pay for better health?. As far as  the budget is limited, the number of treatments times the price is not the right way to proceed to maximize health under constrained resources.
Any government has to set priorities for expenditure according to expected health value created. This information should be public. In any case, when a new drug is available the government should clearly define which benefits are cancelled and which are acceptable. A responsible minister can't  agree new expenditures without any budget.
Therefore, innovative pharmaceutical market is not really a market -right now is clear- and governments should set priorities according to resources available -right now is also clear that they haven't done it-.
Fasten seat belts, we are entering into trying times without any political compass-gps. Citizens are expecting something different. I still remember when Victor Fuchs told long time ago: usually health economists discuss incremental cost-effectiveness in limited marginal terms, the real issue appears when such an amount is enormous. The case of hepatitis C is the example of such a situation, and only health policy and deliberative democracy are the tools to confront it. Unfortunately, this was not the strategy applied nearby.

PS. Catalonia in contention, at Harvard Political Review. Must read, if you are interested on what's going on. Otherwise, try Bloomberg op-ed or LAtimes.

PS. Reading Francesc-Marc Alvaro op-ed I always learn something.

PS. Rating catalans' well-being by OECD.

Ricard Molina. Muntaner-Velódromo. Galeria Barnadas

Against patents

The case against patents

Some months ago, a WP blog hightlighted a paper by Boldrin and Levine with a straightforward title. Now you can read it at the Journal of Economic Perspectives. The summary is in the first paragraph:

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless productivity is identified with the number of patents awarded—which, as evidence shows, has no correlation with measured productivity. This disconnect is at the root of what is called the “patent puzzle”: in spite of the enormous increase in the number of patents and in the strength of their legal protection, the US economy has seen neither a dramatic acceleration in the rate of technological progress nor a major increase in the levels of research and development expenditure.

A risky statement unless there is a clear support from research. However, once you continue reading you'll have arguments to be convinced about it. The impact on pharmaceutical industry is analysed in detail:

There are four things that should be born in mind in thinking about the role of patents in the pharmaceutical industry. First, patents are just one piece of a set of complicated regulations that include requirements for clinical testing and disclosure, along with grants of market exclusivity that function alongside patents. Second, it is widely believed that in the absence of legal protections, generics would hit the market side by side with the originals. This  assumption is presumably based on the observation that when patents expire, generics enter immediately. However, this overlooks the fact that the generic manufacturers have had more  than a decade to reverse-engineer the product, study the market, and set up production lines. Lanjouw’s (1998) study of India prior to the recent introduction of pharmaceutical patents there indicates that it takes closer to four years to bring a product to market after the original is introduced—in other words, the fifi rst-mover advantage in  pharmaceuticals is larger than is ordinarily imagined. Third, much development of pharmaceutical products is done outside the private sector; in Boldrin and Levine (2008b), we provide some details. Finally, the current system is not working well: as Grootendorst, Hollis, Levine, Pogge, and Edwards (2011) point out, the most notable current feature of pharmaceutical innovation is the huge “drought” in the development of new products.

And the proposal is a controversial one:

we could either treat Stage II and III clinical trials as public goods (where the task would be financed by National Institutes of Health, who would accept bids from firms to carry out this work) or by allowing the commercialization of new drugs—at regulated prices equal to the economic costs of drugs—if they satisfy the Food and Drug Administration requirements for safety even if they do not yet satisfy the current (overly demanding) requisites for proving efficacy.

The last sentence sounds far from what should be a "fair" regulatory process in pharmaceuticals. Anyway, it seems that we have entered in a new perspective on patents and more scholars will be supporting it in the future.  I'm close to this perspective, but the details are important, as usual.

Drug pricing 101

In his book "Reinventing the bazaar. A natural history of markets", John McMillan says:

Market design consists of the mechanisms that organize buying and selling; channels for the flow of information; state-set laws and regulations that define property rights and sustain contracting; and the market’s culture, its self-regulating norms, codes, and conventions governing behavior. While the design does not control what happens in the market—as already noted, free decision-making is key— it shapes and supports the process of transacting.

If we look at the pharmaceutical market, there are unique features. The government role is at the same time the "market designer" and mostly the monopsonist. The price setting mechanism relies on multiple regulations that evolve according to circumstances. For example, since 2012 there has been no information about patented drug prices accepted for public funding. It sounds quite weird in a moment that everybody is proud of boosting transparency. The debates over the new pricing decree are still more strange. The current mess was explained some months ago in this op-ed. The uncertainty now also embraces pharma-distribution, pharmacists complain about the system.
Such a pricing system is explained in  this presentation (details about pricing in p.6). As far as it is unsatisfactory for everybody, it needs to be rebuilt. My suggestion is that there is a need to start from scratch. John McMillan would say that we have to look for a clever market designer to reinvent drug pricing as soon as possible.

