How Do We Preserve Competition and Innovation?
Last week, the European Commission (EC) published a preliminary report that described how the makers of branded pharmaceuticals delay the introduction of competing generic medicines. Industry associations for originator companies and generics manufacturers in Europe were quick to weigh in on the report. Now a UK judge has joined the debate.
The Right Honourable Sir Robin Jacob of the Court of Appeal of England and Wales cautioned the EC against changing the patent system in ways that could hinder the development of new drugs. “The big truth is that if you damage the income stream of research companies, you are going to imperil future research at the expense of European—indeed world—citizens. Yes, you will save money now, but at the cost of less future medicines,” said Sir Jacob, according to an Outsourcing-pharma article.
Must decreased revenues necessarily slow research and development (R&D)? Even if generic drugs reduce originator companies’ profits, I think originators might maintain their R&D budgets by reducing other expenses such as marketing.
A study published in PLOS Medicine analyzed market data from IMS and CAM for the year 2004 (the latest year for which figures were available). The authors estimated that US drug companies spent $57.5 billion on promotional activities and $31.5 billion in research and development. If this analysis is accurate, it seems plausible that, faced with reduced sales revenue, a pharmaceutical company could cut its marketing expenses to maintain its research budget. The research expenditures cited in the study included public funds, which could provide some budgetary security even when sales fall.
I agree with Sir Jacob that we ought to promote pharmaceutical R&D, but I think competition from generics would not necessarily jeopardize innovation.
You make it sound simple that if remove money from the Marketing pot and put it in to R&D the profits and economics would balance out. Unfortunately it a matter of the prevailing short term requirement to increase shareholder value that gets in the way. Marketing brings in money today while R&D is an expense today so bottom-line effects are opposite directions. R&D is costly high risk long term venture that can be hard to even measure until products reach the market. Marketing can also be costly but returns generally observable quickly. While I can disagree with many Marketing approachs and certain of the excesses I appreciate that it supplies the fuel to keep R&D going (who also can suffer from poor approaches and own excesses). Although Pharma Marketing people now seem to be being hit hard with cut backs too it has always been the case in my observation that when revenue is down R&D gets slowed or eliminated as a quick fix regardless of what that means for future.
I am not against generic competition per se, yet one possible solution that would help maintain funding sources for R&D is extending the viable patent life of new drugs to better reflect the long period taken to get from discovery to approval which system now can make the exclusivity period very short (thus prompting aggressive Marketing).