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Pharmaceutical Policy Action Plan

Joshua Rutledge

Delaware Technical Community College

NUR 420

Dr. Lewis

October 8, 2020
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Pharmaceutical Policy Action Plan

Currently pharmaceutical drug prices in the United States of America has become a

national problem. Largely playing a role in this issue is the absurdly high price for insulin,

insulin is a biosimilar drug produced by genetically modified bacteria which synthesis this

crucial live saving drug. Currently the President of the United States has issued an executive

order to combat this national medication crisis. This is a problem not only effecting diabetics but

everyone paying absurd prices for drugs that cost manufacturers pennies to produce. Currently

the United States is the worst country effected with high drug prices this is largely due to our

capitalist-based society. It is a huge problem Americans are unable to afford medications and

have decreased accessibility to medicine due to high prices. The obvious solution would be to

impose federal regulations to limit the price of drugs problem solved right? Wrong, it’s not that

simple a lot of the times these companies spend hundreds of millions of dollars to research and

produce these medications to only profit on average $45 million over 20 years for a new product

launch if the drug does well (Francis, 2018). Inadvertently by cutting prices you cut research

projects for potentially huge drugs such as clonidine or Viagra, drugs with dual purpose

therapeutic effects that were discovered through research. So, the real question is how can we

increase drug consumer accessibility without cutting funding for research and development?

Current Legislature

One major issue in the pharmaceutical industry is the prospect of limiting costs for

pharmaceutical drugs with the aim to lower costs for the public consumer. Largely the reason for

high price pharmaceutical drugs is due to monopolization of the free market system, there’s no

competition. Patent law, Title 35 of the United States Code protects these companies’ rights and
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allows for them to monopolize drug markets (Hickey, 2019). Patent law gives the rights of

exclusivity for an invention for 20 years at the patent owner’s discretion. “Currently the three

largest manufacturers of insulins account for 96% of the global market volume” (Torres, 2020).

This year Elijah E. Cummings proposed the Lower Drug Costs Now Act (H.R.3) which aims to

place federal policy constricting the prices on insulin and some 75 select single-source drugs that

attribute to the list of 125 drugs that account for the greatest national spending This Act currently

being voted on in the House of Representatives would implement negotiated price thresholds on

these 75 selected current drugs, all new launch drugs, and insulin to not exceed 120% of the

global average price or 85% of the current US average price (Pallone, 2020). The problem here is

government overreach and constraining the free market system which could bankrupt companies

and prevent research and development for new medications.

Solutions

Now that the problem has been identified what exactly are some solutions? Well

currently H.R.3 is a great solution for the people but not the rights of the business owner,

inventor, or entrepreneur. Trying to formulate a solution for both big pharma and drug

consumers is no easy task but there are some areas that can be modified to reach a comfortable

compromise for both parties. One solution would be to modify patent laws currently in place to

expand on the Hatch-Waxman Act of 1984 (Hickey, 2019). This Act gave pharmaceutical

companies the opportunity to approach patent holding pharmaceutical companies and negotiate

generic drug deals to create generics under the discretion of the patent owner. My solution would

be to use this list of 125 high spending drugs established under the Lower Drug Costs Now Act

and enforce a policy for drugs on this list to open up patents to competitor companies for a

government controlled profit percentage. This is similar to what the Supreme Court will do in
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cases of patent infringement so for instance Smith and Wesson copied the design of the Glock

handgun, Supreme Court ruled in favor of Glock now for every Smith and Wesson sale for that

specific handgun a portion of the proceeds goes to the Glock Company. This allows for

competitive pricing lowering costs, the competitor companies would be able to profit, and the

patent owning company would remain profitable from the competitor subsides.

Another solution would be for the government to implement price cost ratio policy. So, the idea

behind this would be if the cost of insulin is 1$ per bottle, I’m currently selling it for 150$, I just

profited 149$. The government could propose policy, capping the price in which a

pharmaceutical drug is marketed at, in relation to the cost to manufacture the drug. The nice

thing about this idea is that even if they allow for large wiggle room such as a 20:1 ratio that

bottle of insulin is now 20$ instead of 150$ and these companies are still profitable 20:1.

Implementation

My plan for implementing some of these solutions would be to approach and lobby local,

state, and national stakeholders to assist me and sponsor for these policy changes into federal

government. Stakeholders for these policy changes would be both government and corporate

officials that have the connections necessary to implement bills into the legislative process. Local

stakeholders would be my local government officials or healthcare/pharmaceutical boards.

Current governor John Carney is a great example for a local stakeholder, he has political

connections, held a chair on the committee of finance during his tenure as U.S. Representative,

and was a huge supporter of the Affordable Care Act due to its financial benefits, which seems

like a similar viewpoint to my own policies. My plan to approach him about my policies is by

mail or community petition. For a State level stakeholder Delaware’s U.S. Representative Lisa
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Blunt Rochester would prove to be useful resource, she has a direct connection to the House of

Representatives and is co-chair to 2020 presidential candidate Joe Biden. Similarly, I would mail

her my suggested proposals or start a community-based petition. National level stakeholders

would be U.S. Senator Tom Carper who is a huge proponent of public feedback I would use

similar methods to mail him my proposals with community-based petitions.

