Big Pharma and Drug Patents

For a long time, patents have been an essential part of modern society. Patents are important in driving innovation and protecting creators’ rights, as they provide the right to stop others from copying or selling inventions with their consent. According to the US constitution, patents serve to “promote the progress of science and useful arts.”[1] This system rewards innovation as it favors originality, which is extremely important in a market. Thus, it would appear rational to apply the same logic to the drug development and pharmaceutical sector, as to drive innovation for new medications and cures for diseases.

(Using US as an example) In an ideal world, the existence of patents for drugs would allow the pharmaceutical company developing the drug to have 20 years of market exclusivity, free of any competition from other companies attempting to emulate the drug. This could drive huge incentives for companies to develop new drugs, creating a market that is full of innovation. And after the patent is expired, the price of the drug would be dramatically decreased due to competition from the market, thus allowing more patient access. According to the IMS institute for Healthcare Informatics, within five years of patent expiration, generic oral medication fell to 80% of their original prices in 2002. [2]

However, it is evident that this is not the case in practice. In reality, drug patents pose as a great access barrier for patients, especially less financially capable ones, from receiving the treatment they require. Due to the exclusivity of the drugs, they are often priced at a level that is simply unobtainable for consumers.

Take Hepatitis C, the leading cause of liver transplants in the US. Sofosbuvir, a common medication for the illness, costs more than $84000 USD for a 12 week treatment course [3], even if it only costs $136 to produce the same course [4]. Why is there such a discrepancy in the costs? This is in part due to the patent for the drug giving Gilead (the company producing the medication) an unprecedented monopoly on the drug, possessing the power to raise the price of the treatment in becoming the 2nd most expensive drug in the US, with the 1st and 3rd expensive drugs also produced by Gilead. [5]

Or Insulin, a hormone heavily relied upon by diabetics that could not produce it to regulate their blood sugar levels, which costs more than $5705 per year for a patient, accounting on average 31% of their annual spending.[6] This shows that the cost required for such essential medication are a huge financial burden for most people. The expensive price is largely due to pharmaceutical companies like Eli Lilly, Novo Nordisk and Sanofi Aventis regularly renewing and increasing their patents on the drug, a process called “overgreening”, effectively preventing competition from other companies from manufacturing and introducing cheaper alternatives to the market. What is perhaps ironic was that the discoverers of insulin sold the drug to the University of Toronto for only $1 each in 1923, claiming that “insulin belongs to the world,” before the three companies took over the rights and profited immensely off of the medication.

Companies often claim that a lot of the wide margin in production and selling price is due to “Research and Development” costs. While research and development does require large amounts of money, it is quite evident that (in the US) the public already funds the majority of basic research leading to the development of new drugs through the National Institutes of Health [7]. Besides, Sofosbuvir as mentioned above, being the 2nd most expensive drug in the US and earning over $58.6 billion USD in 2013 ($25.8 billion being profits)[8], had no contribution from the companies in its research and developmental stage, as it was already fully developed and ready before being purchased by the companies. [9]

Patents are essential for promoting inventions and driving innovation. However, it is quite evident that in the world of pharmaceuticals, these rules of fair trade are being exploited for the maximum amount of profits by companies, in many instances showing that they prioritize profits over people. As more and more companies are being called out on their immoral actions each year, one could only hope for the end of patent abuse and monopolization.

[1] “Analysis and Interpretation of the US Constitution” Constitution Annotated, https://constitution.congress.gov/browse/article-1/section-8/clause-8/

[2] “Price Declines after Branded Medicines Lose Exclusivity in the US” IMS Institute for Healthcare Informatics,

https://www.iqvia.com/-/media/iqvia/pdfs/institute-reports/price-declines-after-branded-medicines-lose-exclusivity-in-the-us.pdf

[3] “Sofosbuvir(Solvaldi)” Hepatitus C Online, https://www.hepatitisc.uw.edu/page/treatment/drugs/sofosbuvir-drug

[4] “Patient cures spur demand for $1000 Hepatitis C Pill” Bloomberg, https://www.bloomberg.com/news/articles/2014-07-24/patient-cures-spur-demand-for-1-000-hepatitis-c-pill

[5] “The Top 4 most expensive drugs in the US are Hepatitis C treatments” Xtalks, https://xtalks.com/expensive-drugs-in-the-us-hepatitis-c-treatments/

[6] ”Spending on individuals with Type 1 Diabetes and the role of rapidly increasing insulin prices” Health care cost institute,

https://healthcostinstitute.org/diabetes-and-insulin/spending-on-individuals-with-type-1-diabetes-and-the-role-of-rapidly-increasing-insulin-prices

[7] “Contribution of NIH funding to new drug approvals 2010-2016” Proceedings of the National Academy of Sciences of the United States of America, https://www.pnas.org/content/115/10/2329

[8] “Year in Review, 2013” Gilead,

http://investors.gilead.com/static-files/baf65602-b640-4c77-b11d-e092675dba11

Profit margin calculated with the ratio net incomes attributable to Gilead divided by the total revenues per year and applied to HCV products sales per year, yearly figures from Gilead’s annual earning reports

[9] “Hepatitis C Treatment: A short history of Sofosbuvir and Sovaldi” Greg Jefferys, https://www.hepmag.com/blog/hepatitis-c-treatment-short-history-sofosbuvir-sovaldi