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Did Doha kill innovation?
Last week, patent lawyer Daniel Cahoy published a draft treatise entitled "Confronting Myths and Myopia on the Road from Doha" in the Georgia Law Review, in which he examines the challenges faced by drug companies in light of the November 2001 TRIPS agreement, signed in Dohar, Qatar. (Among other things, TRIPS allows countries to enact compulsory licenses for otherwise patent-protected drugs under situations of health emergencies.)
Repeating a common industry refrain, Cahoy warns that compulsory licensing and below-market compensation for drugs removes the inherent incentive for companies to innovate and develop next-generation therapeutics (see also "Patent Pendulum"). Cahoy goes on, however, to offer suggestions on how the uncertainty introduced by the Doha proposals can be addressed and offers possible mechanisms by which countries can get the drugs they need and still reimburse companies at market-equitable levels.
For a lawyer, Cahoy writes well (no disrespect intended) and his treatise is quite readable. More importantly, he makes some very interesting arguments, and while I may not agree with all of his points or conclusions, they are well made. But at the moment, this is not the point I want to address.
As we approach the sixth anniversary of the TRIPS agreement, I am led to question: Did Doha kill innovation?
Has the ability of countries to circumvent global patent protection led to a concomitant decrease in innovation by drug companies?
One way to judge innovation is to examine the number of drug approval applications to federal regulators. According to a November 2006 report by the U.S. General Accounting Office (GAO), the total number of new drug applications (NDAs) to the FDA has dropped off in recent years, as has the number of NDAs for new molecular entities (NMEs). In both cases, however, these drops started in 1999 and 1995, respectively—well before the Doha meeting—suggesting that any innovation problems were well in place before TRIPS was a glimmer in a bureaucrat's eye.
The same report suggests that the number of investigational new drug (IND) applications saw a similar drop from 1998 to 2003, but that the numbers had actually shown signs of significant improvement in 2004 and 2005.
So what does this mean? How else can we measure innovation and the impact of Doha?
Perhaps the real impact of TRIPS on innovation has yet to occur and CEOs are simply firing friendly warning shots over the bows of the ships of state. To mix the metaphor, they are drawing lines in the sand with the threat of dire circumstances yet to come should nothing be done to better protect their intellectual property. Thank goodness they've been there to artificially bolster the industry through these international growing pains.
But then my question to company heads is: How long will your company last if it stops innovating? (Or more pointedly, how long will your job last if your company stops introducing new products every year or so?)
Even with the uncertainties of international law regarding intellectual property, no company (regardless of the industry) can afford not to innovate. Business history has shown time and again that failure to innovate leads to failure to survive, and nothing short of a pharmaceutical cabal that would make Michael Moore's head spin will interfere with the Darwinian nature of business.
If Big Pharma refuses to innovate because of Doha, there are plenty of smaller companies—in both the developed and developing world—willing to step into the breech. Remember, it wasn't that long ago (in business terms) that Genzyme and Amgen were the upstarts pushing in from the drug market's periphery.
Sure, it may mean that drugs will take a little longer to reach the market, but they will reach the market. And if the recent spate of acquisitions, mergers, and licensing agreements is anything to go by, it looks like these upstart companies are already helping Big Pharma deal with its innovation difficulties.
In the meantime, if anyone out there can help me find evidence that Doha has killed innovation, I'd be ever so grateful.