The NIH - Moderna patent controversy: private profit at public cost is a major problem

The NY Times recently reported on the controversy between Moderna and the National Institutes of Health (NIH) regarding the patenting of the Moderna (which NIH has called “NIH-Moderna”) vaccine for COVID-19. Moderna has applied for sole ownership of the patent, while NIH claims that at least 3 scientists it employs were instrumental in the basic science behind the vaccine’s development. This issue is important for a number of reasons: the specifics of this particular – and major – controversy regarding the vaccine, the larger issue of taxpayer support through NIH for projects that become private profit centers, the wider use of federal funds to support private profit, and even more generally the willingness and enthusiasm of both corporations and individuals to benefit from public expenditures while abjuring the responsibility for paying the taxes that make them possible.

The specific case of the “Moderna” COVID-19 vaccine is about more than money or glory; the Times reports

If the three agency scientists are named on the patent along with the Moderna employees, the federal government could have more of a say in which companies manufacture the vaccine, which in turn could influence which countries get access. It would also secure a nearly unfettered right to license the technology, which could bring millions into the federal treasury.

These two issues are very important. Most of the people in the world have not had access to the vaccine, and if the US government (through NIH) owns or controls the patent, it could (although so far it has not, and arguably could also do it under the Defense Production Act) ensure that poor countries with need can get it, and get it at an affordable price. This is far more important than the second, which is that it could make money from selling it to countries that can afford to buy it. It could even license the production of the vaccine by other countries in their own manufacturing process. This is a critically important concern; if all people across the world do not have access to effective vaccination, the coronavirus will continue to spread and mutate and spread back to the US and other more privileged countries. Getting vaccines to the world’s poorest countries must happen, but Moderna has been the worst of all the vaccine manufacturers (and none have been great), refusing to make the vaccine available to most countries, only offering it to those wealthy countries that can pay. (The company will make at least $18B from the vaccine.)

The larger issue is the support that the NIH gives to basic science research, mostly in universities, which is then acquired by pharmaceutical companies who manufacture the drugs based on that research and make enormous profits. No one disputes the huge profits made by Big Pharma, and only the most willfully blind (and of course the companies themselves) argue that they are fair or justified. Pharmaceutical companies like to talk about how much they spend on “R&D”, Research and Development, but (while cost allocation can be done in a number of ways), they spend much more on marketing than on R&D.   

 

NIH spends over $40B annually on scientific research, and in 2020 and 2021 each about $5B specifically on emerging infectious disease research.  Most of the profit goes to the pharmaceutical companies, sometimes with some going to the universities who did the research, using NIH money, through collaborative agreements. But YOU* paid for the basic research.

Thus, beyond any issue with Moderna, the federal government spends lots of your money to support scientific research at the basic level, where the highest risk is (i.e., where the probability of discovering something that is likely to be marketable is lowest) with the drug companies acquiring only the most promising innovations to develop further. And it goes beyond drug companies, although they are among the most regular feeders at this government trough. Remember the bailout of the banks and financial services industries? The savings and loan crisis of the late 1980s which cost the US government (and YOU*, the taxpayer) $32B a year for 30 years, followed by the much larger bailout of the financial services industry in 2009? Remember “too big to fail”? Huge banks and other financial companies nearly wrecked our economy in offering subprime mortgages and other flawed instruments, and were happy to take the profit when it was coming in. While the capitalist principle is supposed to be that their profits are justified by the risks they take, it turns out that they took the profit but eschewed the risk. When it all collapsed, and threatened to collapse the entire economy, they were bailed out by the federal government to the tune of, ostensibly, $700B, but as Forbes columnist Mike Collins reported, this was the tip of the iceberg, with a total cost of over $16 TRILLION!!! To the BANKS, which were, by the way, thrilled to return thereafter to the old way – that is, they make and keep all the money – immediately after being bailed out by YOU*. Just think about the fuss being made about President Biden’s Build Back Better (BBB) proposal, of whether it should be $3.5T or $1T over 10 years (or nothing!) and keep that $16T+ we GAVE to the wealthiest banks in the US in mind! So, the subsidization of pharmaceutical companies like Moderna and others is right in the tradition of YOU* taking all the risk while big corporations make all the profit.

The final issue is that these big corporations often pay little or no tax, as a result of having the money to pay scads of accountants who are adept at finding the loopholes that have been written into the tax laws by a Congress often dependent upon contributions from these same corporations (which would often be illegal corruption at the state or local level but is legal for Congress). Using tax havens abroad, incorporating elsewhere, stashing money in Ireland and the Caymans and other countries may be beyond what you can do, but you do have an important role to play: bankrolling it! Thus my * on YOU* several times above; especially if you are employed and have your federal income tax withheld and thus are paying your taxes, you are funding all this while these corporations – and the billionaires who pay little or nothing, and even less thanks to the $1T Trump tax cut for them – are getting a free ride. No, more than a free ride, they get to charge you – and charge you a lot – for the ride that they are taking!