Risky business

The productivity crisis in pharmaceutical R&D

L'evolució dels processos actuals d'innovació farmacèutica queden ben explicats a Nature. En Pammoli et al. ho descriuen i analitzen en un article clar. Selecciono aquest paràgraf:

The rate and direction of pharmaceutical innovation will continue to be affected by the interplay between patterns of technological change and market regulation. In our view, the value and cost of innovation should be assessed not only from a static efficiency perspective, but also from a dynamic one. From a static efficiency perspective, when two projects with the same potential market value but different POS values are compared, it is rational to drop the riskier project. However, such a
perspective fails to take into account the dynamic effects of competition among different organizations on market value and the risk of R&D projects. First, if all the organizations choose to invest in therapeutic areas in which the POS is high, those markets will experience fierce price competition, also due to the incentives designed by regulators and institutional payers through reimbursement and pricing schemes. If payers do not recognize any premium for incremental innovation, it is rational for investors to aim to achieve market exclusivity in difficult areas, which are characterized by a low POS, rather than being forced to compete on price in a low-risk but highly crowded market. Second, the benchmark to measure the degree of risk is endogenous: at the aggregate level, the more firms invest in high-risk markets, the lower is the risk premium each of them has to pay to investors. Taken together, these two effects have pushed pharmaceutical companies to focus on high-risk, high-potential areas of activity.

El que no expliquen és si aquestes àrees d'elevat potencial (valor de mercat), són també pels problemes de salut més rellevants (valor de salut). Aquesta qüestió acostuma a quedar pendent.

Are Pharmaceutical Companies Earning Too Much?

Are Pharmaceutical Companies Earning Too Much?

Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018

The debate about pharmaceutical companies earnings is a never ending story. Now you can find in JAMA an article that reflects the cost of a new drug: $1336 million. This is the summary:

The FDA approved 355 new drugs and biologics over the study period. Research and development expenditures were available for 63 (18%) products, developed by 47 different companies. After accounting for the costs of failed trials, the median capitalized research and development investment to bring a new drug to market was estimated at $985.3 million (95% CI, $683.6 million-$1228.9 million), and the mean investment was estimated at $1335.9 million (95% CI, $1042.5 million-$1637.5 million) in the base case analysis. Median estimates by therapeutic area (for areas with ≥5 drugs) ranged from $765.9 million (95% CI, $323.0 million-$1473.5 million) for nervous system agents to $2771.6 million (95% CI, $2051.8 million-$5366.2 million) for antineoplastic and immunomodulating agents.

Why this new figure is relevant? Because previous estimates said that it was the more than the double!

The mean estimate of $1.3 billion in the present study was lower than the $2.8 billion (in 2018 US dollars) reported by DiMasi et al,

And   my impression is that we have entered in a difficult world to estimate the real cost. Right now many firms are buying research (buying firms that have already a product close to be commercialised) and they are paying a premium for outsourcing research. Therefore, how to estimate the cost in this situations? Uncertain.

David Cutler asks about the earnings of pharma firms and says:

Ledley showed that from 2000 to 2018, the median net income margin in the pharmaceutical industry was 13.8% annually, compared with 7.7% in the S&P 500  sample. This difference was statistically significant, even with controls, although earnings seemed to be declining over time.

Is this positive return differential evidence of too high a return? Not necessarily. The economics of pharmaceuticals are important to consider. Like several other industries (eg, software and motion picture production), the pharmaceutical industry has very high fixed cost and very low marginal cost. It takes substantial investment to discover a drug or develop a complex computer code, but the cost of producing an extra pill or allowing an extra download is minimal. The way that firms recoup these fixed costs is by charging above cost for the product once it is made. If these upfront costs are not accounted for, the return on the marketed good will look very high.

 Paying more than a drug is worth clinically is not a good strategy. Even if a drug is worth a high price socially, pricing patients who need the drug out of the market is a real loss, even if it leads to more innovation in the future. In still another case, price increases for older, generic drugs serve no innovation purpose. But, as a general rule, it is important to be wary of blunt “lower all drug prices” policies.

Cutler doesn't say too much on price according value and about public funding of research. It leaves the initial question open and waiting for adhoc answers. That's it , it's a complicated issue, no general prescriptions, they need to be adjusted to specific conditions without a captured regulator. This last point is the most difficult one to overcome.

Prix Pictet

Global pharmaceutical market vs. local regulators

Regulating Medicines in a Globalized World: The Need for Increased Reliance Among Regulators

As defined by the World Health Organization (WHO), recognition occurs when a regulatory authority accepts the regulatory decision of another authority “as its own decision;”— reliance takes place when a regulatory authority takes into account the work products of another authority (e.g., inspection reports, scientific assessment reports, joint assessment reports produced together with another authority) to help inform the receiving authority's own regulatory decision, which, in the end may differ from the made by the initial authority using the same products. 

