I do this sort of thing because not everyone reads comments and I believe this to be an important discussion.
Derek Lowe at Corante's In The Pipeline noticed the link in yesterday's post and was good enough to visit.
Derek disagreed with my two objections to the whole idea of opportunity costs being folded into the cost of producing a new drug:
- The money was NOT spent all on day the drug was approved
- Most of the money spent was Federal money
On the first point he says:
People do the same sort of calculations for mortgages and loan payments all the time - imputed interest rates and all that. Are those nonsense as well? If your answer is "yes", do you think you could convince an accountant?
My response, lifted from comments:
And why do you stop the calculation on approval day? That's kind of arbitrary. Why not do the calculation over the life of the product?
Because it would lead to an entirely different judgment.
I'm not saying it's evil, it's simply the way the game is played. For instance, if I (corporately) show $20,000 profit and one expects to make 2% on one's investment, then one values my corporation at $1,000,000 even if I only spent a couple of grand on computers to set it up. Not evil, simply the way the game is played…and has as much bearing on reality as opportunity costs. Exactly as much.
At any rate, I might be able to convince an accountant of the validity of doing opportunity cost calculations over the life of the product but it wouldn't be in the best interests of his client so I doubt being able to convince one to actually do it.
This morning I recognized another disagreement with reality in this argument: taxes. I'm not sure is pharmaceutical companies declare opportunity costs as actual expenses or losses, but if they do they don't declare the entire expense or loss incurred in developing a drug. They would if they could, but they don't know the figure so they can only declare what they can calculate. Taking that into account when calculating opportunity cost would lead to a less assailable figure.
As for the second point, that most drugs are developed in government funded research, Derek says:
I think my response:
…is reasonable if a bit disingenuous.
I feel it justified though. And it's a real suggestion. Let corporations have process patents on the ways they've developed to mass produce the drug, but if it was developed in government funded research the drug itself should be in the public domain.
Posted by P6 at February 21, 2004 11:31 AM
Trackback URL: http://www.niggerati.net/mt/mt-tb.cgi/506
Comments
From the previous thread comments, you finished up with:
"My reasoning is, the risk pharmaceutical companies undertake is in creating the processes whereby the drug is produced, packaged and distributed safely (I include testing in this). They are entitled to a process patent. But in most cases the company neither discovered the compound nor ascertained its primary effects."
Unfortunately, you are wrong. In the huge majority of cases (well over 95%, off the top of my head), the compound was discovered by the drug company. Academic labs do not, as a rule, discover drugs. They are not in that business. They discover biological pathways, new behaviors of known proteins, interesting biochemical regulatory mechanisms. Interesting stuff, valuable stuff. But they do not discover drugs. I can think of almost no exceptions.
Academic labs do not make the thousands of compounds made during drug discovery. They do not test them in primary in vitro assays, nor in secondary cellular assays, nor in multiple animal models. They do not do two-week toxicology testing in multiple animal species, multi-week tox in large animals, or one-year tox in rodents.
Nor do they do clinical trials, which is where the serious money is spent. You mentioned, though, that you include testing as part of what companies do, so I won't add those in. But if you include making the compound for the first time, realizing that it's active for the first time, and finding out about all its feasible variations for the first time, then credit the drug compan in almost every single case.
That's how we can patent the compounds, you know. If anyone else has made a compound before and described it in any way, we cannot own the chemical matter by a patent. And we will almost never go ahead with a project unless we're absolutely sure that we own the chemical matter.
Whoever told you otherwise is gravely misinformed. You would do your source a favor by correcting them.
Posted by Derek Lowe at February 22, 2004 10:35 PMThat's how we can patent the compounds, you know. If anyone else has made a compound before and described it in any way, we cannot own the chemical matter by a patent. And we will almost never go ahead with a project unless we're absolutely sure that we own the chemical matter.Whoever told you otherwise is gravely misinformed. You would do your source a favor by correcting them.
Sadly, I have no source. I just know what is done in academic research and give it more weight than you. As you said earlier, costs would be much higher if pharamceutical labs did it all from the ground up.
And as for not dealing in chemicals you don't own, let's say I'm not expecting that to change but feel strongly it should. All that he pharmaceutical companies do in addition to what the academic labs have done is a matter of process and application of trade secrets, but the culture give ownership of the chemical itself to a single entity.
Now, I can't help but feel that pharmaceuticals would be just as profitable…initially…if the barrier to entry were the risky investment alone rather than an actual denial of the right to use the chemical. That takes place in an alternate universe, though. So I make an effort to understand the true costs and eliminate rhetoric from the discussion.
Again, saying "this is what we must consider" is very different than saying "this is what it costs."
