E-drug: Re: US compusory licensing proposal for medicines (contd)
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John Urquhart is correct, the Canadian and American markets are very
different in size and one cannot extrapolate from the experience in one
to the experience in another. However, my point was that economically
the industry continued to do very well in Canada after the institution
of compulsory licensing and it continued to invest in Canada.
Could a compulsory regime have been constructed in the United States that
would
not have had serious negative consequences for the industry there? I
believe so - the royalties could have been set so that the more R&D a
company did in the U.S. the higher the royalty rate and there could have
been an exemption from compulsory licensing for a set period of time,
say 7-8 years. If you believe the figures in the OECD publication by
Jacobzone (Pharmaceutical policies in OECD countries: reconciling social
and industrial goals) by 1980 the average patent life for a drug in the
United States was under 8 years so a protected period of 7-8 years would
not have been out-of-line.
Finally, the figures that are quoted about the cost of developing a new
drug are still being widely misinterpreted
as Dr Urquhart has done. These figures were based only on new chemical
entities wholely developed in-house by American owned companies.
Therefore, they exclude drugs developed by non American owned companies,
drugs licensed in from any source (about 40% of NCEs are licensed in)
and drugs developed in cooperation with the NIH, universities, research
centres, etc. This probably excludes about 75% of the NCEs. Furthermore
these figures do not take into consideration the tax credits that
companies get for investing in R&D. Depending on where the R&D is done
these credits are about 40-45 cents on the dollar. The pharmaceutical
industry has been consistently more profitable than almost any other
industry, even taking into consideration the problems with accounting
methodology in calculating profits for the industry. According to the
Office of Technology Assessement report: Pharmaceutical R&D: Costs,
Risks and Rewards, returns to the pharmaceutical industry have
consistently been 2-3 percentage points higher than returns to
nonpharmaceutical firms (about 14% versus 11-12%) so even if the
pharmaceutical industry profits were reduced by 20% as a result of
compulsory licensing the industry would still have been reporting
average profit levels.
Joel Lexchin
--
Joel Lexchin MD
121 Walmer Rd.
Toronto, Ontario
Canada M5R 2X8
T: +416-964-7186
F: +416-923-9515
e mail: joel.lexchin@utoronto.ca
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