April 26 is World Intellectual Property (IP) Day, an occasion to champion the protections that have resulted in countless life-saving treatments for patients. Unfortunately, not everyone appreciates the value that IP brings to modern healthcare. In an April 9 letter to the Department of Health and Human Services (HHS), three groups (Knowledge Ecology International, Union for Affordable Cancer Treatment, and Universities Allied for Essential Medicines) urged the federal government to issue a compulsory license for the prostate cancer drug Xtandi.
The groups expressed concern that the medication sold by Pfizer and Astellas is marketed “at a price three to six times higher in the United States than it is priced in other similar high-income countries.” The letter envisions a system where generic manufacturers are free to ignore Xtandi’s patents and produce and price this drug (and others) as they wish. This reckless licensing scheme would set back healthcare innovation and send all the wrong signals to researchers and entrepreneurs. The U.S. must embrace IP protections, not throw them by the wayside.
Since being approved by the Food and Drug Administration (FDA) in 2012, Xtandi has significantly prolonged the life of men with metastatic castration-resistant prostate cancer who have already undergone chemotherapy. Over the past 12 years, researchers have learned that Xtandi is more than just a “last ditch” treatment against the deadly disease. Even in cases where prostate cancer is not metastatic but patients have a high risk of their cancer spreading, taking Xtandi boosts survival odds. All this research demonstrating the safety and efficacy of medications such as Xtandi is not free. According to a 2020 study by John Hopkins and the George Washington University researchers, each large and randomized trial that the FDA relies on to approve a drug or expand labeling costs about $20 million. These studies usually come at the tail-end of a decade-long and $2 billion effort to study and tinker with medications.
High initial medication prices are the way producers recoup soaring drug development costs. In the case of Xtandi, research on non-metastatic prostate cancer cases is ongoing and resulted in the FDA expanding use indications for high-risk patients. Innovation suffers when these researchers are stripped of their patents and cannot continue to recoup their costs. According to a 2016 analysis in the American Economic Review, the weakening of IP protections for medications leads to lower availability and delayed launch times for new drugs. The authors examined data on the “launches of 642 new molecules in 76 countries during 1983-2002” and found that, all else equal, “longer and more extensive patent protection strongly accelerated diffusion [of new drugs], while price regulation delayed it.” This demonstrates the dangers of not just compulsory licensing, but also price-fixing proposals championed by the Biden administration and lawmakers. A more recent preliminary analysis by Princeton scholars confirms these findings. The issuing of an additional compulsory license “is associated with 5.10% decrease in innovation. Specifically, when the market share affected by compulsory licensing increases by 1%, patenting rates for the licensed disease decrease by 12.7% to 16.3%.”
For all this havoc, compulsory licensing seldom leads to lower prices or greater availability. For example, the Brazilian authorities, “granted a CL [compulsory license] for [HIV drug] Efavirenz in 2007 and the local production of the drug started in 2009. Since then, the price of the local generic manufactured version has not changed while the lowest international price has reduced by 77%. If only imports had been considered, then [the Brazilian government] could have saved approximately 25% more.” Rather than trying to tamper with IP protections, the Brazilian government should have embraced free trade policies and let markets work their magic.
Compulsory licensing is a recipe for disaster and leads to fewer options for millions of patients. This World IP Day, governments around the world must embrace patents and give innovators the tools they need to churn out life-saving treatments.
