Of Pills and Profits: In
Defense of Big Pharma
The more
our health depends on their little pills, the more we seem to hate big
drug companies.
In The Constant Gardener
(2000), John le Carré assigns to
the pharmaceutical industry the role
played by the KGB in his earlier novels. A villainous pharmaceutical
company is
using Kenya as a testing ground for a lethally defective drug, and
people who
find out about it die, too. Four recent, non-fiction indictments of the
industry tell a similar story.* Conflating the four into one, one might
title
them collectively How Big Pharma
Deceives, Endangers, and Rips Us Off, with the Complicity of Doctors.
Two of these
books are
by former editors of the prestigious New England
Journal of Medicine. Slamming the drug companies, Marcia Angell argues that Big Pharma,
as
it has come to be called, “uses its wealth and power to co-opt every
institution that might stand in its way, including the U.S. Congress,
the Food
and Drug Administration, academic medical centers, and the medical
profession
itself.” Slamming the medical profession, academics, and professional
organizations, Jerome P. Kassirer, Angell’s former boss, labels them Big Pharma’s
“whores.”
The bill of
particulars,
drawn from the books cited above, goes something like this. Most of
what people
believe about Big Pharma is just
“mythology spun by
the industry’s immense public-relations apparatus.” Forget miracle
drugs—Big Pharma is not a “research-based
industry,” it is “an
idea-licensing, pharmaceutical-formulating-and-manufacturing,
clinical-testing,
patenting, and marketing industry.” As for “the few innovative drugs
that do
come to market,” these “nearly always stem from publicly supported
research” or
are developed by small biotech firms. Big Pharma
simply goes “trolling small companies all over the world for drugs to
license.”
At most tweaking the chemistry of drugs developed by others, it
advances
medicine by “waiting for Godot.”
Moreover,
these me-too
drugs “usually target very common lifelong conditions—like arthritis or
depression or high blood pressure or elevated cholesterol.” Many just
aren’t
needed, because older drugs already work as well or better, or because
the new
drugs are peddled to people who aren’t sick. Big Pharma
is thus “primarily a marketing machine to sell drugs of dubious
benefit.”
All the
while, the
industry neglects many essential drugs that treat uncommon diseases,
transient
conditions, or lethal conditions, or that provide immunity or quick,
complete
cures. Thus, in 2001 alone, there were “serious shortages” of certain
anesthetics, anti-venoms, steroids for premature infants, antidotes for
certain
drug overdoses, an anti-clotting drug for hemophilia, an injectable
drug used in cardiac resuscitation, an antibiotic for gonorrhea, a drug
to
induce labor in childbirth, and, worst of all, childhood vaccines. In
general,
the industry is “supremely uninterested” in tropical diseases and other
afflictions of the very poor. We get Viagra. They get malaria.
Then there is
the
pricing—always the pricing. Big Pharma’s
defenders
claim that research-and-development costs for a new drug can approach
$2
billion, necessitating high prices. But about half of that is spent
wooing
legislators, regulators, academics, expert review boards, medical
journals,
doctors, patients, insurers, and jurors. The money is wasted, or worse.
“[T]ruly good drugs don’t have to be
promoted very much.” “A
genuinely important new drug . . . sells itself.”
Even
subtracting the
costs of flacking, the expense of
developing a new
drug does not run anywhere near $1 billion. Typically, according to Angell, drug companies spend under $500 million.
Their
accountants then double the number on the baseless theory that a dollar
spent
today must earn two dollars (or so) when the drug is finally sold in
2016. But
since Big Pharma licenses from others the
drugs that
matter, and licenses them cheaply at that, its real up-front costs per
drug are
more like $100 to $300 million than $1 billion.
In sum, Big Pharma ignores the drugs that matter, wastes
huge amounts
of money corrupting the market, and passes on the cost to patients.
Especially
to Americans: drug companies “price their drugs much higher here than
in other
markets,” thereby contributing to today’s “yawning chasm” between rich
and
poor.
The solution?
