February 22, 2006

Discussing the Laffey Plan to Remedy High Drug Costs, Part 2

Carroll Andrew Morse

The next two problem/solution pairs proposed in Steve Laffey's plan to remedy high drug costs concern different aspects of the problem of regulation. (The first two problem/solution pairs are discussed here) .

1. The first issue is the relationship between the pharmaceutical industry and the Food and Drug Administration...

Today's Problem: FDA regulates drugs foremost on financial interest--not consumer safety (i.e. Vioxx)
Laffey's Solution: Eliminate fees for FDA approval and ban experts with financial ties on drug advisory committees.
In 1992, the Federal Government implemented a "user fee" system where drug companies pay the government to help provide the resources needed for drug testing.

The problem with a user fee system is not conscious corruption. The problem is the nature of government bureaucracy and its incentive structure. In the private sector, success is measured in terms of a profit. In government, where there is no profit, we foolish humans still need some way to score our successes and failures. In public bureaucracy, management often measures its success in terms of its ability to increase its budget allocation. (An article in the Spring 2002 issue of the Cato Institute journal Regulation, mostly supportive of the user-fee system, agrees with this principle).

Once user-fees are built into the system, pressure inevitably builds on the government to push as many drugs through the testing process as possible in order to collect as much fee money as possible. It is certainly plausible that the 1.56% increase in drug recalls between 1993-1996 and the 5.35% increase in drug recalls between 1997-2001 reported by the Journal of the American Medical Association (via the Christian Science Monitor) is related, in part, to the bureaucracy's tendency to act, not evilly, but shortsightedly, thus warranting some re-examination of the practice of user-fees.

2. A second reform proposal focuses on the issue of patent law...

Today's Problem: Generic drugs are priced 20%-80% below brand names drugs, but comprise on 10% of total drug sales.
Laffey's Solution: Increase generic drug distribution by closing drug loopholes, ending anti-competitive payoffs and adjusting effective patent life.
A patent is supposed to be a deal that benefits both innovators and the public. An innovator gets rewarded for his work by having and exclusive period to market and/or license his product. In return for granting a period of exclusivity, the public learns the details of the innovation and, after the patent expires, is allowed to build upon those innovations.

Unfortunately, patent law's current structure and enforcement is not consistent with its purpose. As soon as the generic drug maker notifies the Food and Drug administration that it is preparing to produce a generic version of drug about to enter the public domain, the brand name manufacturer can sue for a 30-month extension. In that period (and because of the sorry state of patent scrutiny in this country) they can attempt repatenting their original product, triggering other delays. Here's an example from reporting from PBS' Newshour with Jim Leherer showing how current law allows frivolous patents to stifle the purpose of the patent process...

What brand name manufacturers have done in some instances is go back and file new patents on those same drugs, some of them frivolous patents. In one instance, for example, a company suddenly went back and decided to patent the brown bottle that the cancer drug came in, because it said this brown bottle will preserve the potency of this drug. So it filed that patent anew. That triggered another 30-month stay.
Other provisions in patent law encourage generic drug producers to sue brand-name producers in an attempt to shorten the lives of patents. A provision in the law allowing a generic drug producer an 180-day period of exclusivity after winning a patent-shortening suit caused an explosion in litigation starting in the 1980s. Robert Goldberg, Director of the Manhattan Institute Center for Medical Progress, explains the effect that this has had...
During the 1980s only two percent of generic drugs tried to cut patent life short as a way to approval. Today over 20 percent of all generic drugs now enter the market through legal attacks on patent life. And generic firms are attacking as soon as a drug hits the market -- with multiple challenges of the same patent in many cases. No wonder generic companies such as Barr Labs make most of their money not from selling medicines but from suing drug companies and settling cases.
The Laffey plan would address these problems by simplifying patent law. Drug companies would not get an automatic 30-month extension on their patents. And to make sure that the get fully rewarded for their innovation, Mayor Laffey suggests reforming the law so that the clock on pharmaceutical patent doesn't start until the drug actually hits the market.

Clearer and simpler patent law would have a positive effect of creating a stable, non-litigious playing field for the production of both brand name and generic drugs.

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.

I think what is most important on this issue is that Laffey has ventured to offer ideas on combating a difficult and worsening problem. I also believe, if Laffey is to have a shot at winning not only the primary but the general election, besides having good ideas, it is also important for Laffey to develop a more statesmanlike approach to problems.

Perhaps as he begins to offer ideas like these, he is beginning to do this; however, when one opposes "the big pharmaceutical companies" who advertise in NR and The Weekly Standard it appears to me to be more of a populist approach. As for me, I can accept that. What I'm worried about is whether the voting public will come away with an "Eddy Beard" vision of what the US Senate seat will hold in the future or not. Beard, BTW, eventually won his seat, but it was the US House, which is a place not unfamiliar with populism. The Senate, well, is another matter.

Posted by: Chuck Nevola at February 22, 2006 8:04 PM

Where's the commentary on Laffey minion David Quiroa's race bomb throwing against the Republican Guv of RI??
What say you Laffeyholics??
Are all Laffey supporters as emotionally unstable as he and Quiroa are?
Your party is self destructing.
Is this part of the Laffey plan?

Posted by: Tim at February 22, 2006 8:58 PM


Maybe you just arrived in town but this is the 3rd policy brief Laffey has offered since he entered the race. Perhaps you should go to www.electlaffey.com where you can do some research on the candidate before offering your "expert" opinion.