Posted by P6 at February 22, 2004 11:51 PMP6, I admire your convictions. Never let reality blur your vision. If only drugs could be plucked from trees like apples, we'd all be sporting happy faces. Really, the economics of drug development present a dilemma the solution of which would merit a Nobel prize.
On the one hand, you write that you "know what is done in academic research" and on the other you inform us that "all that he pharmaceutical companies do in addition to what the academic labs have done is a matter of process and application of trade secrets, but the culture give ownership of the chemical itself to a single entity." Your description of what academics do doesn't support your initial assertion.
a. The USPTO, not the "culture," gives ownership to the INVENTOR of the chemical entity, whether acadamic or industrial (unless other contractual arrangements have been made between the inventor and the "entity").
b. I have been involved in licensing, technology transfer, and collaborative development efforts between academia and pharma companies for a number of years and have yet to see a 'real' NCE passed from academia to industry. I think you are confusing your terms and the legal ramifications thereof.
c. There are occasions wherein an academic party may have developed (and own patent rights) to certain molecules or chemical structure that it passes (licenses) to industry. However, the development work that is done in such cases is FAR more than simple process/production development. The "raw" compounds/molecules need to be refined and usually result in the invention of new, patentable matter (ie analogues, etc. that are new compunds themselves and are developed specifically for certain human diseases). There is nothing unseemingly about obtaining such inventions. Further, the academic sources are fully compensated for their inventions through license fees and sponsored research.
Your description of what academics do doesn't support your initial assertion.
And the description I gave is...?
The USPTO, not the "culture," gives ownership to the INVENTOR of the chemical entity, whether acadamic or industrial (unless other contractual arrangements have been made between the inventor and the "entity").
The entire concept of property is culturally derived and enforced. But you can have the technical point if you like.
I have been involved in licensing, technology transfer, and collaborative development efforts between academia and pharma companies for a number of years and have yet to see a 'real' NCE passed from academia to industry. I think you are confusing your terms and the legal ramifications thereof.
Why the scare quotes around 'real'? That generally denotes a non-standard meaning and I'll make no assumptions about what you're saying.
I recognize the difference between scare quotes and sneer quotes, so I know why you enquoted "culture."
However, the development work that is done in such cases is FAR more than simple process/production development.
Who said it's simple? It's hella complex process/production development. $400 million worth of complexity.
Incidentally, this is opinion, not advocacy on my part. Basically because heads bleed and walls don't.
Posted by P6 at February 24, 2004 02:19 PMYou can probably assume the distinction being made between an NCE and a 'real' NCE is the difference between the lay meaning of 'new chemical entity' and the technical meaning, which refers to a chemical entity submitted to the FDA for approval as a drug.
Posted by Clay at February 24, 2004 03:10 PMThanks, Clay. I realized a bit later I should have asked what NCE represents too. To many TLAs in the world if you ask me.
So. A thing can be an NCE today and a 'real' NCE tomorrow?
Posted by P6 at February 24, 2004 03:16 PMBy 'real' NCE I meant a drug that contains no active moiety that has been approved by FDA in any other application submitted under section 505(b) of the act.
From an academic perspective I have seen NCE defined as "a compound not previously described in the literature."
Just trying to make a distinction to avoid confusion, not meant to "scare" you [sneer quote?].
"Who said it's simple?"...
That's the implication I drew from your statement" "All that he pharmaceutical companies do in addition to what the academic labs have doneAll that he pharmaceutical companies do in addition to what the academic labs have done is a matter of process and application of trade secrets..."
I apparently place undue emphasis on the word "all"... see what happens when there are no sneer/square quotes?
Well, since you are simply stating your opinion, not advocating, let me share some:
1. It is my opinion drugs should be free to all.
2. It is my opinion the flight from NYC to LA should be three hours shorter.
3. It is my opinion summer should last from Feb to Dec.
Now, I'm not *advocating* here, or even asserting that my 'opinions' are ^probable^ (or even possible). But these are just my opinions, so there's nothing to take issue with.
Well, since you are simply stating your opinion, not advocating, let me share some:1. It is my opinion drugs should be free to all.
2. It is my opinion the flight from NYC to LA should be three hours shorter.
3. It is my opinion summer should last from Feb to Dec.Now, I'm not *advocating* here
No, what you're doing is either lying or spinning. Neither is appreciated.
By 'real' NCE I meant a drug that contains no active moiety that has been approved by FDA in any other application submitted under section 505(b) of the act.
Okay, I can semantically construct a lot of troublesome scenarios. I don't know what section 505(b) says so I don't know how much you've restricted things by that statement. It reads like no section of the drug molecule can have the same effect as an already approved drug. Is that what you're saying, that you know of no case where an academic lab delivered the compound pure enough for approval?
