Rare Afflictions: Medicines or Markets - 04

Move Over Medicines.. time for the Boulevarde of pharmasupra-schemes..

But first, the weekly world edition of The Telegraph often draws a smile at the breakfast table when its resident Matt cartoon makes wry on news. This morning his wit took aim at ‘scientific’ announcements with a couple of blokes depicted at table with a microscope, test tubes and a plate on which was placed a notable vegetable. On the wall behind them a sign read: GM Food. And clutched in his hands a clipboard from which one of them is making an announcement to the world at large. Saith he, “We have developed a carrot that can leap off the plate and punch (someone)—“

Who does not matter, for crackup is already underway and healthily humored peristalsis the better for my digestion.

Yet for the purpose of this blog the cartoon has the added value of serving point on invention and the inventive mind. The former set in context of patent defensibility, the latter in commercial self-interest.

Let’s step back a little..

To US political days of the early 1980s. Senators Orrin Hatch and Henry Waxman had put up a bill to address concerns at branded drugs whose monopoly would lapse as each exclusive-rights-to-sell term expired. Competition was the way. Tried, true, the one-and-only way. BigPharma enjoyed a decade at least for each of its brands, to grow sizeable markets at monopoly prices and after easily recovering R&D costs go on to make fortunes. Giving them wherewithal to adapt and take on the new generics. Lower brand prices, do generics themselves(a subsidiary or affiliate firm to keep more of a market’s revenue) or better, new drugs to keep on the good work..

In 1984 the Hatch-Waxman Act passed into law. Competition the goal it rewarded firms who gained FDA approval and made first filing that a patent was invalid(e.g. timed out) and its product did not breach that patent. With an immediate 180 day exclusive rights-to-sell agreement into markets occupied by the forerunner. Exclusive that is to say from other generics or competitors. Not to be missed, however, would be that such exclusivity also avoided the FDA’s approx. 30 month approval period in respect of other applicants. To wit, first filers had a clear 3 year run into the lapsed patent brand’s market. Opportunity indeed, for it could mean hundreds of millions dollars in a very short time.

Underlining this point and with the benefit of a good deal of experience in the markets since the Act, the Generic Pharmaceutical Association in 2006 said that the ‘vast majority of potential profits for a generic drug manufac­turer materialize during the 180-day exclusivity period.’

Enter the 'Competitors'..

Being patent-holder Solvay Pharmaceutical with its testosterone-replacement brand, Androgel. With market monopoly it was the sole price-setter. Followed in due course by generics firms(Activis is well cited in the case link below).  Who filed per the Act. Only to find itself sued by Solvay claiming patent infringement. Despite which the FDA eventually approved the firm’s generic alternative modeled after the patented brand.

So.. Activis(who had undergone a name change along the way) could either bring its generic to market via the Act’s intended competitive route, or… big surprise (in its day IMO).. promote Solvay’s drug after making a REVERSE PAYMENT AGREEMENT (aka pay-for-delay deal. That is to say, and according to proceedings before the SCOTUS [No. 12–416. Argued March 25, 2013—Decided June 17, 2013 ] receive annual payment from Solvay ranged between $19M and $30M for 9 years).

Nine whole years!! Hey, what is this—what gives—theyse gotta compete not pile on paying patients!! Haven’t they?

Well, my answer to that would take me back to the secondhand goods dealer who was in no mood to haggle prices with a customer one day and bellowed, “I’m in business to make money, mister, not friends!”

And talking about pile, the US Federal Trade Commission have put $3.5B a year on the extra money paid out to patent monopoly pricesetters over and above generics costs. Yes, more than enough money to buy friends.. (lol).

But significantly, pointedly and effectively stifling generics competition and setting up mutually shared patent prices in perpetuity by the Boulevarde’s scheme team

Waitta minute, Federal Trade Commission?, don’t I mean the FDA?

Fraid not, my dear reader, for in this matter the Regulations arm of the FTC holds a very significant brief, and advocacy, role. Well aware as it is, how homeland commercial behavior is subject to global scrutiny in a global world.

By which we could reasonably say that their concern at homeland prices transpose into offshore markets particularly where risk factors such as arise from the above example are calculated and/or incorporated to the US pharmaceutical industry’s advantage. [cf if you will how a storm in the Gulf puts cents on a liter of kiwi gas station gasoline].

