How Ronald Reagan torpedoed the patenting of sensible drugs
Americans pay two and a half times more for their prescription drugs than residents of any other nation on Earth. Although generic versions of popular compounds accounted for 84% of annual US sales volume in 2021, they only generated 12% of dollars actually spent. The rest of the money pays for brand name drugs – Lipitor, Zestril, Accuneb, Vicodin, Prozac – and we have the Reagan administration in part to thank for that. In the excerpt below from Owning the Sun: A People’s History of Monopoly Medicine, From Aspirin to COVID-19 Vaccines, A fascinating look at the long and infuriating history of public research being exploited for private gain, author Alexander Zaitchik recounts the antics of former President Reagan in the early 1980s that helped cement lucrative drug monopolies. Mark.
Copyright © 2022 by Alexander Zaitchik, of Owning the Sun: A People’s History of Monopoly Medicine, From Aspirin to COVID-19 Vaccines. Reprinted with permission from Counterpoint Press.
When Estes Kefauver died in 1963, he was writing a book on monopoly power titled In a few hands. Early in Reagan’s first term, the industry must have been tempted to issue a jubilant retort titled In a few years. Between 1979 and 1981, drug companies did more than break the deadlock of the 1960s and 1970s – they broke it in broad daylight. Stevenson-Wydler and Bayh-Dole replaced the Kennedy Policy with a functional framework for the high-speed transfer of public science into private hands. As the full machinery was built, the industry-funded echo chamber funneled a steady stream of memes into the culture: patents alone drive innovation… R&D requires monopoly prices … progress and American competitiveness depend on it… there is no other way…
In December 1981, the drug companies celebrated another long-awaited victory when Congress created a federal court to settle patent disputes. Previously, patent disputes were heard in the districts from which they originated. The problem, from an industry perspective, was the presence of so many fervent New Deal judges in key regions like New York’s Second Circuit. These lifelong judges often understood patent challenges not as threats to property rights, but as opportunities to enforce antitrust law. Republican-appointed local circuit judges could also be dangerously old-fashioned in their interpretations of the “novelty” standard. In contrast, the judges of the new patent court, called the Court of Appeals for the Federal Circuit, were appointed by the president. Reagan filled his bench with corporate patent attorneys and conservative jurists influenced by the Johnny Appleseed of the Law and Economics movement, Robert Bork. Prior to 1982, Federal District judges rejected about two-thirds of patent applications; the Court of Appeal has since decided two-thirds of all cases in favor of the patent claims. Reagan’s first appointee, Pauline Newman, was the former senior patent attorney at the chemical company FMC.
The Supreme Court also contributed to the industry’s winning streak from 1979 to 1981. When Reagan took office, one of the great scientific and legal unknowns concerned the patentability of engineered genes. Similar to the uncertainty surrounding the post-war antibiotic market – settled in favor of industry by the 1952 Patent Act – the uncertainty threatened the monopoly dreams of the emerging biotechnology sector. The US Patent Office was against patenting modified genes. In 1979, its executives twice rejected an attempt by a General Electric microbiologist to patent a modified bacterium invented to help clean up oil spills. GE scientist Ananda Chakrabarty sued the Patent Office and in the winter of 1980 Diamond v. Chakrabarty landed in the Supreme Court. In a 5-4 decision written by Warren Burger, the Court struck down the US Patent Office and ruled that the modified genes were patentable, just like “everything man-made under the sun.” The decision was greeted with audible exhalations by the players of the Bayh-Dole alliance. “Chakrabarty has changed the game by giving academic entrepreneurs and venture capitalists the protection they’ve been waiting for,” says economist Öner Tulum. “It paved the way for wider commercialization of science.”
But the industry knew better than to relax. He understood that political victories could be fleeting and fragile, and he had the scar tissue to prove it. Exceptionally profitable, especially hated and therefore especially vulnerable, corporations could not afford to forget that their fantastic post-war wealth and power depended on the maintenance of artificial monopolies based on questionable, if not indefensible, ethical and economic arguments. rejected by all other countries. Earth. In the United States, where its largest profit margins are, danger lurked behind every corner in the form of the next crusading senator eager to shape years of unwanted attention on these facts. Even Bayh-Dole, that valuable fledgling legislation, could not be taken for granted. This permanent crisis mode was validated by the return of a familiar threat in the early 1980s. reemerged and threatened to ruin their celebration of dominating every corner of medical research and the billions of public dollars flowing through it.
