Biosimilars and generics as "rip-offs": when the facts may not matter

There are instances when a few well-chosen words are repositories of profound meaning and times when they betray a lack of understanding. An excellent example of the former is the medieval Jewish rabbinic commentator of religious texts, Rabbi Shlomo Yitzhaki, popularly known by the acronym “Rashi”. Frequently, Rashi will pause to ponder a single word in a religious text and offer a lengthy commentary on its significance. Rashi’s genius, echoed in the work of commentators from other religious traditions, reflects a culture where a word will embody deeper meanings, if one chooses to look for them. How different is the role of words in our own time where, instead of conveying a sense of understanding, they signal the opposite. IP is not immune from this. Consider a recent radio interview on Bloomberg radio, later rebroadcast as a podcast. The discussion was about product roll-outs of a certain pharma company. At one point, the interviewer, generally knowledgeable with a substantial feel for financial markets, responded to a reference to a biosimilar medical product, by characterizing such products as “rip-offs”.

Just so all Kat readers are on the same Kat page, Urbandictionary.com defines “rip-off” as follows: “

Stealing ideas and/or products to create something of lesser value. To take credit for something that is not their own. To slightly alter an existing idea and product for personal benefit. Disregard the origin of the true creation in attempt to make a quick buck and turn a few heads.”

The interviewee pointed out that while “biosimilar” and “generic” products differ, they are close enough in their underlying characteristics. Other than that, he did not challenge her characterization of them as a “rip-off”. For a listener who paid close attention to the interview, the take-away was clear-- biosimilar and generic products are undesirable. It seems to this Kat that the IP community should be concerned about the level of understanding of IP embodied in this brief interview exchange. Remember that Bloomberg is a large, business-oriented media empire. As such, one might expect an appreciation of the complexity of the subject, especially from the perspective of the various stakeholders involved.

Start with the consumer, who enjoys the benefit of paying less for the medical products. No rip-off here. “Hold on Kat”, that is the easy part. What about the patent owner or licensee. Isn’t it being “ripped-off”? The answer is “yes”, only if you don’t believe that patented inventions are for a limited period and that the public domain is what it says (see here for a report on patents and the public domain). One can quibble out how to best structure the transition from proprietary to generic, given the sums involved by both the proprietary and generic manufacturers. But such differences of opinion are not about who is getting “ripped-off.”

Indeed, if there is a complaint about pricing, it will more likely be directed towards the proprietary owner, as the public conversation debates when the price for a patented drug is “fair”. But even here, in looking at the entire product cycle, from proprietary to generic, the matter is nuanced. Gideon Parchomovsky and Peter Siegelman published a fascinating article in the Virginia Law Review in 2002 entitled, “Towards an Integrated Theory of Intellectual Property”. In it, they argue, inter alia, as follows (pages 1462-1463):

“When patents can be extended through the creation of brand loyalty, the patentee will strive to maximize her rents not over the twenty-year patent term, but rather over the combined period of patent and trademark protection. Hence, a forward-looking patentee will consider not only current output, but also the effects of current output on future demand. Specifically, a profit-maximizing patentee will charge less than the monopoly price during the patent period if doing so enhances its branding and leads to higher profits over the long run.”

Under this view, “trademark leverage” (in the words of the authors) leads to lower prices. If so, Kat readers can decide whether there has been any “rip-off”.

What we find is that the term “rip-off” is inapplicable to any of the main stakeholders. Yet this Kat assumes that the interviewer, in using the term, is secure in her belief. Perhaps even more, reasoned argument will not likely get her to consider changing her mind. In the February 27, 2017 issue of The New Yorker magazine, Elizabeth Kolbert, in her piece— “That’s What You Think”, discusses several recent books, all directed at the question, “Why reason and evidence won’t change our minds.” She focuses on how our views are shaped by “confirmation bias,” which she describes as –

“the tendency people have to embrace information that supports their beliefs and reject information that contradicts them.”

From this follows the following observations:

. 1. “As a rule, strong feelings about issues do not emerge from deep understanding” (quoting Sloman and Fernbach, “The Knowledge Illusion: Why We Never Think Alone”).

2. “Providing people with accurate information doesn’t seem to help; they simply discount it.”

All of this suggests that, at least for this Bloomberg interviewer, biosimilar and generic products, being a form of “rip-off”, is something to be decried, and there is apparently little that can be done to get her to alter her view. It is certainly a long way from how Rashi approached and understood words. How this is then filtered by listeners is a separate question; this Kat cannot be very optimistic.

(Photo lower left: romankac/Public Domain/Wikimedia Commons