A longtime reader sent along a very interesting example that’s being used in a new book. The Gridlock Economy by Columbia economist Michael Heller is getting some good press, including this interview over at the Wall Street Journal>’s Law Blog. Heller’s thesis is:
“When too many owners control a single resource, cooperation breaks down, wealth disappears and everybody loses.” That is, the gridlock created by too much private ownership is wreaking havoc on our economy and lives. It’s keeping badly needed runways from being built, stifling high-tech innovation, and “costing lives” by keeping groundbreaking drugs from hitting the market.
It’s that last example that caught the eye of my correspondent, and I wanted more details. Fortunately, Heller went on the in the interview to talk about that very case, and I’m going to just quote him on it:
”Here’s a life or death example that’s happening right now: A drug company executive tells me he may have a better Alzheimer’s treatment. But to get FDA approval and bring it to market, he has to license dozens and dozens of patents relevant to testing for safety and side effects. So negotiations fail and the Alzheimer’s drug sits on a shelf, even though my informant is confident it could save countless lives and earn billions of dollars.”
Now, here’s the problem: I’ve actually worked on Alzheimer’s disease myself, and this story does not ring true. I don’t know if Heller’s “informant” is talking about animal testing or clinical trials in humans, but the same points hold in both cases. For one thing, I’m not aware of any patents that have to be licensed to do the standard testing for safety and side effects. There could conceivably be a couple for faster or more convenient tests, but I don’t even know of those. Otherwise, safety testing, in both animals and humans, is (to the best of my knowledge) done pretty much outside the realm of patent considerations. That “dozens and dozens of patents” line seems wildly off to me. I have never heard of a drug (for any disease) that has not advanced due to patent considerations related to safety testing.
Update - and that's partly for a very good legal reason: the safe harbor provisions of the 1984 Hatch-Waxman Act, as reaffirmed in the 2005 Merck v. Integra decision by the Supreme Court. There is specific protection from infringement in the use of a patented compound for purposes of submitting regulatory filings. And the language of the ruling makes it look like it's intended to cover all sorts of patented technologies as well.
Second, it’s important to remember that efficacy testing comes after safety, at least when you get to humans. So this contact of Heller’s is talking about a drug that has not been evaluated in humans for either quality, but he’s still “confident it could save countless lives and earn billions of dollars”. Right – for Alzheimer’s, where you have to worry about human brain levels, where we’re still arguing about what even causes the whole disease, where the clinical trials take years because the deterioration is so slow. Professor Heller is being had.
And let’s stipulate that there are, somehow, enough convincing data to make a reasonable observer confident that said drug would go on to earn billions of dollars. (There is never enough information to completely convince anyone of that in this industry before a drug hits the market, but let’s pretend that there is). In that case, those mysterious patent negotiations would not fail. Some sort of agreement would be reached, with money like that on the table.
The problem with Heller using this example is that there are indeed a lot of problems and potential problems with intellectual property in the drug industry. (I’ve talked about a few of them here). It’s a big, important, complicated, topic – and for all I know, it gets a good treatment in Heller’s book. (I’ll read it and find out). But this cartoon of an example is going to confuse anyone outside the field, and irritate anyone inside it.