This Friday’s Wall Street Journal (June 22,2012) features an article authored by Jonathan D. Rockoff reporting that Abbott Laboratories is contesting a portion of the healthcare law regarding patent protection. Patent protections for the drug industry have a long history. In a prior newsletter I explained to our readers/patients how name brand products and generics work. I would defer interested persons to that article if you wish to have more historical and practical information regarding this.
Abbott is challenging a portion of the healthcare bill that deals specifically with ‘biological medications’ (which by the way is the future for therapeutics). If their case wins, Abbott will guarantee future profit for their drug, Humira. Drug companies have a long history with patent law, and use it to maximize profits. Patent law, patient protection, and the price protecting properties of full dollar insurance work together to increase profits of pharmaceutical companies and hurt consumers by causing higher insurance premiums.
Patent law is beneficial and necessary to the healthcare industry when they are granted to pharmaceutical companies that are developing new, complex medications that require extensive research and capital to develop. A flaw in the system, however, is drug companies can get patents for “reinventing” medications. Basically, they take a drug that is already generically available, and research its efficacy in treating a specific disease. If it is proven to be effective in treating a specific illness, the FDA will grant its approval for that purpose, and the drug company will get an exclusive patent, thus forcing all other companies to stop selling the medication. A less protected, freer market would significantly change the risk/reward analysis that the drug industry would engage in. This would help consumers by lowering the cost of medications.
My first example is quinine. This drug has been around for a long time (I’ve been writing prescriptions since I started in Medicine in 1993. Its most common use in the United States used to be for chronic nighttime leg cramps. A couple of years ago, due to FDA regulations, a company was encouraged to produce recent safety and efficacy studies using quinine for the treatment of malaria. A company named AR Scientific Inc., satisfied that request and were granted an FDA approval for the indication of treating uncomplicated malaria. All prior generic versions and manufacturers no longer could/can produce quinine for prescription sale until the patent runs out. In short, quinine used to be prescribed for leg cramps, but because AR Scientific Inc. did a study that proved it’s efficacy for a different illness (malaria), they were granted patent protection (for the same drug that had been cheaply available for years!). Once they had this protected market, AR Scientific Inc could start charging whatever they wanted. According to http://www.drugstore.com, 30 days costs $195. Patent protection for reinvented drugs like this causes health insurance premiums to rise because health insurance companies would be footing the bill for the overly expensive medication. Under current health insurance paradigms, anyone with an insurance card is going to pay some lower co-pay but the insurance company is going to pay what appears to be over 5 dollars a day- for a medication that used to cost perhaps 10 dollars a month. This is an example of what I call corporate welfare. All of us buying insurance are paying premiums factoring in such market realities. Let’s suppose there was no third party payer to hide under. Even with patent protection, do any of us believe that the manufacturer would continue to price their product at 5 dollars a day to help with leg cramps? I really doubt it. Also if the FDA hadn’t made a new regulation encouraging manufacturers to provide unnecessary research, there would not have been an incentive for this patent request to begin with. On the other hand if you had malaria you would gladly pay 5 dollars a day to be rid of that life-threatening illness, in fact I would argue you would pay a lot more.
Let me give you a clearer example. Last year my son was provided by his dermatologist with samples and a special coupon rebate to use a product for refractory acne called Solodyn at 65 mg daily. This is a patented version of a generic antibiotic called minocyline. I don’t have prescription insurance, so I have to pay cash for my medications. I went to the window to pay for the 1st 30 days of proposed 6 months of therapy and I was told the price was… gulp, “1,100 dollars”! That’s 36 bucks a day. So I said, wait a minute, there is this coupon thing we were provided. The pharmacist politely stated, I am sorry that only works if you have prescription insurance- do you all see the game here!!! The coupon was to protect my out of pocket copay to 50 dollars, meanwhile the insurance plan would get banged for $1,100 for 30 days of medication. Outrageous! The manufacturer assumed any patient seeing the dermatologist would have some kind of first dollar coverage insurance, and thus not care how expensive the drug cost. Now why do our insurance premiums keep rising? Because insurance companies are paying outrageous prices for reinvented medications.
How is Solodyn a “reinvented medication”? Well, Solodyn’s patent exists because it has a special extended release dosing and delivery system. Essentially it is the common antibiotic (minocycline) that is released slowly throughout the day. Being a doctor, I recognized this and instead wrote a prescription for generic minocycline. Price you ask? $26 for the month. Cash.
In a free system, if Solodyn came to market with their sugar coated delivery system, with good marketing etc. they could have commanded perhaps 30-100% above the generic version. Asking for 30 dollars a pill with the current competition, and they would have all prospective buyers laughing at the window as they waved off the pharmacist and made another appointment to chew their doctor’s ass out for recommending such an expensive “reinvented” medication when they could have the generic, equally effective equivalent.
A final and not so funny example of this patent protection and market forces issue is colchicine. We use this medication for acute gout and in refractory gout we sometimes give it daily. There is a genetically inherited condition known as Familial Mediterranean Fever. In persons with this affliction, colchicine is given daily to prevent horrible attacks which cause blood cell breakdown, fever, terrible abdominal pain and joint pains. This product used to be pennies a day to get. Again, sometime in the past few years due to FDA regulatory changes, AR Scientific again went out and performed studies proving its (already well known) efficacy to the FDA. The result was patent approval, all priors pulled from the market and a price for the market monopoly? Citing http://www.drugstore.com, it is $170 for 30 tablets. Adults with Familial Mediterranean Fever need to take 2-3 doses a day for prevention. If you aren’t insured, you are going to need to find $300-400 a month to prevent hospitalization and severe periodic illness. If you are insured, the rest of the group buying premiums has to have this cost “shared” and built into our premiums. Consumers went from pennies to 10 dollars a day, thanks to our governmental agency policy apparently created for our safety and well-being.
Don’t get me wrong; patent protection for the development of new medications is reasonable and absolutely necessary. Without it, it wouldn’t be worth the drug companies’ time to develop medications and many illnesses would remain untreatable. I also believe that most of the time, the FDA serves a necessary purpose. However, the FDA and patent protections contribute to rising health insurance premiums when they give companies patents for already existing drugs just if they can come up with proof for a new use. If we didn’t have this promised bucket of money for the drug companies to raid (first dollar insurance coverage) they would do a different analysis regarding market pricing especially for convenience medications or medications that have existing competition. Knowing that their product wouldn’t move off the shelf if they get piggish about the price, they would enter the market in a more realistic and appropriate price point. The consumers would win. The drug company would have to decide what product to develop based upon a different payout ratio, but this wouldn’t kill innovation.