China goes where Obamacare refused to tread: Takes on Big Pharma on high priced drugs

http://www.nakedcapitalism.com/2012/06/china-goes-where-obamacare-refused-to-tread-takes-on-big-pharma-on-high-priced-drugs.html

China goes where Obamacare refused to tread: Takes on Big Pharma on high priced drugs
Posted by Yves Smith at 12:40 am
Monday, June 11, 2012

Emerging economies are increasingly flexing their muscles over stratospherically-priced life-saving drugs. And before the Big Pharma defenders start caviling about how the high cost of drug development is squeezing profits, it’s hard to be sympathetic. First, the Federal government pays for a staggering amount of drug research (it’s hard to get solid numbers, since the National Institutes of Health is the biggest but not sole funder, but the latest estimate I saw was over 30% of the total). Second, pharmaceutical companies have not done much truly new drug development in a while. Well over 80% of the so-called “new drug applications” are for extensions or reformulations (eg, a delayed release version) of an existing drug. Third, Big Pharma spends more on marketing than on R&D.

The move by China follows targeted measures by Malaysia, Indonesia, Thailand and most recently India to use “compulsory licenses” to make their own generic versions of patented drugs. From Reuters (hat tip reader Joel B):

The amended Chinese patent law allows Beijing to issue compulsory licenses to eligible companies to produce generic versions of patented drugs during state emergencies, or unusual circumstances, or in the interests of the public.

For “reasons of public health”, eligible drug makers can also ask to export these medicines to other countries, including members of the World Trade Organisation.

The intriguing part of this is that this Chinese initiative is completely kosher under WTO rules when life-saving medicines are too costly. Given the high prices put on certain AIDS and cancer drugs in dollar terms, they’re the perfect targets for an action like this. India gave a compulsory license for the manufacture of Nexavar which is used to treat kidney and liver cancers. China appears to be using the compulsory license threat to improve its bargaining leverage for some of the newer HIV drugs, such at Gilead’s tenofovir. China was excluded from a deal with a group of nations to buy tenofovir by paying cost plus a small royalty. Gilead has offered more concessions after the media leaked that China was considering implementing compulsory licensing.

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