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[ed. note: This is another post in Firedoglake’s semi-regular series exposing and exploring ways in which the federal government spends vast sums or forsakes vital revenue in a perpetual, profligate and pathetic quest to assure corporate America that the elected representatives of we the people are really, truly, madly, deeply “business friendly.” With each story, we hope to highlight another government giveaway, tax break, or loophole handcrafted by lawmakers and lobbyists to keep the powerful powerful and make the rich richer. If the reverse Robin Hoodism rises to special heights, we will present it with the FDL Wealthy Welfare Award—or, as we have taken to calling it back here, The Grafty.
As the government works its way up to what will almost certainly be an unprecedented season of deficit peacockery--no doubt resulting in a calls for cuts to Social Security, Medicare, and the other guylines of our social safety net--remember the Grafties, where real money is available to meet our obligations without taking even more away from those who can least afford to lose.]
One thing to understand about capitalism is that individual companies inherently hate market competition that should, in a perfect world, drive their profit close to zero. When possible, they often try to eliminate competition through collusion with other firms, this is known as a cartel. More often, though, in America, they seek corporate welfare from the government. They make huge donations to politicians in hopes that, in exchange, the politicians will give them hugely profitable government subsidies or special government-protected monopolies.
This is what the drug companies are doing in their latest attempt to get politicians to extend their already incredibly long and highly profitable government-protected monopolies on biologics. From the Wall Street Journal:
A bipartisan group of senators including Sen. Orrin Hatch (R., Utah) and Sen. Kay Hagan (D., N.C.) sent a letter Jan. 7 calling on the Food and Drug Administration to interpret the law in ways favorable to the brand-name makers.
The letter says companies should get an additional 12 years of exclusivity if manufacturers alter an existing product to improve safety or potency. It also calls on the FDA to define “exclusivity” in a way that might help delay generic applicants. The Biotechnology Industry Organization helped draft the letter, their counsel said.
The new, 12-year exclusivity period passed as part of the health care reform law was already a disgusting crime against the public.
The FTC determined that a zero exclusivity period would be needed, mainly because unlike the $1-5 million it costs to develop a small-molecule generic, a biosimilar would likely cost $100-200 million and take twice as long. Biologic makers don’t even need their current sweetheart arrangement, yet these lawmakers want to make it even more profitable.
Effectively extending an already unnecessary exclusivity period is practically pure theft committed against the public and the government, which ends up paying much more for these drug through Medicare, Tricare, VA and Medicaid. By preventing competition, it should drive up the cost of these life-saving drugs by billions.
Classic corporate rent-seeking
If I were a company with a current patent on a biologic I would want this change desperately. Why bother to create new, useful products when I can instantly have politicians increase the value of the monopoly the government granted me by also having the government adopt new ways to protect me from the free market?
What company wouldn’t want to have the government let it sell a product for whatever price it wanted, have the government use its power to stop anyone else from selling the product, and have the government directly or indirectly pay for buying the product?
Of course, our elected representatives in a government supposedly “of the people by the people for the people” shouldn’t be putting the rent-seeking of a few well connected corporations over the needs of regular people and the federal treasury.
The four senators who signed the letter: Kay Hagen (D-NC), Orrin Hatch (R-UT), John Kerry (D-MA), and Mike Enzi (R-WY)
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But but but Free Market!
that’s because they understand what they really mean by “free market”;
“laws that protect us are great, laws that protect you are not”
that’s the actual translation of “free market”
I ultimately gave up on writing to Rep Eshoo about exclusivity when she and her staff refused to engage on specific language:
I made a serious effort in 2009 to try to improve HCR legislation and ultimately was ignored. Very disappointing.
I believe this was the bill for which (sadly) Howard Dean lobbied on behalf of the biologic manufacturers in 2009.
Her position on this is really not in line with the Anna I used to know very well. I’m truly disappointed in her.
Yet these people running the country, inside and outside of it don’t want us to have the Medicare and Social Security that we PAID FOR!
It’s just fine for them to get handouts and legislation marked up just for them. I have been against Grover Norquist and his goals for years, but currently so fed up I say go for it! NO TAXES whatsoever, drown that money pit so there is no more Elite Welfare.
They don’t need to tax you if the government is going to game the system to just increase your cost for basic needs.
The punch line: private capital is morally indefensible.
Every such private theft of public property further undermines the claim that corporations and very wealthy individuals have any “right” (as opposed to privilege) to possess the capital they possess – and the legitimacy of the government that serves as their accomplice.
Note that it is entirely consistent to accept a right to private property, real and personal, of the kind that the Fourth Amendment protects against government searches and seizures (“houses, papers, and effects”) while rejecting any right to private capital.
The idea that large corporations – as opposed to many smaller companies that compete with them or innovate around them – are stand-alone, pick themselves up by their own hard work and bootstraps enterprises, is laughable. If it weren’t, the only lobbyists along K Street would be the bums on the street, not the ones in $8,000 suits.
Capitalists hate competition; it makes them work too hard and cuts profits. They seek to avoid or lower it at all costs. Large corporations in America do that many ways, but lobbying in Washington for laws that protect them, immunize them, and actively reward them with tax dollars is fundamental.
