Perverse Incentives

Hi all,

I wanted to share a podcast episode I listened to recently.

The podcast, “The Daily” by the New York Times, discussed how Gilead (a pharmaceutical company) delayed the release of a new version of a drug to maximize its profits from existing patents.

Gilead initially developed a drug for H.I.V. treatment which had a patent expiring in 2017. After the patent expired, competitors would be free to introduce cheaper generic alternatives. Gilead was in the process of a developing an updated version of the drug which was known to be less toxic on the user’s kidneys and bones. Despite the benefits, the company decided to pause the development of the drug in 2004 because it risked competing with the existing patent protected drug.

Many years after pausing development in 2004, Gilead released the new drug in 2015, shortly before the previous drug was set to lose its patent protection.

Many lawsuits have been filed by people who have used the drugs and upon some searching, I learned that a law firm in BC started a lawsuit against Gilead claiming that the company knew about the side effects and knew that there was a safer alternative to the drug, but withheld the development and sale of medications. In addition, the lawsuit claims that some people in Canada who took medications needlessly suffered side effects.

It appears this is a well known phenomenon in the pharmaceutical industry known as product hopping. Pharmaceutical companies capitalize on their monopoly over a drug, and shortly before the patent expires, they switch patients to a more recent version of the drug.

I understand the need for patent protection and how pharmaceutical companies won’t spend money and time developing a drug if it isn’t protected. However, it’s clear that the law needs to find a balance between protecting and incentivizing innovation while not prioritizing profits over the health of patients.

We haven’t covered patents yet but I’d love to hear your thoughts on this story!

You can listen to the podcast on: https://www.nytimes.com/2023/09/07/podcasts/the-daily/gilead-hiv-drug.html

Or read the article on: https://www.nytimes.com/2023/07/22/business/gilead-hiv-drug-tenofovir.html