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..
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