Starve the
fever. We should curb “commercial imperatives,” shorten the time span
of drug
patents and narrow their terms, and sharply limit Big Pharma’s
dealings with clinical researchers, doctors, and patients. Opening the
industry’s accounts to the public, we should require that drug prices
be both
“reasonable” and “as uniform as possible for all purchasers.” Big Pharma should be seen as akin to a “public
utility,” and
regulated accordingly.
So runs
the indictment. Now for a story. In an April 2005 obituary, the New
York Times described Maurice Hilleman
as the man who “probably saved more lives than any other scientist in
the 20th
century.” What kind of genius does it take to get that on your
tombstone? Hilleman himself, it seems,
“credited much of his success
to his boyhood work with chickens.” He went on to use fertilized
chicken eggs
to grow large quantities of bacteria and viruses that were then
weakened or
killed to produce vaccines. The technique was known before Hilleman
arrived, but isolating and then safely breeding a pathogen requires the
touch
of a very delicate artist. “Maurice was that artist,” another scientist
later
recalled; “no one had the green thumb of mass production that he had.”
By farming
eggs, Maurice
Hilleman saved tens of millions of
lives, and
prevented deafness, blindness, and other permanent disabilities among
many
millions more. No Albert Schweitzer or Florence Nightingale could ever
post
numbers like his. Doctors and nurses save lives one on one, and are
paid by the
hour. Hilleman saved lives by the carton,
at
grocery-store prices—acres of cartons, hundreds of millions of warm
eggs
replicating his genius around the clock.
Getting drug
policy
right depends mainly on getting that difference straight—the
difference, that
is, between ministering to the sick and making medicines—and grasping
its
implications from the start. Big Pharma’s
critics do
not even try.
Pricing is
indeed the
key. Whether the first pill typically costs $100 million or $1 billion
to
develop, replicating it costs less—a thousand times less, or perhaps a
million
times less. This slope—precipice, really—is far steeper than most of
the other
hills and valleys of economic life. It complicates things immeasurably.
It also
largely explains the gulf between the industry’s perception of reality
and that
of the critics.
The market
price of a
drug always drops sharply when the patent expires and competitors roll
out
generics. While Pfizer was still charging $10 to $30 per capsule in the
United
States for Fluconazole, which treats
meningitis,
knock-offs were being sold in India and Thailand for about thirty cents
apiece.
The precipice is especially steep for vaccines—because they begin with
self-replicating pathogens and are manufactured in such large
quantities—and
for the custom-designed proteins in today’s leading-edge drugs, which
biotech
companies mass-produce by cultivating genetically modified hamster
ovaries and
bacteria. The heights vary, but cliff-like economies rule throughout
the
industry.
The cliff is
still
higher if you compare the cost of manufacturing the last pill that
rolls out of
the factory against its value to the person who desperately needs it. A
generation or two ago, the diseases that would be rubbed out by Hilleman’s green thumb cost humanity countless
billions in
lost productivity, premature death, and time spent attending to the
sick. Hilleman’s egg farms saved lives at
pennies a shot.
In
circumstances like
these, how is Merck, Pfizer, or GlaxoSmithKline to set an appropriate
price?
Economists have established—as rigorously as things ever get
established by the
dismal science—that there is no efficient price, no “right” price. Any
scheme
is, from one perspective or another, inefficient, unreasonable, or
worse.
Viewed from
the
pill-in-hand perspective, the precipice supports what the critics
demand—vaccines for pennies, not billions, prices pegged to the cost of
the
last pill, not the first. And that is indeed the economically efficient
and
socially desirable price to set—after a Hilleman
has worked his magic, after you have the first egg, the first pill,
securely in
hand. But if you peg all prices to last-pill costs, you will not get
another $2
trillion or so of private capital searching for another Hilleman—who,
by the way, worked his magic at Merck. Big Pharma’s
critics have much to say about Merck’s Vioxx,
the
arthritis painkiller that, because of suspected side effects, was
pulled from
the market in 2004. They rarely mention the company’s vaccines.
The best
solution, if you can pull it off, is to charge both more and less at
the same
time. Sometimes you can.