Recognition and reliance are the first steps towards an improvement of real coordination between regulatory bodies. If the pharmaceutical market is global, the regulators should cooperate for a coherent global regulation.

Making competition work

 Antitrust Policy in Health Care Markets

After reviewing all these issues included in the book, do you still think that true competition could work in health care?

In US, the evidence is that remedies doesn't cure the disease (collusion, monopoly, dominant position abuse).

Contents:

1. Health Care Markets and Competition Policy 1

1.1 The Marketplace of Health Care Spending 1

1.2 Competitive Concerns 3

1.3 Antitrust Policy 4

1.4 Plan of the Book 5

1.5 Concluding Remarks 12

2 Antitrust Policy in the United States 14

2.1 Introduction 14

2.2 The Economic Rationale for Antitrust Policy 14

2.3 Political Foundation of Antitrust Policy 19

2.4 Antitrust Treatment of Monopoly and Cartels 23

2.5 The Clayton Act 26

2.6 Private Antitrust Suits 27

2.7 Class Action Suits 31

2.8 Concluding Remarks 33

PART I MONOPOLY 35

3 Patents and Monopoly Pricing of Pharmaceuticals 37

3.1 Introduction 37

3.2 The Patent System 39

3.3 Patents and Monopoly Pricing 42

3.4 Patent Licensing 47

3.5 Antitrust Remedies 51

3.6 Government Policy Proposals toward Prescription

Drug Pricing 52

3.7 Extensions: Medical Devices and Orphan Drugs 64

3.8 Concluding Remarks 68

4 Patents and Exclusionary Product Hopping 74

4.1 Introduction 74

4.2 Exclusionary Product Hopping 75

4.3 Legal Challenges to Product Hopping 78

4.4 Solutions, If Any 88

4.5 Concluding Remarks 92

5 Bundled Discounts and PeaceHealth 95

5.1 Introduction 95

5.2 Bundled Discounts 96

5.3 Bundled Discounts in Health Care Settings 99

5.4 Anomalies of the Discount Attribution Test 105

5.5 Antitrust Treatment of Bundled Discounts 109

5.6 Concluding Remarks 112

PART II SELLER CARTELS 113

6 Collusion in Health Care Markets 117

6.1 Introduction 117

6.2 A Basic Cartel Model 117

6.3 Collusion among Physicians and Surgeons 121

6.4 Collusion among Hospitals 126

6.5 Collusion among Pharmaceutical Manufacturers 128

6.6 Collusion among Medical Device Manufacturers 131

6.7 Collusion among Health Insurers 132

6.8 Concluding Remarks 134

7 Collusion in Generic Drug Markets 136

7.1 Introduction 136

7.2 The Competitive Promise of Generic Pharmaceuticals 137

7.3 The Incentive to Collude 140

7.4 The Alleged Conspiracies 142

7.5 Economic Consequences of Collusion 150

7.6 Deterring Price Fixing 152

7.7 Concluding Remarks 154

Appendix: Alleged Participants in Generic Pharmaceutical

Drug Conspiracy 154

8 The Hatch-Waxman Act, Patent Infringement Suits,

and Reverse Payments 168

8.1 Introduction 168

8.2 The Hatch-Waxman Act 169

8.3 Reverse Payment Settlements 172

8.4 The Actavis Decision 177

8.5 The Post-Actavis Experience 186

8.6 Legislative Remedies 192

8.7 Private Damage Actions 197

8.8 Concluding Remarks 200

Appendix: The Economics of Settlements 200

9 The Alleged Insulin Conspiracy 204

9.1 Introduction 204

9.2 Insulin: A Brief History 205

9.3 The US Insulin Market 207

9.4 Pharmacy Benefit Managers 215

9.5 Collusion in the Insulin Market 220

9.6 Concluding Remarks 225

10 Licensing of Health Care Professionals 230

10.1 Introduction 230

10.2 Economic Concerns with Professional Licensing 232

10.3 North Carolina Dental and the State Action Doctrine 236

10.4 Licensing to Exclude Competition 242

10.5 Economic Effects of Mandated Supervision 245

10.6 The Empirical Evidence 249

10.7 Concluding Remarks 250

PART III MONOPSONY 255

11 Monopsony, Dominant Buyers, and Oligopsony 257

11.1 Introduction 257

11.2 Basic Model 258

11.3 Dominant Buyer Model 267

11.4 Oligopsony 270

11.5 Monopsony in Health Insurance Markets 273

11.6 Antitrust Treatment of Monopsony 275

11.7 Concluding Remarks 277

12 Countervailing Power: Physician

Collective Bargaining 279

12.1 Introduction 279

12.2 Bilateral Monopoly 280

12.3 Physician Cooperative Bargaining 286

12.4 Competitive Concerns 296

12.5 Concluding Remarks 298

13 Group Purchasing Organizations, Monopsony, and

Antitrust Policy 300

13.1 Introduction 300

