In my preceding posts, I’ve argued that Howard’s rejection of Labor’s seemingly innocuous PBS amendment was a high-risk piece of political brinkmanship, designed to force Labor into yet another backdown. But another thought occurred to me and others (for example, Brian Bahnisch in this comments thread), today. Perhaps the amendment isn’t innocuous after all, and Howard has been told that his great and powerful friends won’t wear it.
Certainly this is the line that Latham needs to push. So far, the debate seems to be going the right way. Howard’s counterargument, that the amendment might discourage US companies from investing in Australian ideas is a dangerous one. As I’ve pointed out previously, it’s inconsistent with the line that, as far as the PBS is concerned, the FTA is a non-issue.
John Quiggin 
Maybe, but more likely Howard thought that he was comprehensively beating Latham in the public debate on this (Labor divided, Labor indecisive etc) and that by rejecting the amendments, and so stringing out the issue he could finish Latham off once and for all.
Interesting that Beattie, Bracks and Carr have all conspicuously supported Latham today.
Your link to Brian Bahnisch’s comment is weird, John. It goes to some internal Movable Type page.
Question from a newbie: why *are* the state Labor premiers so gung-ho for it? This seems to be a weak point in Latham’s front.
We’ve discussed the Premiers a bit in earlier posts – essentially Premiers love making deals, even when the costs exceed the benefits. Plus, Carr was happy to knife Latham.
But Howard’s gamble has had the happy effect of pulling the Premiers into line behind Latham.
i do love that last week john howard seemed unable to say anything about the fta without saying something along the lines of “the labor premiers understand what’s in the national interest”. that, at least, has backfired on him a little.
If the changes were made, would that mean that the US would have to re-approve the treaty or not?
Because that could take months…. so it is no wonder why Howard wants it passed unchanged.
No that doesn’t make sense otherwise their acceptance of the other amendment would similarly be a problem.
John, I’ve only got general knowledge in this area, but I understand our intellectual property base in pharmaceuticals research is quite significant, but we don’t have a BHP in the area. We have a plehtora of small companies that lack the grunt to bring even one drug to market. At some stage they have to sell it to the big multinationals to prove up and market in return for licence fees.
It is not beyond American Big Pharma to threaten to withdraw their research funding from Australia IMO. After all we have been messing up their game of extracting maximum profit with our world class PBS, which is a threat to them, because other countries and individual American states have been learning from us, as was shown in Monday’s 4 Corners program.
They’ll smoodge us, but if necessary they’ll play rough if they think that’s what it takes IMO.
Does anyone have an answer to my question regarding Big Pharma, to whit, is the high price paid by US pharmaceutical consumers subsidising the R&D efforts of the US Drug Companies.
And are foreign consumers, using generic or price-controlled drugs, taking a free-ride on Big Pharmas investments?
If this is the case, will global insecurity in bio-medical IP, or hard-ball drug pricing policies by national authorities, deter US investment in the Pharma industry?
Drug development is expensive and risky:
It is not much point getting cheap drugs if we kill the goose that lays the Golden Egg.
A good source is the British Medical Journal and anything written by Ray Moynihan. The web address is bmj.com I haven’t a lot of time to look but I did find this news article “US politicians want federal funding to discover cost effectiveness of new drugs” published in September last year
http://bmj.bmjjournals.com/cgi/content/full/327/7416/642?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&author1=moynihan&andorexactfulltext=and&searchid=1091614012572_3038&stored_search=&FIRSTINDEX=0&sortspec=relevance&resourcetype=1
Try this one by John Merson Jack … he says necessary R&D including the complex raft of clinical trials amounts to only about 15% of US costs.
I don’t have references on hand but most of the R&D risk /effort is funded by the public purse through universities and research councils. Big Pharma spends far far more on advertising to get consumers to demand their drugs and bribing (sorry cross that typo out) I meant schmoozing doctors to prescribe the drugs than they do on true R&D. iirc depending on accounting rules a lot of advertising and buying /sponsoring University Profs and A Profs counts as R&D.
cs, that’s the proportion of costs applicable to a successful drug. What proportion of successful drug sales revenue is chewed up by the duds? As Jack points out this is probably rising with diminishing marginal returns.
It’s not clear from the article whether these are fully distributed costs (ie including ‘duds’) Observa. In any event, the big drug companies are rolling in superprofits via protection rackets, and there is evidence that many of the ‘successful’ drugs are in fact ‘duds’, which helps to explain why up to 40% of costs are for ‘marketing’, as FXH points out. Given how much know ‘corruption’ exists in this game, I think the onus on trying to establish diminishing returns to the point of sacrificing r&d lies on your side of the play.
