Why sign up generics manufacturers for a drug you've only just got patent and approval for?


More importantly, why would you sign up generics manufacturers to make a drug that you can charge $84,000 a course of treatment for? Which is exactly what Gilead, the makers of Sovaldi, the $84,000 a course treatment for Hepatitis C have just done:

Multinational American drug maker Gilead Sciences was set to join hands with at least five Indian generic pharmaceutical companies and allow them to manufacture and sell cheaper versions of its new hepatitis C medicines - sofosbuvir and ledipasvir - in 90 countries, four people in the know told Business Standard.

Clearly, someone is being either terribly clever here or terribly stupid. So which is it?

It is, of course, being clever. NICE has approved Sovaldi for use in the UK, the FDA has in the US. Gilead has some short number of years (usually, about ten) to squeeze that drug for the billion dollars or so it cost to develop. So, obviously, they're going to charge what the market will bear. $84,000 looks like a lot, is a lot, but it's about the same price as other current treatments and is markedly more effective. So, that's the price they set.

But to then go and licence to generics manufacturers to sell in 90 odd countries looks most odd: won't this undercut sales? No, no, it won't: for the generics manufacturers only get the rights to sell in countries where there's no way at all that anyone would pay $84,000 for a course of treatment. For yes, there are poor countries out there and poor countries, rightly, don't try to spend that sort of money on treating one patient. They can save tens, hundreds, thousands of lives by spending the same amount on, say, a vaccination campaign.

Thus, at full market price there would be no sales: at generics prices there will be some and thus some revenue to Gilead.

But that then leads to, well, isn't it unfair on us? We've got to stump up $84,000 a treatment and poor people pay a groat a pill. True, but why is this unfair? Aren't we rich people supposed to be tendering to the ill and sick of the world?

Further, this isn't particularly to do with the way that the patent system works. Imagine that all health care research was done by the state instead. It would still be us rich world people paying for all of that research from our taxes, wouldn't it? On the simple grounds that poor people don't have incomes to pay tax upon to fund medical research. So whatever the structure is the end result will be the same. We rich people will pay to get the drugs designed and through the approval process. The poor will then get them. Whether we pay in advance in taxation or later through the price of the patented drug doesn't make much difference, does it?

And yes, for all that the NHS is The Wonder of the World and all the rest, we in the UK are indeed rich world people and that's why we're being charged this arm and a leg for this drug. And, given that we pay for the NHS through taxation it really makes absolutely no damn difference at all, what the patent or research structure is?