13.2 What Do We Know about GPOs? 301

13.3 GPOs and the Exercise of Monopsony Power 302

13.4 Foreclosure of Suppliers 307

13.5 GPO Funding Mechanisms 312

13.6 Antitrust Enforcement Policy 315

13.7 Concluding Remarks 319

PART IV BUYER CARTELS 323

14 Collusion in the Nurse Labor Market 325

14.1 Introduction 325

14.2 The Shortage of Nurses 326

14.3 A Simple Analysis of an Employer Cartel 329

14.4 Recent Antitrust Litigation 333

14.5 Antitrust Damages 336

14.6 Antitrust Policy 341

14.7 Concluding Remarks 343

15 Collusion in the Oocyte Market 345

15.1 Introduction 345

15.2 Collusion in the Oocyte Market 346

15.3 Antitrust Standards 348

15.4 Economic Effects of Price Ceilings 351

15.5 Rule of Reason Analysis 352

15.6 Antitrust Injury and Damages 357

15.7 Disposition of Kamakahi 362

15.8 Concluding Remarks 365

16 No-Poaching Agreements and Antitrust Policy 368

16.1 Introduction 368

16.2 Background 370

16.3 No-Poaching Agreements in Health Care:

Seaman v. Duke University 373

16.4 Damage Theory 375

16.5 Government Regulation 381

16.6 Concluding Remarks 383

PART V MERGERS AND ACQUISITIONS 385

17 The Economics of Horizontal Mergers 389

17.1 Introduction 389

17.2 Mergers to Monopoly 390

17.3 Mergers of Producers to Realize Efficiencies 393

17.4 Mergers of Buyers to Realize Efficiencies 397

17.5 Merger Efficiencies Resulting in Increased Quality 401

17.6 Concluding Remarks 404

18 Horizontal Merger Policy 405

18.1 Introduction 405

18.2 Horizontal Merger Policy 406

18.3 Defining the Relevant Antitrust Market 410

18.4 Economic Evidence of Competitive Effects 412

18.5 Mergers and Their Anticompetitive Effects: Sutter

Health 415

18.6 Agency Analysis of Mergers in Health Care Markets 419

18.7 Concluding Remarks 431

19 The Economic Theory of Vertical Integration 434

19.1 Introduction 434

19.2 Vertical Integration 435

19.3 Vertical Integration and Competitive Distribution 439

19.4 Successive Monopolies in Production and Distribution 444

19.5 Competitive Concerns with Vertical Mergers 448

19.6 Empirical Evidence on Vertical Mergers 450

19.7 Mergers of Complementary Input Suppliers 451

19.8 Concluding Remarks 455

20 Vertical Merger Policy 457

20.1 Introduction 457

20.2 Legal Foundation 458

20.3 The 2020 Vertical Merger Guidelines 461

20.4 A Merger in Biotechnology: Illumina/GRAIL 465

20.5 The Merger of a Health Insurer and a Physician Group:

UnitedHealthcare/DaVita 469

20.6 The Merger of a Hospital System and a Physician Group:

St. Luke’s/Saltzer 472

20.7 Concluding Remarks 476

21 Concluding Remarks

Stimulating ideas for drug development and pricing

New Health Technologies. Managing Access, Value and Sustainability

This new OECD report sheds light over several issues in an heterogeneous way, but the pharma chapter has a box that I want to highlight. It is really suggestive:

Future scenarios about drug development and drug pricing

These disruptive scenarios result from an expert consultation led by ShiftN and commissioned by the Belgian Health Care Knowledge Centre of Expertise and the Dutch Health Care Institute. The aim of the consultation was to imagine disruptive ways to finance R&D that could potentially better respond to public health needs.

Scenario 1: Needs-oriented Public-Private Partnerships
Public actors and drug developers are tackling public health priorities in vigorous and pragmatic partnerships. The public actor identifies indications representing high public health needs; specifies criteria for the performance levels of drugs to be developed for those indications; and indicates his willingness to pay. Through procurements with enforceable contractual commitments, the public actor enters into a partnership with drug developers to
find solutions for these needs. Developers are prepared to enter into the partnership and to give price concessions for a pre-negotiated fixed agreement on price and volume, and speedier access to market, which reduces their development risk. This drug development and pricing model is close to existing governmental procurement practices in researchintensive areas such as public transport, defence and space exploration.

