Congress’s latest approach to curbing drug prices looks a lot like theft.
The U.S. Constitution grants inventors the “exclusive right to their discoveries secured for a limited time” in order “to promote the progress of science”.
A new bill would undermine this right. The “Medicare Negotiation and Competitive Licensing Act” would deprive inventors of their patent rights, commonly known as intellectual property, (IP) and allow competing firms to copy medicines before their patents expire.
This practice would occur through the issuance of “compulsory licenses,” which allow competitors to market copies of patented drugs.
Lawmakers have long condemned this practice abroad, accurately noting that compulsory licenses weaken the IP protections that inventors rely on to raise the funds needed to sustain their research and to turn their inventions into products that benefit patients.
Adopting compulsory licenses stateside could smother drug innovation, endanger patients, and maim our economy. Lawmakers should scrap the proposal.
Patents are crucial for pharmaceutical innovation. Bringing just one new drug to patients costs about $2.6 billion — and takes more than 10-years — on average.
To make that investment worthwhile, inventors and investors need assurance that they’ll have market exclusivity when their new product reaches the shelves. Patents provide this financial security by preventing competitors from immediately marketing cheaper copycat versions of new drugs.
The new bill would bring a great deal of uncertainty to drug development for investors because the government could effectively confiscate drug patents.
Medical innovation would slow. Unsure if the government will honor patents, investors will move their money to less risky endeavors that may be far removed from medicine.
My personal experience provides an example. In 1999, after years of working at the US Food and Drug Administration, I joined a company that was working on a promising liver cancer therapy. Our largest investor was a Hong Kong based conglomerate. In the early 2000s, amid talks about drug price controls in the U.S. Congress and growing tourism in Macau, our supporter came to view their Hong Kong to Macau ferry service as providing a potentially more reliable return on investment than a new drug. Funding for our liver cancer therapy waned.
Compulsory licenses are not a new problem. China, India, and Thailand, for example, frequently issue compulsory licenses to allow local generic manufacturers to steal U.S. inventions.
In the United States, lawmakers have encouraged the development of high-tech medicines without weakening IP rights. Both the 1984 Hatch-Waxman Act and the 2010 Biologics Price Competition and Innovation Act sped up the approval process for generic manufacturers, while also protecting innovators through strong IP policies.
The new bill could undermine such reforms and jeopardize the future of American pharmaceutical innovation.
It’s not just patients who will suffer. The U.S. pharmaceutical industry employs more than 800,000 Americans and adds nearly $700 billion to our GDP each year. The industry relies on the ability of drug firms to create new medicines — a task that will become a lot harder if the new bill passes.
Wanting to make drugs more affordable is a noble goal. But destroying IP protections through compulsory licenses is no solution.