Drug Royalties?

[USCguy]

Do drug companies get royalties on their drugs once they lose the patent and the drug becomes generic? If not, it seems like that would be one way to reduce drug costs. Shorten the patent period, but give the drug companies royalties and let other companies produce the generics for a slightly increased price. It seems this would lower the overall price of drugs, but the drug companies wouldn't be completely screwed over.

Possibly a compromise where both sides win (or maybe nobody wins)?

---

Members don't see this ad.

 

[kronickm]

They always get paid for their drugs. The thing is, who is going to pay $$$$ for lipitor when you can now get a generic for 1/100th of the price.

 

[docB]

Do drug companies get royalties on their drugs once they lose the patent and the drug becomes generic? If not, it seems like that would be one way to reduce drug costs. Shorten the patent period, but give the drug companies royalties and let other companies produce the generics for a slightly increased price. It seems this would lower the overall price of drugs, but the drug companies wouldn't be completely screwed over.

Possibly a compromise where both sides win (or maybe nobody wins)?

I get what you're proposing but I don't think it would help.

The situation now is that drug companies hold the patent on a new drug for a period of time. That time is when they are expected to make their money. Once it goes off patent they have a choice. They can keep pricing their drug high and hope that people will be willing to pay for the "real" thing or they can drop their prices enough to try to keep the generic makes from entering the market.

Under your proposal the drug company would hold the patent for a shorter time but once generics hit the market there would be royalties paid to the original maker. That would have the effect of lowering the prices earlier but then making the generic prices higher. It would just result in a shift on the timing of the payments.

If we cut the amount of money that the drug companies can make from their products we cut the incentive to make new drugs.

 

[USCguy]

I feel that the question then becomes will the higher generic prices (still much less than the patent price) earlier help solve the majority of the "I can't afford my medicines, etc" problems people are facing today. If people are just taking so many pills that generic vs. patent-protected doesn't matter, then we are just screwed. However, if the issue is that people can't afford the new "blockbuster" drugs that companies turn out until they become generic, it seems that spreading the cost out over a larger number of years would help. Also, pharm companies wouldn't have as much worry about "where does our money come from when it goes generic." If you churn out drugs at the same pace they do now, it seems to me that they will make more money with the royalties in the long run than they would in the present situation.

If the current deal is patent protected for 10 years, then generic (I don't know what it actually is), then cut it down to a year or two (during the final phase of FDA approval) and allow companies to make the rest of their money off the royalties from generics. Think of how much money a company would make if they were receiving royalties from penicillin or amoxicillin all these years later (utopian example; I realize most drugs don't have the long histories of wide spread use that PCN has).

or maybe I"m just crazy

 

[Llenroc]

Are you joking? The drug patents are only 15 years. Compare that to most other types of technology (decades), or to copyrights (sometimes over a century). Half the drugs on the market today will be generics in 8 years. 15 years really isn't a whole lot of time, when you consider the fact that now it's been discovered and applied it will be available for anyone to manufacture and use for the rest of human history. After 15 years, anyone can manufacture the drug, and there are no royalties paid. The cost of the drug drops effectively to a little bit more than the manufacturing/distribution cost + small profit.

The ignorance on this thread is so astounding it makes me wonder what angle folks are coming from on all these other threads where they're ranting and raving about the evils of the pharmaceutical industry.

 

[USCguy]

Are you joking? The drug patents are only 15 years. Compare that to most other types of technology (decades), or to copyrights (sometimes over a century). Half the drugs on the market today will be generics in 8 years. 15 years really isn't a whole lot of time, when you consider the fact that now it's been discovered and applied it will be available for anyone to manufacture and use for the rest of human history. After 15 years, anyone can manufacture the drug, and there are no royalties paid. The cost of the drug drops effectively to a little bit more than the manufacturing/distribution cost + small profit.

The ignorance on this thread is so astounding it makes me wonder what angle folks are coming from on all these other threads where they're ranting and raving about the evils of the pharmaceutical industry.

What exactly are you referring to as "ignorance?" The fact that I don't know the ins and outs of patent law, or trying to come up with a new solution to a problem that is affecting many people?

 

[genesis09]

The default drug patent is currently about 20 years in length. However, generally half of it is eaten up during development. After being approved, the manufacturer can do certain things to increase the length of the patent. For instance, if they study their medication in pediatrics, thats an extra 6 months. They can apply for patent credits. Generics are allowed the start the FDA approval before the patent expiration date. When that starts, the patent holder will sue them and try and get the approval of the generic delayed. Look at what happened to Imitrex. It has been off patent since last year, but due to delay tactics, the first generic won't come out until next fall.