A drug called
eflornithine was developed in the
1970’s to treat cancer.
It didn’t suppress cancer very well—but it did, unexpectedly, cure
something
else: sleeping sickness. Endemic in many parts of Africa, sleeping
sickness (trypanosomiasis) is the second
most deadly parasitic
disease on the planet. (Malaria is first.) Treated with eflornithine,
the near-dead sleepers arise, take up their pallets, and walk.
But they are
too poor to
pay on the way out. In 1999, the manufacturer stopped producing the
drug. It
licensed the formula to the World Health Organization (WHO), but no
other
company was willing to make it. The reason was obvious: sub-Saharan
Africa
cannot cover even the second-pill cost of manufacturing Western drugs
to
Western standards. And the really poor, or those that assist them, can
barely
afford the last-pill cost.
Then
Bristol-Myers-Squibb discovered that eflornithine
impedes the growth of women’s facial hair, and began marketing it in a
beauty
cream called Vaniqa. The company that
still controlled
the rights gave the WHO $25 million—enough for a five-year supply, at
last-pill
prices, plus research, surveillance, and training of health-care
workers. Yes,
the rich get Viagra, and Vaniqa too. The
poor still
get malaria, but they can now beat trypanosomiasis.
This,
roughly, is what
is meant by “price discrimination,” or charging both more and less at
the same
time. The best scheme all around, for sellers and buyers alike, is a
wide range
of wealth-adjusted (or, technically speaking,
“demand-elasticity-adjusted”)
prices. Complicated in theory, this is often an utter mess in
practice—as we
learn first-hand whenever we take an airplane trip. Business travelers
get
soaked, college students fly almost for free, and the jumble of prices
in
between drives most people nuts. But the planes are packed full, and
that
drives the average price of
a ticket way
down. The rich fly, and the much less rich fly, too.
As told by
the
journalist Tina Rosenberg, the Vaniqa
story is “a
scandalous illustration of the politics of neglected diseases—and of
how much
wealthy people drive the global medical market.”* Big Pharma,
she acidly concludes, values American complexions, not African lives.
Well, not
exactly. Shareholders paid for the drug’s development. Complexions paid
for the
factory. Big Pharma gave WHO a license,
and then,
later, the cash to buy plenty of eflornithine
at
last-pill prices. Where then is the scandal?
It is
pretty easy to package and market eflornithine
in
such a manner that a New York matron will not look to buy her face
cream by
mail order from a relief agency in Burkina Faso. In more prosaic
circumstances,
though, discriminatory prices can be difficult to sustain. Typically,
resellers
step in to buy low and sell just a bit higher, until the price gap all
but
disappears. It takes a lot of branding, packaging, peddling, and flacking to make one thing look like two (or
more)
different things. The no-name box in the supermarket contains exactly
the same
cereal, but you pay extra for Wheaties in
order to
partake in the Breakfast of Champions.
Big Pharma
does Wheaties all the time, which
infuriates the
critics. Angell reports that, after its
original
patent for Prozac expired, Eli Lilly got a separate patent, and a
separate FDA
license, to use the old chemical for a new purpose: the treatment of
“premenstrual dysphoric disorder.” The
company
renamed Prozac as Sarafem, colored it pink
and
lavender, and was able to price the cute little pill three times higher
than
the green generic. There is, Angell
believes, no
possible justification for such nonsense.
But there is.
This kind
of behavior is not aberrant or anomalous—it is an inevitable and
essential part
of groping toward the right price where there is no right at the end of
the
tunnel. Somehow or other, the average price of the pill has to end up
high
enough to pay off the up-front cost.
No law of
economics
decrees that you can always accomplish this. Competition ordinarily
pushes
price down to marginal cost, paying no heed at all to costs that were
sunk
years ago. The problem is especially acute with drugs, where so much
cost lies
in the original chemical design. The pioneer also shoulders the
considerable
financial burden of persuading the FDA that the drug is safe and
effective,
while me-too applicants can, in principle, just photocopy what the
pioneer has
already filed. It is not impossible for the pioneering company to end
up as the
only player that fails to profit from its discovery.
