Profitability through Simplicity: October 2012

Friday, October 19, 2012

Improving Global Affordability of HIV/AIDS Drugs Through Technology Innovation

Affordability of HIV/AIDS drugs is critical for the well-being and survival of patients especially in the underdeveloped countries. Companies have done an excellent job of inventing the necessary drugs. Initially the patients who were not covered under healthcare programs could not afford them. Even who were covered, food for the family and drug for an individual ⁽¹⁾ became an excruciating choice. Companies in the developing countries took upon themselves to commercialize processes that had lower their manufacturing costs i.e. the lower selling price. Thus, the availability and affordability became possible to many in the countries.

Various governments and non-profit organizations (notably US Government, Médecins Sans Frontières’, WHO, Clinton and Bill & Melinda Gates Foundations) have done an excellent job of making the necessary drugs available for the needy. However, in the slow economic environment, governments and foundations are facing funding challenges that could make availability of the necessary drugs an uphill task ^(2,3). The need for the drugs has not gone away and is not going away.

How do we make the drugs more affordable? Is there a solution?

Answer to the query posed above is “YES” and it comes from lowering the manufacturing cost. Using the best manufacturing technologies along with the best business practices e.g. supply chain rationalization, economies of scale, better chemistry and improved execution can lower the manufacturing cost of the needed drugs by 20-40% from the lowest selling prices listed at http://utw.msfaccess.org/drugs ⁽⁴⁾.

The cost reduction claim may seem to be large but are not out of the realm of possibilities. Any cost reduction i.e. lower selling price is worth the effort. Anyone who is familiar with chemical processes and cost accounting can reverse ⁽⁵⁾calculate factory costs within +/- range of the actual costs. A thorough review of the chemistry, process equipment, current practices, economies of scale and supply chain ^(6,7)would be needed to develop better costs. Such review along with creativity and innovation can lead to the development and execution of the best and lowest cost process. Quality will be built in the process. Profits could also increase.

Above mentioned reviews and practices are a common practice in the chemical, petrochemical and other chemicals related industries but have not been practiced in the pharmaceutical manufacturing which includes the manufacture of the active ingredients and their formulation to a dose. If done right, the saving could be higher. Best technology will also facilitate and simplify regulatory compliance.

If we are able to lower the cost of the needed drugs, pressures on the funding governments and the foundations will be reduced. It is possible that lower prices will extend coverage. It will be a win-win and lessons learnt could be used to lower costs of other drugs also.

Girish Malhotra, PE

President

EPCOT International

Malhotra, Girish: Drug Prices: Food vs. Medicine - A Difficult Choice for Some June 16, 2011
MSF Report: Funding shortages threaten advances against HIV/AIDS, political promises will fall short accessed October 18, 2012
Malhotra, Girish: Drugs for Infectious Diseases, Funding and Opportunity December 11, 2011
Médecins Sans Frontières’ Untangling the Web of Antiretroviral Price Reductions: 15th Edition accessed October 18, 2012
Malhotra, Girish: Neglected Tropical Disease (Infectious Diseases) Drugs: What are they telling us about Innovations! March 7, 2012
Malhotra, Girish: Chemical Process Simplification: Improving Productivity and Sustainability February 2011
Malhotra, Girish: Chapter 4 “Simplified Process Development and Commercialization” in "Quality by Design-Putting Theory into Practice" co-published by Parenteral Drug Association and DHI Publishing© February 2011

Friday, October 5, 2012

Patents: Should We Change Our Intellectual Property Model/Strategies?

In the last thirty-five years about 351,000 US patents ⁽¹⁾were classified in 424 and 514 class category i.e. they are drugs related. This translates to about 10,000 patents per year. I am told that an average US patent ⁽²⁾(up to 20 pages. Costs go up as the number of pages increase) over its life cost the assignee about $15,000 to $18,000. I am also told that the patents filed in Europe cost about four to five times the US patent costs. European patents are not part of the discussion. However, the readers can use the information of this discussion to draw their own conclusions.

Based on number of patents granted per year, companies spend about $150.00 to $180.00 million per year. These costs are less than 0.5% of the annual pharmaceutical revenue of about $800 billion per year, a very insignificant cost. Just for enlightenment purposes 351,000 patents over thirty-five years cost companies about $ 5 to 7 billion dollars for the US patents only.

Good side of this expense is that they give companies a hold on their invention for the life of the patent and are every bit worth the expenditure. However, the question is how much information is being shared with competitors, how they are using the information and what is the total damage caused to the companies by this sharing. In addition, another question is what is the percentage of revenue generating patents. I wonder if such an analysis has been ever done.

We all understand that before the Internet Age, information had to be manually retrieved. Now we can search information in seconds just by using certain carefully chosen words. Before Internet we used the best methods available for the time and still missed relevant documents. Missed information could invalidate the patent.

Patents are an open book. They facilitate learning, an excellent teaching tool, show us how to circumvent, improve our processes, develop better process and product and even show us how to infringe. They give us a head start. This is especially true for process patents. This is my learning from patents. Compositions of matter patents also do the same. Unless someone is aware of infringement, companies do not have the manpower to police.

Few questions come across. They are:

If a patent cannot be policed, what is the value of the patent?
Do the patents have defensive or offensive value and what are they worth if they cannot be policed?
What kind and how much financial damage the information disclosed in the patent causes and has been caused to the companies especially when the patents are invalidated due to lack of proper prior art search?
With the advent of Internet should the patent strategies be reconfigured/rebooted?
Should the intellectual property model be reevaluated?

I do not have the answers to the above but I am sure there are many pundits and gurus who are and will address the questions and have the answers. I wonder if there would be a pro and con debate. We all know there is value in patents but the question would be value for whom, what kind and at what cost.

The above questions and comments are based on my recent analysis of an API molecule synthesis. Of the three patents first was the original innovation filing. The second two patents are a variation of how to synthesize the same chemical differently. Same molecule is being synthesized using same and similar chemicals. There is no innovation when it comes to chemistry or process simplification. Yield was significantly compared to the original patent. Money was spent but I am not sure of the value. New patents basically taught how chemistry could be altered and possibly simplified.

I am not challenging wisdom of having patents but asking a question “Is it time to re-visit IP strategies to make sure we are not giving away the store?” A re-evaluation might be of value as it could have some impact on how the IP business is conducted.