Hedge Funds Care About Dollars, Not Lives
There’s no denying that prescription drugs and biopharmaceutical companies save countless lives every year. The U.S. HIV/AIDS death rate is down 83%, U.S. cancer death rates are down 20% from their peak, and the five-year cancer survival rate is 68%. None of this would be possible without the continued introduction of innovative new medicines into the market.
However, hedge fund managers are lining their pockets via a new strategy that hurts patients and kills innovation in the biopharmaceutical sector. Hedge fund managers such as Hayman Capital Management’s Kyle Bass are using outdated patent laws to challenge biopharmaceutical patents so that they can then short biopharmaceutical stocks and cash out. This is all done under the guise of helping American patients.
The Money-Making Strategy
This strategy stems from the vulnerability of an administrative process known as Inter Partes Review (IPR). In 2011, Congress created the IPR system to fast track patent challenges and discourage patent trolls. However, the unexpected consequence is that hedge fund managers can easily exploit the IPR system by questioning any biopharmaceutical patent’s legitimacy.
Hedge fund managers claim there’s an altruistic motive driving their patent challenge strategy, but the facts don’t support this contention. While patent invalidation would open the door for generic drugs to enter the market, it would close the door to biopharmaceutical investors, funding, and innovation, creating a much bigger problem for patients. The truth is, when we kneecap biopharmaceutical companies, we harm every patient whose health depends on the innovative medicines and therapies they create.
Why Do Bio-pharmaceutical Profits Matter?
Bio-pharmaceutical research and development is a key factor in helping patients live longer and happier lives, but it’s also expensive. The biopharmaceutical industry has already invested more than $500 billion in R&D since 2000. If hedge funds try to bankrupt biopharmaceutical companies and cause them to question the security of their patents, these companies will have no choice but to discontinue invention and discovery of the drugs that give patients so much hope.
The length of each patent varies, but it’s typically long enough for companies to spend a significant amount of time researching and developing new drugs, and to recoup R&D costs and profit enough to research and develop the next lifesaving medication. However, they can only do this if they can sustain funding to continue innovation.
When a generic drug is introduced to the market, the branded drug pricing is completely lost, and R&D funding is stifled. Generic drugs may be cheaper, but they stifle innovation and ultimately hurt patients. Generics prevent biopharmaceutical companies from researching, developing, and inventing lifesaving innovations.
Without R&D Funding, What Happens to the Patient?
The hard fact is that we will all be patients in need someday, and rather than letting hedge funds toy with our future, we should be ensuring that the best treatment options are available when we need them. Without strong patent protection, patients will suffer. There will be fewer treatment options and fewer new medicines.
The public agrees. In an online poll, 61% of voters find it likely that patients with life-threatening diseases will have fewer treatment options and 59% of voters find it likely that fewer life-saving medicines will be developed. By manipulating the patent system and influencing stock prices, hedge fund managers are gambling your long-term health away for obscene short-term profits.
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