Patently ridiculous

David Akin's post on prescription drug research and development is definitely worth a read. But it's worth filling in a few pieces of background information to demonstrate the appalling demands being made by Big Pharma - and the unfortunate likelihood that the Cons would be receptive to them.

Here's Akin:

(T)he lobby group for the big pharmaceuticals had been pushing for an extension on their patent protections, promising, in return, to spend 10 per cent of Canadian sales on R&D in Canada. The Industry Canada policy officers note that: "... after peaking in 1997 at 12.9% [of sales], [Big Pharma spending on R&D] has declined to 8.5% in 2006. The dollar value of their R&D has been flat at about $1.2 billion while sales have continued to grow.

Now, the first point worth noting is that the Cons had already given Big Pharma a freebie on exclusive sales of brand-name prescription drugs which aren't covered by normal patent rules. For those drugs - estimated to cover roughly a quarter of the prescription drug market - the Cons increased the window for exclusive sales from five years to eight without apparently getting anything in return other than the industry's gratitude.

So what was the cost of that giveaway? Estimates at the time pegged the cost at approximately $120 million per year, based on three extra years of exclusive rights to a quarter of Canada's prescription drug market.

Let's use that number as a rough guide and set the cost of a year's exclusive right related to a set of drugs covering a quarter of the prescription drug market at $40 million. Since patented drugs involve the other three-quarters of the brand-name drug market, that would put the cost of a year's extra protection for them at $120 million.

But then, most of the mooted extensions of patent protection would involve adding five years to the current 20-year term. So the actual annual cost of meeting what figures to be Big Pharma's demand would be in the range of $600 million.

What would the federal government expect to receive in exchange for its agreement to hand that much money from patients and provinces to Big Pharma? Based on the percentages listed in Akin's article, the current sales included in the calculation are in the range of $14 billion. From there, the promised increase in research would amount to 1.5% of the current sales amount (since research would go from 8.5% to 10%) - resulting in an extra $210 million being spent annually on research.

In sum, then, the deal proposed by Big Pharma would involve it taking $600 million in free money, in exchange for its putting barely a third of that into Canadian research which would itself lead to future profits. Needless to say, it's not hard to see why the brand-name drug industry would love that outcome - but the result would be an obvious disaster for the Canadian public.

But wait, there's more!

After all, it's not as if the drug companies themselves are likely to want to stop doing research anytime soon. And Akin provides another piece of information from the report cited as to the relative costs of carrying out R & D in Canada and elsewhere:

Costs of research and Development R&D costs per drug in 2005 averaged US$605 million for chemical pharmaceuticals and US$559 million for bio-pharmaceuticals and took 12-13 years to reach market approval by health authorities (source: Tufts Center for the Study of Drug Development).
...
There is variability between firms depending on the drug, number of failures and government R&D funding. In Canada, drug R&D costs are lower due to lower R&D and clinical trial costs (KPMG).

So Canada already enjoys a competitive advantage over other countries in terms of the actual cost of prescription drug R & D. Which means that Big Pharma is effectively asking for a massive subsidy to do what's already in its best interest - namely, carrying out research in the country where that can be done most efficiently for distribution around the world.

All of which is to say that there's no reason why the federal government should be doing anything other than laughing off the demands of the brand-name pharmaceutical industry. But unfortunately, the Cons' track record doesn't reflect any apparent interest in doing anything but taking the industry's orders. Which means that it's far too likely that Canada's health care system and patients will once again end up paying for the Cons' tendency to put Big Pharma first.