For Medicare Part D, the individual providers can negotiate with the manufacturers. However, generally, the savings stay with the PBM. Occasionally, a pharmacy might get a rebate from them. They are trying to change the reimbursement structure for Part D. If they actually go through with it, it could cause the majority of independent pharmacies to go bankrupt. However, that's another discussion for another day. To get the best prices from the manufacturers, you must have a closed formulary.

 

[Nasrudin]

Are you joking? The drug patents are only 15 years. Compare that to most other types of technology (decades), or to copyrights (sometimes over a century). Half the drugs on the market today will be generics in 8 years. 15 years really isn't a whole lot of time, when you consider the fact that now it's been discovered and applied it will be available for anyone to manufacture and use for the rest of human history. After 15 years, anyone can manufacture the drug, and there are no royalties paid. The cost of the drug drops effectively to a little bit more than the manufacturing/distribution cost + small profit.

The ignorance on this thread is so astounding it makes me wonder what angle folks are coming from on all these other threads where they're ranting and raving about the evils of the pharmaceutical industry.

Indeed perhaps you could enlighten us. What is the good side of their market philosophy and techniques?

 

[Sol Rosenberg]

Are you joking? The drug patents are only 15 years. Compare that to most other types of technology (decades), or to copyrights (sometimes over a century). Half the drugs on the market today will be generics in 8 years. 15 years really isn't a whole lot of time, when you consider the fact that now it's been discovered and applied it will be available for anyone to manufacture and use for the rest of human history. After 15 years, anyone can manufacture the drug, and there are no royalties paid. The cost of the drug drops effectively to a little bit more than the manufacturing/distribution cost + small profit.

The ignorance on this thread is so astounding it makes me wonder what angle folks are coming from on all these other threads where they're ranting and raving about the evils of the pharmaceutical industry.

I find your lack of knowledge of the patent process disturbing for someone calling others ignorant of the patent process.

While I'm not a patent attorney, I currently hold 4 US patents, and have a few more in the queue. I have spent many hours talking with patent attorneys in the process of filing my own patents, so I am somewhat knowledgable about the process.

Current US patent law is that a patent is valid for 20 years from the date of INITIAL FILING. It usually takes about 2 years (though one of mine was granted in a little less than a year from initial filing, and one is still being reviewed after almost 3 years) from the initial filing to the time that the patent is granted, providing a de facto patent protection time of about 18 years.

This law was changed about 10-15 years ago. It used to be that a patent was valid for 17 years from the date that it was GRANTED, but in an interesting example of legal loopholes, the guy who invented UPC barcodes (or his attorneys) purposely filed the patent improperly, and it took many years (~10, IIRC) for the patent to be granted. In the meantime, others copied barcodes because they were not yet patented. When the guy eventually did receive the patent, there were LOTS of people who infringed upon it, and he sued (or threatened to sue) them all and made some major $$$. Therefore, the current law of 20 years from the initial filing solves this problem.

Anyway, there is no distinction in US patent law between different types of patents (i.e. drug vs. "technology" in your example.) Copyrights are a different story though, and last much longer. One de facto difference in patents, however, is that most "technology" inventions don't need to be approved by a regulatory body like the FDA. Therefore, they can be marketed as soon as they are patented, unlike drugs, which may require significant additional time after the patent is awarded to make it through all the trials, etc, required for FDA approval. Therefore, the "recovery time" that drug makers have to recover their R&D investment is much shorter.

 

[Sol Rosenberg]

Indeed perhaps you could enlighten us. What is the good side of their market philosophy and techniques?

Simple: It promotes R&D. Without R&D there is no innovation.

R&D is a very costly process in any industry, pharma included. Like the guy from Australia was saying, in other countries, most "pharma research" amounts to simply copying what that US pharma companies come up with, because international patent law [enforcement] is largely a joke. R&D is a good thing, especially where healthcare is concerned, as that is how new drugs, procedures, equipment is developed. If everybody was doing the copying and nobody was doing the innovating, well, there would be no innovation and no progress.

We should be doing everything that we can to encourage R&D and innovation. Patent protection is one of the most fundamental processes that we have to do this. I'm actually somewhat shocked to see people opposed to patent protection? 😕

 

[USCguy]

Simple: It promotes R&D. Without R&D there is no innovation.

We should be doing everything that we can to encourage R&D and innovation. Patent protection is one of the most fundamental processes that we have to do this. I'm actually somewhat shocked to see people opposed to patent protection? 😕

For the record, I'm not against protecting a company's investment in their product, such as the large investment necessary to create a successful drug. Thats why I propose the royalty fee for companies that produce a "protected" drug. If you can produce a blockbuster drug, you are looking at a set source of income (at least until the next generation of drugs comes along, I guess).

