Patent Monopolies, Corruption, and the New Alzheimer’s Drug

July 20, 2021

It seems that no one in policy circles believes that people respond to incentives. How else can we explain this lengthy piece in the New York Times on the process by which the Food and Drug Administration (FDA) approved Aduhelm, a drug for treating Alzheimer’s disease.

The piece details how the clinical trials designed to determine its effectiveness were aborted, since it did not appear to be helping patients. Nonetheless, the FDA worked close with Biogen, the drug’s manufacturer, to find evidence that it might be effective in slowing cognitive decline. The FDA ended up approving the drug over the unanimous objection of its advisory panel. (There was one abstention.)

Incredibly, the piece never once mentions the role of government-granted patent monopolies in this outcome. Biogen was very anxious to get the drug approved because it intends to take advantage of this monopoly and charge $56,000 for a year’s treatment. If the drug would be available as a generic, which anyone could manufacture, the price would be far lower and there would be much less incentive to pressure the FDA to approve a drug of questionable effectiveness.

Obviously, we need to pay drug companies to research and develop new drugs. But patent monopolies are only one mechanism, and because of the perverse incentives they create, often not a very good one. (The opioid crisis is another example of the harm resulting from the perverse incentives created by patent monopolies.) My preferred route is direct government contracting for research, as we did with Moderna in the development of a coronavirus vaccine. (We also let them get patent monopolies, since some folks feel you can never give drug companies too much money.)

In addition to getting lower priced drugs, and eliminating the perverse incentives created by patent monopolies, direct funding would also allow for open-source research. This means that all researchers could quickly learn from the successes and failures of others doing similar work. In the case of coronavirus vaccines, this might have prevented Pfizer from throwing out one sixth of its vaccines because it did not realize that its standard vial contained six doses rather than five. It may also have allowed it to realize more quickly that its vaccine did not need to be super-frozen but instead could stored in a normal freezer for up to two weeks. (I outline a mechanism for funding research in chapter 5 of Rigged [it’s free].)

Anyhow, it would be nice if we could one day have a serious discussion of alternative mechanisms for financing research  instead of acting as though the patent system came down to us from god. Apparently, the NYT is not even willing to acknowledge the corruption that results from the incentives it creates. That is not good.



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