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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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In the Pipeline

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February 22, 2004

Reimportation's Just the Beginning

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Posted by Derek

Here are some interesting points raised by reader Duane Oyen, from e-mail and quoted by permission

"I think that any reimportation scheme has to be done on the basis (honest basis, not demagogic political windbaggery, which is where it usually ends up) of free trade- thus causing ME to "get to" YOU- because of the need to eliminate the egregious price discrimination that currently exists. The safety argument, as you state, is a legitimate reason to be cautious, not forbidding. Thus Canada is the perfect guinea pig- even citing NAFTA as the rationale. If a drug company sees that the Canadians are playing price control games with their product, they should be perfectly free to leave that market without having their patents violated, and the US should enforce the IP.

Eventually, the loss of market volume by the company, and the loss of treatment efficacy by the country, will cause the transaction prices to float to a more appropriate level. The ultimate price movements in smaller markets such as Canada will be less significant, as well as relatively slow, giving the lie to those politicians (leftist inheritance limo lib Mark Dayton, bawl your office) who claim that reimportation is a panacea for rising medical costs."

The situation in Canada is: would you rather make a little off your drug up there, or make nothing at all? Companies choose the former - there's no way out. Duane's right that in a more rational situation, the balance between the need for profit and the need for the drug would allow things to reach some sort of equilibrium, but I'm not sure that the warm, windless political conditions needed for that state are ever going to exist.

He goes on to say, in a discussion of what the future of drug pricing holds, that:

"I simply do not see a collapse in drug R&D and discovery. I see relatively significant changes in the business models, but they are already occurring regardless, as more and more of the sclerotic behemoths look to entrepreneurial startups and university spinoffs to feed their pipelines, and drug treatment follows network broadcasting into "narrow-casting". If market changes were established that reduced the ability to internationally price-discriminate, we should do three other things at the same time- a) make adjustments to patent laws (Forbes has made some good suggestions on this over the past couple of years); b) change the NDA process to reduce qualification costs and share risk more fairly (which means that ATLA attorneys have to be reined in a bit); and c) strengthen orphan drug incentives; perhaps even encourage more industry participation in NIH grants."

These are good points. I don't think, though, that there are enough startups and university ideas to keep everyone's pipeline alive - at least, not yet. The in-licensing game is very competitive, and has been for some years now. But he's right that changes in patent law and regulatory approval are basically going to have to take place eventually, and it's time that we starting thinking about what these should be. The idea of strengthening orphan drug-type incentives is floating around in several places, too. This week I'll be talking about a paper that's just appeared that argues for some changes like this in detail.

In coming years, we could be moving to different ways to reward drug discovery other than patent exclusivity and pricing power. It'll be a rough transition, too. The industry had better starting thinking about these issues seriously, or we're going to be dragged, biting and clawing, in directions not of our own choosing.

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