The Fordham international IP conference just concluded a panel on patents for second uses of medical inventions, and the discussions illustrated once more the degree to which the patent system is poorly designed to address this issue.
All sorts of issues were raised at Fordham, including the impossibility of getting patents in some cases, and the challenges in enforcing such patents. There is also the mismatch between the risk adjusted costs of establishing new uses, and the costs of the monopoly to society when it can be enforced, and the problems that arise when companies obtain rent seeking patents on combination of drugs they did not develop. For these reasons and more, KEI has considered different models for inducing and rewarding investments in R&D on new and/or more rationale uses of new drugs. One version of this is found in the various medical innovation prize fund bills introduced in the U.S. House of Representatives or U.S. Senate by Bernie Sanders beginning in 2005. But we have also suggested another approach, which would be implemented faster, before the more transformative delinkage reforms are implemented. We considered this partly in response to the debate in the United States and in Europe and new incentives for “dormant cures” and other new use issues.
Specifically, we propose the United States and other countries impose R&D funding mandates on companies that sell medicines that do not face generic competition, possibly exempting drugs with small annual revenue thresholds, and/or which have yet not recovered multiples of the costs of the trials that were used to register the drug for the lead indication. The preferred funding mandate would be a tax or fee that was paid to the federal government, into a fund for rationale use of drugs. The fund would be spent on a combination of research grants and innovation inducement prizes that would lead to more rationale use of the drugs. That could include research that would narrow the use of a drug, for a population or use for which the drug was inappropriate, or broaden the use of the drug, when that was appropriate.
In the U.S. market, a levy of 1 percent of patented drug sales would generate about $4 billion per year right now, enough money to pay for about 110,000 patients in clinical trials, using the PhRMA numbers for the average costs of trials. A levy of 2 percent would double that.
The incidence of the levy would largely fall on the seller, who was already picking a price that maximized revenues/profits, but even if the incidence was borne by consumers, it would be offset by the shorter period of the monopolies on the drugs (less evergreening). There would also be other important benefits, including most significantly, by creating a system of financing that rewarded and encouraged third parties to improve the evidence for medical uses of drugs, including looking at the comparative benefits of rival drugs for the same indication.
An alternative method of financing would be to place a levy on health insurance programs, both public and private. If the reduction in evergreening and the improved rational use of drugs was considered economically important, the payers would welcome such an innovation in the way we fund and provide incentives to invest in R&D to explore new and better uses of existing drugs.
Ideally, this would also have a global and trade dimension, so that one country did not bear the entire cost of producing more knowledge about the use of existing drugs.