This Is One Reason People Hate Drug Companies

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Bloomberg reports:

GlaxoSmithKline Plc sued U.S. regulators to block the sale of a generic form of the company's Flonase allergy drug, saying the copy may not work the same.

The lawsuit, filed today in U.S. District Court in Baltimore, said the Food and Drug Administration failed to establish that the generic copy of Flonase worked the same way as the original nasal spray. The FDA yesterday approved Boehringer Ingelheim GmbH's application to sell the generic version.

Just stop it GlaxoSmithKline! This kind of activity gives your industry a bad name and politicians the ammunition they need to bring you down. You've had your 20 years of patent monopoly on Flonase. That was the deal you agreed to when you got the patent. Stick to it and go create some new cures; then make all the money you can off your new patents.

NEXT: A Concord of Visions

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  1. How often does this sort of thing happen?

  2. How often does this sort of thing happen?

    From what I read in Forbes, way too often. Drug companies habitually use lawsuits to artifically extend patents. Another common tactic is to create a new patent by tweaking the delivery mechanism for an existing drug. It calls into question the validity of the whole patent system in regards to pharmaceuticals.

  3. MP:

    It does bring up an interesting patent issue that isn’t necessarily limited to pharma: how much of a change in a product or idea does a patent owner have to make in order to qualify for a new patent. Maybe there are guidelines regarding this already—but, alas, I am not learned in the field of patent/copyright law.

  4. By the same token, I would like to see more of this kind of commentary from Reason. Not doing so gives ITS critics ammo when they want to accuse it being a pawn of Big Pharma.

  5. Why don’t thay just show that the manufactoring of generics does not have the same stringent quality controls as does the manufactoring of brand names?

    Make people want the brand name, don’t use courts to keep your market share.

  6. Wait, someone suggested that not everything a company does is wise and/or moral? I’m awaiting the howls of outrage.

  7. Why don’t the companies buy or build a generic drug firm and manufacture it when the patent is up? Their generic firm would then be able to manufacture generics from other drug company’s products. Yes, I realize this means that they’ll end up halting manufacturing the drug after the patent is done and it won’t make as much money, but they can still pocket some cash from it.

  8. Patent law gets abused like this way too often. The claim the company is making sounds pretty spurious–if the generic is no good, then that’s something the FDA and consumers will be responsible for dealing with. Furthermore, Flonase is a branded and federally registered trademark, I’m sure, with all of the brand loyalty that comes with a quality product. Since the company had a legal monopoly on Flonase, it should have tremendous marketshare (like, 100%) to go with the brand loyalty.

    Twenty years of knowing that the patent would expire should be plenty of time to prepare for this eventuality. It also is plenty of time to recoop costs and to start thinking about lowering the price to compete with generic producers. Honestly, they should thank the stars that this didn’t happen three years ago, because the patent term–like copyright–recently got extended.

  9. Fuck the drug companies and bring on limits on exhorbinant monopoly gouging by these companies. The American people will stand up one of these days and stop being exploited by these companies. If only the Democrats had any balls and were not nearly as beholden to Big pharma as the GOP is.

  10. I don’t advocate doing away with patent like I do with copyright. Pharmesudicles in particular justify patent protection in my mind. However, this is typical of how grotesquely dysfunctional intellectual property has become. IP is in need of draconian reform.

  11. Let’s not get too hasty. These companies are spending an insane amount of money on developing all of these amazing drugs. A big chunk of that cost comes from the hoops that they have to jump through to get drugs approved, courtesy of the FDA. Not that the industry isn’t guilty of plenty of abuse, but eliminating patent protection will end up stopping the flow of new medicine to us entirely. Bad idea. We’re a little spoiled, too. Just think how incredible it is that you can ingest a chemical which has a specific effect on you with (we hope) limited side effects. Science is magical.

  12. “Just stop it … ”

    Well, I’m sure moral opprobrium from magazine editors will stop Glaxo from trying to make millions of dollars through semi-legal rent-seeking.

  13. “Another common tactic is to create a new patent by tweaking the delivery mechanism for an existing drug.”

