As we move forward into a new millennium, a large number of Americans, especially senior citizens or those without insurance, will find it increasingly difficult to obtain prescription drugs because of rising prices. International price increases have had the most severe consequences in third world countries where sixty percent of the population does not have regular access to essential drugs. (1) While this paper focuses on domestic prescription drug prices, many analogies may be drawn between the problems created by high prescription drug prices in the United States and those in third world countries.
Many have attributed rising prescription drug prices to the laissez-faire attitude of the U.S. federal government. As a result, Congress has introduced new proposals to combat both these criticisms and prices. Many of these proposals reduce the amount of protection granted to a patent holder of a newly developed prescription drug. Large pharmaceutical companies are lobbying against these proposals, claiming that implementing such "price controls" will hinder the research and development of new and important drugs. (2) They argue that the patent protection offered to pharmaceutical companies allows them to recoup and profit from their monetary investments on recently introduced drugs, and in turn, allows them to produce new essential drugs. (3) Using this argument as a catalyst, the pharmaceutical industry has pushed for the adoption of a style patent protection regime internationally. (4) Ultimately, the Pharmaceutical Manufacturers Association (PMA) of the U.S. appealed successfully to the government to take retaliatory trade measures against third world countries that did not change existing national legislation, which provided no protection to pharmaceutical products. (5)
High prescription drug prices must be reduced through a proposal that allows new drugs to be more accessible and affordable to those who need them, while maintaining the drug companies' ability to profit and reinvest in new essential drugs.
This article will discuss a recently proposed bill, The Affordable Prescription Drugs Act (APDA), (6) and how it will attempt to strike a balance between reducing prices to make essential drugs more available and affordable, and working with pharmaceutical companies to make sure they profit and reinvest their money into research and development of new essential drugs. It argues that the APDA increases competition in the market place, thus reducing the price of prescription drugs, while still allowing pharmaceutical companies to profit from their inventions. In reaching this conclusion this article examines the bill itself, how to define an essential drug, whether current prices are fair, Congress' attitude towards these prices, the drug industry's justifications for high prices, and presents a rebuttal argument against those justifications.
II. THE AFFORDABLE PRESCRIPTION DRUGS ACT
Representative Sherrod Brown (7) introduced APDA in the House of Representatives on September 23, 1999. (8) The bill favors "good old fashioned American competition" by reducing the amount of patent protection granted to pharmaceutical companies. (9) The APDA would allow the government to force price competition for drugs that provide a substantial health benefit, but carry an excessive price tag. (10) It would accomplish this by issuing a compulsory license to a drug manufacturer to produce a generic version of a brand name drug which is still protected under patent. (11)
Certain steps must be taken and requirements met before a compulsory license is granted. The bill requires three important elements to be satisfied. First, the Secretary of Health must determine "[s]uch compulsory license is necessary to alleviate health or safety needs which are not adequately satisfied by the patent holder, contractor, licensee, or assignee." (12) This fast element determines whether the drug should be considered essential or non-essential. If the drug has been determined to be essential or one that provides a "substantial health benefit," the first requirement has been met. (13)
The second element requires, "It]he patented material is priced higher than may be reasonably expected based on criteria developed by the Secretary of Commerce." (14) This determines whether a drug's price is so excessive that it bears no semblance to pricing norms for other industries. (15) To help make this determination drug companies would be required to provide audited, detailed information on the expenses accumulated while developing the drug. (16) Companies that fail to disclose such information would be ineligible to participate in federal health care programs. (17) After this information has been gathered and analyzed, if the selling price of the drug is determined to be "exorbitantly costly," the bill's second element has been met. (18)
The third and final element states: "the patent holder, contractor, licensee, or assignee ... has not taken or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in a field of use." (19) This element functions as an "escape clause," allowing the drug company to work with the government in voluntarily lowering prices. (20) Thus, many drug companies could avoid a compulsory license if they decide to voluntarily lower their prices below an excessive price rate as determined by the Secretary of Commerce.
If these elements are satisfied it will be determined that a compulsory license is necessary to reduce the price of the drug to make it more accessible and affordable to those who need it. A generic manufacturer would then be granted a compulsory license to manufacture the drug while it is still under patent protection. (21) During the period that the generic drug is on the market, the generic manufacturer would pay royalties to the original manufacturer. (22) These royalties would help "amply reward" the patent holder for being the first on the market, while "Americans would benefit from competitively driven prices." (23)
It is important to note that the APDA does not use price controls to reduce prescription drug prices. (24) Instead, the bill reduces drug industry monopoly power, while increasing consumer buying power by subjecting the drug industry to market-driven competitive forces. (25) The bill is a means of moderating prices that are too high without inadvertently setting prices too low.
III. HOW TO DEFINE AN ESSENTIAL DRUG AND EXCESSIVE PRICING
Art important and difficult element to determine is whether a drug should he considered essential. Most would agree that life-saving drugs should be considered essential. However, there are many drugs that fall into a gray area, such as the antidepressant Prozac whose determination as an essential drug will be difficult.
The difficulty of this determination is compounded by the fact "that there is no established systematic process, either in our regulatory or medical structures, to establish criteria for identifying and prioritizing the most important drugs...." (26) So how will the Secretary of Health determine whether a drug is essential or nonessential? Some possible criteria include the volume of use of the drug, the number of people the drug will impact, the severity of the condition for which the drug is prescribed, or if the drug is used only to treat a life-threatening condition. (27)
Such criteria lead to an array of difficult choices in determining what is an essential drug. For example, proponents of treatments for rare life-threatening diseases view certain drugs as essential, even though these drugs may ultimately be used on a relatively small amount of the general population. (28) In contrast, drugs used to treat medical conditions such as ulcers, while not a life-threatening disease, would be more widely prescribed and impact a larger portion of the population. (29)
Determining how an essential drug is defined is a complex issue. Yet, developing a definition and process for identifying essential drugs is imperative for the success of the APDA. Possible models that can be examined in order to determine whether a drug is essential or non-essential are those used by many third world countries that have already produced an essential drug list. (30) According to the World Health Organization (WHO), more than sixty countries have operationalized essential drug program, with thirty more in the process of drafting such programs. (31) These essential drug lists were initiated in poorer countries in order to ensure a reasonable level of health care for as many people as possible. (32)
The WHO has been a large promoter of the concept of essential drugs "to advance health equity through expanded access to basic medicines for poor people in poor countries." (33) Currently, the WHO's Tenth Model list of essential drugs contains 306 active drugs. (34) Such a list allows a country to focus its efforts on supplying the most important drugs to a population that is unable to gain access to them.
Experts have argued that using the WHO's Model List as a basis will prove to be largely ineffective "[b]ecause of the great differences between countries, the preparation of a drug list of uniform, general applicability is not feasible or possible. Therefore each country has the direct responsibility of evaluating and adopting a list of essential drugs, according to its own policy in the field of health." (35) This argument is countered by recent studies of various essential drug lists from different countries, which have shown surprisingly small variations of drugs determined to be essential. (36) The theory behind this lack of diversity is that diseases normally transcend national boundaries in symptoms and cures. (37)
While an essential drug list developed in America should be broadly based on the WHO's Eleventh Model List, it should also incorporate the specific criteria that will make it more suited to the economic and medical needs of Americans.
Another problematic element is the determination of when a drug's price should be considered excessive. This requirement poses the problem of determining what financial statistics are relevant. The drug industry will inevitably argue that the cost of research and development of drugs that failed to reach the market should be included in this calculation. The industry …