good part of the political debate has recently been
on importing cheaper drugs from Canada. In a move which
could be considered no more than pandering to win votes
several politicians have come out in favor of allowing
this to occur. I thought it may be useful to point out
some of the problems with this approach to lowering
health care costs which have been totally ignored by
the politicians. The webmaster even emailed questions
to the officials representing his area and various
political candidates and received no response.
has become cache to bash the drug companies. Just go
do a search on Amazon.com and you will find several
books blaming these companies for the problems with
escalating health care costs (click
here to do a search). While there obviously is a
need for cost cutting at the large players in the pharmaceutical
industry (primarily in marketing), my experience is
with small companies and startups and I assure you that
the problems we encounter have more to do with paying
the high cost of drug approval than high overhead.
rate of failure of drug candidates in pre-clinical analysis
is extremely high. Only 5 of 5,000 new potential drugs
tested in animal models make it to clinical trials and
only 1 actually is approved for use by the FDA. Pretty
long odds if you are looking to start your own company...
opinion on this subject comes from being a scientist
and entrepreneur in the biotechnology field.
about intellectual property?
property is currently managed and prosecuted by country.
One of the major problems with importing drugs from
Canada is that many companies have either (1) licensed
the Canadian rights to another company or (2) have no
Canadian rights due to not filing patent coverage.
imagine a scenario. Company A develops a drug and goes
through the expense of approval in the United States.
After approval Company A licenses the Canadian rights
to the drug to Company B. Company B is required to offer
the drug at lower cost than company A, however the risk
and financial outlay of Company B is considerably less
than Company A. Furthermore, the cost of Canadian approval
of a pharmaceutical product is considerably less than
in the United States and all the legal costs of protection
of intellectual property would have already been assumed
by Company A. Under some of the suggested plans Company
B would now undercut the price of Company A and violate
the terms of the license agreement and the United States
patent coverage (through no action of their own).
even more disturbing scenario is revealed if the company
in question does not have intellectual property rights
in Canada, but has them in the United States. In some
currently proposed plans, competitors would be able
to swoop in and market drugs from the North in violation
of United States patent coverage.
of these scenarios makes a mockery of the US patent
system and will discourage innovation and cause the
giant pharmaceutical companies to gain an even tighter
grip on global health care.
intellectual property protection in countries around
the world cost money. Companies
have to realize that expense and that can only come
after approval. Drugs are more expensive prior to patent
expiration due in part to the cost of intellectual property
protection being built into the costs over the life
of the patent. Since costs of patent protection vary
by country so will the markup.
does it cost to obtain drug approval?
Tufts group third drug-cost report estimated the out
of pocket costs for drug development at $403 million
(I have removed the $399 in cost of capital calculations
from the often quoted $802 million to reflect actual
out of pocket costs). Adjusting for inflation, this
is an increase of 2.5x in the past ten years. The majority
of the costs are incurred in the clinical trials process
which was absorbed in more extensive safety screening,
and recruiting sometimes thousands of patients for clinical
trials involving chronic diseases. In contrast a study
prepared for the Life Sciences Branch, Industry Canada
in May of 2003 concluded that biotechnology and pharmaceutical
companies could save up to 45% over trials conducted
in the United States.
less costly overall, the approval process in Canada
actually takes longer and there is a delayed acceptance
of new pharmaceutical products due in large part to
the fact that each province must approve the drug independent
of the Canadian government. Also ironically, whereas
many branded pharmaceuticals are less expensive, many
generic products are actually more expensive than the
is obviously significant room for improvement in the
way drugs are approved and administered in the United
States and we can learn from other countries. One point
is that the clinical trials process has become lengthy
and costly to try to eliminate 100% of the risk in pharmaceuticals.
We need to become adults and accept the fact that medical
intervention carries risk and not undergo it lightly.
I am less concerned regarding safety of imported drugs.
At a minimum, the prescribing pharmacy should be liable
for selling of drugs that do not meet FDA standards
if they are going to export.
fallout of any legislation
Tougher price negotiations abroad to even the field
and not have the US consumer bear the majority of
drug development burden. That is probably a good thing.
innovation. Without assurance that pricing will allow
money invested to be returned, the existing companies
will become more conservative. Also, venture capital
firms will fund fewer and fewer life science start-ups.
regarding intellectual property.
bottom line is that it costs money to characterize potential
disease treatments, patent them, and run them through
the clinical trials process. Someone has to pay for
that and fund the development of the therapies of the
future. Importation of drugs from Canada is a non-inventive
solution that will cover a small number of treatments
and will create a beaurocracy to oversee to insure that
it does not infringe on existing laws regarding patent
protection and the FDA regulation of pharmaceuticals.