    Yep. It’s the nice intersection between patents and regulation. You need an NDA to append an ANDA (generic)to. So lets say you’re a generic, and the patent on the raw material for an immediate release tablet is coming up. You start the fairly extensive process of making your ANDA filing so that you can time market launch as close to patent expiration as possible. Everything goes swimmingly, until some point after you file, but before approval, the innovator pulls the NDA for the immediate release version of the product and reveals that it has filed and NDA for an extended release version using a patented extended release mechanism. The generic is totally out of the market now – there is no NDA on the immediate release to append an ANDA to (side note, the perfectly useful, and sometimes more useful immediate release product is now off the market totally!) and they can’t use the patented extended release mechanism in anything until the patent expires. End result, no competition for the drug for up to more than a decade!

    It’s also true that much R&D investment is spent on finding ways to create new patentable technology, as opposed to finding new technology that is actually more useful.

    “Why don’t the companies buy or build a generic drug firm and manufacture it when the patent is up?”

    They do. But for a lot of reasons (Cliff Notes – there are a lot of differences between marketing generics and marketing innovative drugs), they generally are not very competitive in the generic market. That could change, but it’s unlikely, given the “spare any cost” mentality that prevails at innovative (they like to call themselves “ethical”) firms.

  14. “This kind of activity gives your industry a bad name ….” Um, it’s called capitalism, Ron. Selfishness is a good thing, remember? Actually, I agree with you about the drug companies 99.44%, but being shocked at their tendency to exploit intellectual property laws, hide “embarrassing data,” etc. is a bit naive.

    After all, if the wine industry can sell us “feel-good” products at ridiculously high prices, why can’t the drug industry? Or are you saying that the fact that “the state” effectively creates the drug industry by enacting intellectual property laws gives the state the right to hold the drug industry to unusual standards of social responsibility? I hate to get all Hobbesian on your ass, but maybe it’s true.

  15. “I don’t advocate doing away with patent like I do with copyright”

    Actually, there is a much stronger libertarian argument for copyright than there is for patents. Patents, when you boil them down, are nothing more than a licensing scheme, which seeks to subsidize the profits of a particular group at the expense of another group.

    “A big chunk of that cost comes from the hoops that they have to jump through to get drugs approved, courtesy of the FDA”

    A perfect example of how, instead of addressing the problem caused by government interference, solutions proposed are for more government interference!

    No doubt about it, the FDA artificially inflates the cost of making pharmaceuticals. But that just means we should downsize (or preferably, eliminate) it, not that we need to subsidize profit margins at private companies.

    A CR type organization could do the FDA’s job much cheaper, and probably much better, too.

  16. quasibill: You write:

    Actually, there is a much stronger libertarian argument for copyright than there is for patents. Patents, when you boil them down, are nothing more than a licensing scheme, which seeks to subsidize the profits of a particular group at the expense of another group.

    Which is OK as far as it goes, but as I’ve argued before patents are more than that:

    Abraham Lincoln once described patents as “adding the fuel of interest to the fire of genius.” What many people forget about patents is that they are a disclosure mechanism. The monopoly is granted on the grounds that the inventor tell us exactly how he makes his product. This disclosure mechanism removes us from the old economically stagnant world of trade secrets in which inventors could only make money if they told no one how they did something. This allows other people to use those insights to invent other products. Patents are not perfect, but they have worked pretty well.

  17. Patent is good, though with plenty of flaws. It creates an added incentive to develop new ways of doing things. Without such protection, expensive R&D to develop something that someone else can reverse engineer (without incurring the sunk expense) becomes rather pointless. Also, Ron’s point about patent law being a disclosure mechanism is a good one. Without patent law, companies would go to insane lengths to keep their processes secret, to the extent that they could. In perpetuity, I might add.

  18. Actually, once the generic is out, the market plummets for the brand name, even if it costs less than 1% more. It’s like “paying retail” for something that “everyone gets for wholesale”. Most insurance companies will refuse to pay the price difference and many pharmacies will default to the generic or will aggressively market the generic as a customer service.

    Also, I and many people that I know have noticed a difference in the efficacy of generics as compared to the name brand. Of course, that isn’t worth spit without a scientifically controlled study to confirm it, and rightly so.

