Would Longer Drug Patents Really Lead to Lower Drug Prices?
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that the response from any drug company in this situation would be to say that they couldn’t reduce drug prices because:
1) Their patent could be declared invalid or found to infringe another patent.
2) Competitors could develop a better product and take away market share, so they need to keep the price high.
3) Their company needs the income to recoup additional legal expenses that were incurred in order to get the longer patent coverage.
4) New rules in places like India and China allow the government to award compulsory licenses to competitors to make and sell patented drugs, potentially putting future revenues derived from other portfolio drugs sold in those countries at risk.
5) Sales were originally shared with another company, so revenues to their company were not “maximized” and therefore need to be recouped going forward.
Each of these rationalizations sounds logical, and all but the last one would clearly apply to nearly every drug already on the market. These same explanations could also be trotted out to justify why drug prices on products with theoretically longer patent lives (30, 40, or even 50 years, for example) could not be lowered.
Drug pricing is an extremely complicated topic, and figuring out the “correct price” of a particular drug can be challenging. Check out some of the proposed new rules associated with the Affordable Care Act to see just how problematic this can be. What exactly defines a drug’s price? Are we talking about the retail price in a pharmacy? The price paid by Medicare? By hospitals? The average wholesale price? Does “bundling” this drug’s sales with other medications affect the price that patients will pay? How do Big Pharma’s “Payment Assistance” and new co-pay coupon programs factor into these numbers? What percentage of patients actually qualifies for these discounts?
Drug prices have deliberately been made difficult to find, with obfuscation trumping clarity as the industry standard. Buying drugs, it turns out, most closely resembles the process for purchasing airline tickets and hotel rooms: there appears to be no real set price. What you shell out is different from what your neighbor pays, and few people really fork over the full (unlisted) price. The AWP (Average Wholesale Price) is the most often used cost benchmark, but because this number differs significantly from the real prices that are often paid for a drug, it is often derisively referred to as “ain’t what’s paid”.
Enbrel faces considerable competition in the marketplace from other anti-inflammatory medicines that bind with the TNF molecular target, as well as drugs that act through different mechanisms. One competitor, Abbott’s adalimumab (Humira), is poised to become the best selling drug in the world now that Lipitor has gone off patent. A product that might drive down the price of all injectable TNF inhibiting biologics, including Enbrel and Humira, would be an orally active rheumatoid arthritis medicine. Pfizer’s experimental drug tofacitinib (which has a unique mechanism of action) was recently recommended for approval in this disease indication by an FDA advisory panel, and awaits a final decision from the agency. Its price (compared to currently marketed drugs), in addition to its relative safety, efficacy, and convenience, will likely factor into whether or not this oral medication will be widely adopted if it is approved.
Let me answer the question that I posed above: Did Amgen lower the price of Enbrel, a core constituent of its drug portfolio, once they were awarded the extended patent coverage? Obtaining this information took considerable effort, as drug-pricing data is almost as tightly guarded as US nuclear launch codes. Several local pharmacists couldn’t supply the answer, and major drug distributors Cardinal Health and McKesson wouldn’t share the information. Numerous calls to various Amgen customer information numbers were unproductive, but perseverance paid off and a helpful Amgen representative finally provided me with the number: The average sales price of Enbrel actually increased by 9.8 percent from 2011 to 2012.
Anyone shocked by this news clearly hasn’t been paying attention to healthcare issues in general and drug prices in particular. Any scientist will tell you that it’s always better to have more than a single data point when evaluating information, even in pharmaceutical economics. If you know of other drugs that received extended patent coverage for some reason, please cite the example and let us know whether the price increased or decreased thereafter. The cost of our medicines are derived from a complex formula that combines elements of innovation, perceived value, rationalization, regulation, competition, duration, and good old-fashioned greed. The trend, however, is ever upward at an unsustainable rate, and despite all of the chatter about the “patent cliff”, the industry remains highly profitable. The current crisis that is reshaping the biopharmaceutical industry is due to a number of different factors, but the length of drug patents does not appear to be one of them.