Complaints about high drug prices and the behaviour of pharmaceutical companies are piling up. At the same time, there is a feeling of powerlessness in society: we need these monopolistic companies, but hopefully we can keep them in line, even if we are, regretfully, at the mercy of their whims and the interests of their shareholders.
It is high time to break through this societal feeling of powerlessness. We cannot escape the question of whether the pharmaceutical industry, as it exists today, will ever be alright. In fact, the following essential question is in order: do we still need these companies? The answer is no.
Let’s take time for a thought-experiment. Developing drugs for new disease variants requires research. To achieve this, we do not need the current pharmaceutical companies per se. That research can be done at universities or by other independent research institutes, as is (in part) already happening.
Of course, this has to be paid for and there is a solution for this financial issue. To fund research into new medicines and medical devices, we are setting up substantial Pharmaceutical Research Funds, fed with public funding. Later in this essay I will come back to the question where that money should come from. One could imagine those Research Funds taking on a semi-public character, but how exactly is a matter of further debate.
Independent committees within those Research Funding Agencies, consisting of people from the medical community and from society at large, select the diseases for which research funding will be available. It is important that the Research Committees remain at arm’s length from the government. These Committees determine which research institutes will conduct research, including the testing of possible drugs. This approach relates not only to diseases that present themselves acutely, but also, for example, to pandemics that might occur in the future. The research assignments – the tenders – involve both basic and applied research. What we call alternative medicines, vitamins and other treatment methods could also be included in such research. The assignments may concern the tenders, as formulated by the Research Funds, but also proposals made by already existing research institutes themselves.
The Pharmaceutical Research Committees are going to issue tenders. Both university and commercial laboratories can bid for those. Of course, the current pharmaceutical industries can do that too – why not, they have a lot of knowledge. The big difference is that, in the case of an acquired tender, they get paid to do the research and testing – nothing else – and after that the acquired knowledge may be freely used.
To avoid misunderstandings, in my proposal there will be no pharmaceutical industry in the hands of the state. Preferably not. Every laboratory and every research institute – commercial, academic or otherwise – may consider the research assignments, issued by the committees of the funds. In that way there will be plenty of free competition. It is possible that the Research Committees will decide to award the research for a drug, vaccine or medical device to a few applicants with different research approaches. These applicants can, and should, communicate with each other about their interim findings, in order to enrich each other’s research.
All knowledge and its possible uses resulting from this research should be publicly and freely available. There are no more patents involved anymore. Our current research policies have created a situation in which the big pharmaceutical companies own most of the patents on medicines and medical devices. Both the high costs of acquiring and defending the patents and the resulting monopolies from acquired patents have resulted in highly overpriced drugs.
According to economist Dean Baker, without patent protection the US health-care system could make savings of up to 85 percent on prescription drugs. If he is right, or only roughly right, this fact provides a strong reason to abolish the patenting of all prescription drugs. In the current situation, the pharmaceutical industries acquire excessive profits, for instance, on their well-run blockbuster drugs and on drugs for rare illnesses, while other researchers are not allowed to use the available knowledge for further development of more effective or more socially desirable new drugs. The granting of intellectual property rights, including patents, was intended to promote innovation. But that reasoning is self-defeating. Once the patent is granted, the owner of the patent has an exclusive monopoly on the uses of the relevant knowledge. This therefore halts the further development of free innovation. Patents may promote innovation for a short while – but even that remains to be seen – after which they slow it down on a great scale. As a society we are doing ourselves no favours this way.
Let’s return to the thought experiment: we have eliminated patents on medicines and medical devices. There will be no more patented pharmaceutical knowledge anymore. What we then do is the following. We put that knowledge into a Pharmaceutical Commons – make it a community property. In principle, this knowledge may be used by everyone. But in the case of the actual uses of medicines and medical devices we need to place scientific, social, economic and moral constraints on how, by whom, and under what conditions that knowledge may be used. Commons are always regulated – they should be -, so here, in the case of pharmaceuticals, as well. This fact is immediately important when, with that knowledge in their pockets, manufacturing companies will start to manufacture pills, powders, potions, vaccines and the like.
In itself, there should be no restriction as to which companies can do that, but they do receive, from our societies, a package of conditions. Obviously, for Europe, the EMA – the European Medicines Agency – has to approve the quality of what is produced. Equally self-evident is that the manufacturing companies deliver their manufactured pills, powders, potions, vaccines and the like to pharmacies at cost price – with a reasonable, modest profit. A corollary condition is that the cost price calculations must be completely transparent. The producing companies are bound by a price ceiling, because they use knowledge paid by public money and organized by public institutes.