    Even if there is a demonstrable difference in the efficacy this amounts to little more than a temper tantrum from Glaxo. They’ve invested landfills of cash on getting the drug approved and the generic vendor gets their copy approved presumably on a wink and a nod. They don’t think it’s fair and they want Uncle Sugar to know that. It’s an illustration of just how dependent on government behavior they have become.

    If anything, this is another illustration of why patents should be abolished. If Glaxo couldn’t get a licensed monopoly on the fruits of their research, their very existence wouldn’t be so dependent on government sanction. You may argue that drug research would come to a screeching halt if patents were ended, but that holds no more water than Patrick Henry’s argument that America would become a godless moral no-mans-land without a national church. The demand for drugs would still be there. The corporate structures that currently fill that demand may not survive without patents, but some other sytem will inevitably take their place, probably a much more effective one at that.

  19. Ira Weatherall:

    “Why don’t thay just show that the manufactoring of generics does not have the same stringent quality controls as does the manufactoring of brand names?

    Make people want the brand name, don’t use courts to keep your market share.

    Because they can’t. As a specific case in point, I’d prefer just about any Barr Laboratories generic to a Wyeth-Lederle Vaccines (purchased by GSK vaccines in 2005) product from the Maretta, PA plant.

    Generic pharma companies are much more risk-adverse in their quality control. One bad lawsuit could kill the company, while a large pharma co. can pay off or obfuscate with lawyers. My feeling is that generic mfr’s have a much stronger incentive to total quality, and enjoy being a second-generation production line, with incremental production improvements compared to the original pharma company.

    http://www.pharmcast.com/WarningLetters/CompanyWL.htm
    This site shows 2004 warning letters organized by company. Granted, the counts below reflect a function of overall company size and number of individual facilities and product lines, but the 10 pharma branded manufacturers aren’t exactly paragons of quality.
    1 Barr entry; 13 GSK entries, 12 Astra-Zeneca entries, 5 Eli Lilly, 15 Pfizer entries, 8 Pharmacia, 6 Schering, 5 Wyeth entries, 5 Merck, 6 Bristol-Meyers Squibb entries.

    Marietta PA’s 10 year history of bad production methods is discussed toward the end of this article:
    http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/02/25/MN12226.DTL

  20. Actually, there is a much stronger libertarian argument for copyright than there is for patents. Patents, when you boil them down, are nothing more than a licensing scheme, which seeks to subsidize the profits of a particular group at the expense of another group.

    How is that different from copyright?

    My position on IP is as much practical as ideological. From a libertarian perspective, I note that intellectual property is a government created monopoly and fundamentally distinguishable from actual property. As a practical matter, I observe that art and literature have thrived even when unprotected by copyright. I don’t see any upside to copyright. On the other hand I can’t imagine how the expense of new drug development could be born without patent protection.

    Even so, the state of patent law and practice has gotten way out of hand. It has become nothing more or less than the graft of a corrupt establishment. Ron makes a good point, once patents expire they become public domain, is a key concept of patent law. (The most infuriating thing about copyright is how it keeps getting extended and is not allowed to expire) I must partially disagree with his assessment that “Patents are not perfect, but they have worked pretty well”. I would say that was true for most of the history of the republic, but not in recent decades as this example illustrates.

  21. Don’t forget that in 2003 GSK was investigated for bribery, data manipulation and creating false patents to exclude generics (paxil). Over 200 of its own scientists implicated. Of course, they settled out (clean as a whistle). I’m sure that settlement was from the R&D slush fund. However, this is the way most all of big pharma operates. If the FDA wasn’t such a policy oriented scientific clusterfuck then maybe big pharma would play by the rules instead of making them.

  22. In defense of Glaxo, sort of, I’d just like to point out that the 20-year patent term began as soon as they patented the compound. So it’s not right to say they’ve had 20 years of market, considering the average FDA approval time it works out to something like 5-8 years of marketshare…which makes up for the 12-15 they invested in development, and helps pay for all the failure (IIRC something like 1/5000 compounds patented ever make market).