Scenario 2: Parallel Drug Development Track
EU member states set up a parallel, not-for-profit drug development track that exists alongside, but independent of, the pharmaceutical and biotechnological industry. The aim of the parallel track is to develop cheaper drugs without compromising safety and effectiveness. After having made up an inventory of the public health gaps and priorities in health care, EU member state authorities ask leading public research institutes which
discoveries, assets, tools and capabilities they possess to develop solutions addressing (some of) the needs that were identified. Starting from the match between demand and available expertise, coalitions are built between these (not-for-profit) research institutes, payers, authorities and patients’ organisations. All these partners make the commitment to participate in an open and transparent way in clinical research projects. Intellectual
property (IP) rights are acquired early on in the development process by the partners of the consortium, and ownership is shared. Alternatively, the parallel research infrastructure can completely deprioritise ownership; i.e. inventions and developments in the parallel track are not protected and are in the public domain.

Scenario 3: Pay for Patents
A consortium of European countries join forces and establish a “Public Fund for Affordable Drugs”. Each of the participating countries deposits a fixed annual percentage of what it currently spends on drugs into the Fund. Private payers (including insurance companies) can also join the Fund. The Fund continuously screens the research market for “interesting” drugs that are being developed in Phase II or in Phase III for indications with clear health priorities. The Fund buys the patent from developers, conducts or commissions the last phases of research in public research institutes or subcontracts to private partners (with strict public oversight), and guides the submission process for market authorisation. Because the drug is then put on the market at a relatively low price, substantial savings are generated for the public payer. Once the system is functioning “at cruising speed”, these
savings can (partly) serve to replenish the Fund. The “Pay for Patents” model delinks R&D from manufacturing and sales. The prices decrease because the partners in the Fund consider medicines as public goods that should not be financed through monopoly prices.
Hence, once the patent is owned by the public sector, after a successful development and authorisation trajectory, the rights to produce, distribute and sell the drug can be licenced to manufacturers and distributors that provide the best deal in terms of quality, safety and accessibility for the lowest cost. As a rule, various private partners compete with each other, with the result that “new drugs enter the market at generic prices”.

Scenario 4: Public Good from A to Z
Drug development is essentially a public enterprise, and is radically re-oriented from serving private profits towards serving the public interest and patients’ needs. In a drug development system that is essentially a public enterprise, private drug companies still have a role, albeit with a completely different business model. They mainly manufacture drugs and deliver services to the public provider on a competitive basis. With drugs and other health technologies essentially public goods, patents and monopolistic prices have no role.
Patients and public health providers, not corporations, choose which unmet needs research should address. Public authorities regularly publish lists of research priorities, based on objectively established and patient-informed unmet medical needs. Governments organise and fund that research through a variety of mechanisms, including requests for proposals based on well-defined targets that any research team, public or private, can compete for, or milestone compensation, and active management of the innovation process. By paying directly for R&D and active management of the drug development pipeline, nations and health care systems pay much less than the patent-protected prices of the past. Ultimately, drug prices are set on the basis of the real costs of manufacturing, quality control and distribution, which are decoupled from R&D.
Source: Vandenbroeck, Ph. et al. (2016), “Future Scenarios About Drug Development and Drug Pricing”, Health Care Knowledge Centre (KCE) Report 271, D/2016/10.273/59, Health Services Research (HSR), Brussels.

Pharma confidential

We have just entered a new world. A confidential pricing market has been created!.  A complete new pharmaceutical market that Adam Smith couldn't realise. It's not a joke, it is what an official answered yesterday to the press. The Ministry can't explain the prices of prescription medicines not funded by NHS because they are confidential. The journalist was asking about the price of 400 medicines that were delisted from public coverage last September and why pharmaceutical firms have increased its price thrice. Does this make any sense? Do we need such regulator? Maybe a vacation is the best option . Last April a new regulation introduced the notified price, this is a free price that has to be notified for prescription medicines not funded by NHS. However, notified price it is not confidential price. That's the reason why we have to ask for compliance with the law, just that. The Comision Interministerial de Precios has not published any administered price since last June, and notified prices are considered confidential by the Ministry oficials.

Pharm niche busters

The Information Pharms Race and Competitive Dynamics of Precision Medicine: Insights from Game Theory
Economic Dimensions of Personalized and Precision Medicine

Precision medicines inherently fragment treatment populations, generating small-population markets, creating high-priced “niche busters” rather than broadly prescribed “blockbusters”. It is plausible to expect that small markets will attract limited entry in which a small number of interdependent differentiated product oligopolists will compete, each possessing market power.

