Sen. Sanders Bill Proposes Replacing Drug Monopolies With Innovation Focused on Real Health Problems

The article is very long so I trimmed the comments to the
essentials.
Elaine

http://www.huffingtonpost.com/james-love/sanders-bill-would-replac_b_69219.html

The Huffington Post | October 22, 2007

James Love: Sanders Bill Would Replace Drug Monopolies with Prizes

Posted October 20, 2007 | 11:12 AM (EST)

We pay far too much for new drugs, and don't get much in terms of
innovation. Senator Bernie Sanders (I-VT) has a plan to change that,
and many people think he is on the right track.

QUICK FACTS
In 2006, the FDA approved 18 new molecular entity (NME) pharmaceutical
drugs, and 4 biologic products. While all of the products were
addressing real health problems, the total was sharply down from a
high of 53 NMEs a decade ago. Only 6 of the 18 new drugs were thought
to offer "significant improvement compared to marketed products, in
the treatment, diagnosis, or prevention of a disease." In 2006,
consumers worldwide paid an estimated $643 billion for
pharmaceuticals. Legal monopolies on the sale of new drugs were
responsible much of this, perhaps as much as $400 to $500 billion of
the total. (Most new drugs can be manufactured and distributed for 1
to 5 percent of brand name prices). If the monopoly price premium was
just $400 billion, this worked out to $18 billion per each of the 22
NMEs. For the 10 priority products (6 drugs and 4 biologics) that
actually improve health outcomes, it was $40 billion each.

While we pay staggering premiums for drug monopolies, only a modest
amount is actually reinvested in R&D. In 2005, only 8.5 percent of
global pharmaceutical sales were spent on R&D, and only a fraction of
that was invested in products that improved health care outcomes.

The high prices also present enormous hardships for patients and their
families, and expensive obligations on the employers and taxpayers who
pay for medicines. Often people don't even get new drugs that would
help them, because the patient can't pay, or the insurance company,
employer or family doesn't want to pay.

On Friday Senator Sander introduced a bill called the Medical
Innovation Prize Fund Act of 2007 that would provide a profound change
in the way we finance new drugs. A link to the text of the bill and a
detailed description of how it works is available here.

What the Sanders bill does is separate the market for innovation from
the market for the drugs themselves. It delinks the incentive for R&D
from the price of the drug. It eliminates all monopolies for new
drugs, and replaces the monopolies with a system of large cash prizes
-- $80 billion per year at current GDP levels. The prizes are linked
to the ability of a new drug to improve health care outcomes.

(For more discussion of the use of prizes to stimulate innovation,
read about John Edwards proposal to look at prizes for medical
innovation, and this web page on innovation prizes.

These are comments on the Sanders bill by 16 experts on innovation and
health care.


COMMENTS BY CONSUMER AND HEALTH NGOs

Bill Vaughan, Consumers Union. " As health-care costs continue to
spiral, our nation must focus debate on why prescription drugs cost so
much. Unfortunately, Congress has never delved into why the process
that brings new drugs to market is so insanely expensive, inefficient,
and ineffective. Senator Sanders' bill, 'The Medical Innovation Prize
Act of 2007,' could at long last begin that debate. The current system
is simply not working and is increasingly unaffordable." [....]

Merrill Goozner, Author, The $800 Million Pill: The Truth Behind the
Cost of New Drugs. "Research is risky, new drugs are too expensive,
and industry focuses far too much of its effort on drugs of minimal
medical significance. The prize fund solves all these
problems...." [....]

Buddhima Lokuge, Médecins sans Frontières (MSF). "Study after study is
confirming what our field teams have seen for years. Using the price
of pharmaceuticals to fund innovation leads to the rationing of
essential medicines and the exclusion of low-income
populations." [....]

James Love, Knowledge Ecology International (KEI). "The Sanders bill
offers a huge change in the business model for drug development - as
large as the change in the business model for network services that we
call the Internet. Like the Internet, it would create a culture of
abundance in terms of access to knowledge goods. By separating the
markets for innovation from the markets for the physical goods, the
Prize Fund would ensure that everyone, everywhere, could have access
to new medicines at marginal costs. It would dramatically increase
incentives to invest in products that improve our lives, and decrease
incentives to invest in wasteful and often harmful marketing of 'me
too' drugs that do little to improve health outcomes. ... The
mechanisms to determine prize valuations will be less complex than
those used to justify drug prices or reimbursement. ...This
bill...cuts costs and expands access at the same time. As the Internet
has proved, when the benefits of change are large, it is possible to
change an entrenched but dysfunctional business model."

Ethan Guillen, Universities Allied for Essential Medicines (UAEM). "We
applaud Senator Sanders for introducing this innovative legislation.
The current intellectual property system has done a great deal of
good, but remains flawed, as is demonstrated by the fact that millions
still do not have access to life-saving medicines." [....]

Edmund Mierzwinski, Consumer Program Directors, U.S. PIRG. "It is
natural for consumers to distrust monopolies, which can even limit
access to medicine. The Prize Fund bill, from U.S. Senator Bernie
Sanders (I-VT) shows us that we don't have to tolerate monopolies or
the abuses of monopoly pricing to stimulate innovation..... Much of
the savings in the bill would be due to the cutbacks in wasteful
marketing efforts that now drive costs up." [....]

