Can We Reform the Drug Industry?

An Online Discussion

This is an edited email discussion that took place between participants in the AIDS Treatment Activists Coalition (ATAC). George Carter is an activist interested in patent reform and researching complementary therapies; Eric Goldman is a patent attorney.

For more on ATAC, see

George M. Carter: I think we should reform the patent system so pharmaceutical companies only get three years of exclusive profits on a patented drug instead of the twenty years they currently enjoy. After that, put price controls on them. Slash the salaries of the executives and increase the salaries of the people doing the real work -- the bench workers and the study nurses.

Eric Goldman: Believe it or not, this is an issue of constitutional proportions. Today's patent laws are derived from Article I, Section 8 of the Constitution. Thus, today, in order to encourage drug companies to share the research and development information behind their drug development efforts, we grant them patent protection to ensure that disclosing that information will not kill their profits.

George: Patents may be constitutional, but we still need reforms.

Eric: Even if we eliminate or reduce the duration of the state monopoly created by a patent, one might predict that drug companies will begin to keep more and more of their research secret. What they cannot protect under patent laws, they will maintain as trade secrets. Once information is not freely shared, progress slows. There would be no more presentations at conferences about pending research.

George: But in genome research, proprietary claims and gene patents are stifling progress. Even university researchers have been prevented from investigating genes that are "owned" by someone else.

Eric: Anyway, I don't think gutting the patent laws will get us where we want to go. In my view, the best way to go is to track which drug patents were obtained in whole or in part with NIH money or money from another government source, and then seek to control the price of drugs so patented. There is already some legislation on the books (Bayh-Dole Act) to support this approach; it's just not being actively pursued by anyone.

George: Why are corporations able to profit from taxpayer-supported research?

Eric: Twenty years ago the government adopted a policy of granting exclusive licenses to let private industry conduct basic research on discoveries from government labs, rather than having the NIH conduct or fund such research directly. This was part of the whole "streamlining government" revolution. For example, the NIH holds patents on using blue-green algae as a topical and in vivo microbicide, but is not doing the basic research. They've farmed it out to small companies under exclusive licenses.

George: And that development work should go forward with promising candidates investigated independently by the NIH, universities and hospitals. Then the cost of developing a drug could be assessed rationally and prices set accordingly. Until then, why shouldn't we be able to import fairly priced generic versions of life-saving drugs that are unaffordable here?

Eric: CIPLA in India and several other Israeli and Brazilian companies ignore patents to make generic versions of protected pharmaceuticals. But none of the outside-the-U.S. companies I am aware of have the infrastructure or expertise to develop drugs: they really ride on the coat tails of U.S. and European industry. They wait for Big Pharma to screen the drug, do the pharmacokinetics and toxicity stuff, do the full-scale clinical trials, and then get the drugs approved by the FDA.

George: Hmm. That sounds like the way Pharma treats the NIH.

Eric: If the U.S. and Europe start buying CIPLA knockoffs, or if we demand domestic pricing on parity with the lowest price developing nations pay, we would simultaneously remove virtually all incentive to develop AIDS drugs and we couldn't use the enormous inflated prices gouged out of U.S. customers to help subsidize lower rates in the developing world.

George: Nonsense. Paying lower prices here until the necessary reforms are in place would free up funds currently wasted on executive golden parachutes and the marketing departments of Big Pharma. That money could be used to do other things like expand ADAP coverage.

Eric: This is a nation that functions on the profit motive. We have to accept that. Take away the profit motive, and investors in pharmaceutical companies will move their money someplace else. And, since we all seem to agree that the U.S. drug industry is the primary source of R&D, this prospect scares me.

George: The bottom line is, the industry is not going to settle for any situation where they don't make obscene profits.

Eric: I personally don't care how much profit drug companies make. I do care how much of that profit comes from me, either directly as a consumer or indirectly as a taxpayer; and I do care if their profit depends on restricting worldwide access to necessary drugs; and I do care that some of that profit be spent on basic research instead of stock dividends and advertising. I don't demonize profit, but I deplore a lack of progress in the name of profit.

George: Frankly, this is a campaign that other groups of pharmaceutical consumers are keenly interested in and the industry is frightened by that. Because a reform movement like this represents genuine leverage against their outrageous power and greed. Settling for the few crumbs they sweep from the table is a failed form of activism. It's time for a revolution.

Eric: And what will be the implications of that revolution? That we will force drug companies to produce better drugs for less money through legislation? Never gonna happen; they donate too much money to politicians. That we will get some form of socialized medicine, a federal drug plan? All the money for that plan just got spent on stealth bombers and a missile shield defense.

George: Yet the current situation is utterly intolerable.

Eric: Or are you suggesting that we get into bed with AARP and the various State Attorneys General, the people who will be most interested in forming drug-buying collectives to drive down prices by using market forces? This seems more promising; to use the capitalist system to beat the capitalists by raising the market power of the consumers. Not as sexy as a revolution, but possibly more achievable.