It has been interesting to see Tony Abbott go off about this matter. The comments by the PM that he won’t accede to the request for what he describes as minor changes lades to the question “If it is so trivial why is there such a strong and negative reaction by the Coalition?”
Beazley would have given way to Howard and made everyone else lose heart. He would also have spoken on the issue in such a way as to create a Huh? response in the electorate.The small target approach is very silly for men who have size.
This issue is of course about our health system and what it means to be an Australian working for the benefit of Australians – it appears to be a piece of political theatre where for a change Howard is wedged and where Mark Latham has struck a position which recognises the opposition of many of his supporters whilst also supporting the American alliance.
Can he keep it up and win the population over? Possibly as there aren’t too many benefits for Australians in implementing the American medical model where so many are denied decent medication and treatment because of the greed/business acumen of those who make and prescribe drugs.
from what I understand the return on the successful druigs outweighs the losses on the duds by anything from 10:1 and upwards. Latham has little to lose by sticking to his guns on this whereas Howard has it all before him. No guts, no glory and lo-gloss retirement
Jack Margo Kingston put some interesting stuff re Big Pharma up on her site today. Scroll past the stuff I wrote when I was tired this morning and she has a list from Crikey of all the staffers from this government who are now working in Pharma. Then she has a list of Big Pharma, their profits and revenues. Actually they are not as big as I had thought they might be, but some of them have a very healthy ratio of profits to revenue it seems to me.
The figures cs gives on the cost of bringing drugs to market are as I have understood them. I’m not sure how the duds are counted, and it is a significant problem for the companies. Discovery isn’t the most expensive bit, as I understand it. The development of a really new drug takes about 10 years or more, I believe. The animal and human trials are very expensive, and a drug can fall over at the last hurdle because of side effects.
John may know for sure, but Big Pharma is often cited as the most profitable industry sector of all public companies.
btw please ignore that ‘trade analyst’ label Margo put on me. It’s embarrasing and the last thing I’d want to be. I might end up like Alan Oxley!
You’ve done great work there, Brian. Might I just add a thought here, too, for those who don’t get a moment to wander over to Back Pages: by honing this FTA debate down into pharmaceuticals, ie, effectively Labor “protecting Australians’ health” Latham has neutralised all that television advertising by the govt on Medicare. That’s a buzz. Great to see politics in action where it should be, not through advertising agencies.
Can the FTA restrict the use of cheap generic drugs?
Brian
Thanks for the tip on Margo. You have my admiration and sympathy. One may occasionally, whilst fossicking in the great drifts of her piled-up drivel, find a nugget of useful information in her Diary. But I am happy to let you pull that duty.
The key ideological issue here is whether the US’s lax attitude to pharma drug oligopolies and tight attitude to drug patents assist in the financing of a greater rate of life-saving drugs than the less-patent regulated and more price-controlled model pursued by other nations.
The OECD scoreboard on industrial sci-tech shows that the US punches far above its weight in Health-related R&D
Ron Bailey has a great article in Reason, giving a fair-minded analysis of the economics of the Pharma industry.
One can level plenty of complaints against US Pharma companies, such as “me-too” bells and whistles drugs, hyped marketing on non-diseases and corruption of medical authorities, but they are at least out there finding usable cures for diseases.
That is more than most other nations drug industries do.
Look at some of Ray Moynihan’s work in the BMJ Jack and you might be a little less impressed about the work of the big pharmas. Sure they get some things right but they don’t mind covering up mistakes or ruining the lives of people who point them out.
Jack
The OECD scoreboard that you quote is for direct government investment in drug R&D. But says nothing about the effectiveness of this funding. For instance, there’s nothing to suggest that more drugs are developed in the US per dollar spent than elsewhere. Given that German and Swiss companies make up more than half the pharmaceutical industry, I find it unlikely that the US is punching above it’s weight relative to Europe in the creation of new drugs.
More importantly, the pharma industry was the first industry to ‘industrialize invention’ during the last decades of the 19th Century. The article in Reason that Jack Strocchi refers to makes out that it is a lottery as to whether a new drug is developed or not.
This is just not true – the chemical industry knows exactly how much work it will need to do to acheive it’s aims. They do not throw money at a lot of different high-risk projects knowing that virtually none will pan out, but that a few may score real jackpots.
Research is not done by gold prospecting but by business planning. Companies decide beforehand what the risks and likely benefits are, how they can be minimized and whether a particular direction of research is worth pursuing.
The consequence of this well established approach is that the amount spent on R&D balloons higher and higher because of it’s inherent lack of innovation. In the past the major companies have maintained cartels of various kinds to ensure that prices can be fixed and this R&D style can be supported.