    That said, the solution to this sort of rent seeking is getting rid of the FDA, or at very least the efficacy requirements. Secondly, eliminate the ability to repatent using minor tweaks. In the slow-release example above, if the slow-release mechanism is new, well, allow the manufacturer exclusive rights to the slow release version, but allow the generic manufacturer to make the original, etc.

  23. You may argue that drug research would come to a screeching halt if patents were ended, but that holds no more water than Patrick Henry’s argument that America would become a godless moral no-mans-land without a national church. The demand for drugs would still be there. The corporate structures that currently fill that demand may not survive without patents, but some other sytem will inevitably take their place, probably a much more effective one at that.

    I’ve suspected this myself, but haven’t yet found the brave free-market writer/economist willing to state the case.

  24. Maybe because your average free-marketer thinks “spend gobs of money developing a product that every one of your competitors can then start producing an exact copy of” sounds like a lousy business model.

  25. “This allows other people to use those insights to invent other products.”

    Not to argue from authority here, but have you ever read a patent? I have, and have spent many days and months working to re-create what they describe, often fruitlessly. This disclosure element is often vastly overrated, especially in pharmaceuticals, where teams of patent attorneys write descriptions that conclude lots of language like “through a mechanism well known to those schooled in the art” – which is a bald-faced lie, and I can point to several court cases where we proved it was.

    Further, this disclosure aspect could be handled in the free-market – those who think it would be useful, could pay for it, and sign non-disclosure, non-compete agreements. And that way, they’d actually get useful disclosure, and not the crap that currently gets drafted into patents by patent attorneys who have a good idea just how far they need to go.

  26. Ack. One would think if patents were so great, Reason could afford a server that would post a response for me…

    “This allows other people to use those insights to invent other products.”

    Not to argue from authority here, but have you ever read a patent? I have, and have spent many days and months working to re-create what they describe, often fruitlessly. This disclosure element is often vastly overrated, especially in pharmaceuticals, where teams of patent attorneys write descriptions that include lots of language like “through a mechanism well known to those schooled in the art” – which is a bald-faced lie, and I can point to several court cases where we proved it was.

    Further, this disclosure aspect could be handled in the free-market – those who think it would be useful, could pay for it, and sign non-disclosure, non-compete agreements. And that way, they’d actually get useful disclosure, and not the crap that currently gets drafted into patents by patent attorneys who have a good idea just how far they need to go.

  27. Man, you guys need to feed the hamsters more often. Here’s my third try at this post:

    “Without such protection, expensive R&D to develop something that someone else can reverse engineer (without incurring the sunk expense) becomes rather pointless.”

    Actually, there often are quite a few “sunk expenses” in reverse engineering as well, but that’s irrelevant. Expensive R&D goes on in building automobiles, year in and year out. Yet none of them patent their designs in the manner that you claim is required for drugs. Why? Because they’ve built brand reputations through the innovations. Same with Tvs, and stereos, and mp3 players, etc. The same can be true in pharmaceuticals (of course, absent the FDA).

    “Without patent law, companies would go to insane lengths to keep their processes secret, to the extent that they could. In perpetuity, I might add.”

    And be fairly impotent in doing it. First, no competent doctor would ever prescribe a medicine that he knows nothing about. Second, reverse engineering, as you note, is always possible. Give me a small lab with a GC/MS and a LC/PDA and I could probably reverse engineer any pharmaceutical on the market. And I’m not even very good at either method anymore.

    No, it would quickly become cost and income prohibitive for pharmaceutical companies to engage in massive secrecy.

  28. Most insurance companies will refuse to pay the price difference and many pharmacies will default to the generic or will aggressively market the generic as a customer service.

    What country do you live in? Clearly it is not the U.S. …

    In virtually every state, it is illegal for insurance companies to require you to use generic medicines instead of the brand names… In most states, it is also illegal for insurance companies to have a smaller deductable for generics. Insurance companies are for the most part legally compelled to make sure their customers do not pay any difference between generics and brand names. It is part of the whole “Health Care Consumer’s Bill of Rights” type thing that the politicians pass to “protect us” from “exploitation” by the insurance companies.

