"Everyone knows that the pharmaceutical industry cannot exist without innovation and innovation cannot exist without Intellectual Property (IP)," said Dr. Aharon Schwartz in his opening remarks in a lecture at a seminar on the subject recently held by law firms S. Horowitz and IP law specialists Kenyon & Kenyon LLP.
Schwartz added, "I could bring a molecule to the major pharmaceutical firms tomorrow that gets rid of cancer in 24 hours. But if I don't have a patent on it they would say thank you very much and goodbye."
Schwartz recently stepped down as Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) VP Innovative Ventures but continues to serve as chairman of several companies including BiolineRX Ltd. (Nasdaq: BLRX); TASE:BLRX) and Biocancell Therapeutics Ltd. (TASE:BICL).
If the lawyers in the audience thought that Schwartz was going to justify the importance of their work, then they were in for a surprise. Schwartz asked what would happen if the pharmaceutical industry completely discarded the concept of IP, and led the audience to draw the conclusion that this was the way to save the pharmaceutical industry.
Schwartz does not really believe that it would be possible to implement such a radical approach tomorrow or any time soon, but he told "Globes", "It is clear to me that the route we have taken so far has led to a dead end.
He explained, "The pharmaceutical industry's business model, which is protected by IP, was until recently very successful. It is based on the fact that companies successfully bring to market just a few products and are defined as a monopoly in these products through patents, and thus are able to recoup their overall investment in R&D."
The success of this model can be seen from the bottom line - pharmaceutical companies have in recent decades reported significantly high profits compared with average Fortune 500 companies.
Despite this Schwartz believes that this model is changing. "In the pharmaceutical industry we are almost not curing patients. We are only treating them. And I can tell you from my own personal experience that I am aging every day and that's true for all of us. And as you get older you don't get healthier."
Insufficient growth
An aging population is causing health costs to rise. These budgetary restrictions have hit the financial results of pharmaceutical companies. "Their current growth of 2-4% compared with 10-15% several decades ago is insufficient," he said.
What else has gone wrong? Pharmaceutical companies are investing more than in the past in innovation but output is declining and the number of new products is almost zero compared with the 1990s. "They've tried to do everything. Spinoffs, acquisitions, insourcing, outsourcing, splitting large companies into small divisions in order to better operate as if they are start ups and nothing has helped."
Schwartz claims that the main hope for innovation in the market currently comes from two directions. Firstly, customized treatments in which every treatment is only for the patient for whom it would be most effective, at the right time and in the correct dosage. Secondly, focused treatment that better directs the molecule to the organ it is designed to treat. "
He said, "If someone can cause these two options to work, it would be wonderful." He gives credit to customized treatments such as Herceptin and Glivec that have transformed the lives of patients. "Glivec attacks the mutations that are found in 90% of cancer patients treated by the drug. 90% of patients is customization?"
This discussion leads Schwartz to deal with the billion dollar question: "Why is nothing working today? Why did everything work at the end of the 20th century?" The answer in his opinion is that the biological mechanisms that helped develop drugs in the past were simpler. "They have now invested in biological and molecular mechanisms that are terribly complicated. It is very difficult to operate in this environment where they don't really know what is happening."
Nevertheless, medicines continue to be protected by patents. "Global prescription drug sales this year will total $600 billion of which $540 billion are the costs of the monopolies. If the monopoly yields innovation then that's excellent, but the monopolies don't result in innovation so why reward them?"
If IP was discarded, said Schwartz, it would be possible to invest, for example, $250 billion of global GDP in research to promote biological molecular science and the balance, about $320 billion could simply be repaid to consumers or collected as a tax to make existing treatments accessible for patients that simply don't have the money for these drugs. Such an allocation would improve global health more than new drugs that would extend the lives of a few patients by several years."
Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2012
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