Patents
address this
problem by granting a monopoly for a fixed term, during which the
manufacturer
can keep prices high or, better still, calibrate them to each buyer’s
willingness to pay. The Food and Drug Administration’s “data
exclusivity” rule
places a separate hold on photocopy-licensing: for five years,
competitors have
to conduct their own, independent tests.
The rules
keep patent
and data-exclusivity rights quite narrow. Establishing the safety and
efficacy
of one drug-dose prescription for one disease wins an FDA license
tailored to
that drug-dose-disease combination, and the right to market the drug only
for that single “on-label” use. A patent can likewise secure just the
chemistry, or it can protect a novel method of use. Taken together,
these
conditions ensure a manageable licensing process, facilitate
incremental
improvements, and promote the search for new uses of old medicines. But
they
also let a drug company elude competition by differentiating one pill
from
another much like it, coloring a green pill pink and wrapping it in new
legal
paper.
Some green
pills,
indeed, are not given a patent until they are
turned
lavender or pink. You cannot patent bark from the Cinchona tree, even
though it
cures malaria, or penicillium mold, though
it kills staphyloccocus bacteria—at least,
not until you purify or
tweak it enough to persuade the Patent Office that it is new and
improved.
Genetically engineered forms of life can be patented, but not “pure
products of
nature.” Rules that protect even small changes in drug composition thus
help
promote the extraction of new therapies from the vast pharmacopoeia
developed
by four billion years of natural selection.
Similarly
when it comes
to promoting the search for radically new uses of old man-made
drugs. Many important therapies almost certainly lie hidden in biochemically active entities developed years
ago;
academics and government researchers continue to look for them, but
private
capital may have little incentive to do the same. If a patent expires
before
even a first good application is found, manufacturing facilities will
not be
built, and any further search for useful effects will then depend on
the
ability of a small research lab to brew the chemical from scratch.
Patent and
data-exclusivity rules that protect the discovery of new uses of old
drugs
serve a valuable purpose here, too.
Much could be
lost
without them. Pills often work in mysterious ways, and happy surprises
sometimes lie hidden at the bottom of the bottle. Rogaine and Viagra
were both
developed to lower blood pressure. The clinical trials didn’t pan out,
but
participants reported new hair and better sex. Another chemical that
suppresses
hair growth also kills a parasite. Gemzar,
developed
to counter viral infections, is used to treat cancer. In the 1980’s,
the FDA
officially classified as an “orphan drug” a compound derived from a
deadly
bacterium that causes botulism. The drug was needed to treat a rare,
incapacitating disease characterized by uncontrollable twitching of the
eye
muscles, but liability concerns had driven its one supplier out of the
market.
Plastic surgeons now use botox to smooth
out wrinkled
faces.
Angell is quite
certain that
Big Pharma is economically sheltered to a
far greater
extent than it needs or deserves to be. Patents, she writes, “have
relatively
little to do with stimulating innovation, which usually occurs outside
the
industry.” We are also told (somewhat paradoxically) that patents
corrupt
academics, small businesses, and the National Institutes of Health,
because
these entities are allowed to patent the fruits of government-funded
research
and license them to big drug companies. We should therefore run a
six-year
patent clock after a drug is licensed and scrap the FDA’s
data-exclusivity
rule.
But there is
no
“therefore” there. Why not, instead, grant thirty-year patents and
ten-year
exclusivity? Might that not help interest Big Pharma
in all the drugs that it currently will not touch at all? Perhaps.
Or
perhaps
not. To see why not, we have to return to the conundrum of pricing.
Even a
perpetual, ironclad monopoly will not guarantee returns sufficient to
cover
first-pill costs—no matter how good the drug, or how desperately it may
be
needed. This seems obvious enough in the case of a disease that
afflicts people
who survive on a dollar a day. But the calculation has to be made every
time,
in every case, and it does not become easier just because people paying
for the
pill happen to have more money.
