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Against Monopoly

defending the right to innovate

Drug patents

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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Maybe generic drug makers will be sueable

In a highly speculative piece the New York Times suggests that a possible change in labeling requirements risks generic drug makers being sued link here. This comes just two years after the Supremes decided the reverse i.e., that they couldn't be sued as the law required they use the same warning label as the brand-name makers (see our piece posted on 06/26/2013 at 08:40 AM.

Apparently the change is prompted by the FDA's discovery that users harmed by a generic drug should be able to sue if their drug fails to perform correctly.

This all seems a stretch. The warning labels are framed based on what is known at the time it is approved. Subsequent experience could quite reasonably have shown the need for amending approved uses and thus, labeling. Like most of us, when the facts change, the FDA changes its opinion or so we can hope.

Patented Drug Turns to Gold (With lots of Government Help)

Steve Rattner has a provocative op-ed in the NYTimes today link here. It focuses on a drug maker, Jazz Pharmaceuticals, which has found ways to make a "nothing" enterprise into a gold mine.

The company makes an orphan drug (one defined in law as a treatment for a condition affecting fewer than 200,000 people). It gets a 50 percent research-&-development tax rate and 7 (vice 5 years for other drugs) of market monopoly after FDA approval. Jazz raised the price so that a year's treatment costs $65,000 nominally, but then subsidizes the co-payments above $35 a month (essentially a price cut for those with health insurance). In any case, the company has proved to be enormously profitable, importantly by putting its patents in a subsidiary abroad where they are taxed very little. Indeed, total profits are currently reported to be 49 percent of sales.

The question for Jazz now becomes whether competitors will be induced to compete, lowering prices, once the 7-year tax cut expires. Price competition seems unlikely, since it currently has only 10,500 customers and a competitor would have to gamble that it can take market share from Jazz.

Question for taxpayers: how long will this ripoff continue?

Generic drug makers can't be sued if they have FDA approval

The Supreme Court ruled last Monday that Generic drug makers can't be sued for defective designs when their previously FDA-approved products cause injuries link here. That might appear to be a questionable decision. But it is also a victory for competition and lower prices in a product line that raises already high medical care costs.

The choice here is between having reasonable consumer safeguards and a steady flow of improved treatments for tough and often rare health problems. There is of course a presumption that the approval process has been thorough. But then the plaintiff's recourse is the FDA which is generally very careful. Indeed it is often criticized for taking excessive time to approve new treatments.

One should note as well, that this is not a criticism of drug patents, which are constitutional but questionable, given the games that new product-owners pursue to extend their patent-created monopoly with no public benefit. Note rather that the need for safety approval will exist whether or not there is a patent.


   

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