A chapter in a new book on  Precision Medicine explains the new approaches to a oligopolistic market structure where the size of the market may be determined by biomarkers with a cut-off value suggested by pharmaceutical firms themselves. The dynamics of this market is described according to game theory. Sounds fishy at least.
I already have pending chapters to read of this book. A must read for physicians and economists.

The farce of confidential drug prices (3)

 Exploring the consequences of greater price transparency on the dynamics of pharmaceutical markets

The 2018 OECD report Pharmaceutical Innovation and Access to Medicines suggested that increased price transparency could promote public accountability, while potentially delivering efficiencies to health systems by including economic considerations in coverage, treatment decisions and budget allocation. Despite this, precisely what should be made more transparent, and how greater transparency would affect the functioning of markets, have been poorly characterised. To help frame the policy debate, the OECD undertook an exploration of the potential consequences of greater price transparency on market dynamics. The work included a roundtable and a series of semi-structured interviews, with participation by 19 experts in pharmaceutical pricing, economics of pharmaceutical markets, competition, and law. With an extensive review of the current practice and relevant literature as a preface, this report presents the key findings from those consultations.

 

Against patents (2)

 Medical Monopoly. Intellectual Property Rights and the Origins of the Modern Pharmaceutical Industry

Medical Monopoly combines legal, medical, and business history to offer a sweeping new interpretation of the origins of the complex and often troubling relationship between the pharmaceutical industry and medical practice today. Joseph M. Gabriel provides the first detailed history of patent and trademark law as it relates to the nineteenth-century pharmaceutical industry as well as a unique interpretation of medical ethics, therapeutic reform, and the efforts to regulate the market in pharmaceuticals before World War I. His book will be of interest not only to historians of medicine and science and intellectual property scholars but also to anyone following contemporary debates about the pharmaceutical industry, the patenting of scientific discoveries, and the role of advertising in the marketplace.

 

Pharma, Big Pharma (2)

 Government, Big Pharma, and The People. A Century of Dis-Ease

A book to read, with this Table of Contents:

Dedication
Acknowledgements
Preface
Chapter One – Introductions
Health
Woman as a Biological and Social Entity
A Different Paradigm
Health Care and Rights
Drugs and Their Role in Society
Drug Policy
Big Pharma
Drug-Related Problems
The People
What’s Ahead
Conclusion
Chapter Two – The Four "P’s"
Introduction
Marketing as an Actualizing Process
The Marketing Mix/The Four "P’s"
Government and the Four "P’s"
Conclusion
Chapter Three – Investigators and Investigations
Introduction
The Hearings
The Grand Inquisitor
Gaylord Nelson – Son of Torquemada
The Fountain Hearings
Senator Kennedy Joins the Fray
Small Business Problems – Dingell
Drug Efficacy Problems – Fountain
Moss on Drug Abuse
Fountain Redux
Congressman Rogers on Transition
Senator Humphrey and the Literature
A Newcomer – Congressman Van Deerlin
Senator Fountain – "One More Time"
Senator Kennedy Returns
FDA Under the Microscope Again
Kennedy – Not Too Tranquil
Gore on Pharmaceutical R & D
Senator Fountain Again
Claude Pepper for the Old Folks
Zomax in the Spotlight
A Pryor Engatement
The Task Force on Prescription Drugs
Research Findings and Recommendations
Conclusion
Chapter Four – Legislators and Legislation
Introduction
Laws and Policy
Bills and Sponsors
The Process
Conclusion
Chapter Five – Regulators and Regulations
Introduction
The Food and Drug Administration
Other Regulators and Regulations
Federal Trade Commission
Federal Communications Commission
Drug Enforcement Administration
Centers for Medicare and Medicaid Services
Patents and Trademarks
State Regulations
Drug Names
Conclusion
Chapter Six – Non-Government Influence
Introduction
Self-Regulation
Third Parties – Managed Care Controls
Formularies and Prescription Limitations
Lawyers
Advocates and Adversaries
Mail Order Pharmacy
Pharmacy Benefit Managers and Outcomes Management
Conclusion
Chapter Seven – The People and Their Drugs
Introduction
The People as Patients
Health Belief Model
Case – Health Belief Model
Attitudes and Evaluation of Drugs
The Sickness Career
The Sick Role
The Sick Role in Acute and Chronic Illness
Compliance with Medication Regimens
Other Influences on Medication Use
What to Do
Death or Maybe Not
Conclusion
Chapter Eight – Response of Big Pharma
Introduction
Response to Government
Big Pharma Speaks
Response of Big Pharma to the People
Some Ideas for Big Pharma
PMA Monographs
Statesmanship
Conclusion
Chapter Nine – Little Pharma and Friends
Introduction
Generic Pharma – Not So Little
Big Bio
What is Special about Specialty Drugs?
Little Boutiques
Back to the Future – Compounding Pharmacists
Friends
Conclusion
Chapter Ten – Greedy Big Pharma
Introduction
Two Parts of Greedy
AARP and Greedy Big Pharma
Congress and Greedy Big Pharma
Risk vs. Reward
Greedy Big Tech
Conclusion
Chapter Eleven – Whence the Drugs?
Introduction
Origins of Drugs
Drug Product Development
Marketing in the Last Century
Invention, Discovery, Development
Curiosities and Surprises
Recommended Reading
Conclusion
Chapter Twelve – Drugs of the Future
Introduction
But Seriously
Drugs in an Aging Society
Future Drugs for the Aged
Lifestyle Drugs
Conclusion
Chapter Thirteen – The Non-Prescription Products Market-Dr. W. Steven Pray
Introduction
Patent Medicines
Laws That Regulated Non-Prescription Products
FDA’s Review of O-T-C Products
The Prescription to O-T-C Switch
A Third Class of Drugs
Quackery – Lacking Proof of Efficacy
Quackery – New Names Confer False Respectability
Conclusion
Chapter Fourteen – Issues and Studies in Pharmacoeconomics
Introduction
The Emergence of Pharmacoeconomic Research
The Cost of Illness
Quality of Life Assessment
The Economics of Non-Compliance
Economic Epidemiology
Conclusion
Chapter Fifteen – On Drug Prices – Dr. E. M. "Mick" Kolassa
Pricing: The Forgotten "P"
The Growing Importance of Pharmaceutical Prices
Prices, Politics and Problems
Pricing Terminology
What is a Pharmaceutical Price?
Price Decision Making
The Value of Pharmaceuticals
The Future of Pharmaceutical Pricing
Chapter Sixteen – Summary, Ruminations and Apologia
Introduction
Ruminations
Trends
What If’s
Apologia