Mark Cooper, Consumer Federation of America. "Consumers have an
interest in innovation, but also in affordable prices. The current
system of granting marketing monopolies for new medicines fails on
several counts. Most new drug approvals offer little in terms of
therapeutic benefits over existing medicines." [....]


Rob Weissman, Essential Action. "The patent monopoly-based system of
R&D has proven inefficient at advancing a needs-driven public health
agenda. Even by Pharma's estimates, barely more than a sixth of what
is spent on drugs is invested in R&D, and the actual amounts may be
significantly less." [....]

Dean Baker, co-director, the Center for Economic and Policy Research.
"The current system of financing research on prescription drugs
through patent monopolies leads to enormous economic waste and leads
to a situation in which hundreds of millions of people find it
difficult or impossible to pay for the drugs they need. The Sanders
bill provides one mechanism for correcting some of the worst problems
of this system. Under the bill all prescription drugs could be sold in
a competitive market, just like most other products. Without
government patent monopolies, the vast majority of drugs could be sold
for a few dollars a prescription, as is the case with generic drugs at
present. The Sanders bill begins the necessary debate over reforming a
financing mechanism that is essentially a relic from the feudal
system. It is virtually inconceivable that if we were designing a
method for financing drug research from scratch that anyone would opt
for the current system of patent monopolies. We should not be stuck
with such an inefficient system forever simply because we inherited it
from Old Europe."

Professor Brook K. Baker, Health GAP and the Northeastern University
School of Law Program on Human Rights and the Global Economy. "The
adoption of a prize fund to reward therapeutically targeted innovation
and to simultaneously encourage the development of a competitive, low-
cost generic market could revolutionize access to medicines in the
U.S. and end up saving U.S. insurers, governments, and patients
hundreds of billions of dollars for many years to come." [....]

John S. James, AIDS Treatment News. "This is a very good idea that
would end astronomical drug prices, and eliminate the use of patents
to block medical research -- while focusing research and development
on new drugs that matter for people." [....]

ACADEMIC EXPERTS

Burton A. Weisbrod, John Evans Professor of Economics, Northwestern
University. "Senator Sanders' bill addresses the seriously-flawed
current system in the pharmaceutical marketplace. It breaks the link
between the incentives for pharmaceutical firms to undertake R&D on
new and more effective drugs, and their incentives for pricing those
drugs--and breaking that link is critical. The basic economic problem
is that R&D is extremely expensive, but producing their end result,
"pills," is not. Under current law the only way the high cost R&D can
be made profitable is to charge prices for pills that vastly exceed
the tiny cost of producing them." [....]

Steven Shavell, Director, John M. Olin Center for Law, Economics, and
Business and Samuel R. Rosenthal Professor of Law and Economics,
Harvard University. "Senator Sanders' proposed new legislation to
replace the system of exclusive marketing rights for drugs with a
system of prizes may constitute a great win-win policy for consumers
and for the drug industry. Under the Sanders' plan, consumers would
benefit greatly and immediately. Consumers would no longer pay sky-
high prices for new drugs, because drug developers would no longer
have monopolies and would not be able to charge what the market will
bear." [....]

Kevin Outterson, Associate Professor of Law, Boston University. "Our
current biomedical R&D system is unfair and inefficient. R&D is
increasingly driven by marketing rather than medical need. Drug
companies finance R&D from consumers, health plans and governments
through high-priced patented medicines. The Medical Innovation Prize
Fund Bill is a serious attempt to simultaneously provide access to all
drugs at generic prices..." [....]

James Boyle, William Neal Reynolds Professor of Law and co-founder of
the Center for the Study of the Public Domain at Duke Law School.
"There is a long, distinguished and successful history of using prizes
as incentives for innovation. Prizes have successfully encouraged
advances ranging from methods of determining longitude in the 18th
century, to private, manned space flight in the 21st." [....]

Frederick M. Abbott, Edward Ball Eminent Scholar, Professor of
International Law, Florida State University College of Law. "There is
wide acknowledgment that the system intended to promote innovation in
the pharmaceutical sector is broken, as perhaps best reflected in the
November 2006 Report by the Government Accountability Office to
Congress on New Drug Development in the United States." [....]

Aidan Hollis, Associate Professor, Department of Economics, University
of Calgary. ".... Under the current system, in contrast, firms are
often rewarded very richly for innovations with relatively small
effects on population health, and not enough for more important
innovations. Since the Sanders bill ties the reward to the innovator
directly to measurable health effects, the incentives for innovation
are exactly right. Companies with a great pipeline of therapeutically
valuable products should love this bill, because it promises them an
opportunity to make a lot of money - and companies with a pipeline
full of products which are marginally effective (but which they were
planning to market heavily) will hate this bill. ...The proposed
mechanism in the bill will force pharmaceutical firms to compete to
earn their share of the prize fund by developing products which have
great therapeutic value. The government's role is limited to
estimating therapeutic value." [....]
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