We have now arrived at the point – to bring it sharply into focus once more – where the funding of research was the responsibility of the Pharmaceutical Research Funding Agencies, while the producing companies have to supply their medicines at cost price. This means nothing more or less than that drugs will henceforth be available in pharmacies at a normal price, which will be a fraction of what is currently being charged to the pharmacies, and thus to the patients. Compared to the current absurd situation, this is revolutionary. Of course, this substantial price drop will have a more than beneficial effect on health care costs. On the medication side, these health care costs will be significantly reduced. Moreover, these are medicines and medical devices that have been developed from a social and health-care interest, paid for collectively by us as citizens. We have strongly reduced the commercial weight of shareholders and marketing.
Now the time has come to ask the pressing question of how the Pharmaceutical Research Funds will be filled with substantial amounts of money. There is an answer to that question. What we will do is the following. On top of the very low price at the pharmacy, we levy a surcharge, an amount on top of the set price of the drug. One can refer to this surcharge as a levy as well. The resulting funding will be used to replenish the Research Funds for new research. We, as a society, will use these crucial surcharges to finance the research we want. The old principle applies here: he who pays the piper calls the tune.
Instead of levying a surcharge on top of the set prices of drugs at the pharmacy, one may imagine that we don’t implement this surcharge: alternatively another option could be that the health insurance providers finance the Research Funds. After all, in our proposal drugs and medical devices will be substantially cheaper, so the costs for the health insurance institutes will diminish equally. From those savings they could finance the costs, the money needed for the Research Funds.
How much money should be deposited in these Research Funds to ensure that sufficient short- and long-term research, for various types of diseases and disorders, can be broadly funded? Prospective economic research is needed to answer that question. How much funding is needed each year to fund the necessary research, including all the relevant tests? If we know that, then that amount can be calculated back to how high the surcharge should be on top of the price at the pharmacy, or otherwise what the health insurances should contribute.
Economist Joseph Stiglitz compares what we now, in the current undesirable situation, have to pay at the pharmacy, with a tax: you have to buy the overpriced medicine, since there is no or hardly any alternative. So this constitutes a kind of tax. But then the fundamental principle “no taxation without representation” should apply. With our surcharges, we ourselves fill the Research Funds, where people from the medical world and other segments of society decide for themselves what diseases the money will be used for.
Of course, what I am proposing can only be started if all, or at least a significant number of, for instance European countries participate, and hopefully other countries as well. That will require some missionary work, no question about that! The pharmaceutical industries based in France, Germany and Switzerland, will not let this happen silently. For the pessimist – looking at this playing field – my proposal is already a lost cause. But it does happen sometimes that David defeats Goliath – witness the court case in the Netherlands about climate-issues, in which Milieudefensie (Friends of the Earth) beat oil giant Shell. It has to be said that while today’s pharmaceutical industries are horrifyingly powerful monopolists, they are not loved, to put it mildly, and that creates opportunities.
Suppose we get to the point where Europe is in the starting blocks for a radical transformation of drug research and production: we have placed the relevant knowledge, financed by the Research Funds, in a Pharmaceutical Commons. In principle, because of its free availability, it may still be used by the present pharmaceutical industries to produce and sell drugs at their usual overpriced rates. In practice, however, in the new situation of free competition they will be quickly outdone by the new producers that use the cheap freely available pharmaceutical knowledge, consequently at very low rates.
Of course, in order to develop medicines for new diseases, it must also be possible to make use of knowledge already available in society. The problem that arises here is that the uses of much of that knowledge is already privatized through patents by the present pharmaceutical companies. In my analysis, these patents should never have been granted, but that is a thing of the past: don’t cry over spilled milk. Still we do want to use this knowledge. An option is to buy them out, albeit under duress, or perhaps better yet expropriate them, for a reasonable fee. There will be some wrangling about how much, but that can be worked out. Questions that will arise include, for example, how many years certain patents would still be valid; what is their real value and not the value inflated by big pharma. A second option is to apply compulsory licenses. As Shobita Partharasarathy has demonstrated, this procedure has been increasingly and repeatedly used (primarily in Europe) in a variety of social controversies concerning the patenting of life forms.
Although buying out may temporarily involve a lot of money, that would be easily cushioned because, in my analysis, drugs will become substantially cheaper at the pharmacies. Of course, we must be sure that the incumbent pharmaceutical industries do pay taxes on the amounts they will receive as buyouts! That is something they, with their epidemic tax evasions in mind, have yet to learn. We are going to check that.
One of the many benefits of my proposal is that it puts a brake on the spread of illegal drugs. We know that, worldwide, there is a lot of that in circulation, often of questionable quality, or just plain fake. This is a catastrophe for public health. Because the prices of medicines, according to my proposal, will be considerably lower than they are now, a significant proportion of the illegality in the area of medicines will be curbed. Of course, not all the illegal stuff will disappear from the market, but the incentive to offer illegal pills, potions and powders over the internet will diminish. The illegal market can hardly compete with the cheap drugs that will be available at pharmacies after the introduction of my proposal. This is a gain for public health.