Until the 1930s, there was no “generic” pharmaceutical industry as such. There were only big pharmaceutical companies and small ones, some big, some obscure. They were both selling products that were, in the parlance of ethical medicine, “non-proprietary.” To be listed in the United States Pharmacopeia and National Formulary, the official prescription drug bibles, drugs could only have scientific names; the essential properties of a good scientific name, according to the first edition of the Pharmacopoeia, were “expressiveness, brevity and dissimilarity”. The naming of drugs and medicines was the other half of the patent taboo: branding a medicine showed the same deceit and greed as monopolizing one. “Ethical marketing” rules allowed products to include institutional affiliation – Parke-Davis Cannabis Indica Extract or Squibb Digitalis Tincture – but the names of the drugs themselves (cannabis, digitalis) did not vary. “The generic name emerged as a parallel form of social property belonging to all those who resisted commodification and thus took center stage in debates over monopoly rights,” writes Joseph Gabriel.
As with patents on scientific medicine, the Germans gave the American pharmaceutical industry early instructions on the use of trademarks to strengthen market control. Hoechst and Bayer broke all the rules of so-called ethical marketing, aggressively advertising their breakthrough drugs under brand names such as aspirin, heroin and novocaine. The idea was to tie these names and the things they described in the public’s mind so tightly, that the brand name would provide a de facto monopoly long after the patent expired.
The strategy worked, but the German firms did not reap the benefits. The wartime Office of Alien Property redistributed German patents and trademarks among domestic companies that produced competing versions of aspirin, creating the first “branded generic”. During the prolonged rattle of the patent taboo of the interwar period, more and more American companies embarked on the use of original trademarks to suppress competition. As they experimented with German tactics to avoid “genericide” – the loss of markets after patents expired – they were activated by court rulings that turned trademarks into forms of material property, similarly that patents were redesigned in the 1830s.
After World War II, branding and monopoly formed the two-pronged heart of a post-ethical growth strategy. The industry’s incredible post-war success—between 1939 and 1959, drug profits soared from $300 million to $2.3 billion—was fueled in large part by the book’s expansion of German game. While brandishing monopolies with trade names, the industry launched campaigns to ruin the reputation of scientifically identical but competing products. The goal was the generic drug “scandal,” writes historian Jeremy Greene. Pharmaceutical companies “have worked methodically to moralize and sensationalize generic distribution as a dangerous and subversive practice. Distributing an unbranded product in place of a branded product has been called “counterfeiting”; substituting a cheaper version of a drug at the pharmacy has been described as “deception”, “collusion”, “misrepresentation”, “fraud”, “unethical” and “immoral”.
As with patenting, it is the pharmaceutical companies that have dragged organized medicine with them into the post-ethical future. As late as 1955, the AMA’s Board of Pharmacy and Chemistry upheld the ban on advertisements for branded products in its Journal. This changed the year Equanil hit the market, ushering in the era of brand name prescription drugs as the primary source of revenue for medical journals and associations. “Clinical journals and new ‘disposable’ promotional materials were now full of advertisements for terramycin, premarin and diuril rather than oxytetracycline (Pfizer), conjugated equine estrogens (Wyeth) or chlorothiazide (Merck)”, writes Greene. In 1909, only one in ten drugs had a brand name. By 1969, the ratio had flipped, with only one in ten marketed under its scientific name. In another echo of the patent controversy, the rise of marketing and brand name drugs has produced division and resistance. In the mid-1950s, an alliance of so-called nomenclature reformers arose to decry trademarks as unscientific servants of monopoly and call for a return to the use of scientific names. These reformers—doctors, pharmacists, labor leaders—appeared regularly before the Kefauver committee beginning in 1959. Their testimony about how industry used trademarks to suppress competition informed a section of Kefauver’s original bill demanding that doctors use scientific names in all prescriptions. The bill reflected the standards that prevailed during the heyday of ethical medicine and would have allowed doctors to recommend companies, but not their brand name products. Like most of Kefauver’s basic propositions, however, the generic clause was removed. The only trademark-related reform in the latest Kefauver-Harris amendments has limited companies’ ability to rebrand and market old drugs as new breakthroughs.