    In fact, there was an insurance company (Blue Cross of Michigan) that was trying to start an informational campaign to encourage people to use generic drugs. While it is illegal for them to charge a lower deductable for generics, or only pay for generics, their informational campaign told people “When you purchase the higher price name brand over the generic drugs, it costs us billions of dollars… and we end up passing those costs on to the consumers in the form of higher premiums. By using generics, you help keep the cost of insurance down”… Well, a group of “consumers rights” people, and “human rights activists” decided that even explaining to consumers about how generic drugs save money should be illegal. Blue Cross apologized, and Michigan passed a law making it illegal for insurance companies to in any way, shape, or form encourage their customers to use generics.

  29. “Actually, once the generic is out, the market plummets for the brand name, even if it costs less than 1% more”

    Actually, not entirely true. Furthermore, the brand tends to retain a significantly higher mark-up than generics, so it’s a rare brand indeed that is only 1% more than generics.

    In reality, this nice easy market that everyone describes for generics is tremendously cut-throat. In the company I worked for, the revenue projections from being 2nd to generic market were less than 1/10th of the revenue projections for being first to generic market. In fact, I had several projects scrapped when their timelines got pushed to far past the expected market date for our closest competitor.

    People who talk about putting a generic pharmaceutical out like its candy do nothing more than demonstrate their own ignorance on the subject and prove conclusively that their opinion on the subject is worth little more than the electrons they are printed on.

  30. “As a practical matter, I observe that art and literature have thrived even when unprotected by copyright. I don’t see any upside to copyright. On the other hand I can’t imagine how the expense of new drug development could be born without patent protection.”

    Actually, there is absolutely no evidence to support a linkage between IP rights, even patents, and innovation. In fact, most of the available evidence tends to establish that there is no linkage.

    As far as copyright – I imagine that even in Ancapistan, content providers will demand a certain amount of protection of their content in order to sell to people. Granted, I’ll agree that current copyright law is completely alien to what a free market would provide, but I just the market eventually working out something that we would be able to identify as copyright – producers will push hard for it, and most consumers accept the fact that the producers deserve to be paid for their production.

    I don’t see the same dynamic in patent law. If you want to fund research in a certain field, there are already plenty of charities to donate to. There’s no need to create this archaic system of rewarding some innovation because it is considered “new” by some peon locked in his cubicle while not rewarding other innovation with the same subsidies because the same peon doesn’t believe it’s “new” enough.

    And then you have all the great stuff where they are patenting the human genome. That’s so obviously an abuse of the system, but it’s been sanctioned, so the only conclusion that you can reach about the system is that it contains a fundamental flaw.

  31. Timothy –

    When I was intimately involved in the process, a statute was passed that gave innovatives “credit” for the FDA process up to I think 4 years. It may have changed since then, but I doubt it. So that’s no longer an issue.

    That said, i agree that the problem is the FDA. But if you fix the FDA, there’s much less of a need to subsidize big pharma through patents…

  32. “Maybe because your average free-marketer thinks “spend gobs of money developing a product that every one of your competitors can then start producing an exact copy of” sounds like a lousy business model.”

    Actually, sounds like the business model of pretty much every entrepreneur I’ve ever known.

    The odds are against entrepreneurs ever getting rich off their business, even in a free market. Heck, in a free market it’s probably less than 50/50 that they’ll ever turn a profit. Yet, even now, people take that jump all the time.

  33. The 1% price difference cited might be while the generic is enjoying it’s 6 months exclusivity awarded them for winning the race to the FDA to file their ANDA.

    “Don’t forget that in 2003 GSK was investigated for bribery, data manipulation and creating false patents to exclude generics (paxil). Over 200 of its own scientists implicated. Of course, they settled out (clean as a whistle). I’m sure that settlement was from the R&D slush fund. However, this is the way most all of big pharma operates. If the FDA wasn’t such a policy oriented scientific clusterfuck then maybe big pharma would play by the rules instead of making them.

    Comment by: twelve at February 24, 2006 12:19 PM”

    If I am not mistaken you are talking about the suit Eliot Spitzer brought against GSK. That was simply a headline grab, and revenue seeking. Spitzer settled for 2.5 mil after trying to shake them down for 55 mil. I believe they also had to post all of the clinical trial data for studies on children.