Now, I don't mean to imply that your opinion doesn't matter, you are entitled to it, but I think if you went to Laffey's site and viewed the videos, the press releases, the trips abroad etc. the "statesman" you long for will emerge.

One other point, I'm no fan of Ed Beards but he won an election that no one thought he could win. There is something be said for being a "populist".

Posted by: Larry Dallas at February 22, 2006 9:58 PM

Why is it that Laffey supporters feel at such liberty to be condescending? Odd. (While we're recommending that others do research, you might do well, Larry, to look into Chuck Nevola.)

As for the other side — the far other side — (apparently Tim's): Oy.

Posted by: Justin Katz at February 22, 2006 10:10 PM

What do topic do you think Laffey will cover next?

We need this guy in the senate.

Posted by: Sentinel at February 22, 2006 10:21 PM

Tim, please if you can't talk about the issues (in this case, drugs because Chafee is in the drug's industry's pocket) then go find James and have a Laffey bashing party at Chafee HQ, please spare us your nonsense.

By the way, Laffey is conservative on the big issues like taxes, spending, foreign policy, and Alito. On drugs and energy he would be considered a populist, that is a winning a combination in Rhode Island. When people are mad, like they are now, they want a fighter, especially one with plans who has delivered in the past, not platitudes from those bred for higher office.

Posted by: Fred Sanford at February 22, 2006 10:34 PM


That's six ? in one short post. It makes me wonder if you know anything at all.

Stay on topic. This isn't your blog.

I know, you could start "Savage Inarticulate Brutes For Chafee.com."

Yeah that would work.

J Mahn

Posted by: Joe Mahn at February 23, 2006 12:15 AM

Well, how do I follow all that ... by getting back on topic.

From what I've read of Laffey's plan, it all seems very well thought out and quite workable. What I like about it is its general simplicity, as opposed to the labyrinthine and inefficient system that we currently have (It reminds me of a quote ... that our current healthcare delivery system combines the compassion of laissez-faire capitalism, with the efficiency of Soviet communism.)

As a person who has had some medical issues, I have often been on the wrong end of our health care system. I've certainly felt the pressure by certain doctors to switch from one drug to another -- made by the same manufacturer -- because I've been told it was "new and improved" only to find out that there was little if any extra benefit, other than to the pharmaceutical companies and to the doctors who get all those "free samples" brought to them. The Prilosec to Nexium bait and switch comes to mind -- gee, coincidentially, Prilosec's patent was ending, go figure? There are more examples than I care to recall.

I haven't read Chafee's plan yet -- oh right, he doesn't have one. Was that overly condescending? :)

Posted by: Will at February 23, 2006 2:47 AM

"The Laffey plan would address these problems by simplifying patent law. Drug companies would not get an automatic 30-month extension on their patents. And to make sure that the get fully rewarded for their innovation, Mayor Laffey suggests reforming the law so that the clock on pharmaceutical patent doesn’t start until the drug actually hits the market."
Those sound like sound, common-sensical reforms. We need to make sure that whatever is done to try to reduce the cost of prescription drugs does not create a disincentive for R&D.

Posted by: AuH2ORepublican at February 23, 2006 10:10 AM

Not to complicate an already complex matter further, but there is the lawyer side of this issue that needs to be fixed simultaneously. Without Tort Reform, we will only be addressing a portion of the problem. Many of the reasons for the inflated R&D costs include exhausive testing and trial periods because the companies know some ambulance-chasing lawyer will be looking for a big payday lickety split. I do not imply we should take short cuts to rush drugs to market and thus risk public health. However, I have a big problem when a new drug saves 200,000+ American lives per year, a few poor souls die due to extremely difficult to target adverse reactions, and the lawyers extract huge sums from the drug company. How does that serve the greater public good? Government has become of the lawyers, by the lawyers, for the lawyers.


Not to be confused with the Tim who defames the name with his pathetic rants.

Posted by: Tim2 at February 23, 2006 10:47 AM

While I don't agree with Tim #1, I am dissappointed that there has been no posts on this blog about the Kass/Quiroa thing. This seems like something that at least merits discussion/defense, no?

Posted by: Grady Shipley at February 23, 2006 11:16 AM

Grady their silence speaks volumes on where/who their loyalty lies in this ugly episode.
The greater problem for this blog is it's losing legitmacy.
How can they ignore an issue going on in their own party and one that's been the subject of media coverage for two days unless to discuss it exposes certain people.

Posted by: Tim at February 23, 2006 5:46 PM

The only thing that was ugly about that "episode" is that it made news. It should have been handled privately, and in a less emotional manner from both sides.

Posted by: Will at February 23, 2006 5:53 PM

Grady and Tim,

Isn't this posting thread relevant to the Laffey Pharma 2 commentary? Further evidence that you cannot contribute a cogent thread of relevant commentary. If you want a legitmate blog, stop driving your personal agenda and speak to the issues. A tough thing to do no doubt when you have no solutions - only gripes to throw around.


Posted by: Tim2 at February 24, 2006 5:47 PM

Tim and Grady sound like one in the same. Or it may just be mentally-ill-James posting from another computer. Like fraidy-scared Chafee, they avoid the debate and are distracted from the issues that really matter.

Laffey's got a plan to address the high cost of prescription drugs. Chafee does not!

Posted by: Stretch Cunningham at February 25, 2006 11:02 PM