Very Big
Insurance can
and frequently does flex its muscles to flatten and lower the prices a
drug
company would otherwise charge. In Canada, the government, acting as a
buyers’
cartel, may force the pioneer to choose between selling at a cut-rate
price or
not selling to Canadians at all. If it chooses to sell, residents of
Detroit
may then shop at Canadian prices by hopping on a Greyhound bus. (Online
shoppers can skirt the law and shop at Canadian prices anywhere.) Or
Medicare,
Medicaid, the Veterans Administration, Anthem, Aetna, Kaiser
Permanente, and
all the other institutional buyers in Washington, Ottawa, and elsewhere
may
simply take their time deciding what they are willing to pay; and while
they
reflect, the patent clock ticks.
Other drugs
are just too
important for their own economic good. Supplies of vaccines are
especially
precarious, Angell notes: three out of
four companies
that were making vaccines twenty years ago no longer do so. She
acknowledges
one problem: in 1994, the Centers for Disease Control “capped what they
would
pay for vaccines purchased for use in public-health centers across the
country—the source for most children in the United States.”
Nevertheless, she
says, drug companies ought to be willing to continue supplying vital
drugs “as
a social service—and a thank-you to the public that subsidizes them so
handsomely.”
Unfortunately,
that is
pretty much how things work already. If Merck ever develops a vaccine
for avian
flu, it will end up selling most of what it produces to the government,
and the
government will get a very good deal. Every other drug that Merck sells
is
already sold at the government regulator’s pleasure, and much of what
it sells
is paid for by the government’s insurers. In these circumstances, Merck
might
quietly conclude that the government price for an avian-flu vaccine is
bound to
be too good, and
decide to let some other drug company’s
shareholders deliver the thank-you.
There is
more. Before a company decides to seek or manufacture a vaccine, cancer
drug,
or diet pill, a miracle breakthrough, a me-too variant, or an exact
clone of a
drug already on the market, it must also weigh the various risks of
delay,
failure, or worse. Although Angell
complains that Big
Pharma often out-sources the scientific
risks inherent in searching for a new chemical that will cure a
disease, at
least as important are risks encountered beyond the lab: at the FDA, in
the
factory, and in the courts.
The first
U.S.
application for thalidomide—for use as a sleeping pill—was submitted to
the FDA
in 1960. A junior official took her time reviewing the original
application.
While she did, a German scientist identified thalidomide’s dreadful
power to
halt embryonic limb development in the early stages of pregnancy. Delay
was all
the FDA contributed, but that alone prevented thousands of birth
defects in the
United States. Thirty-seven years later, the FDA authorized use of the
drug to
treat a rare condition associated with Hansen’s disease (leprosy).
Persuading
the FDA and
the medical community that the correct lines have been drawn to
separate good
drug-dose-disease combinations from bad requires a great deal of money
and a
long and often unpredictable amount of time. Exact chemical copies of
drugs
already approved are fast; me-too variants only somewhat slower. Also
relatively fast are drugs that offer even a glimmer of hope in treating
late
stages of terminal disease—inoperable or metastatic
cancer, for example. By contrast with these, drugs used by pregnant
women and
children are difficult; and vaccines, because they are administered to
large
numbers of healthy children, are especially problematic.
Manufacturing
adds
another tier of expense and risk. Development of the vaccines that
eradicated
polio from most of the Western world was funded mainly by the March of
Dimes.
That charitable foundation also oversaw the first field trials
establishing the
safety and efficacy of Jonas Salk’s vaccine. It then handed the project
to the
government, which licensed five private companies to produce the
vaccine.
