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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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September 17, 2007

Arsenic, Patents, and the World

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Posted by Derek

As I was mentioning the other day, the latest issue of Nature Medicine has the details on a story that doesn’t, on the face of it, do the industry any credit. About twenty years ago, there were reports out of China that a solublized form of arsenic was very effective in treating acute promyelocytic leukemia, a rare (and fatal) form of the disease. Arsenic had been used as a folk remedy for such conditions, as it has been for many others (often with much less justification!), but its most common compounds (like arsenic trioxide) are tremendously insoluble. The Chinese authors had found a way to make that one go into solution where it could be dosed, but didn’t disclose it in their publication.

That left the door open to someone else, namely a small company called PolaRx. They found a way to do the same thing with the oxide (as far as anyone can tell), and got a patent on its use in oncology. Over years, mergers, and reshuffles, the patent finally ended up in the hands of Cephalon, who now market the soluble arsenic trioxide. However, a course of treatment costs about $50,000, which means that for many patients around the world, the drug is totally out of reach.

Even across the entire world, there aren’t that many patients for this therapy, so the price would tend to be high no matter what. It’s worth remembering that production costs are not a major factor in the pricing of most drugs. We’re not indifferent in this business to how much it costs us to make something, far from it, but we try to keep that a small part of the price. So what does set the price? What sets the price is what sets most prices in this world: what the market will bear. A drug that only treats a small number of patients every year is going to cost a lot of money, no matter what it’s made out of. A company will not market a compound unless they can use its profits to help defray the costs of all the things that don’t make it to market at all.

Cephalon is charging what their market will bear, which is their right, but their market is the health insurance organizations of the industrialized world. That’s another thing to remember – drug companies aren’t selling direct to patients most of the time. They’re selling to insurance companies, and first-world health insurance will put up with a lot of things that no one else can or will. There’s a lot of room to talk (and to complain) about this (I think it distorts pricing signals something fierce), but all the complaints have to start with the realization that this is how things are now set up. Cephalon, for its part, says that it’s open to compassionate use of its drug – that is, providing it to people in need who absolutely cannot afford it. With any luck articles like the Nature Medicine one will help to get the word out about that, and we’ll see how well they follow through.

It’s tempting to blame the patent system for this whole situation – after all, the only reason the company can charge these prices is that they’re the only ones who can sell it, right? But perversely, this might actually show the need for more use of patents rather than less. As another piece in Nature has helpfully reminded people, patents not only grant a period of exclusivity. In return for that, you have to tell people how to replicate your invention.

The alternative, in countries that don’t follow this system, is usually secrecy, and I can’t help but think that this is why the original Chinese work didn’t disclose all the details. A strong patent system eliminates a lot of trade-secret grey areas: someone owns a discovery (for a predetermined period of time), no one owns it, or everyone owns it. There’s none of this “someone owns it until someone else finds out about it” stuff.

But my guess is that the Chinese lab, being used to a trade-secret (or government-secret) culture, reflexively held back their important details. If they wanted to make sure that no one could patent anything, they would have (or at least should have) put all the information out into the public domain, where it would have been prior art against anyone attempting to file on it. (But see below - would that have helped get it through clinical trials, or not?) It’s worth noting that if a patent had been filed back in the early 1990s, the drug would not only have come to the world’s markets faster, the patent would also be much closer to expiration by now, opening up its production. The US researcher who formed PolaRx and filed the patent, Raymond Warrell (now chairman of Genta), stands up for it in the Nature Medicine article, and like it or not, he has a point, too, saying that the patent stimulated interest in the compound: "Without the patent, it would have remained a curious Chinese drug, not available to anyone else." I should note that there may well be room to argue about the validity of the patent, from prior-art concerns, but no one (as far as I know) has seen fit to challenge it.

But I can say for sure that without intellectual property protection in the US and Europe, no drug company would have touched the compound. Without industrial input, the drug would have either never reached the market at all (arsenic trials were a hard sell at the FDA), or would have likely come on more slowly. (That ticking patent clock does keep an organization moving, I can tell you). And now its success in the market has other companies working on improved versions of the therapy. This is how our world works, and (for better or worse) there's no requirement that it be aesthetically appealing.

Comments (8) + TrackBacks (0) | Category: Cancer | Drug Development | Odd Elements in Drugs | Patents and IP | Why Everyone Loves Us


1. A-non-y-mous on September 17, 2007 8:46 AM writes...

Good post, Derek.

No IP = no drug. Companies want something they can own. What company in their right mind wouldn't? Can you imagine Merck doing all the pre-clinical and clinical trials on a compound, getting it through the FDA, then the next day 35 generics are put on the shelf? Innovation would cease to exist, because there would be no money in it, and we'd be left to the academics to save the world (cheap shot, I know).

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2. such.ire on September 17, 2007 9:52 AM writes...

Derek, I'm a bit confused as to the logic that you propose for drug pricing. If production cost is only a small part of the drug pricing, then wouldn't a small market lead to lower prices, because of the lower demand? I realize that there's a third-party-payer situation, but I'm sure insurance companies would be willing to sacrifice coverage of an esoteric ailment in order to cover something with broader demand. There must be some basic economic thing I'm missing here.

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3. Morten on September 17, 2007 10:36 AM writes...

@2 Design and development costs are fixed and a much greater part of the drug price than the actual production costs. Less users means that the individual treatment cost goes up. Pretty sure that's what Derek means.
And the more esoteric, the lower the chances that alternative treatments are available so you can charge what you want... If that's what you want.

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4. CMC guy on September 17, 2007 11:11 AM writes...

Production costs generally are a ultimately a small percentage of price however the complexity of the material (i.e. biologic or multiple chiral centers) and the quantity required can influence situation- particularly in making a decision as to viability of a project. There are many burden costs inherent in making 1 kg vs. 100 kg vs 1000 kg so like the "economy of scale" the price per kg is lower the more bulk made (often dramaticly so). As with many things it is difficult to estimate these with limited info availabel early on and often is not clear to late in a program or even after implementing commercial manufacturing.

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5. Derek Lowe on September 17, 2007 1:00 PM writes...

Yep, a company will decide that they're not going to do a program unless they think it'll bring in at least $XXX. Then it's a question of what the market can (will) pay for. If there are fewer patients, the price will go up - you won't make the viable-project cutoff unless those fewer people pay more per head. This works the same way in other industries, too.

Of course, those numbers vary quite a bit, according to the company, its resources and expenses, etc.

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6. Petros on September 17, 2007 1:58 PM writes...

Yes Cost of Ggod is an issue and I remember it being a killer for my one invention taht made phase II, process couldn't make it cheaply enough for the WDF's management.

However, COG and price are very different. If I remember correctly Celgene's lenalidomide is priced at about the same level as a modern biotech product, even though lenalidomide is a relatively simple chemical, a thalidomide analogue.

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7. DLIB on September 17, 2007 3:05 PM writes...

Thankfully Ben Franklin read Diderot

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8. wcw on September 19, 2007 12:13 AM writes...

There are a lot of different ways to motivate human ingenuity. I liked this post a lot, but the idea that it translates to 'no IP == no drug' is, er, wrong. Helpfully, our host does a much, much better job describing the current incentive structure, virtues and warts alike. Kudos there.

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