Posted by Bill Sandweg on 22 June 2020.
One of the lessons of the COVID-19 pandemic is that our drug development model and drug supply chain are broken. Our western capitalist system has served us well for many years. It provided products at a low price, which allowed us to enjoy a good standard of living. It does not do everything well, however. The profit motive has produced a dysfunctional drug development model and has also produced less-than-robust supply chains that rely on foreign manufacturers to produce the drugs we need.
Here are just some examples of drug development and supply dysfunction.
Orphan Drugs. Orphan drugs are drugs created to treat rare illnesses. Under normal market conditions, a manufacturer cannot sell enough of the drug to make a profit. This requires either government intervention to support the sale of the drug by direct payments to the manufacturer or charging an extremely high price for the drug to those unfortunate enough to need it.
Orphan Illnesses. Orphan illnesses are a corollary of orphan drugs. They are illnesses that are so rare that there is no money to be made in developing, licensing and selling a cure without government assistance. While no illness is a good thing, it can be truly tragic to contract a rare one. Victims of rare illnesses and their families regularly stalk the halls of Congress trying to drum up support for research into cures and treatments for their disease.
Leveraging Generic Drugs. Sometimes there is a generic drug that is used to treat a rare condition. It has been on the market for a long time and is relatively inexpensive. Often, because of the rarity of the disease, it is the only drug being sold to treat it. Some unscrupulous investors have taken to buying the company making the drug and then raising the price to astronomical levels. Even if another manufacturer decides to begin making and selling the drug at reasonable prices, there will be a period of time when patients have no choice but to pay the artificially inflated price. Of course, there is no guarantee the new manufacturer will decide to sell at the old price. It may just decide to join in fleecing the patients.
Patent Abuse. Our patent system is intended to reward innovation by protecting the innovator from competition for a limited period of time. In the case of pharmaceuticals, at the end of that period, new manufacturers can enter the field and market generic versions of the drug. The abuse arises when the original manufacturer applies for multiple patents over time after making slight tweaks to the product, thereby unfairly extending the protection period. Another form of patent abuse involves the original manufacturer either paying potential competitors to stay out or suing them and alleging patent violations. Sometimes, just the threat of an expensive patent suit can be enough to keep out competitors.
Race to Cut Costs. No manufacturer wants to pay too much to manufacture its product. In drug manufacturing, as in so many other forms of manufacture, that has meant moving production overseas to a country with lower labor costs. This has the unfortunate consequence of making our drug supply vulnerable to unrest, labor problems or shipping problems elsewhere in the world. If a cure for coronavirus is developed in Asia and is in limited supply, you can expect to see the countries of Asia preventing or limiting its export to the United States.
Fakes and Knock-offs. Federal agents routinely discover and seize fake versions of popular drugs. These fake versions may look just like the real thing and may even be sold by reputable vendors and drug stores. In rare cases, they may actually work but, more often than not, they are just pretend versions put on the market to steal from patients.
If there is a silver lining in the COVID-19 crisis, it is the light it is shining upon the failings of our drug and medical supply chains. These medicines and supplies are too critical to the health of our country to be left to the “invisible hand” of the capitalist system. We need to make sure that we have a strong development and supply chain to assure we have the drugs and supplies we need in the future. No more relying on some shady Chinese manufacturer to make N-95 masks that may not even work. This is going to require federal intervention. We need to learn from our mistakes.