Acton Commentary

D.C.’s Drug Problem


A crisis has beset our nation’s capitol, in the form of an out of control drug problem. I am not here referring to the very serious problem of illegal substance abuse in our nation’s capitol, but to the war being waged against our nation’s pharmaceutical industry. The most recent offensive in D.C’s “war on drugs” comes in the form of the “Greater Access to Affordable Pharmaceuticals Act”, commonly known as Schumer-McCain, in reference to the honorable gentlemen from New York and Arizona, the legislation’s chief senatorial sponsors.

This act attempts to address the serious problem of soaring drug costs for seniors. It is clear from both a demographic and public policy perspective that some form of retirement relief is necessary for the growing population of our nation’s seniors. The ability to effectively treat the newly emerging medical conditions resulting from increased longevity will be more important than ever. As life expectancy continues to climb in the United States, there will be a growing challenge to policy-makers to foster a regulatory environment more responsive to the need for new and more innovative drug development. The Schumer-McCain legislation seeks to address the price issue by weakening patent protections and further eroding the intellectual property rights appropriately afforded to pharmaceutical companies.

Without going into the highly detailed provisions of the legislation, its most significant effect will be to allow generic drug makers to begin the manufacture of previously patented drugs sooner. The bill would accomplish this by reducing the shelf life of patent protections on certain drugs. Two serious deficiencies mark this legislation, however, and these deficiencies contain within them the potential to do long-term harm to the development of the innovative medicines necessary for sustaining public health.

First, this legislation does not take into account the onerous and interminable regulatory process currently imposed on drug makers seeking to bring new products to market. According to most estimates, the average time for FDA approval for a new drug runs somewhere in the neighborhood of 8-12 years. As a result, the regulatory approval process constitutes approximately half the effective lifetime of patent protections, which are in force for 20 years.

The second deficiency of the Schumer-McCain bill is intimately related to the first. Drug makers incur steep costs in the process of research and development. The equipment, personnel, time, lawyers, and compliance with onerous regulatory processes constitute but a few of the costs a drug maker can expect in the research and development phase. On average, a pharmaceutical company spends about 14 years and $800 million in the development of just one successful medication. As a result, it can take up to ten years just to recoup the costs incurred in the research and development process. Usually, a drug maker doesn’t enter into “profitability” for a newly marketed drug until nearly half of the patent’s life has expired.

In understanding the serious deficiencies of this legislation, however, there is cause for even greater concern, especially when these deficiencies are examined in light of the demands of justice. Moral analysis cannot be ignored for the sake of political expediency, no matter how well intentioned the proposed policy. Justice demands that one receive that which he is due. In the case of name brand drug makers, it is they who have born the costs of research and development, footed the bill for regulatory compliance, and endured the burdensome FDA approval process, in some cases, for more than a decade. By reducing the shelf life of patents, a generic producer may begin manufacturing a previously patented product sooner than current law allows. This has the effect of limiting the ability of name brand producers to recover the costs of their hard work, innovation, and investment. Such a policy enshrines injustice in the name of helping seniors.

It is possible that Schumer-McCain might lower costs for seniors on certain drugs already invented and marketed. Such a gain, however, is quite limited to the near term. A longer view of the situation indicates that such a short-term gain will have long-term consequences. The competitive edge possessed by a pharmaceutical company lay with its ability to develop new products and usher them to market. When that new product hits the market, the manufacturer must recoup costs as well as make the profits necessary to fund the research and development of future products. Since future product development largely depends on present profits, Schumer-McCain’s attempt to lower costs by limiting the scope of patents will have the effect of limiting a drug-makers ability to finance the new medicines seniors will need. Forcing drug companies to be less responsive to the genuine human needs expressed in market demands is bad news for America’s growing senior population.

No doubt, seniors all across America need real retirement relief in the form of lower cost prescription drugs. This is best achieved by relieving the regulatory burdens currently placed on drug companies and by shoring up patent protections. Current inefficiencies within the regulatory process hinder the development and delivery of the life sustaining drugs needed by many seniors. The ability to move drugs in a more cost effective and timely manner from development to delivery would allow drug manufacturers to recoup costs earlier and to employ with greater effect the more efficient production technologies necessary for mass marketing and distribution. With the ability to achieve such innovations sooner in the production and marketing process, costs would begin to fall more rapidly, providing much needed price relief for seniors.

The latest offensive in Washington’s war on drug companies is further evidence of election year politics taking the place of sound analysis. Schumer-McCain, despite its laudable goals, threatens to undermine one of America’s most innovative and vital industries, as well as deny seniors the products on which their present and future health relies. Should such legislation become law, D.C.’s “drug problem” will become our own.