The Mortgage Model represents a cornerstone of what we call the Biotech Social Contract, which is an implicit agreement between the biotechnology industry and society. In this agreement, drug makers tacitly commit to making medicines that will go generic without undue delay (i.e., after a patent-defined “mortgage” period), and in exchange, society will make all medicines accessible to patients who need them through proper insurance, which means that a patient’s costs have to be low enough that they can afford the medicine. The biotech social contract is at the heart of affordable innovation.
Later, we will discuss how biotech social contract requires MPI, which stands for Market-based pricing for a Patent-defined period of time, made affordable via proper Insurance.
This is an ideal, and many of the problems we will be discussing stem from when this ideal is violated. Some patients can’t afford the medicines they need because they either aren’t insured or their insurance saddles them with high out-of-pocket costs for appropriately prescribed medicines that the insurance plan claims to cover. And some medicines don’t go generic after their initial patents expire, either through dodgy patent gaming or simply because they are too complex for other companies to make copies of. The end result is the same in that society ends up paying high prices even after it paid off the mortgage. This can feel like being charged rent for your own home. High out-of-pocket costs and drugs not going generic as intended by the patent system violate the biotech social contract, making people angry and prompting calls for solutions. The question is how to solve these problems.
The answer is a combination of insurance reform and price controls. But these fixes have to be applied correctly, and there are many who would implement these solutions, particularly price controls, in ways that would unravel affordable innovation (e.g., by imposing price controls well before a drug was meant by the patent system to go generic). This course will teach you to tell the difference between sound and unsound reforms so that you can hopefully help advocate for the former and also recognize when the latter, if implemented, would have a negative impact.
To drive the point home, check out this video of executives working to discover new cures for Autoimmune disorders as they discuss this dynamic.