Unfortunately this is our system. As a CEO and former bioentrepreneur who licensed technologies from half a dozen Ivy League institutions and built multiple biotech companies, I have many scars, and many bones to pick with the industry but there is one issue in particular that is easy to fix and people need to understand the problem in order to begin a meaningful dialog for reform. While a perfect solution eludes me at present, I propose an elegant evolution that will meet resistance from multiple powerfully-entrenched forces, but is actually easy to implement. Let us begin with indulging a little perspective.
A heroin-addict musician writes a song and enjoys legal protection and royalties for over 100-years. Believing in freedom to live life as we choose, I pass no judgement on anyone’s preferred lifestyle and find it hypocritical that alcohol and tobacco are legal while cannabis and other medications of choice are vilified. Such morally authoritarian persecution empowers organized crime and burdens society with wasted law enforcement, increased crime, lost taxes, incarceration, destroyed families and lives, and impure black-market substances send countless thousands to ER’s and often the morgue. With all due respect for the deceased, without heroin we may never have had the amazing music created by Jim Morrison, Jerry Garcia, Miles Davis, and all the other greats, and had it been legal and available in pure form, perhaps they would have remained among us for longer? I like to think they had urgent business elsewhere, after having already given so much, but who knows these things?
While not all musicians are heroin users, and I apologize for singling them out, my point is the relative ease and extraordinary low cost required for royalty protection that continues generously paying from beyond the grave. Works created after January 1, 1978 enjoy copyright protection for the author’s life plus 70-years. For anonymous, pseudonymous, or works made for hire, a 95-year term from the year of first publication or a term of 120-years from the year of its creation, whichever expires first, is granted. Now that’s legit! Or is it?
In contrast bringing a medicine to market for human use is absolute blood sport, and arguably the most difficult, complex, and expensive endeavor on the planet. The legal cost of filing a composition of matter patent globally often exceeds $1 million and involves massive time and work by highly specialized people. If successful, patents afford 20-years of commercial protection.
Now for the reality. Once the clock starts ticking you lose 6-9 years and spend $500 million to over $2 billion conducting clinical trials (I’ll leave out the vulgar-marketing costs) as you climb the regulatory ladder to final approval. Towards the end, vulture generic companies enter the market in full violation of IP protection and undercut sales by perhaps 90%, eliminating another 2-3 years of market. You can sue, but all the while they’re making a parasitic fortune and they fight back and tie up the court and it’s hard to justify the battle because in the end you lose either way. So you have 8-12 years and often less to recoup your upfront costs, plus any costs from failures along the way; and somehow you must make a profit that justified the massive risks. Hence the eye-popping retail prices we hate.
Just as many drugs fail to reach market, many musicians fail to produce a marketable song. But the value proposition of writing a great song, which is also not easy, is still orders of magnitude more lucrative on a risk-adjusted dollar cost basis then trying to develop a medicine. Creating an artistic work also doesn’t require expensive and complex labs, legions of special experts, endless lawyers, and a labyrinthine regulatory hell. The productivity and risk associated with a single wasted life versus billions of dollars is also disproportionate. Herein lies the crux of the problem: that intellectual property laws are antiquated and require a massive 21st century-thinking overhaul.
A simple fix would be to increase the 20-year IP protection, but this unfortunately incentivizes drug companies to gouge us harder in their endless pursuit of gargantuan profit. Instead, what if we fixed a yield curve using the development cost as a basis, and applied an amortization schedule? We add a rate of compound annual interest; let’s say 10%, during the clinical development cycle. This gives us dev-cost (D) + interest (I). To this we add the actual cost of production (P); D+I+P = X. Depending on several factors such as Orphan Drug Status and or net development cost, FDA grants a profit schedule of perhaps 100% per annum for 5-years, thereafter declining 10% per year, and terminating at P+10-20% for a 25-year period (overly generous perhaps?), or some similar metric.
Or algorithm, as naturally everything should be registered on a distributed ledger.
Perhaps one day we’ll have a decentralized fund to advance medical research, and profits use a metric similar to what I propose but instead of going to shareholders, go back to the fund for more research? My calculus is overly simplified and I don’t have all the answers, but hopefully we can begin a more practical dialog to solve this complex and intolerably vexing issue.
Given the cost and risks, we need to revisit how we incentivize the search for new cures. Without proper incentive to justify the endeavor, we’ll end up pissing away huge financial resources for more boner-pills, and develop fewer treatments for life-threatening conditions as the M.B.A./CEO taskmasters hunt for the maximum extractable profits.
Lastly, I’m compelled to point out that not all biotech/drug companies are created evil. Many of the entrepreneurs/doctors/researchers are seriously passionate about discovering and inventing cures for very complex conditions. What I found is that the corporate suite and venture capitalists are usually the guilty parties. As a startup CEO who was always at their mercy, or lack thereof, I left the industry a couple years ago thoroughly disgusted. We had a non-toxic functional cure that suffered an ill-fate for all the wrong reasons and the result is millions of desperate people continue receiving an expensive toxic piece of shit that doesn’t even work, because that’s what Big Pharma made and well hey, why innovate when money is pouring in? What these demented corporate leaders and their greedy boards forget is that nobody’s family members are immune to illness. This negligent oversight has done irreparable harm to humanity. And for what? Mo’money?
So I flip Farma The Bird in all its violating glory, as this unsolicited opinion is my final act in biotechnology. In the future I threaten to share my disruptive views on strategies, deployments, and implications of decentralized systems and distributed ledgers; on monetary theory, occasionally government, historic anecdotal indulgences, release a Kraken or two, invoke offending pagan idolatry, call bullshit, reveal many wild dreams and fantasies of a better world for my daughter and humanity’s next 7-generations while raising a great horn of ale to the Innovators...may they live long and prosper…Sköll.
Dream Big, Make it Happen, and May the Decentralized Force Be with You!
I can also be found at https://medium.com/@akau.tau