Business as usual is unacceptable in a pandemic

 What are the obligations of pharmaceutical companies in a global health emergency?

Timely article by Ezequiel Emanuel et al. in The Lancet:

Pharmaceutical companies have special obligations in this emergency, which follow from their indispensable capacity to help to end the pandemic by developing, manufacturing, and distributing COVID-19 vaccines. However, the capacity to help alone does not fully specify companies’  obligations. Additionally, market-based arrangements, with patents, marketing exclusivity, and confidentiality clauses, give pharmaceutical companies the freedom to choose what treatments to research and develop, how to price and distribute their products, and whom to furnish with products through bilateral agreements.9 Indeed, companies need not produce vaccines or infectious disease therapies at all. Patents and exclusivity, alongside the absence of price controls or requirements for technology transfer, also permit companies to charge higher prices than they otherwise could.  Governments adopt intellectual property rights, limited pricing regulations (ie, each country has its own pricing, with no one countrycontrolling the pricing, at most being able to set limits on the prices that can be charged), trade agreements, and other limited  interventions (eg, manufacturing, inspections of facilities, etc) in the hope of incentivising the development, manufacturing, and distribution of socially valuable products. Everyone—including pharmaceutical companies— agrees that business as usual is unacceptable in a pandemic.

 Ethical obligations:

Què hem de fer?

Using Market-Exclusivity Incentives to Promote Pharmaceutical Innovation

Sabem que la indústria farmacèutica investiga, però també que els medicaments que s'aproven cada vegada són menys, i generen més controvèrsia. Aquest article del NEJM ens diu el que s¡ha fet en termes d'incentius per a promoure la recerca i els dubtes raonables sobre el que s'ha assolit. Conclusió:

Although use of market-exclusivity incentives to promote pharmaceutical innovation has potential benefits, future legislative efforts aimed at encouraging investment in drug research and development should be more precisely designed to avoid waste and misuse, and they should be linked to demonstration of positive public health outcomes. Without these limitations, making exclusivity incentives available to pharmaceutical manufacturers may not be worth the potential risks to public health.

Extendre el termini de la patent pot ser contraproduent. Cal evitar el malbaratament. I això es relaciona amb el que deia fa uns dies, massa incentius provoquen que els errors els paguem molt cars.

Ps. Record de Juan Gris a Christie's 28m de $

Ill-prepared for the arrival of new medicines

Pharmaceutical Innovation and Access to Medicines

While in the last years the number of new drugs in the market has been limited, this trend has changed and countries may expect larger bills in the next future. The OECD report explains the main challenges of pharmaceutical innovation and says:

Despite a slowdown in growth in the 2000s, pharmaceutical spending has nevertheless increased sharply in some therapeutic areas, such as oncology and certain rare diseases where many new medicines target small population groups and command high prices. While these may well address unmet needs, they often have prices that may not be justified by the health benefits they confer.

