Opinion

Why is the government allowing its own drug research to be monopolized for profit?

Corporate profiteering is allowing dangerous diseases to fester

A rich man.

How do we eradicate HIV/AIDS? One route is a vaccine, but so far that has proved a very difficult research problem. There is an ongoing clinical trial of one promising treatment in South Africa, but unlike the smallpox or polio vaccines, it appears to provide only moderate protection. Another is "pre-exposure prophylaxis," or PrEP — drugs which prevent HIV infection if taken every day. One such treatment called emtricitabine/tenofovir (better known by its brand name Truvada) works very well for this, cutting the risk of infection by up to 93 percent.

But there is a problem. As The Washington Post reports, in the United States, Truvada is monopolized by the pharmaceutical giant Gilead, which charges between $1,600 and $2,000 a month for the treatment (the wholesale price is $1,414). Bizarrely, the studies proving Truvada works for PrEP were conducted and paid for almost entirely by the federal government (the Gates Foundation also helped). The Centers for Disease Control even holds a patent on this specific treatment.

Yet the government is doing nothing to prevent this outrageous price-gouging, which places a near-insurmountable barrier to getting the drug out to all who need it. It's an object lesson in the dangers of allowing private companies to profiteer off government research.

First, some background. Truvada was originally developed to treat people who already had HIV, as part of the usual suite of anti-retroviral medications to slow down the virus' progress. Two government-funded scientists proved it could be used to prevent transmission — first Thomas Franks at the CDC, who demonstrated it worked with monkeys, then Robert Grant, who showed the same for humans with a grant from the National Institutes of Health. That work was completed around 2004.

Gilead immediately set about marketing and selling Truvada for PrEP, which brought in $3 billion last year and $36.2 billion since 2004. Yet because of the eye-watering price (and broader dysfunction in the American health-care system), only about 20 percent of the people who need the drug are getting it, and many who do have to navigate hellish bureaucracy to get access. The extreme cost also sucks money away from other priorities, particularly for cash-strapped state Medicaid programs.

Meanwhile, the government isn't even collecting any royalties on this cash cow it paid to develop. Why is that? Georgetown Law Professor Neel U. Sukhatme told the Post it's because government officials want to facilitate private profiteering from government research:

Rather, NIH and CDC officials see their role as encouraging the commercialization of government-financed discoveries, not placing curbs on them, Sukhatme said. That tends to take patent infringement lawsuits off the table. "They may not want to be in the position of suing these companies that arguably are producing valuable stuff," he said. [The Washington Post]

In the first instance, it is outrageous that the government is just handing valuable research it literally paid for itself over to a private company so it can pillage American society. (A month's supply of the drug in South Africa costs about $6.) It should demand drastic price cuts, or license its patent to a generics manufacturer. Indeed, it could just manufacture the drug itself and sell it at cost.

But that reasoning shouldn't stop just at government-funded research. A patent is itself a government creation — a monopoly enforced through the state legal system. The purpose, as the Constitution spells out, is "To promote the Progress of Science and useful Arts[.]" Patents, and private pharmaceutical companies in general, are useful only insofar as they lead to the creation of broadly useful inventions and treatments.

Now, drug development is expensive, and there could be a place for private companies in the national research portfolio. But especially for vitally important treatments that are only needed for a small fraction of the population, allowing merciless monopolist price-gouging is simply untenable. For instance, Pharmasset (later purchased by Gilead) developed a genuinely revolutionary cure for Hepatitis C, which affects perhaps 41,000 Americans in acute form. But they charge about $84,000 for a 12-week course of treatment.

Incidentally, this kind of thing is why Americans spend roughly twice per person what peer nations in Europe do on pharmaceuticals. It's pure corporate profits.

If we want to eradicate HIV, which infects 40,000 Americans every year (or Hepatitis C, or many other diseases), the obvious best strategy is to make treatment widely available to everyone who needs it as cheap as possible. That's how it was done with smallpox. All people who need PrEP should have ready and dirt-cheap access to Truvada.

And as demonstrated by Franks and Grant, good old government research laboratories and grants work great to keep the drug development pipeline flowing. For private research, antitrust policy like forced patent licensing to stop monopolist price-gouging could keep other prices relatively cheap — or we could set up a prize system for certain key treatments (like new antibiotics), whereby the government makes a large one-time payment to any company that develops one, after which the drug goes into the public domain.

But allow unrestrained corporate profiteering, and we'll allow these dangerous diseases to fester forever.

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