I wouldn’t worry about the pharmacuticals’ ability to achieve a decent enough return on their investment. They control large parts of the clinical trials process – the process by which the efficacy of their product is shown because they fund it. The journals are full of successful trails but how may trials that showed the new drug wasn’t better or even worse than the existing treatments were buried by the drug companies (not including that journals’ often have substantial drug advertising in them to help defray the cost of publication)?
They are also getting a second bite of the cherry on their older drugs. They have been increasingly been releasing old drugs in slow relase preparations which make them more clinically useful (lesser side effects, more even dosing and greater possible doses because the peaks and troughs) getting patents on these and profiting for a much less investment than having to start from scratch.
As for finding new milecules and new treatments? The genetics and genomics revolution is starting to have effects on drug development – and promises to unlock many promising doors (you can already start to see the effects in cancer treatments where they are trialling agents that inhibit gene expression of growth factors in tumours) . The issue of gene patents is an issue in itself though.
The drug companies do earn higher than average profits bur experience higher than average levels of risk. Par for the course. Public money going into more fundamental drug research can partly be understood as subsidies directed toward provision of a public good — something that will be underprovided by markets because of spillovers.
The AFR this morning is interesting on the PBS and the FTA. The leader by Andrew Christie and Sally Prior (Intellectuial Property experts) suggests that Labor’s proposal to amend the FTA to exclude spurious patent claims won’t work.
The editorial AFR is scathing describing Latham’s proposal as ‘arbitrary and unresearched’ suggesting he take out a patent on his new ‘eccentric’ approach to politics –announce policies one day and research them the next’. He did it on Iraq and now seems to be doing it on drugs. And the whole thing seems to be nonsense politics (an illusory defence of the battlers in suburbia from high drug prices) that has nothing to do with the case for the FTA.
It is discouraging.
Assume for a moment that there are a set of bogus patents on pharmaceuticals which Labor’s amendment will protect generic drug manufacturers from.
Does the FTA require that Australia legislate (or regulate?) to recognise these patents where we didn’t before?
I assume that must be the case, but I haven’t seen anyone actually say it.
No Tom – the FTA doesn’t change anything. And Harry, while I also doubt the merit of the amendments, I am curious as to how the politics will play out. This could definitely work for Latham. If it does, then he deserves it – because Howard was also playing the FTA mostly as a political tool. The FTA has always been more interesting politically than economically (and this is coming from somebody who has spent a lot of time looking at it from an economic perspective).
Is it possible to have a patent law that grants over old drugs which found new uses? There is already a precedent with Thalidomide being used in cancer treatment.
The cost of new drug development has been prohibitive, but it is only in new drugs where the investment can be recouped, since old drugs don’t usually enjoy patent protection.
However, old drugs have the benefit of have known side-effects, and the benefit of long testing. It would probably take less time and cost less money to find new uses for it.
howard has tampad himself with asistance from Iron Mark.
Just as Howard was deceitful over Tampa so is Iron Mark over this.
In Tampa howard had a simple message to sell but the ALP had a complex one.
It is the mirror image this time.
that is why howard is in a mess and he is digging a bigger hole each day.
Chui, I think the issue of new uses does come into it, but I’m not a patent lawyer. One of Drahos’s concerns is that generics sometimes specify a new use when they are developed. He says at the moment they don’t have to do new field trials. He says that under the new regime they may have too, but such trials carry an inherent risk and ethics committees are unlikely to approve them. If so it is a catch-22, but I’m not sure whether this is a problem in the real world as distinct from Drahos’s brain.
[Warning to Back Pages readers – Duplicated thought]
In parliament Howard said this: The whole basis of the patent law is to encourage innovation, to encourage the entrepreneurial spirit, to encourage people to lodge applications to protect their good ideas.
If he was concerned about innovation this his government wouldn’t have cut the R&D Tax concession from 150% to 125%
Big pharma is awash with money. You can tell by the size of their marketing budgets directed at doctors, both in and out of hospitals.
Example: My wife works in a hospital, as a social worker. She doesn’t prescribe drugs, and can’t even recommend them to patients. Yet, each week, my wife brings home a bunch of pens, funny shaped notepads and other toys, all with drug company logos. And the doctors are certainly given more and better toys than the social workers.
And where does this money come from? Why, your taxes, of course.
Trying to make sense of the FTA debate
As usual, commenters have contributed mightily to the discussion about the politics and policy of the passage of the US-Australia free trade agreement (FTA) through the Australian parliament. See comments in my post below, and also here and here. Below…
Trying to make sense of the FTA debate
As usual, commenters have contributed mightily to the discussion about the politics and policy of the passage of the US-Australia free trade agreement (FTA) through the Australian parliament. See comments in my post below, and also here and here. Below…