StreetTalk: Send Lawyers, Guns, and Money: My Patent Has Hit The Fan

Regulations coerce big pharma to walk a fine line between realizing big profits and gouging consumers.
Jun 01, 2005
Volume 18, Issue 6

There's an old joke you may have heard before about a guy on his hands and knees crawling on the street.

A police officer comes up and asks, "Hey, pal, what do you think you're doing?"

The guy looks up and says, "I lost $20 on Mulberry Street and I'm looking for it."

The police officer scratches his head. "But this is Maple Street."

The guy responds, "I know. But the lighting is better on Maple Street."

Brian O'Connell
When it comes to choosing between preventive health measures or treating our maladies with prescription drugs, American society is just like the guy on Maple Street. We are increasingly relying on prescription drugs to take the easy way out and look for health care solutions "where the lighting is better." Given that prevention is usually preferable to treatment, who cares if it's the wrong place?

Don't get me wrong. I'm not saying that the prescription drugs coming out of the pharma pipeline aren't valuable and useful. They are — especially the ones that we need to treat trauma patients and other victims of injury or disease over which they have no control. I have many friends in the prescription drug industry who think they do a bang-up job in helping to alleviate pain and suffering.

That said, I think Americans are adapting way too easily to unhealthy lifestyles in full confidence that if they do get sick, there's a miracle pill a phone call away that will cure what ails them. It's a mindset that the biopharm industry, quite candidly, would be crazy not to accommodate.

I'll leave the cultural significance of our rising dependency on prescription drugs to the philosophers. As a Wall Street guy, I tend to look at the financial side of the picture. It paints a telling picture, one where the burgeoning trend of generic drugs is on a collision course with the various patent protection initiatives that protect brand name prescription drug developers from interlopers poaching on their turf. And the consumer is caught squarely in the middle.

How so?

First, our society's penchant for prescription drugs has torn a gaping hole in our collective wallets. According to the US government, overall US health spending has risen to $1.9 trillion in 2005. In 1960 we spent $27 billion on health care. Prescription drugs comprise about 10 percent of that total health care bill — about $190 billion, according to Uncle Sam. That's up from $17 billion in 1983.

Granted, inflation takes its toll as the years progress, but not by that much.

Consequently, Americans and consumers abroad are turning to cheaper prescription drug alternatives, specifically generic drugs, to save money. In general, generics are much less expensive than their brand-name counterparts. Take the anti-anxiety drug Klonopin. The price for 90 0.5 mg tablets is roughly $85 here in the US. But its generic counterpart clonazepam goes for about $20 for the same quantity and dosage. Generic drug advocates say their products are backed by the same standards FDA applies to brand-name drugs, which is true.

But that's not really the point I'm making here. The low cost of generic drugs relative to brand-name drugs has the biopharm sector up in arms and lobbying heavily for tougher worldwide patent rights laws. The industry is worried — and rightly so — that consumers here in the US and globally will reject pricey brand-name drugs and opt for low-cost generics instead.

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