THIS WEEK, members of the House of Representatives will be asked to pass a bill that will allow the hugely profitable pharmaceutical manufacturers to charge higher prices for their trade-named drugs and be protected from competitive, cheaper, generic drugs.
Already, around a quarter of the congressmen have been persuaded to sponsor this measure, called the Patent Term Restoration Bill, and a last-minute battle is on to try and stop the drug companies from extending their patents monopolies up to an additional seven years to "compensate" them for the time spent testing their products for safety.
The bill has already sailed through the Senate and met only a hiccup of opposition in the House Judiciary Committee. During the Labor Day recess, there was a rallying of the opposition, which consists of consumer groups, senior citizens' organizations, trade unions and the generic drug companies, none of which want to see the drug monopolies extended. They claim, with indignation, that the legislation will give an unnecessary windfall to the industry that -- after oil and tobacco -- is the most profitable in America.
It is hard to find any economic justification for such a generous government gift. But with remarkably little investigation of the facts, Congress has allowed the drug companies to persuade it that not only is the legislation equitable, it will encourage the research and development of presumably valuable new drugs.
It is interesting that although the drug companies have stressed their threat that research will decline if the patents are not extended, not one of them has promised to embark on new research if the legislation is passed. Logically however, it seems unlikely that drug companies would cut back research since new drugs always hold out the promise of ever-larger profits.
The new legislation is designed so that the innovators of new drugs can be compensated for the time lost to them as a result of testing requirements established by the Food and Drug Administration. It is argued that drugs take much longer to get on the market than other products and the effective patent life for them is therefore shorter than the 17 years laid down by Congress in 1861. It is also said that the FDA testing process has taken longer and longer since the 1962 amendments to the drug law, enacted in the aftermath of the Thalidomide tragedy.
It's hard to see that drugs incur any particular disadvantages compared with other patentable products. A 1965 study of patents on 35 key American inventions by the late John M. Blair, former chief economist to the Senate antitrust subcommittee, showed that 11.6 years of the average patent had been used up before the product entered the market. He excluded the case of the fluorescent light bulb which took 79 years. However, the first television set took 22 years; the telephone, eight years; radar, 13 years; the jet engine, 14 years; and the zipper, 27 years. One of the shortest on the list was created by a drug company -- Merckand Co. -- whose streptomycin took only five years.
A look at the drug market generally, and at the top-selling drugs specifically, show the industry's claims that relief is imperative to be nonsense. The procedures known as "evergreening" allow a patent holder to keep refreshing the application by modifying the original so that the real patent starts much later. By such means, Valium, arguably the most successful drug in the history of pharmaceuticals, will have enjoyed 22 years of market monopoly by the time the patent ends in 1985. In 1981, its inventor, Hoffmann-LaRoche, sold $214 million worth of the drug in the United States alone.
Furthermore, just because the patent comes to an end, this does not mean that the drug company loses its monopoly power. Hoffmann-LaRoche's other popular tranquilizer, Librium, until recently the top-selling drug in America, still has 90 percent of the market although its patent expired in 1979. This is despite the fact Librium is still 15 times more expensive than its cheapest generic equivalent.
The only organized opposition to the big drug companies is the Generic Pharmaceutical Industry Association. It is obviously a vested interest, but there are independent statistics to bear out its claims.
Office of Technology Assessment figures show that the eight best-selling drugs in America in 1980 had a generous average patent life of 15 years. Another independent study showed that half the drugs whose patents had expired continued to dominate the market, with cheaper generic drugs taking only 3 percent of their sales.
The generic companies are criticized largely because they are depicted as parasitic, doing no research of their own, but copying other people's hard work. But the generic manufacturers do serve another purpose; they force drug companies to bow to market forces and lower their prices.
One of the drug industry's most outrageous statistical manipulations has been the claim that research as a percentage of sales has dropped over the years. In fact, the Office of Technology Assessment again shows that research investment has increased steadily -- even adjusted to inflation -- each year. That it has not gone up in proportion to sales is surely an indictment of drug company's greed to hold on to profits rather than reinvest for the future.
The average brand-name drug is eight times more expensive than the cheapest generic equivalent. In some cases, the differential is twice that. In addition, once a drug patent expires, the trade-name drug companies themselves can manufacture each others products and do so. With rare exceptions, the trade-name companies' generic drugs are more expensive than the generic companies' products.
The drug companies trade on our fear that if we do not give them their patent extensions, they will not give us the drugs to cure our diseases. It is a crude form of blackmail. But it only works if we believe them.
Drug companies are continually looking out for new drugs even under the allegedly meager inducements of present law. This is particularly true in the high-incidence diseases like arthritis, diseases of the heart and stress-related ills.
This week Hoffmann-LaRoche will launch a major new drug, Accutane, a treatment for acute cystic acne. The company has not been discouraged by current patent law from taking on the highly lucrative acne market, which has 350,000 severe sufferers and in which more than $125 million is spent on a variety of skin products each year.
The race is also on for a cure for the terrifying, now-incurable, sexual epidemic, herpes simple x. And great publicity has attended the rush to develop drugs that will treat illnesses of the brain -- especially memory loss and senility.
The FDA has already been highly sympathetic to the drug companies' claims that past administrations have been repressive and new drugs were held up. The process of approval has been streamlined and will be even faster in the future.
Despite this, the drug companies still complain. And for reasons that are hard to understand, people listen sympathetically. The average rate of return on drug company shareholders' investment during 1970-1977 was 18.3 percent, compared to 12.2 percent for other forms of manufacturing, according to a Federal Trade Commission report in 1978. Since then, the figures increased to 20.4 percent in that year, 20.8 percent in 1979, 20.1 percent in 1980, and 18.7 percent in 1981.
One of the few legislators to speak out against the drug companies is Rep. Albert Gore, (D-Tenn.) and he has estimated that the new patent bill being voted on in the House this week would cost consumers an extra $3 billion to $5 billion in the next seven years, if passed. His figures are based on the 42 top-selling drugs last year and assume that without the new law, generics will continue to undercut and compete with them as they have been doing historically.
When all this is considered and in light of who is going to pay -- people any government is supposed to protect such as the elderly, the sick, the poor, and the taxpayers who underwrite such support programs for them as still survive -- the legislation seems all the more outrageous.