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Does the UN Understand the Value and Protections of Drug Patents?

Does the UN Understand the Value and Protections of Drug Patents?
(Dollar Photo Club)

By    |   Wednesday, 20 July 2016 06:41 AM

Do medical miracles cost money?  That is the question people have to ask when considering the value and effectiveness of prescription drugs. 

Over the past two centuries, medicine has been transformed from homemade elixirs to drugs that cure or control some of the most devastating diseases known to mankind.

Many of these advances come with a price as it costs money for research and development to cure a disease.

There are a great number of conditions and diseases around the globe as well as those associated with demographic drivers, like aging and obesity, which have led to a marked increase in prescription drug use. According to data published by the Journal of American Medical Association in late 2015, nearly 3 in 5 American adults take a prescription drug.

That rise has contributed a significant increase in healthcare spending. According to the World Health Organization the total spending on healthcare runs around $6.5 trillion, roughly $948 per person. Now for the other shoe - per data tabulated by Aon Hewit’s Global Benefits group, in 2015, the global average medical trend rate of rose 8.75%, 5.5 percentage points higher than the average inflation rate of 3.2%. This year, Aon Hewit forecasts the average medical trend rate will increase an eye popping 9.1%.

That’s well above inflation and significantly above the growth in domestic wages. Most if not all consumers bemoan the continuing rise in healthcare costs (despite promises from President Obama that he would “bend the health care curve”), but from a global perspective roughly 1 in 3 people lack dependable access to “essential” medicines. The combination of higher prices and lack of dependable access has caught the attention of the United Nations (UN) and its High-Level Panel on Access to Medicines – and not in a good way.

There are very few instances one can find where intervention in the marketplace by global bureaucrats in the UN has benefited innovation. There are a variety of avenues the UN could take in looking to address what’s been termed a “global health crisis” from policy.

The one it has opted to take, however, could endanger future drug development as potential patent reform proposed by the UN runs the risk of removing the financial incentive associated with new drug development.

The UN’s position on patents may slightly raise the prices of medicines. The UN is right — drugs often become marginally cheaper when there are more alternative brands on the market. And as any good free marketer knows, more competition over time tends to lead to better prices and better service.

When it comes to drug development, it typically it takes each innovator over 12 years and a whole lot of money — $2.6 billion dollars on average — to develop a single new drug.

Viewed from a different angle, of thousands of potential medicines that companies are developing, a small percentage make to clinical trials and only one in 12 makes it to market. What this means is drug innovators are risking both time and capital in an attempt to create a product that might not even pan out. In order to continue funding new developments, drug developers need to recoup invested capital by reaping the benefits of a successful drug. 

As such, in the early years of a drug’s release, protecting the investment and intellectual property of its creator to ensure that he or she can potentially recoup their investment is simply smart business. This makes rather intuitive sense to any business owner or person working in the private sector.

The World Health Organization (WHO) also notes that an absence of patent protection is a facilitator of drug counterfeiting.

Some estimates suggest 100,000 people die each year because of counterfeit medications, while others purport some 700,000 people die just from fake Malaria drugs.  Strengthening patents in developing countries, not weakening or loosening them would guarantee that real, effective drugs reach those in need.

Again, let’s consider a different perspective and ask the following questions:

Would we continue to have an entrepreneurial economy filled with new technologies and advanced solutions if copycats were allowed to roam free unchecked?

If unchecked, what would be the financial incentive for Novartis, Pfizer, Roche Holding, Sanofi US, Johnson & Johnson and dozens of other pharmaceutic companies to invest billions of dollars going forward?

What would this mean for all those individuals, current and future, that are suffering from potentially treatable conditions?

The bottom line is to ensure a vibrant and ever evolving landscape of new drugs, companies need to have a reasonable expectation that they will be able to recoup their investments and earn a profit for their initiative.

As we’ve come to learn in the world of crony capitalism all is not what it seems or what seems logical, and that means understanding the motivations of those that are attempting to drive industry shaping changes. In the case of the UN and drug patents, Yusuf Hamied, one member of the UN panel, is in the generic drug business and is currently lobbying his colleagues to join him in his quest to destroy intellectual property.

Why? Because his generic drug business could make millions if patents were removed from all drugs. If Hamied’s efforts are successful, once again crony capitalism could give rise to a situation in which the wants of the few outweigh the needs of the many.

While it may fall on deaf ears outside the private sector, protecting a company’s ability to earn a return on its investment fosters profits, which in leads to more innovation that can be spread to the far corners of the world. Much like boosting the minimum wage and Obamacare, if one thinks through eliminating profit from the equation one would realize doing so would create more problems than it solves. 

American policymakers should keep their eyes on the UN as they are playing with fire.   

Christopher (Chris) Versace is the editor of the newsletter The Growth & Dividend Report and is a featured columnist to The Street.com as well as a contributor to FoxBusiness.com and Forbes.com. To read more of his blogs, CLICK HERE NOW.

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Do medical miracles cost money? That is the question people have to ask when considering the value and effectiveness of prescription drugs.
drug, patents, value, un
Wednesday, 20 July 2016 06:41 AM
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