Just trying to make a distinction to avoid confusion
Understood. I asked for clarification for the same reason. The quotes were enough to let me know you were shading your meaning but not enough to establish your meaning.
"Who said it's simple?"...That's the implication I drew from your statement "All that he pharmaceutical companies do in addition to what the academic labs have done is a matter of process and application of trade secrets..."
I could have been clearer, I suppose. I meant all as in "in aggregate." I had no intention of minimizing something that I greatly need, respect and can't do myself.
Now, if there's further non-snippy conversation, fine. But so far neither of us has given the other any information we didn't already have once all the terminology is translated to mortal-speak.
Posted by P6 at February 24, 2004 05:54 PMBiocouncil:
Further, the academic sources are fully compensated for their inventions through license fees and sponsored research.
Doesn't this sorta net out to "work for hire"?
Posted by P6 at February 24, 2004 05:59 PM>Doesn't this sorta net out to "work for hire"?
Yes, but not in the manner in which you probably mean ("work for hire" is a legal term). The "work for hire" is done by the researcher/inventor for the academic institute.
Researchers assign their work to the university or institute (with standard terms regarding royalty-sharing, release back to inventor if patent not pursued, etc.).
The transfer of the technology/license to industry is not a work for hire, as the institution can market the technology to whomever it wishes and negotiates a deal that is satisfactory to it (or does not license the technology).
Posted by BioCounsel at February 25, 2004 01:05 PMOK, if it's sponsored research and there is an option/license terms with university negotiated upfron for output of research... maybe this is what you mean by work for hire.
Do you think this is a bad thing?
Keep in mind that there is no guarantee that a) the sponsored research will result in an invention, or b) that the invention will be worth anything.
The industry partner pays for research, overhead costs, and license access fee/option fee, royalties and usually milestone payments -- thus bearing the risk.
Posted by BioCounsel at February 25, 2004 01:29 PMOK, if it's sponsored research and there is an option/license terms with university negotiated upfron for output of research... maybe this is what you mean by work for hire.Do you think this is a bad thing?
That is what I was talking about.
I think it's an unquestionably good thing as long as the academic labs have some freedom in choosing the projects. The university keeps the knowledge and transmits that. They're not in a position to fully sponsor the work. To me it looks like everyone gets what they negotiated for.
Basically, our difference will be philosophical. We all know that a CEO and corporate board is charged to maximize profit for the benefit of investors. My thing is, I'm a capitalist that recognizes the concept of "enough." That doesn't affect my understanding but it definitely affects my judgements view of the ideal.
(Edited ten minutes later for accuracy)
Posted by P6 at February 25, 2004 01:43 PMHey there, I'm here thanks to a link from Derek's page.
I've been in both academia and the drug industry -- not very deep into each, I'll admit, but easily far enough to know how things work. ;) (I worked for a lab that analyzed drug trial data... that is, we took the fluids (urine, blood, etc.) and ran them through specialized equipment to find out what the drugs did once they went through people's bodies. I also worked in several research labs as an undergrad and in graduate school.)
Basically, I don't know of any individual research lab that made a drug that was approved by the FDA. (They do go into partnerships, as you're discussing above). It is far too expensive, and they don't have the resources.
They would never get the grant money. It simply would NOT be approved for use in finding a drug. Most attempts at making a drug fail. I'm not talking 60%. I'm talking almost ALL. Any grant money used that way (even if they could manage to scrape up enough, which isvery unlikely. Basic science costs nothing compared to series' of drug trials) would almost assuredly just be thrown down the toilet.
Posted by Katie at February 25, 2004 07:45 PMKatie:
Most attempts at making a drug fail. I'm not talking 60%. I'm talking almost ALL.
I honestly didn't know the failure rate was that high.
Is this failure after the academic research looked promising? By failure, do you mean unanticipated side effects, inability to get the compound pure enough?
You guys know there's going to be a post that takes all I'm learning here into account, I hope.
Posted by P6 at February 25, 2004 09:39 PMThe failure rate is in the high 90% range, and that is after you take the promisiming route. Typically the effective dose causes nasty side effects, or can't be absorbed by the body for any of a number of reasons. The really expensive failures are ones that work fine in mice or rats but then end up not working in higher animals. The worst drugs are those that look great in everything else, but you get to humans and suddenly ugly side effects crop up, or the drug doesn't work at all. It isn't at all uncommon a pharma research to work his entire career without ever working on a drug that goes to market. That is decades of getting paid without the company you work for being able to get a return on paying you.
Posted by Sebastian Holsclaw at February 26, 2004 01:44 PM