But, would a set source of income reduce a company's push to create new drugs? I don't think it would. The company would be in a race to "protect" as many drugs as they can, because that will give you that much more of a secure future (financially anyway). And if that company becomes satisified with their progress, there will be 5 other companiess out there looking to get their foot in the door.

Thoughts?

 

[Sol Rosenberg]

For the record, I'm not against protecting a company's investment in their product, such as the large investment necessary to create a successful drug. Thats why I propose the royalty fee for companies that produce a "protected" drug. If you can produce a blockbuster drug, you are looking at a set source of income (at least until the next generation of drugs comes along, I guess).

But, would a set source of income reduce a company's push to create new drugs? I don't think it would. The company would be in a race to "protect" as many drugs as they can, because that will give you that much more of a secure future (financially anyway). And if that company becomes satisified with their progress, there will be 5 other companiess out there looking to get their foot in the door.

Thoughts?

How do you enforce a royalty/licence without patent protection?

The process works like this:

1. Inventor obtains a patent. A patent is a legal instrument that prevents anyone else from using inventor's invention.
2. If anyone uses inventor's invention, inventor can sue them and will prevail in court.
3. Inventor may grant a license to someone else to use his invention. Usually that will involve paying fees to the inventor (royalties.)

So, I don't see how you would have royalties without patent protection? If there is no patent protection, why would anyone pay royalties?

 

[Sol Rosenberg]

however, there is nothing that says that insurers should have to pay for branded drugs when generics are available.

In the US, at present, many (most?) insurers won't pay for a branded drug when a generic is available. That's just common sense on their part.

 

[genesis09]

In the US, at present, many (most?) insurers won't pay for a branded drug when a generic is available. That's just common sense on their part.

Most insurance companies once a generic is available will place the generic on the lowest tier and the brand on the highest. There are people who just don't want a generic drug, and are willing to pay the premium.

 

[Nasrudin]

Simple: It promotes R&D. Without R&D there is no innovation.

R&D is a very costly process in any industry, pharma included. Like the guy from Australia was saying, in other countries, most "pharma research" amounts to simply copying what that US pharma companies come up with, because international patent law [enforcement] is largely a joke. R&D is a good thing, especially where healthcare is concerned, as that is how new drugs, procedures, equipment is developed. If everybody was doing the copying and nobody was doing the innovating, well, there would be no innovation and no progress.

We should be doing everything that we can to encourage R&D and innovation. Patent protection is one of the most fundamental processes that we have to do this. I'm actually somewhat shocked to see people opposed to patent protection? 😕

OK. All well and good. I'm just not quite sure why nobody seems to have a problem with the sale of medical judgement and Congressional oversight to the interests of pharmaceutical corporations, which has absolutely nothing to do with research and development or patent law.

The "evils" being suggested by the op and why would people even consider questioning the intentions of corporations is what is incredulous to me. Sanctimonious middle class middlebrow minds who extol the vritures of the market to protect us from "socialism," are so common in medicine as to make it almost pointless to disagree.

 

[USCguy]

OK. All well and good. I'm just not quite sure why nobody seems to have a problem with the sale of medical judgement and Congressional oversight to the interests of pharmaceutical corporations, which has absolutely nothing to do with research and development or patent law.

The "evils" being suggested by the op and why would people even consider questioning the intentions of corporations is what is incredulous to me. Sanctimonious middle class middlebrow minds who extol the vritures of the market to protect us from "socialism," are so common in medicine as to make it almost pointless to disagree.

I never said anything about pharma companies being evil. The entire purpose of this thread was to propose my idea to get medicines into the hands of the patients that need them at a price they can afford, while still letting the pharm company get their money.

Also, I think some people may be caught up on the vocabulary being used. The idea was to protect the developing company's financial interest, while letting other companies make the generic version at a lower cost much earlier in the timeline. Whether you want to change the patent law to allow this while still calling it patent protected or create some new law to handle this process and call that something; doesn't matter.

 

[Nasrudin]

I never said anything about pharma companies being evil. The entire purpose of this thread was to propose my idea to get medicines into the hands of the patients that need them at a price they can afford, while still letting the pharm company get their money.

Also, I think some people may be caught up on the vocabulary being used. The idea was to protect the developing company's financial interest, while letting other companies make the generic version at a lower cost much earlier in the timeline. Whether you want to change the patent law to allow this while still calling it patent protected or create some new law to handle this process and call that something; doesn't matter.

My mistake I was referring to Lenroc's post as a general consensus of the majority on sdn.

I am also interested in the general questions you are posing.