The sad part – well, it is all sad – is that the YOU* includes lots of minimum wage workers, lots of people who are members of marginalized minority groups, lots of folks just squeaking by (or not), lots of folks who cannot afford and do not have health insurance, and cannot pay for the drugs they need, who are paying the taxes that support the drug companies and the banks. Yes, the fallacy of the common good (see this interesting analysis which identifies the fallacy in the tragedy of the commons) means that there are many regular people who wish they were not paying, or paying so much, in taxes despite the fact that they are happy to benefit from and think they are entitled to benefit from publicly funded (ie, tax-funded) things like roads, fire and police protection, national defense, Social Security, etc. This is short-sighted and wrong, but most of us just get to grouse and still pay.

But not the corporations, banks, pharmaceutical companies. The COVID-19 vaccine patent controversy, while very important, has implications far beyond the immediate issue.

VISA and colchicine: maybe the banks and Pharma really ARE in it for the money!

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This is a guest posting by R. Stephen Griffith, MD, Chair of the Department of Family and Community Medicine at the University of Missouri-Kansas City.

A recent article explains in some detail one of the devious ways the banking industry, and the recently spun-off companies of VISA and MasterCard, make the money it takes to support the executive salaries and bonuses. (“How Visa, Using Card Fees, Dominates a Market”, Andrew Martin, NY Times, Jan 4, 2010)

Each time one of us swipes a debit card at a retail outlet, the retail outlet pays a banking institution a fee. That seems like an honest way to make a living, but the plot thickens. If we punch in the secret code associated with the card, the bank gets a few cents. If instead of using the code we sign the receipt the bank gets a bigger fee. Apparently there is no more expense associated with the latter method, but the fees negotiated by VISA et. al with the retailers provides for the higher fees. The individual banks then receive the fees, which encourages them to “push” more of the VISA’s (or which ever company is offering them the best deal). The credit card companies expand their reach, the banks make more money, and everyone involved in the deal is happy. In fact, the higher the cost per transaction the credit card company can negotiate makes more money for the bank, and so a bidding war develops in which the higher the fee, the more the banks gravitate to that company. The fee can be up to 75 cents per transactions—many multiples of the fee for a swipe and use of the code. This is transparent to the consumer, who willingly signs or puts in his/her code as requested by the retail outlet. Of course, the unwitting consumer eventually pays the extra expense (passed on from the retailer as part of the cost of doing business). Just another way for the banks to make a living.

There are those of us who would suggest that this is “gouging” the customer and there should be some repercussion to the perpetrators. I was among the inflamed and insulted when I read the article. But then this horrible thought crossed my mind: as a well meaning and cost conscious family physician, how many times have I committed the same offense?

The relationship between physicians and Pharma has been a topic of discussion since I was in medical school, although until relatively recently I have seen very little response from the medical community. The representatives of Pharma host our meetings and visit our offices, give us food, pens, pads, tickets to games, sometimes even trips to nice places. Associated with the gifts is also free “education” about why the product about which they are educating the physician is better than generic or “me, too” drugs made by another company. The docs are given samples which they can provide their patients to try the new drug out and “help save money for the patients.” Of course, if the medication works, a prescription for the drug will be given. The extra expense (sometimes an extraordinary amount of extra expense!) of the newer drug is borne by the patient or the patient’s insurance after a co-pay (which results in higher premiums the patient pays.)

So the medical community’s “scam” is we get lots of benefits and the expense of those benefits is borne by someone else—our patients.

To be fair, not all physicians accept gifts from Pharma. And in the last few years or so, the value of the gifts has been more restrained. And a growing number of physicians are refusing to even meet with representatives from Pharma, refusing the samples and the false economy of providing them, refusing the gifts and “education”. Creating distance from Pharma is a good thing—they are as fun to hate as the banking industry. And if you doubt the amount of greed in Pharma, please read this: “An Old Gout Drug Gets New Life and a New Price, Riling Patients”, Jonathan D. Rockoff, Wall St. Journal (and below, as it may not be completely available on the WSJ site.)

The article is about colchicine, a drug for the treatment of acute gout (and a few other things) that has been around for more than a century—long before the advent of the FDA. The FDA has encouraged pharmaceutical companies to study some of the older drugs for true effectiveness, and the company can then apply for a three year patent on the medication. URL Pharma, Inc. did the clinical trials on less than 1,000 patients, and proved that a drug everyone already knew worked, worked. Amazing! They received a three year patent, and now a pill that was $4 per month long before the $4 per month plans existed, is $5 per pill! Since it is usually given twice a day, the drug will now cost patients $10 per day when it formerly cost about a quarter.

Stories like this and the one about banks makes it easy to feel distaste for the banking industry and Pharma. Where is the justice in banking executives making millions and then being bailed out by taxpayers? Where is the justice of Pharma making huge (I would argue inappropriately huge) profits from the ills of our patients? I just wish the profession of medicine (and I) hadn’t played a part.


