[FoRK] pharmaceutical ethics

J. Andrew Rogers andrew at ceruleansystems.com
Sun Jun 14 11:22:07 PDT 2009

On Jun 13, 2009, at 9:58 AM, Simon Dann wrote:
> I am currently researching into cases where patenting within the
> pharmaceutical industry has cost lives such as for example making a  
> certain
> cheap widely available test restricted to just one lab and placing a  
> huge
> royalty fee on top of it pushing it out of reach of those whom it  
> could
> help. I heard of several cases like this happening in the news but  
> cant find
> the articles anymore and a computer crash lost all my bookmarks so  
> if any
> examples could be given, the more current the better it would be
> appreciated.

This happens quite a bit and I can think of a couple cases, but the  
reality of the situation is convoluted.

It is important to keep in mind that the regulatory process is gamed  
by the government for its own financial benefit in a way that drives  
up costs on patented med tech when it finally hits the market. Back  
when I was investing in medical biotech I saw a lot of cases where the  
US government (most of the world's R&D of this type happens in the US)  
used its regulatory power over medical technology to reduce their own  
internal costs but with the side effect that it greatly compressed the  
timeframe companies had to recover R&D expenses for perfectly viable  
products in the general market.

Here is a simple version of the game that gets played.  A promising  
piece of diagnostic technology is developed and submitted to the FDA  
for approval.  The government decides that this submitted med tech  
will be a big improvement under one of their existing medical  
programs, such as the Veterans Administration hospitals. Under the  
current regulations, the government can widely deploy the med tech but  
as long the med tech is not FDA approved the government only pays the  
marginal cost of production for the product -- no amortizing R&D,  
never mind profit.

The conflict of interest is obvious and real.  If the government  
widely deploys a new product, they can save millions or billions of  
dollars by not granting FDA approval until the latest possible day  
allowed by law. Consequently, you have cases where patented med tech  
is "not approved" for *years* while it is concurrently and pervasively  
in production use by the government for routine medical purposes.  If  
you look at all the med tech that is allowed to hit the FDA approval  
expiration date before being approved, many times you find that it is  
something that is so widely used by the government because it is good  
stuff that it would cost the government a lot of money if they did  
approve it, hence why they don't.

There are many cases where things like diagnostics are inexpensive in  
principle but the US government freeloaded on it for so long while  
withholding FDA approval that there is a very short window in which  
the invested R&D can be amortized. It is one of the hazards of  
investing in medical R&D.


J. Andrew Rogers

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