Another advantage is that pharmaceutical knowledge and its use will no longer be privatized. Henceforth there will be a large reservoir of insights available on which one can build. What is of great importance at the same time is that knowledge about failures and unsatisfactory outcomes of research will become publicly known. Much research leads, seemingly, to nothing. That’s part of the game. But knowledge about failures is extremely useful. There will be no need to invent the wheel a second time. Moreover, knowledge of a failed research project can put another research group on a track that does lead to results.
Medical and pharmaceutical research groups at universities will have to get used to the fact that they no longer have to operate in a market, because there will be no market anymore. In the current situation they often have to resort to secrecy in order that their patentable research results can be sold to pharmaceutical industries. After all, that is the common earning model of their research institutes. In the new situation they can simply compete for the research assignments – the tenders – of the Pharmaceutical Research Committees, where they can propose as well projects for further development and implementation of their research results.
It is a well-known fact that serendipity, the stroke of chance, sometimes produces ground-breaking results. The more freely shared knowledge there is, the more likely it is that happy coincidence can strike. Because of this unpredictability, it is advisable to provide long-term funding from the Research Funds to a number of research laboratories that specialize in certain areas. It is of course evidently so that teams of researchers working together over long periods of time can produce extraordinary results. Expertise is not something that just happens – it must be nurtured and be allowed to thrive in collaborations where people can – so to speak – read and write together. This requires continuity and stability.
The big difference with the research laboratories of today’s pharmaceutical industries is that these labs strive for knowledge that is exclusive, patented, and can be brought to the market, especially the kind of knowledge for which a substantial market exists or can be created. In my proposal, even in the case of the long-term funded research institutes, this exclusivity does not exist, quite the opposite. The primary goal is not to focus on markets and shareholders, but on the health interests of different societies, both poor and affluent. That is why the long-term funded research laboratories must continually discuss their research programs with the Research Funding Agencies. However, within this constellation, there should and will be ample room for the unexpected, the pharmaceutical gems that populations were not waiting for, but suddenly pop up as a ʻgiftʼ for the well-being of our public health care.
How does such long-term funding relate to the tenders issued by the Research Fund Committees, as described above? It is fruitful that two things go together: the specific requests for medicines and medical devices from society and the independent research programs of the research laboratories. It goes without saying that research laboratories without long-term funding can and will respond to the tenders from the Research Funds. Increasingly, it appears that these often smaller institutes prove to bring about fantastic innovation.
A crucial difference with the current situation is that, in order to further develop and test their discoveries, researchers no longer have to sell their heart and soul to big pharma. The same applies, of course, to public medical research institutes. Presently, if something promising is discovered there, all relevant knowledge has to be transferred to large commercial laboratories for further development. From that moment on these laboratories will be in the front seat. Knowledge and a knowledgeable infrastructure financed by society – coming, after all, from the universities – is handed over to them at a relatively low price, and subsequently we, as society, have to pay a top price. My proposal will put an end to this cash fest once and for all.
When smaller university institutes or research laboratories without long-term funding are on the road to a major discovery, better-equipped entities are needed for further development and testing. These could be the larger long-term funded institutes. It should be repeated once more: they cannot exclusively appropriate, patent, or monopolize that knowledge. From then on things develop as described above: all applicable knowledge, including the failures, are freely available, and drug-manufacturing companies can elaborate on that, under the conditions I have indicated above: production is fine, but the resulting products have to be delivered to the pharmacy at cost price.
In this essay I constantly talk about the Pharmaceutical Research Funds, in the plural. It is an open question whether there should be just one, larger Research Fund, with several departments, or whether the establishment of several Funds is more appropriate. Of course, this is not the only question that my proposal of disengaging big pharma raises. It is necessary that a research group, a task force, will be formed, consisting of people from different disciplines: pharmaceutical and medical sciences, organizational science, (political) economics, legal sciences, sociology and political science. It should be possible to free ourselves from big pharma and to bring medicine back from the private to the public domain. That much is clear. But at the same time there is a long road ahead of us, with many obstacles.
If we follow this proposal and make big pharma superfluous we will kill several birds with one stone. Health care will no longer be primarily subservient to shareholders and will become more affordable. All the research needed to develop medicines will no longer be surrounded by patents, but will return from private to public ownership. The most essential part of my proposal is that access to medicine and medical devices will once again become a human right, and no longer the plaything of big pharma shareholders. They should stay far away from it, and my proposal shows that that is possible.
Health care should not be privatized. Soon, in my view, medicines should be developed that the medical world and society itself have decided on. And if we are no longer inundated by marketing for medicines – one of the sources of the current distrust of big pharma – we could have an open and more fact-based discussion in society about the usefulness and uselessness of certain treatments.
What we all know is that today’s pharmaceutical industries have “priced themselves out of the market”, to use a term they understand, by their monopolistic positions, pricing, behaviour and profits. Whatever good has been done by pharmaceutical industries in the past, we must recognize that their business model is out of date. What they were able to, we as a society can do much better now: invent and make medicines at an affordable price, without being bound by opaque commercial interests and excessive profit schemes.