  34. So GSK wants the generic company to demonstrate bioequivalence, which is the basis for generical approval, and this is a bad thing? Fine, let any generic company sell their knock offs and let’s just trust them that their formulation is as safe and effective as the original.

    Process: drug company spends 10+ yrs and millions doing studies to show their compound is safe and effective. Generic comes in creates something they say is the same thing, with minimal (if any) studies showing it is the same (or at least 20% “the same”).

    In your quest to hate corporate America and honorable pursuit for cheaper drugs, it seems you’ve ignored the reality. Here, big pharma might actually be doing the public a favor.

    Let me ask you this, if Ford spent millions and a decade building a car that ran on some new super fuel to show it was safe and effective, and let’s say the next year a smaller auto company comes out saying they have the same thing. Would you hop into that second car even though it wasn’t adequaltely tested? Just b/c a generic has the recipe, doesn’t mean they’re actually recreating the same product. Ask you wife to cook your favorite moma’s dish and maybe you’ll understand.

  35. Patents should maybe exist in some form for physically produced items like chemical formulas and machines. Software, business method, and natural world (example: human genome) patents should be abolished. It seems like you can’t go a week without reading about some rent-seeking tech patent troll. See the EFF for more about this: http://www.eff.org/patent/wp.php

    My biggest gripe with patents is that they tend to only protect those with deep pockets. Often an inventor will seek to partner with a major company, get denied, and then the company will steal the inventor’s idea. Hoover did this to James Dyson (of Dyson vacuums). Ultimately Dyson prevailed in court, but many times inventors just can’t afford to spend years litigating.

  36. Maybe because your average free-marketer thinks “spend gobs of money developing a product that every one of your competitors can then start producing an exact copy of” sounds like a lousy business model.

    This is just something I’ve tossed around in my head, but why couldn’t pharma companies sign exclusive contracts with pharmacies that wish to sell their product, eliminating the need for patent? Before a drug is released to the market, after FDA approval, the drug company could sign 7-year (for example) exclusive contracts with any pharmacies that wished to carry a new drug. This is just a sketch, and I’m sure someone will come up with a great reason why this couldn’t work (although someone equally may be able to refine this into a much better plan), but that would be at least one market-based solution to the problem of patents.

  37. Quasibill:

    Actually, sounds like the business model of pretty much every entrepreneur I’ve ever known.

    Sorry, not talking CD-pirating operations.

  38. This is just something I’ve tossed around in my head, but why couldn’t pharma companies sign exclusive contracts with pharmacies that wish to sell their product, eliminating the need for patent?

    That might work in libertopia, but it sounds like a practice that would get banned real quick here.

  39. Of course, more importantly, absent patents, why would pharmacies sign such contracts instead of just laughing at the pharma companies and buying generics?

  40. The odds are against entrepreneurs ever getting rich off their business, even in a free market. Heck, in a free market it’s probably less than 50/50 that they’ll ever turn a profit. Yet, even now, people take that jump all the time.

    More seriously…OK, I’ll bite. How will a pharmaceutical company make a profit actually researching and developing drugs when, upon release, anyone else can manufacture and sell the same drug? Frankly, in such a setup, why would any company engage in R&D?

  41. “Sorry, not talking CD-pirating operations.”

    With insight like that, do you expect anyone to take your comments seriously?

    “How will a pharmaceutical company make a profit actually researching and developing drugs when, upon release, anyone else can manufacture and sell the same drug? Frankly, in such a setup, why would any company engage in R&D?”

    Well, against my better judgment, as your previous posts show the depth of thought you’ve given the subject, I’ll answer.

    Why do auto companies spend millions of dollars in new vehicle design each year? Why does Sony put out new models of TV each year? Yup. You guessed it. Competition drives innovation, just like it would in pharmaceuticals. You build brand, and as I’ve noted before, your vision of “just copying” a pharmaceutical and marketing it is so simplistic so as to make it akin to saying playing Risk is like being President. It takes time to reverse engineer (and money). It takes time to formulate. And it takes knowledge to get the formulations right. If a generic puts out a crappy copy, it’ll be obvious fairly quickly, and given the possible consequences, will likely be out of business real quick (liability is the least of its problems – reputation or brand would be of the utmost importance in such a market).

