The Price of Drug Innovation: Middlemen, Global Free-Riding and the Future of Medicine | IPWatchdog Unleashed

This week on IPWatchdog Unleashed, we have a conversation about one of the hottest topics not just in the intellectual property world, but one that people are discussing both inside and outside of government. The cost of prescription pharmaceuticals is higher in the United States than anywhere else in the world, and many in the United States—including President Trump—are fed up with this imbalance.

There are a variety of reasons why drugs cost more in the United States than in other countries. One of the chief reasons Americans pay more is the existence of middlemen known as pharmacy benefit managers (PBMs) which only exist in the United States. These PBMs do nothing to discover or innovate drugs, and likewise do not sell the drugs to consumers, but somehow they take a staggering 50% of the overall cost of pharmaceutical drugs. The other major differentiator is the fact that research and development is paid for almost exclusively by Americans because other rich western countries implement strict price controls and refuse to pay for R&D.

What makes drug pricing an intellectual property issue is the fact that those who do not like patents engage in a sophisticated and coordinated campaign to mislead the public into ignoring what really drives prices and instead blame patents. In other words—they lie.

It is all too easy for many to incorrectly believe that patents are responsible for higher drug prices, but that is simply not the case. In fact, without patent protection there is no way any company could ever even take the first step toward bringing drugs to market, which costs somewhere between $3 billion to $12 billion depending on the drug. Would you spend that kind of money to bring a drug to market that could be instantly copied by others without paying you a dime? Of course not. That would be a recipe for going out of business and losing everything.

Patents don’t cause high drug prices—what they do is enable the creation and marketing of drugs. Without patents we’d literally have no new drugs. And whether you are willing to believe the truth or not, the government does not pay for drug discovery, innovation and taking drugs to market—they just don’t. The government pays for basic science that is too speculative for any for-profit company to undertake. But the funding of basic science accounts for much less than 1 percent of the total investment required to take a drug across the finish line and to market. And, if we care about truth, from the point where some university using a small government grant has discovered something interesting there will be billions and billions of dollars spent to innovate cures and treatments using that basic science the government seed funded.

So, against this backdrop, this week my conversation is with Corey Salzberg, who is Vice President and Global Head of IP Affairs for Novartis, which is one of the leading and most innovative biopharmaceutical companies in the world. We discuss the issues that matter for the pharmaceutical industry, including what is really responsible for higher drug prices in America. We discuss President Trump’s attempts to force most favored nation (MFN) pricing that would demand the U.S. pay no more than what other countries pay for drugs. And we discuss much more, including the recent tragic deaths of Malcolm Jamal Warner, Ozzy Osbourne, and Hulk Hogan, and the future of artificial intelligence (AI).

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