The Federal Trade Commission's Pursuit..

We should understand how the FTC is pursuing this matter on a basis of breaking up the logjams arising from such non-competitive arrangements between firms. Its guide is anti-trust law, not as in this case you may be led to believe by Pharmas and their lobbyists, patent exclusivity.

To the precise point then: does patent confer anti-trust immunity?

In the first instance - FTC approach to the District Court - patent exclusivity rules.

In the second instance - FTC to Appeals Court(11th Circuit) - complaint dismissed.

In the third - FTC to SCOTUS re dismissal - UPHELD. Appeals erred in dismissal

As to why the SCOTUS ruling was sought there had appeared a “Circuit split” when FTC pursued and secured a ruling to favor anti-trust action in a similar case—excellent link. Certiorari aka Petition to Review thus arose. Interestingly the 5-3 Supremes decision came by independent ‘rule of reason’ thinking.

Aspects of the decision:—

1. A view that the Appeals Court was fearful of complex expensive litigation- well-expressed in paragraph 4 here

2. How the Hatch-Waxman Act required disputing parties to report settlement terms to .. wait for it.. federal anti-trust regulators..

Suggesting other possibilities that include:—

* Parties do ‘agreement’, not dispute, in their very own workaround for ‘patent’ price prolongation.

* Legislators and their advisors never anticipated reverse payment(RPA) with its connotation of bribery making legal behavior let alone accepted practice.

Both of which appear intolerable. Hence in clear need of resolution. RPA the pro-competitive way may be one satisfactory explanation. Else thoroughgoing litigation via regulators and  plaintiffs which the Supremes guidance may have set in train.

Though such a course is unlikely to prevent further impacts in offshore US prescription drug markets. And ought delay adequate benchmark settings to any trade arrangements until it has a better grasp of clean slate and real world post-Recession needs.


Next time a  peek at the medicines distribution side, distortions caused by make merchants in sizeable patient communities...

Rare Afflictions: Medicines or Markets - 03

MOVE OVER MEDICINES.. time for Patents in Markets

Model Most Sought

An informative point is made by Downton Abbey’s co-producer Neames when he relates that the country estate to which the family goes in A Journey to the Highlands was first built and owned by the Scottish* Campbell family. Built, said he, for prestige.. to umn show off.. their power and influence thereabouts. 

*A.J.P. Taylor’s prefaced word pertaining correct Scot usage.

What strikes viewers is the enormity of everything, huge gardens, a stone-walled castle with its bridge over some former moat leading to and from the entrance and then that high and wide room whose walls are festooned with rifles and gun arrays. Point served to all who would enter that here was a protected and exclusive preserve for its owner occupiers. 

Time traipse several hundred years and cross the Atlantic to America’s propertied. To find remarkable similarities in all but the castle or battlements thing. As Maggie Smith verbally duelled with Shirley Maclane so ably - though ‘outgunned’ on this particular point - “Americans” she complained to Edith, “they always get our underbelly!” 

To wit, tradition stood for little at all once property ownership conferred rights to self-defence and exclusive family life. Which had become the model most sought under a written Constitution in the United States of America.

And so on into business: property whether a railway or bank held lawful right to defend. Under bandit attack a call to private posse or public was the way of things.

We are, of course, in the physical realm, where forces were perceived and resources pitted to equal and opposite engagement. To uphold one’s property. 

But what then of wealth in the human mind and intellectual property? Why, nothing much, is the honest answer. American owners of intellectual property conferred upon themselves the right to self-defense.

Which has become a major and enduring problem once vast corporate wealth came upon and absorbed not Lady Grantham’s traditional values so much as Americans’ very own model most sought.

Here’s How..

Patents, were designed, as we have heard in recent days (President Obama’s initiative vs patent trolls (see below) are what lawfully confer on their owners protection against duplicity and in the pharmaceutical industry an exclusive period of time - say 15 years - whereby a patented product can be marketed so as to recover R&D costs and secure market share. From which investors make commercial return on their investment.