    Furthermore, as I noted, there is already a lot of charities devoted to finding a cure for X. Why is that? Because pharmaceutical companies don’t fund R&D for cures, as a general rule. No profit margins there, as opposed to treatments. Furthermore, the patent system encourages them to engage in otherwise pointless R&D and marketing. Case in point, 2nd gen beta blockers, which were generally no more effective than 1st gen. Yet the pharmas aggressively marketed them based on preliminary, flawed, biased studies because they were still on patent, vs. the 1st gens that weren’t.

    It’s really not that much different from any other market. Of course, you’d need to get rid of the FDA for these things to be true, as well. Once again, the whole system is so f’ed up by the government that anyone who talks about our healthcare as “free market” is either a marxist trying to score points or some seriously good narcotics.

  42. Add –

    and re-iterating the point that you ignored – why does any entrepreneur enter the market, when the odds are significantly against them?

    Know what the required net worth is for a Sonic franchise? It’s over 1 million, last I checked, with a startup of 500k liquid. Why would anyone enter one of those when any competitor could open up a McDonald’s, Burger King, or Wendy’s, or all three, next door?

    And that’s nothing compared to a true startup in hi-tech or heavy manufacturing industries.

    Ain’t nothing guaranteed in life, unless you get the government on your side. I don’t see why pharmaceutical executives should get this favor more than a guy opening, say, a grocery store.

  43. With insight like that, do you expect anyone to take your comments seriously?

    Well, since that wasn’t a serious comment, I’d really hope nobody would take that seriously.

    You build brand, and as I’ve noted before, your vision of “just copying” a pharmaceutical and marketing it is so simplistic so as to make it akin to saying playing Risk is like being President.

    I’m not really sure whose idea of “just copying” you’ve been noting as simplistic, but I don’t think you’ve made such comments in response to anything I’ve said, despite your phrasing that suggests such.

    You build brand, and as I’ve noted before, your vision of “just copying” a pharmaceutical and marketing it is so simplistic so as to make it akin to saying playing Risk is like being President. It takes time to reverse engineer (and money). It takes time to formulate. And it takes knowledge to get the formulations right.

    I’m actually somewhat aware of the complexity of those problems. Reverse-engineering a drug and setting up production is certaintly non-trivial. But it’s rather less work than developing the drug in the first place. If you wish to argue that it isn’t, please feel free to explain why companies seek patent protection for drugs at all – and why anyone goes to the trouble of producing generics.

    As for Sony producing TVs, what would happen if any other electronics company were to start producing and selling TVs that were identical in design to Sony’s, aside from their own name on the front? They would get sued under any number of IP-related laws, from imitation of trade dress to possible patents on components.

    why does any entrepreneur enter the market, when the odds are significantly against them

    Because they think they can make rather more money than they spend. They don’t enter a market in order to do the lion’s share of R&D work for their competitors and get left holding the bag.

  44. Furthermore, as I noted, there is already a lot of charities devoted to finding a cure for X. Why is that? Because pharmaceutical companies don’t fund R&D for cures, as a general rule. No profit margins there, as opposed to treatments.

    Heh. Well, thank goodness Nippon Kayaku and other companies were apparently feeling charitable when they developed and patented the drugs that comprised my chemotherapy a few years back. I haven’t exactly been a repeat customer…

  45. “If you wish to argue that it isn’t, please feel free to explain why companies seek patent protection for drugs at all ”

    Rent seeking, pure and simple. Have you ever been to a Merck campus (yes, they are campuses, not buildings or sites)? If you look at the structure of the business, the first thing that strikes you is that it looks like Detroit, circa 1980. And there’s only one reason for that – government protection of their profit margin. A good friend of mine works there – makes over 100G a year in a union job, where he gets written up if he does too MUCH work. And yet while Detroit has suffered and is still paying for employing such a business model, Pharma’s been posting huge profits. Why’s that? (note that all of big pharma is entering a downturn – it’s industry-wide because they’ve pretty much tapped out the bp meds, penis meds, and ulcer meds. That’s where the money was.)

    “As for Sony producing TVs, what would happen if any other electronics company were to start producing and selling TVs that were identical in design to Sony’s, aside from their own name on the front? They would get sued under any number of IP-related laws, from imitation of trade dress to possible patents on components.”

