Monday, January 30, 2006

Drugs for Radiation Poisoning and Other Adventures in Intellectual Property Law 

Last night on 60 Minutes there was a story on Hollis-Eden, a California biotech company whose most-developed product is Neumune, a drug to combat radiation poisoning that victims would take in the aftermath of nuclear/radiological incident. According to the Department of Defense, the drug is best option currently available for preventing the lethal bleedings and infections caused by radiation poisoning.

The point of the 60 Minutes piece was that the government, which should be purchasing possibly millions of doses of this drug and helping to finance the clinical trials, which are currently in Phase I,* is only purchasing 100,000 doses--not nearly enough. 60 Minutes put the blame on HHS and the head of Project Bioshield, Stewart Simonson, the Mike Brown of terrorist threats.

Overall, I think its hard to disagree with the general thrust of this story--assuming this drug is our best current hope, we should be trying to develop it and get it to the major population centers that will be most likely the target of a radiological terrorist attack. My problem lies in how the piece assumed the government should be funding and purchasing this drug from Hollis-Eden. The argument over how much the DoD or HHS will pay to develop this drug is important, but the larger issue is how the government can ensure that drugs like this are developed and stockpiled.

Dean Baker, hero of the Social Security debates of last year, has a post on Maxspeak explaining how patent law distorts drug prices. The post in general is accessible to lay readers, and you all should read it--it is about Tamiflu, but many of same issues arise with Neumune. Baker's conclusion is that we should publicly finance all drugs:
Just for the record, the U.S. government already spends $30 billion a year on biomedical research, primarily through the National Institutes of Health. Everyone (including the pharmaceutical industry) claims that this is money very well spent and the appropriation always enjoys deep bi-partisan support. Why shouldn’t we believe that if we doubled this appropriation, to replace the $25 billion that the drug industry claims to spend on drug research (two-thirds of which goes to research copycat drugs) that we would end up with at least as good progress in developing drugs as what we have at present?

And, if the research funding all took place upfront, then the patents could be placed in the public domain. This would allow all drugs to be sold as generics. It would reduce drug prices by approximately 70 percent, saving approximately $150 billion a year. Half of these savings would go to the government (mostly through paying less for the Medicare prescription drug benefit), which would more than recoup its additional spending on drug research.
I've not thought about this enough to say it should be the case overall, but it certainly has appeal for drugs with major public-health implications, such as Tamiflu or Neumune. So, why is 60 Minutes doing a piece that states that Hollis-Eden is the good guy and the government is the myopic bad guy? The upshot of the piece is that we need Neumune, not that we need Hollis-Eden stockholders to get a solid IRR on their investment. The government shouldn't pay Hollis-Eden to develop and manufacture Neumune, it should pay Hollis-Eden for Neumune, straight up. It should even use its power of eminent domain. There is no reason the government should be paying Hollis-Eden monopoly rents for this drug (it should be noted that, like most drugs, this drug was not developed by Hollis-Eden--according to their SEC filings, H-E licensed it in 1999 from a doctor at Virginia Commenwealth University. This is not to say H-E doesn't have significant R&D expenditures--they do (about $19MM in 2004)

This is really just one of many areas where our intellectual property regime is just not up to snuff. Matthew Yglesias has said the following about copyright law, but it applies to all IP:
Record companies and their movie studio allies have managed to convince a shockingly large swathe of opinion that the purpose of intellectual property law is to prevent copyright infringement. In fact, the purpose is to advance the general welfare of society.
This is important--we needn't be too deferential to the IP rights of either Hollis-Eden or Roche (company that owns Tamiflu). The point of IP law is to promote the general welfare, not to protect the holders of IP rights. And I'd say ensuring that millions don't die from Bird Flu or radiation poisoning is trump here.

Another place where IP law gets in the way is in the copyright of performances. The New York Times has an article from Saturday about the rights a director may or may not have in the performance of a play. Lots of interesting issues, all of which I think are ill-suited in one way or another to be solved by copyright law as we know it.

*note for FDA-semi-literate readers: Because of the ethical problems involved in dosing humans with radiation to test the efficacy of the drug, Neumune is being developed under a rule which can give marketing approval based on safety on humans and efficacy on animals--efficacy on humans need not be demonstrated.
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