Saturday, July 30, 2005

Interesting take on Merck v. Integra

from :

Patents do help innovation by providing incentives for investors to fund research and development (this necessary funding could be provided in other ways; for example, see "Medical Innovation Prize Fund: New Idea in Drug Development," in this issue). But patents also block innovation. A patent means that only one company in the world can develop an idea (absent corporate dealmaking, a very inefficient process that can delay medicines for years as lawyers and executives battle with other or just don't have time). Usually research ideas are simply dropped once patent issues come into view. Yet the company with the patent is unlikely to be the one with all the other patents needed, with the interest in pursuing the project, and with the best technical, financial, and human resources (including the nebulous but all-important personal chemistry and enthusiasm) to create a new treatment successfully. Therefore the best research and development that could be done is unlikely to happen at all. Patent gridlock could be the major, overlooked reason for the unexpected big drop in the ability of pharmaceutical companies to produce truly innovative new medicines, despite huge advances in basic biological knowledge and in research tools.

Several years ago an official at a major pharmaceutical corporation said that it could not research about 100 potential cancer treatments its scientists wanted to test, because it could not obtain the rights at all, or could not negotiate an affordable price. If one of the world's biggest companies could not handle this problem in its own central field of work, think of the obstacles others must face.

Price negotiation always includes the risk of no agreement, as parties dream big and then walk away if they don't get what they want. But medical patents can burn the future as well as the present, escalating a failed negotiation into a legal blockade to critical research and innovation everywhere in the world -- with life-and-death consequences for many who were never at the table.

Patent Gridlock -- A Perverse Economics of Scale?
Economists should examine the possibility that a patent system with universal reach may become much less useful and more harmful when its universe gets too large -- that gridlock develops because there are far more research projects that can be blocked by patents or forced into less productive channels, and far more patents and claims in existence to block them. The U.S. patent system may have worked fairly well until about mid 20th century; then large companies increasingly used patents for blocking, getting hundreds of patents and thousands of claims to keep rivals out of an area entirely even if they do not infringe, just by the risk and cost of litigation. The "golden age" of drug development about 50 years ago may have been a legacy of the previous environment before gridlock set in -- a small taste of what could have been possible with modern science, if it had not been choked off by a new golden age of overgrowth of patent rights and litigation.
Now that biological and pharmaceutical patents are enforced worldwide, have greatly increased in number, and have far more ongoing research to block, their damage to innovation may be much greater than their benefit. But this problem tends to remain invisible, because those involved are usually pledged to secrecy, and also are trying to work something out so that their projects can proceed at all, however unsatisfactorily.

Patents on the genetics of viruses or other naturally occurring disease mechanisms can be particular destructive in stopping research on new treatments, as happened recently with hepatitis C. Ownership of pieces of the heredity of human beings or human diseases creates barriers to entry that are infinite, by act of Congress or other government bodies. Tens of thousands of these pieces of exclusive ownership of nature (sometimes controlling whole human diseases) may have created a fatal gridlock that is blocking the translation of new knowledge into practical medical treatments.

If this analysis is correct, pharmaceutical and related patents could be killing more people than all the wars on Earth combined, by blocking the research and development of new medical treatments for diseases that kill far more people than wars. This problem sneaked up on the world, mainly because of a change in scale -- the sheer amount of both research and patent activity today, and their global reach, which dumps all patents into a single huge, universal pool, where each one can stop innovations anywhere. This possibility urgently needs expert and public attention.

Reducing Patent Gridlock
A June 2005 decision by the U.S. Supreme Court2 should reduce patent gridlock in certain cases. The court unanimously allowed patented drugs to be used in preclinical studies [LBE note: recall footnote 6; the Supreme Court presumed that the CAFC decision did allow preclinical studies] to develop new drugs (but not for basic scientific research) without permission of the patent holder. The court said that its decision did not address whether research tools could be used similarly. Surprisingly, large pharmaceutical companies tended to side with consumer groups like AARP to support this decision, while smaller biotech companies as well as research universities tended to be opposed (due to legitimate fears that big pharma might not need to pay them for using their work in developing research tools, which will never generate revenue by being sold to patients as drugs).
This unanimous Supreme Court decision seems to open the door [LBE note: hmm, isn't this backwards?] to well-crafted legislation to further relieve patent gridlock, while also allowing the development of research tools to be profitable. For example, a compulsory-licensing system could create a medical patent pool, allowing big pharma, universities, or anyone else doing medical research to make free use of a broad class of patents, in return for a royalty based on sales, when and if any products developed with those patents were sold. Then any company or other organization could use almost any technology for medical research, without the hassle, expense, and delay of patent negotiation. This would free the research process, make royalties more predictable, and pay for innovation at the time of product sales -- after the work has already proven itself, and when a revenue stream exists. Paying for rights as a percentage of sales (instead of as a large fixed cost) could also encourage low prices in poor countries -- distributing research costs more equitably and realistically.

Open-source projects could also conduct rights-free medical research and drug development under the same rules. If they never made sales they would never owe royalties on the patents they used. And their work could greatly increase the value of patents by finding and proving new uses for them, at no cost to their owners.

A less ambitious approach to open-source type development in pharmaceuticals (not suggesting any legal changes) was discussed last year in The Economist, generally favorably ("An Open-Source Shot in the Arm?" June 10, 2004). Here the idea was to move the collaboration that already works well in bioinformatics (such as in the human genome project, a clear example of successful sharing of data) further downstream, closer to the patient. For example, effective worldwide collaboration and data sharing might greatly increase the discovery of new uses for off-patent or otherwise unpatentable drugs. (Recently the common antibiotic doxycycline was found to be a major advance for treating filariasis [elephantiasis], one of the most common causes of disability worldwide -- by killing bacteria needed by the worms that cause the disease, leading to their eventual death.3) Online research projects could also organize volunteer and other contributions toward developing entirely new drugs for tropical and other neglected diseases (see the Tropical Disease Initiative).

An important article on Internet collaboration ("The Power of Us," Business Week, June 20, 2005, page 75-82) describes many examples of successful new business projects based on the work of many people throughout the world, often volunteers, made possible by widespread online communication. Open-source software development is just one of these.

This approach will surely be different in pharmaceuticals than in software, because the industries are so different. It may contribute greatly to some projects, by allowing research to proceed at full speed, without unworkable rights constraints. This is already happening, but only in a few areas so far, where some way can be found around the prevailing patent gridlock.

The current system of drug development is failing. The time for exploring new ideas and practices is now.


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3:36 PM  

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