    Actually, extremely wrong. Honestly, do you have any idea what you talk about, or do you just make up stuff as you go along? Imitation of trade dress would be tremendously difficult if you put your own brand name clearly on the product, and patents on components are a different issue. The issue is they know other people will make bigger tvs, or flat screen tvs, or anything like that as soon as they do. So why do they do it, year after year? Contrary to Marxist and mercantilist thought (and yes, they come from the same place) innovation is caused by the market, not the government.

    “Heh. Well, thank goodness Nippon Kayaku and other companies were apparently feeling charitable when they developed and patented the drugs that comprised my chemotherapy a few years back.”

    Yep, Nippon Kayaku is sure big pharma. Anyway, I can guarantee you that they received funding for their research either from the government or from one of the many charities that are out there looking for a cure for cancer. However, cancer treatments are not cures, as you should well know. That said, it is tremendously likely the treatment you received was developed almost entirely by a start-up – that’s how most innovatives get products like that. The ones they develop in house have to have a much higher profit margin, unless it classified an “orphan drug” and given a lot of free passes at FDA.

    And once again – citing the current market as something even approximating “free” is, well, foolish. The FDA and patents are so pervasive and have distorted it for so long, that you actually have to do more than a cursory look to understand what’s happening and why, and what it would be like absent patents aand the FDA.

  46. “Reverse-engineering a drug and setting up production is certaintly non-trivial. But it’s rather less work than developing the drug in the first place. If you wish to argue that it isn’t, please feel free to explain why companies seek patent protection for drugs at all – and why anyone goes to the trouble of producing generics.”

    Rent seeking, pure and simple…government protection of their profit margin

    Why would they engage in what you characterize as rent-seeking – how could they engage in rent-seeking – if it wasn’t easier for another company to reverse-engineer their drug than for them to develop it? If what you were claiming were true, patents would be virtually useless for a drug company, instead of something they pursue aggressively.

    Honestly, do you have any idea what you talk about, or do you just make up stuff as you go along?

    I’m getting that impression very strongly from you, actually.

    Contrary to Marxist and mercantilist thought (and yes, they come from the same place) innovation is caused by the market, not the government.

    And that you’re fond of throwing out applause lines that actually have nothing to do with the issue at hand. Unless you’re just going down the ancap route and stewing angrily at the idea of government protecting what private innovation has created…Either way, boring.

    And once again – citing the current market as something even approximating “free” is, well, foolish.

    And that you like arguing against claims that I haven’t made.

    Have fun.

  47. In fact, there was an insurance company (Blue Cross of Michigan) that was trying to start an informational campaign to encourage people to use generic drugs. While it is illegal for them to charge a lower deductable for generics, or only pay for generics, their informational campaign told people “When you purchase the higher price name brand over the generic drugs, it costs us billions of dollars… and we end up passing those costs on to the consumers in the form of higher premiums. By using generics, you help keep the cost of insurance down”… Well, a group of “consumers rights” people, and “human rights activists” decided that even explaining to consumers about how generic drugs save money should be illegal.

    Doing a quick Google search, I see a lot of links to Blue Cross of Michigan’s campaign (call “The Unadvertised Brand”) but no information that this PR campaign was made illegal. Can you provide a link to such a story?

  48. Surprising they just didn’t get Congress to extend the patent term as Disney ,Parker Brothers, and Hollywood did the copyright term.

  49. Does anyone doubt anymore that the real purpose of the FDA is to serve and protect the very industries it is obsenstibly in place to oversee?

    nmg

  50. So, why do patents work for pharmaceutical companies? The patents allow for pharmaceutical companies to get a return on their investment. It takes several billions of dollars to get a drug to market. The investment of development, clinicals,trials,approval,advertising, is the company’s right. Give them a break. I see you writing a blog, not treating cancer or AIDS. F*ck off!!

  51. The drug barons are the greediest bastards in this country. Their profits are obscene. There is no difference between “legal” and illegal drug dealers. The drug executives make 500 times as much as their lowest paid employees. End the greed and fuck the drug barons!!

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