(From the Wall St. Journal),
An Old Gout Drug Gets New Life and a New Price, Riling Patients
By JONATHAN D. ROCKOFF
A centuries-old drug used to treat excruciating gout pain had cost just pennies a tablet—until last year. Now, the retail price has skyrocketed to more than $5 and some of the manufacturers have ceased production amid a battle over marketing rights.
The tale of how this common gout drug, colchicine, became the costlier branded drug Colcrys offers a window into the Byzantine world of drug pricing. The price rise is a consequence of a Food and Drug Administration effort to improve the safety of long-used but unapproved drugs, with a trade-off often made between drug affordability and safety.
In July 2009, a Philadelphia drug maker received FDA approval to exclusively market colchicine for gout attacks for three years. The company, URL Pharma Inc., was taking advantage of a push to bring medicines predating the FDA, like colchicine, under the agency's regulatory umbrella. The FDA offers exclusive marketing rights if a drug maker conducts clinical trials.
URL Pharma had commissioned studies that confirmed its colchicine product's safety and efficacy, while demonstrating it should be taken at a lower dose than typical and not used with certain other medicines. The company is marketing its drug as Colcrys—and the retail cost averages $5 per pill, according to DestinationRx, a health-care data provider.
URL is also suing longtime manufacturers of unapproved colchicine, saying the companies are now illegally marketing their products. Some of the companies are fighting the lawsuits. Some themselves have raised prices—including one increase of just under a dollar per tablet to $1.17, according to DestinationRx. The higher price for Colcrys was first reported by Kaiser Health News.
There were 3.5 million prescriptions and $6.4 million in sales in 2008, according to the most recent data available from IMS Health, a drug-data firm.
"It's not a new product. It's been out for hundreds of years. To all of a sudden have to pay $125 or $150 a month, after it only cost $5 or $10 a month, is a real problem," said Stanley Cohen, a Dallas doctor who is the president of the American College of Rheumatology. He met with the FDA to express concern about the price increase.
The chief executive of URL Pharma, Richard Roberts, said that it priced Colcrys in line with other approved, branded drugs used to treat gout pain. To help patients afford Colcrys, Dr. Roberts said, the company is offering to pay a portion of co-pays, and it is providing a three-months' supply to low-income patients for $15.
Eileen Wood, vice president of pharmacy and health-quality programs at CDPHP, an insurer in New York state, said insurers will have to absorb much of the added expense. URL's contribution was "not any new therapeutic tool, not new science; they just added cost," she said.
Nancy Sparks Morrison, a retired schoolteacher who suffers from familial Mediterranean fever, an inflammatory disorder that's treated with colchicine, said she is buying colchicine from Canada because she can't afford Colcrys. Ms. Morrison said she plans to get help from URL Pharma to pay for Colcrys because the company has just expanded its assistance program. "I'm retired on Social Security, and I have a small pension," said Ms. Morrison, 71 years old, who lives outside Charleston, W.Va.
The price increase is an unintended consequence of the FDA's nearly four-year-old initiative to regulate unapproved drugs. These medicines were sold before the FDA was established, and therefore weren't required to undergo approval. After decades of use, the medicines are considered safe by doctors, but haven't been proven to satisfy the agency's standards. Colchicine's use has been traced back to the sixth century, according to the FDA.
Seventy drugs that were grandfathered have been approved since the FDA began its initiative, most notably pain reliever Vicodin, from Amneal Pharmaceuticals LLC, the FDA said.
The FDA had hoped a significant price increase wouldn't follow Colcrys's approval and regrets the increase, said Janet Woodcock, director of the agency's Center for Drug Evaluation and Research. Dr. Woodcock encouraged more competition, saying another company could seek approval for colchicine's regular use in gout, rather than the acute use that URL Pharma received approval for.
There had been no standard for dosage before FDA approval. Colchicine's excessive use can cause side-effects, such as severe diarrhea that is potentially fatal. The FDA said it receives reports of five deaths a year, on average, involving patients who took colchicine tablets.
"We took bad guidance, even guesswork, and made this evidence-based medicine," Dr. Roberts said.
Closely held URL Pharma, which is owned by a hedge fund, a private investor and employees, is a longtime seller of generic drugs, including colchicine. When the FDA launched its push, the company began searching for those with safety risks whose patients could benefit from clinical testing, Dr. Roberts said.
URL Pharma said its 17 clinical trials of colchicine involved a total of 988 patients. The trials showed that gout patients need take two tablets after an attack and one more an hour later, the FDA said. Trials also demonstrated side-effects from use with certain other medicines, including some antibiotics and antihypertensive medicines. Those are now flagged on the label of Colcrys.
After obtaining FDA approval of Colcrys, URL Pharma went to federal court to sue manufacturers of colchicine, including Excellium Pharmaceutical Inc., Vision Pharma LLC, Watson Pharmaceuticals Inc. and West-Ward Pharmaceutical Corp., saying they have been illegally marketing their colchicine products since Colcrys's approval. A fifth company, Qualitest Pharmaceuticals, settled and stopped production. The four companies are fighting the lawsuits.
"You have this product out for at least a hundred years and all of a sudden it's no good?" said Lou Dretchen, who oversees sales and marketing at Excellium of Fairfield, N.J. Mr. Dretchen said the small, closely held generic drug maker stopped colchicine production after URL Pharma sued. The other companies declined to comment.
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