How We Fix This: The Case for a Publicly Financed Medicines Research System

Fran Quigley

“OK, but tell us what we would replace it with.”

The response in the online comments section following one of my articles on access to medicines may have been a bit curt, but the point was well-taken. Virtually no one who is not a pharmaceutical corporation CEO likes the current medicines system, with its ever-climbing prices causing deadly access barriers. But the question remains: are medicine patent monopolies and the resulting high patient costs a necessary evil?

The answer to that question is no, and it has never been more persuasively provided than in Dean Baker’s new book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.  Baker is an economist and co-director of the Washington DC-based Center for Economic and Policy Research, and widely admired and cited for his books and his blog posts about intellectual property, employment policies, and globalization.

In Rigged, Baker returns to the challenge he and others have engaged before: explaining what a medicines system would look like if it was based on the principles of the human right to health and medicines access as a moral imperative, not a tool for record-breaking profits. Baker’s explanation, which takes up most of a chapter in Rigged, is the most accessible and compelling one yet offered.

Baker starts his case for a publicly financed research system by referencing three inarguable premises. First, there has been an enormous increase in intellectual property protection, especially for medicines, in the past 40 years. This reversal of the generations-long practice of treating medicines as a public good started with the 1980 Bayh-Dole Act in the United States allowing private parties to claim monopoly patents on government-funded research. In 1995, the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement forced the global community to adopt US-style patent protections. In the years since, many “TRIPS-Plus” bilateral and multi-lateral trade agreements have erected even more imposing monopoly protections that block access to medicines.

Secondly, Baker references the compelling research and analysis, particularly that of David Levine and Michele Boldrin, showing that a patent monopoly system, with its incentives for research on products that cater to the global wealthy and culture of protectionist litigation and secrecy, is a drain on innovation.

Baker’s third and final premise is the most important one: a publicly financed medicines system is well within reach because, for all intents and purposes, the current system is already publicly financed. Governments spend billions of dollars each year in the most risky early-stage research for medicines. Then, through their health care programs, governments spend billions of dollars more purchasing the fruits of that research at monopoly-inflated prices.

Those billions of dollars already pouring into a dysfunctional system hold the key to reform. The industry trade group Pharmaceutical Research and Manufacturers of America, PhRMA, claims that its members spend $50 billion per year in medicines research. That privately funded research forms the foundational argument in support of the current monopoly patent system and its windfall profits. But what if we could find in the current medicines system the public dollars necessary to replace that research, and then some?

Baker does the math for us and the results are stunning. We know from long experience with generic drug alternatives that, if the government stops granting monopoly patent protections on medicines whose discovery it funds, the price of those medicines drops on average 90%-plus. As a very tangible example, the many cancer medicines that now cost over $100,000-annually could be available for a few thousand dollars, within the affordability range for middle-income patients and, for low-income patients, readily subsidized by governments.

Publicly funded patent-free research would be enormously more efficient and effective than the private research now conducted. Publicly funded research avoids the toxic “me too” incentive that causes corporations to devote its resources to the profit-seeking quest to duplicate existing high-revenue drugs. And significant benefits will flow from making research results publicly available and able to be built upon by subsequent researchers.

Even when assuming the most conservative estimates of the benefits of this alternative approach, Baker calculates $329 billion in annual US savings—enough to replace the private industry’s claimed research expenses several times over. His high estimate is a whopping $800 billion-plus in savings. Baker’s calculations are admittedly US-centric, but he notes that a system of international coordination of R&D support, such as the global R&D agreement already being pursued by advocates at WHO, would follow the same principles.

Baker’s model for publicly financed patent-free research still includes a role for the private pharmaceutical industry, assuming it can re-orient itself toward innovation and discovery as opposed to its current marketing-focused business model. Research funding in this model can resemble the existing contracting system in the US Department of Defense, which pays private corporations to conduct research that has led to groundbreaking technical innovations. The key difference is that the compensation for the pharmaceutical industry will come up front, through a winning bid to conduct research that is in the public’s best interest, instead of the pay-off being monopoly patent price-gouging at the end of the process.

Baker notes that this path for continued relevance and revenue for the pharmaceutical industry helps increase the odds of this model becoming a reality. But it won’t be easy. The industry’s diversions of some of its windfall profits to political lobbying, campaign contributions, and image marketing has built it considerable political clout. So Baker also makes the case for an intermediate step of publicly funded clinical trials, targeting the stage of the research that is now largely privately funded. But it is also a stage of research that is widely criticized for its lack of transparency, connectivity to marketing in lieu of fact-finding, and skewed reporting that favors the corporation sponsoring the trials. In a publicly funded system that avoids the distortions of patent monopoly rewards, there is no incentive for those flaws to be perpetuated.

Baker’s description of his model is heavy on the numbers and discussions of marginal cost pricing, deadweight loss, and elasticity. He is an economist, after all. But he concludes his analysis by stepping away from the spreadsheet and pointing to the true bottom line: The current system of medicine access leads to widespread, needless, human suffering. A better one will not just save dollars—it will save lives.

Fran Quigley is a clinical professor and director of the Health and Human Rights Clinic at Indiana University McKinney School of Law, and a coordinator of People of Faith for Access to Medicines. His book, Prescription for the People: An Activist’s Guide to Making Medicines Affordable to All will be published by Cornell University Press this fall.