It has always been so, since before the days when English candlemakers persuaded Parliament to prohibit making candles at home in order to protect their revenue. Then along came whale oil, then petroleum-derived kerosene and electricity, each with their own monopolists and lobbyists, to upset their applecarts.
This is very interesting. The ACA uses the term “market exclusivity” rather carelessly when in fact it traditionally refers to the longer of (1) patent exclusivity, and (2) data exclusivity.
Pharma’s letter indicates for the purposes of the ACA it would like to redefine market exclusivity as data exclusivity, so they are clearly on the defensive here. I think their argument is likely to prevail, but I don’t understand how their lawyers allowed this to happen in the first place.
FDA is seeking guidance as to what the phrase “change in safety, purity, and potency” means with respect to biologic drugs. This is in fact somewhat nebulous. Pharma’s letter indicates they would like to keep it nebulous, presumably so they can litigate in the future.
As an aside, Israel has a huge biogenerics industry and they are also one of the only developed countries that don’t recognize our data exclusivity laws. So this is yet another giant under the table subsidy courtesy of the U.S.
Rigged market.
Kay Hagan (D-NC) along with John Kerry (D-MA) joined with Republicans to further rig the marketplace in favor of Big Pharma. These two pseudo-Dems have forsaken the people who supported them in exchange for an inside track in the payoff money race.
There is no honor among politicians. But the same applies to corporations. If these two Blue Dogs step out of line just once, they lose the race for the boodle.
So they have ensnared themselves in the Big Pharma web from which there is no escape.
There is an old Mafia expression: To win in politics, you gotta have the geetus. These two corpo-Dems know where to go to find it.
It’s data exclusivity. Patents typically expire before the clinical data exclusivity period is over. The whole issue of minor tweaks renewing exclusivity is not present with patents because the minor tweak (EG PEGylation) isn’t patentable.
Sorry, but you’ve got that absolutely wrong. Instances where data exclusivity outlives patents under current laws are so rare, I can’t even think of one. Anyone who follows the pharma trade press knows that that the dates that give pharma execs and investors agita are the patent expiration dates on the core compounds, not the data exclusivity expiration date.
Because data exclusivity runs out long before core 20-year patent protection, generic companies have typically already jumped through all the necessary regulatory hoops to hit the market the instant the core patent expires on a brand-name drug.
Typical example: Lipitor was approved in 1996, and its core patent is due to expire only this year. Data exclusivity ended years ago. Even if it were extended to 12 years — do the math — generic competition would still be ready to hit the ground this year. Of course, Pfizer is paying the first generic competitor to delay introduction of its drug; such pay-for-delay deals are common and obscene — the FTC and some legislators are attempting to outlaw them but face an uphill battle.
Biopharmas argue that they need longer data exclusivity than is accorded small-molecule drugs in part because the gap between the patent and regulatory approval is longer for such complex agents. The FTC rebutted that argument in a report published in 2009 (I think; my link to it is on another computer). The FTC in fact argued that biologics should have zero data exclusivity and rely solely on patents for their IP protection.
The question of what biopharmas actually gain from 12-year data exclusivity is more complex than has been discussed on FDL to date. I believe it primarily comes down to reduced litigation costs and increased investor confidence rather than an actual delay in approving a biosimilar. The questions of how biosimilar is biosimilar enough and of “evergreening,” which you raise through your example of pegylation, are important side issues I don’t have time to address here and now.
To be clear: Although my understanding of what biopharmas gain from extended data exclusivity has grown more nuanced since July 2009, when I first alerted FDL to the issue (a good month or so before Jane took up the cudgel on the cause), I oppose it no less now than then.
iI’ve been tracking this stuff for the last 17 years. There are drugs that have been on the market for over 40 years that are still under patent exclusivity. The patent is simply sold by one manufacturer to another manufacturer, which somehow confers extended exclusivity of the drug’s manufacture to the new owner of the patent.
The drug oxandrolone is a perfect case in point. It has been on the market since the 1960′s, and has never been made by more than one manufacturer. It’s price to consumers has increased over 100-fold since the the 60′s, which is implausible in a truly free market where a drug’s production–completely synthesized in a lab–has been known about for this length of time.
Even more interesting is that the only entities that can import drugs from a foreign source are the current American drug manufacturers. So in the case of oxandrolone, the American producer of the drug can import it, but patients and doctors cannot. (I’ve talked to and discussed this extensively with the US Customs Dept.)
Talk about a rigged system.
Jon, Is there anyway that we can use the new Coporate Personhood ruling to our advantage?
You may wish to look at the current AT&T efforts to go back to the Supreme court to squash any public viewing of their privates. LOL!
Can you imagine that? This company had no problems intercepting our calls and internet but now want their own privacy protected.
From the very JUDGES that stated the Constitution does not guarantee ANYBODY a right to privacy!!!!!!!!!!!
More often, though, in America, they seek corporate welfare from the government. They make huge donations to politicians in hopes that, in exchange, the politicians will give them hugely profitable government subsidies or special government-protected monopolies
Which is exactly what was/is happening on the State level with health insurance companies.
There was never any “free market” in health insurance.
There was never any “free market” in health insurance.
Exactly.
Exactly why there is not such thing as a ‘free market’.
There are free-er markets (comparatively speaking) but not a totally free market. Goverment collusion is a big part of the un-free nature of markets.