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Ms. Marx Goes to Washington

Updated: Mar 9, 2019

At her first big congressional hearing, freshman Rep. Alexandra Ocasio-Cortez, who embraces socialism, proved that she has an agenda. And Karl Marx’s spawn appeared disinterested in private property rights.

The House Oversight Committee held a show trial on pharmaceutical pricing. An exchange between AOC and a friendly witness from Harvard attracted a lot of attention. It’s recounted and treated to scrutiny by an expert in drug development, Derek Lowe. It’s worth a read. Even better, take the time and have the intellectual integrity to read his links.

AOC probably won’t consider a few critical facts about property rights in the drug space.

• About 15% of new drug discoveries come from academic labs, meaning industry discovers 85%. A private entity likely discovered it, definitely developed it and clearly owns it.

• Like other sophisticated areas of invention and commercialization, it takes trial and error, product and market development — and extensive investments of time, effort and money — to go from idea to viable product. There’s no guarantee of success and many failures.

• From drug discovery, which follows basic research at the NIH, a university or other lab, it takes 10-15 years to develop a new medicine. It costs an average of $2.6 billion in private dollars to develop the new drug and cover the sunk costs of those that didn’t pan out.

Less than 12% of potential new drugs that start clinical trials get FDA approval. Just one out of five medicines FDA approves earns enough to pay for the average R&D cost. The average time between FDA approval and generic competition is 12.5 years.

Secure property rights makes the difference, not only in pharma but all areas. Before the Bayh-Dole Act, federally funded research led to the U.S. government owning 28,000 patents; commercial entities tried to commercialize only 5 percent of those inventions because the government retained and controlled the property rights.

• Because Bayh-Dole deliberately puts exclusive ownership rights in the hands of universities, licensees and businesses, it has led to new medicines, new jobs created, new startups, new industry sectors and more.

• Today, society reaps the benefits of private ownership of pharma IP. The United States “funds about 44% of world medical R&D, invests 75% of global medical venture capital, and holds the intellectual property rights for most new medicines.”

But wait! There’s more! “New innovations, however, often provide improved health that was not previously available at any price or obviate the need for more costly care,” the Council of Economic Advisors has stated. “They thereby lower the effective price of health down to the price of the patented drugs, and later down to the price of generic drugs.”

The key to getting the greatest return on taxpayer investment in basic scientific research, of which a small part results in potential drug discoveries, lies in respecting the property rights of the private investors and companies willing to assume the high risk of losing on most of their attempts to translate a molecule into a successful new medicine. That’s a fact.

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