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April 24, 2013Myriad, Glivec, and the $1 Billion “Myth”
The Supreme Court once again considered the case of Association for Molecular Pathology v. Myriad Genetics, this time hearing arguments to determine once and for all if genes are patentable. Shares of Myriad rallied the day of the hearing--onlookers thought the Justices were somewhat sympathetic to the notion of gene patents, or at least wary about making a broad ruling. Investors in Myriad are right to be concerned with the outcome, since the company still makes most of its revenue from its BRCA tests. But should anyone else care?
Many pundits certainly think so. An article from Bloomberg sets the tone:
“A decision against gene patenting would ripple across a host of industries -- including biotechnology, agriculture, industrial microbiology and pharmaceuticals. The case has implications for the growing field of personalized medicine and efforts to map the human brain and discover new uses for embryonic stem cells.”
Well, it’s hard for me to see how that’s likely. The mere fact that few gene patents are filed anymore is some indication of how little value companies see in most isolated DNA sequences as inventions unto themselves. Most existing gene patents will expire in the next seven years or so. Even one of the plaintiffs in the case, Ellen Matloff, Director of Cancer Genetic Counseling for the Yale Cancer Center, seemed to acknowledge during a segment on PBS NewsHour that this case is more about principle than practicality.
“We’re finding new ways around things like isolated DNA,” she acknowledged. “But moving forward, this is a bigger issue. Are we going to let people patent things that occur in the human body, that they did not invent? Because if we do do that, it’s going to hinder personalized medicine.”
In other words, she’s either anticipating an incredibly broad ruling or she’s gearing up to address something that’s not part of this case. Nor is it clear what future problem she’s worried about. By way of example, she points out that full-genome sequencing would be prohibitively expensive if it were priced the way Myriad prices BRCA testing. That’s true, but it seems to disprove the point she’s trying to make: Despite the existence of gene patents, full-genome sequencing has advanced by leaps and bounds and prices have plummeted.
The plaintiffs have also argued that gene patents limit freedom of research, but thousands of research papers have been published on the BRCA genes over the past decade or more despite Myriad’s patents. Hmmm.
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Indeed, a bigger threat to the pharma industry emerged not at the U.S. Supreme Court but at its Indian counterpart. The Indian High Court ruled against issuing Novartis a patent on Glivec (sold in the U.S. as Gleevec), meaning companies are free to market generic copycats domestically. Considering that the pharma industry is counting on emerging markets as a tentpole of its growth strategy, the Glivec case has some far-reaching implications.
India has a very different standard for patentability than the U.S.--it didn’t offer patents for drugs at all until 2005, and then only for discoveries made after 1995. Glivec’s original patent was just a little too old for that cutoff, and the Supreme Court said the new patent wasn’t different enough from the prior discovery.
Since the decision, Novartis has made noises about not introducing new drugs into India, as have some other large pharma companies. That may be the case to some extent--Novartis doesn’t do much R&D in India, for example, and may continue not to. But my guess is that most companies won’t be able to resist a domestic pharmaceutical market that is expected to quadruple by 2020. Ultimately, it will become a partnering issue and a pricing issue for Western companies, rather than a decision to simply ignore the world’s second-most populous country. Pharma companies would obviously like to deal with an intellectual property system similar to that of the U.S. and Europe as it moves into these new markets, but that’s not going to happen. The industry is going to have to accept much lower pricing and perhaps enter into some creative deals with generic manufacturers before launch.
This is good news for poor patients looking for cheap medicine. Not such good news for folks in the U.S. who might have hoped that an increasingly affluent world would take some of the pricing pressure off our market.
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Speaking of which, is it really true that we have to pay so much for drugs because they cost so much to develop? GlaxoSmithKline CEO Andrew Witty recently shocked a lot of people when he said that the $1 billion price tag for a new drug is “one of the great myths of the industry.”
No, he hasn’t been converted to the research of Donald Light and Rebecca Wharton and their $43 million price tag for a new drug. He was saying that much of the cost behind that $1 billion price tag is failure. Reduce failure, and the cost comes down--something he claims is already happening at Glaxo, to the benefit of private and public payers.
What should we make of this comment? On the one hand, it puts attention on Glaxo’s pricing--is it really coming down? Even if R&D costs declined, is there any reason for the company to reduce prices when payers are willing to bear huge costs? On the other hand, it may be an ingenious way of stringing along governments cost-cutters: “Don’t worry about high costs--growing efficiency will take care of the problem for you!”
-Karl Thiel
Read the BioPharm Executive online newsletter April 24, 2013.
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