Pharmacanomics - the ethics and economics of drug development
It's fascinating how investor pressure has changed the behavior of pharmaceutical companies. They're not alone, of course, but we like to think of medical firms as being a bit more altruistic than most. I remember when I thought it was noble that a firm would go after "previously unmet medical needs." It wasn't until I talked to a pricing specialist at such a highly successful firm that I realized that's not nobility, that's a competitive advantage, and one which allows the company to price their goods as high as possible.
We saw this a few years ago, with the shortage of flu vaccines. Suddenly it was painfully obvious that very few companies made drugs that had such small profit margins.
We see it again today with news that fewer antibiotics are now in the pipeline. New antibiotics are harder to develop, and they aren't the blockbuster that investors are looking for.
"Drugs that treat chronic conditions such as heart disease, arthritis and diabetes must be taken for a lifetime. A good antibiotic can clear an infection in a week to 10 days. With the cost of developing new drugs ranging between $110 million and $800 million, cautious investors are putting their money into research that promises the biggest payout."
So what about the argument that companies need blockbusters, and they have to charge huge prices in order to better fund drug development? Most early-stage drug discovery takes place in universities and research institutions, not pharmaceutical firms. What's more, a study published earlier this year in the journal PLoS Medicine found that US pharmaceutical companies are spending twice as much on marketing as they are spending on the research and development of new drugs. While $57.5 billion was spent on drug promotion in 2004, only $31.5 billion dollars was spent on industrial research and development.
These same economics also prevent drug companies from sharing their product with sick people in developing countries. As an investor, I want the highest return for my money. As a citizen, I want drug companies to do the right thing for their consumers and society. Unfortunately, there are penalties for not giving me the highest return, but there are no penalties for not doing the right thing for society. Which has the greater pull?
posted by Jennifer Russell at 11:00 PM
1 Comments:
The private sector is good at certain things, and so is the nonprofit and public sector. To change these fundamental qualities would require some alchemy, such as doping diamond to make it conductive instead of the godlike electricial insulator that it naturally is.
If you want to encourage more pharma charity as a whole, instead of praying that one of them is struck by an epiphany, then you have to change the rules.
As much as I don't like special interest groups, they could be useful here as tools: people with a vested interest in getting those drugs to dying people could pester and bully the companies in public long enough that there IS a penalty for being just in it for the money.
Of course, this is coercion at its finest. The other bet would be to make the employees filled with such altruism and pride (by subverting the corporate culture) that they could act (temporarily) against the interests of shareholders and dump their goods onto the world.
...Or you could give more money to nonprofits and have them put R&D results into the public domain.
9:56 AM
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