Talking points

If I were to ever meet our state officials to propose my topic, I would start off by defining

the current problem with the pharmaceutical free market system and identify the demographic of

people affected greatly by this system. Next, I would start my talking points the first point being

the linear correlation between pharmaceutical profits and research and development. On average

pharmaceutical companies profit $45 million for a new product launch over the extent of a 20-

year patent (Francis, 2018). Secondly, I would identify the core of the issue which is the abuse

of Patent Law, Novo Nordisk, Eli Lilly and Company, and Sanofi - control 99% of the $21bn

(£16bn) global insulin market in terms of value and 96% in terms of volume (Torres, 2020). This

is largely since these companies currently hold the patents for non-animal derived insulin and

continuously modify the drug make up to extend the life of current patents (Amin, 2018).

Thirdly I would discuss the benefits of revising pharmaceutical patent law and the potential for

increased revenue both for competitors and patent holding companies along with the consumer.

A prime example of this can be seen with the Influenzas vaccine the World Health Organization

(WHO) convenes world experts twice a year to add emerging flu strains to update flu vaccines

(Rizvi, 2020). If government owned drugs/biosimilars must be openly shared for research, why

are drugs like insulin which are instrumental to survival allowed to be privately protected? I

would continue talking point in support of my policy plan using the argument for federally
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implemented price-cost ratio constraints. In a market research study on price restraints alone they

found it more efficacious to address the cause by changing the background conditions that foster

the monopoly, to provide incentives that promote more competition (Leonard, 2004). Finally, I

would finish my point with the effects of price reduction on the Medicare system and the

decrease in consumer costs relating to pharmaceutical medications. Costs in United States per

vial of insulin was on average $320, while in Canada the same medication under a different

name was 30$ (Torres, 2020). Currently Medicare will absorb 80% of the cost for insulin and

insulin related products which according to the previous statistic that Medicare pays 256$ for

each bottle of insulin in the United States (Medicare, 2020).

Conclusion

Pharmaceutical companies have always had very close ties with politics. This is partially

due to the large government regulation on pharmaceutical drugs enforced by the Food and Drug

Administration (FDA) and the large amounts of money that changes hands in the pharmaceutical

market. It is the job of the federal government to break up monopolies in the free market

capitalist system and through the abuse of patent law many pharmaceutical companies are taking

advantage of the United States free market system. My future goal for this policy plan are to

increase the competition in the pharmaceutical market, lower drug costs to the consumer, retain

profit for pharmaceutical companies to pursue research and development.

One instance of this abuse of patent law can be evidenced by insulin and the price

inflation for a monopolized drug in the free market. To combat this many politicians are in

support of the Lower Drug Costs Now act (H.R.3) currently under vote in the house of

representatives. This law bill proposes to combat the problem of pharmaceutical monopoly by
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putting price restrictions on select drugs. This solves the surface level problem by lowering drug

prices for consumers but does not combat the larger issue at hand which is abuse of patent law.

I have proposed a policy plan to implement in conjunction with this new law bill that

more effectively combats not just the high prices but this abuse of patent law and help break up

monopolizing companies. My proposed plan consists of an array of solutions such as the

modification of current patent law to open up brand name drugs for generic sale with percentages

of proceeds going to patent owners, along with the implementation of producer cost-consumer

price ratio constraints. This would more accurately fix loop-holes in the current system and not

only facilitate the lowering of drug costs for consumers but also for Medicare recipients along

with increase the accessibility of these medications by allowing for other producers to

manufacture and sell generic forms of these medications. This policy plan utilizes local, state,

and national stakeholders to enact a plan of action and properly address these problems going

from an individual scale (myself) to a national bill proposal in the U.S. House of

Representatives.
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References

Hickey, K. (2019, May). Drug Pricing and the Law: Pharmaceutical Patent Disputes.

https://fas.org/sgp/crs/misc/IF11214.pdf.

Torres, K. (2020, January). Insulin prices: How much does insulin cost? The Checkup.

https://www.singlecare.com/blog/insulin-prices/#:~:text=A%202018%20study

%20estimated%20that,133%20per%20patient%20per%20year.

Amin, T. (2018, December 6). Patent abuse is driving up drug prices. Just look at Lantus.

STAT. https://www.statnews.com/2018/12/07/patent-abuse-rising-drug-prices-lantus/.

Hatch, O. G. (1984, August 10). S.2748 - 98th Congress (1983-1984): Drug Price Competition

and Patent Term Restoration Act of 1984. Congress.gov.

https://www.congress.gov/bill/98th-congress/senate-bill/2748?s=1.

Leonard, T. (2004, January). THE PRICE IS WRONG: CAUSES AND CONSEQUENCES OF

ETHICAL RESTRAINT OF TRADE. Journal des Economistes et des Etudes Humaines.

http://www.princeton.edu/~tleonard/papers/iswrong.pdf.

Abbott, T. A., & Vernon, J. A. (2007). The cost of US pharmaceutical price regulation: a

financial simulation model of R&D decisions. Managerial and Decision Economics, 28(4-

5), 293–306. https://doi.org/10.1002/mde.1342

Lower Drug Costs Now Act. Congress.gov. https://www.congress.gov/bill/116th-

congress/house-bill/3.

Rizvi, H. (2020, July 13). What if...drug patents were scrapped? New Internationalist.

https://newint.org/features/2020/06/11/what-if-drug-patents-were-scrapped.

Medicare. (2020). Diabetes Supplies, Services, & Prevention Programs. Centers for Medicare

and Medicaid Services. https://www.medicare.gov/Pubs/pdf/11022-Medicare-Diabetes-

Coverage.pdf.