Countries may be ill-prepared for the arrival of novel medicines targeting wide  population groups. In 2013, the first of a new class of very effective but expensive
drugs known as direct-acting anti-virals (DAAs) for hepatitis C created a shock due to the potential budget impact of treating all infected people. Many countries initially restricted access to the most severely affected patients, creating frustration among patients and clinicians alike. Although subsequent entries of alternative products have created competition on prices and allowed payers to expand eligibility to treatment, the initial shock highlighted the lack of readiness of payers for such events.

In some countries, sudden, large price increases for off-patent medicines have made important treatments unaffordable for patients.

Finally, innovation is lacking in certain areas of high-unmet need, such as new antimicrobials, non-vascular dementia, and some rare diseases.

The report summarises different proposals and measures that would be helpful for a government that cares about citizens' welfare. Unfortunately, this is not our case.

Exhibition at Foto Collectanea

Pharmaceutical contracts and prices

  Introduction to Market Access for Pharmaceuticals

Contents:

Chapter 1: Health as a Good

Chapter 2: Decision-Making in Public Health

Chapter 3: Definition and Concepts

Chapter 4: HTA Decision Analysis framework

Chapter 5: Early HTA Advice

Chapter 6: Overview of Market Access Agreements

Chapter 7: External Reference Pricing

Chapter 8: Gap between Payers and Regulators

Chapter 9: Early Access Programs

Chapter 10: Market Access of Orphan Drugs

Pharma, big pharma (8)

 Drug Truths: Dispelling the Myths About Pharma R & D

This book answers the questions about the process and costs of pharmaceutical R & D in a compelling narrative focused on the discovery and development of important new medicines. It gives an insider's account of the pharmaceutical industry drug discovery process, the very real costs of misperceptions about the industry, the high stakes--both economic and scientific--of developing drugs, the triumphs that come when new compounds reach the market and save lives, and the despair that follows when new compounds fail. In the book, John LaMattina, former president of Pfizer Global Research and Development, weaves themes critical to a vital drug discovery environment in the context. This is a story that Dr. LaMattina is uniquely qualified to tell.

TABLE OF CONTENTS

PART I A MATTER OF THE HEART 1

CHAPTER 1 CHOLESTEROL DRUGS ARE UNNECESSARY 3

CHAPTER 2 INDUSTRY IS MORE INTERESTED IN "ME-TOO" DRUGS THAN IN INNOVATION 13

CHAPTER 3 IT TAKES INDUSTRY TOO LONG TO DISCOVER NEW DRUGS 23

PART II THE ROLE OF PHARMACEUTICAL R&D IN HEALTH CARE 39

CHAPTER 4 DRUGS ARE DISCOVERED BY ACADEMIA 41

CHAPTER 5 NEW MEDICINES ADD COSTS BUT LITTLE BENEFIT 50

CHAPTER 6 BIG PHARMA HAS FAILED AND SHOULD LEARN FROM BIOTECH SUCCESS 59

PART III THE PROFIT MOTIVE 69

CHAPTER 7 THE INDUSTRY INVENTS DISEASES 71

CHAPTER 8 NEW DRUGS ARE LESS SAFE THAN TRADITIONAL MEDICINES 79

CHAPTER 9 INDUSTRY SPENDS MORE ON ADVERTISING THAN ON R&D 91

CHAPTER 10 INDUSTRY DOES NOT CARE ABOUT DISEASES OF THE DEVELOPING WORLD 100

PART IV THE FUTURE 109

CHAPTER 11 BIG PHARMA'S DAY HAS PASSED 111

CHAPTER 12 FINAL REFLECTIONS 122

A plea for public patents on COVID prevention and treatment

 Funding of Pharmaceutical Innovation During and After the COVID-19 Pandemic

Extensive public investments also are being made in therapeutics. The 2 most prominent monoclonal antibodies (by Regeneron and Lilly) have come to market with substantial governmental support for product commercialization. Both products derive from therapeutic research platforms established with governmental support before the COVID-19 pandemic, but product commercialization and manufacturing received major additional investments in 2020. Separately, the National Institutes of Health (NIH) Rapid Acceleration of Diagnostics program has committed $1.5 billion to supporting development of diagnostic tests related to COVID-19. The specifics of the federal contracts largely remain confidential.

Why do they remain confidential? 

The lesson of the COVID-19 experience is that, when innovation in the life sciences is imperative, the traditional reliance on pharmaceutical industry prices and profits is jettisoned in favor of governmental grants and procurement. Sustained public funding for product development and commercialization will permit the sustained financing of innovation, a renewed attention to major public health needs, and the global position of the US pharmaceutical industry.

If there is public funding, why there aren't public patents?