Through the decades1950-1980 many pharmaceuticals came from R&D, thence via the FDA(Federal Drugs Administration) back out to branding and US markets. Further, with multinational companies, such patented US brands went into overseas markets. Driven we could reasonably conclude by the fact of opportunity to medicate more widely, earn sizeable revenues and grow greater profits amounting to well satisfied/rewarded executives and boards.

Such was this opportunity that multis were legion and all with like attitudes of there being enough global opportunity to go around. Branded made the best returns. And so, wherever possible, US firms would ‘do what it takes’ to secure those brands. Not least, by longer patent lives(aka extended exclusivity periods.. 20 years instead of an earlier agreed 15. 1990s exec analysis might go something like: 5 more years and expanding means a cool billion so what’s $50M on lawyers ta do our thinking.

The picture I’ve drawn here is deliberate so as to have you recognise the old saw that when money is talking intellect can go out the window. And I make this pointedly in the knowledge of a US President fronting for his republican constituency and their Bah Humbug! dismissals of expensive lawyers. Pardon my poet-try but the following has sprung to mind:—

Tricky Dicky’ was for them long gone; 

firm execs do the done! from now on.

Legal dexterity on behalf Big Pharma’s patents amounted to defense, period. Devil’s advocate for a moment I’d say specialist lawyers were deemed necessary by weak-minded employers. So who among them might pass up good opportunities to leverage fees for so simple and justifiable a practice. In the land of the free there was free market mania. Defense was staked in the grounds of growth. 

Blockbuster drugs.

Holler was in boardrooms: Hey, the world is going global. We—yeah—wees making it global. My firm is global, it aint multinational anymore. We need more. Y’guys gotta think billions..

Nor am I lite here. Fact: According to Matthew Herper@Forbes(2012) the top-selling medicine ever earned (US)$12Bn in a single year. Anyone care to name this was Pfizer's Lipitor. The blockbuster drug, which is used to lower cholesterol levels, was first introduced to the market in 1997 and had a strong run of exclusivity until its patent expired in late 2011. One source puts its gross overall sales prior to it falling off the ‘patent cliff’ at $123bn. 

But let us be careful and conservative in a calculable and sensible linear annual earnings accumulation. 1997-2000(4yrs) it makes (US)$2bn. Each year thereafter to 2009 it adds a further $1bn to the total for 8 years [= 12 in its patent calendar]. Gross to date: $54bn. The next couple of years it ticks over at the same rate(#10bn/yr) then in the final exclusive it kicks to $12bn. Grand total $86bn.

Now I set the first figure ($2bn) because experience tells me that every marketing effort is made early to cover R&D costs for a particular drug. This can take time and four years is a reasonable expectation. As the $ figure at or prior to 1997 is also reasonable.

I should point out that it is an add-on creative accounting - for instance including company acquisition costs which really are more market-rooted than R&D expenditures, and a most dubious practice of including capital costs(aka other utility or use) in accounting R&D costs. Of course when such things and loss-generating incompetances are low-balled into this single category then this excuse of excuses for why pharmaceuticals cost so much can appear very large indeed. My suggestion is that buyers be more than aware and have the blighters declare! Everything. Before you part with a nickel.

In terms of market returns a good rule of thumb is that US sales rank 50 percent of total global sales. Examine this specific and we know from US sales data ONLY how SEVEN drugs came in with $1bn in quarterly sales. US citizens are solely accounting here for what corporates term an implicit willingness to pay high prices for their prescription drugs.

Should this be the driver of overseas pharmaceutical drug pricing then I suggest it be considered a Model Least Sought

Bear in mind, please do, that in the USA its patent drug cliff is one of the driver's to greater incomes - hopefully to make up the shortfalls generics usage has generated. Another, of course, is need to climb out of recessionary status and economic conditions.

But these matters are well canvassed there if not elsewhere. Along with alternative, so-called ORPHAN drugs development for orphan(rare = < 200,000 US patients with a diagnosed and prescribable condition) which are rendering a US cachet to patient populations around the globe.

Next I'd like to cover some aspects of these and other matters before moving into a closer scrutiny of a particular orphan drug product.

* Patent trolls — Hattip radionz’s webmaster via their Worldwatch of last Sunday morning, I understand that American Life has an excellent 2-parter on this topic. 

Online there is also a small businessman taking a commonsense approach in dealing to them here

Till next time..