Although the government prescribed exactly how it was to be
manufactured, the
instructions were not quite the same as those the foundation had
promulgated
prior to the first trial. The Cutter Company, the smallest of the five
licensees, followed the government’s instructions to the letter, but
failed to
kill all the virus in the vaccine. Seventy thousand people suffered
mild forms
of polio. Two hundred were paralyzed. Ten died.*
The Cutter
tragedy
helped spark changes in liability law that made it much easier to sue
drug
companies for their failures, even in the absence of negligence. Today,
some
liability claims are all but certain to be forthcoming when millions of
users
pop the same pill, and every drug carries with it an inescapable risk
of
bet-the-company litigation. Estimates of Merck’s Vioxx
exposure currently range from $5 to $50 billion. Along with other
vaccine
manufacturers, Merck is also defending claims that thimerosal,
a mercury-based vaccine additive, causes autism. It almost certainly
does not,
but juries cannot always be trusted to get things right.*
One
influential writer has
explained the process well. Tort lawyers, who know how to “prey on
people’s
fears,” “postulate increasingly obscure syndromes” that “can’t be
studied
systematically.” Juries “usually have no competence in the area,” often
“misinterpret science,” and base their judgments on “emotional
appeals.”
Moreover, “losing just one lawsuit can stimulate an avalanche of
others, and
each loss usually means the stakes grow higher in the next case.” For a
company
that “loses just one of every ten or twenty cases, the costs can be
enormous.”
Litigation can thus “destroy thriving companies,” shut down “an
important area
of medical research,” and even “threaten an entire industry.”
It is a pity
that Marcia
Angell never mentions any of these
consideration in
her book touting “the truth about drug companies.” The omission is all
the more
regrettable since she wrote the above words herself in Science
on
Trial, her 1996 book about breast-implant litigation, and
they
are as relevant today as they were ten years ago.
The
various
risks I have described overlap and interact. Whatever a drug company
says, or
fails to say, during the FDA licensing process may figure prominently
in
subsequent lawsuits. Even the FDA’s fully informed approval of the
factory, and
of the labels and package inserts that accompany the pill, may not
suffice—a
jury is free to conclude that things should have been done, or just
said,
differently. As Angell correctly noted a
decade ago,
trial lawyers have been remarkably successful at putting all the focus
“on the
manufacturers’ behavior” and at “avoid[ing]
the issue
of causation altogether.”
The risks
also vary
greatly from drug to drug. The FDA’s treatment of different categories
of drugs
reflects reasonable medical judgments and policy choices. But juries,
acting in
hindsight, and weighing the story of a single claimant, can be swayed
by a much
broader range of human emotions. A child with a birth defect is a good
plaintiff, however tenuous the connection may be between the defect and
the
mother’s morning-sickness pill, obstetrician, anesthesiologist, or
labor-inducing drug.
And this
brings us back
to the mystery of the missing drugs, the ones that Big Pharma
ignores. Why didn’t WHO just make eflornithine
itself? Why aren’t the so-called “real innovators”—the small biotechs, universities, government labs,
etc.—stepping up
to supply the neglected anesthetics, anti-venoms, steroids for
premature
infants, and childhood vaccines? Why is
Big Pharma itself
ignoring them?
The short
answer is that
drugs in general, however innovative and valuable they appear up front,
may
present more risk than smaller players can shoulder. Some may promise
too
little return, and harbor too much economic risk, to be handled by
anyone.
As for Big Pharma’s addiction to unnecessary
medications, Angell would have the FDA
review not
only the safety and efficacy of each new drug but also the public’s
need for
it. She questions whether many drugs are needed at all. The companies,
she
contends, “promote diseases to fit their drugs,” redefining the “high”
in
“cholesterol” or “blood pressure,” the “dysfunction” in “erectile,” the
“dysphoric” in menses, and the “normal” in
“aging.” She also
believes that new drugs are often worse than the old ones they replace.
The
FDA, she argues, should license a drug only upon a showing that it is
materially better than what is already available.
In practice,
this would
create an enormous bias in favor of the first drug through the gate.
Establishing efficacy is a very large undertaking, even in tests
against a
placebo. For later arrivals, the far higher cost of testing drug
against drug
would crush incremental improvements completely. It would also cut off
the
possibility of discovering that a second-best pill for a first disease
is the
first-best pill for a second. Eflornithine
performed
worse than other cancer drugs, and unwanted facial hair is a normal
incident of
female aging. No drug company ever would have bothered to submit this
drug to Angell’s FDA.
Much of
the conduct described by Angell and other
critics
rings true, because it sounds like a rational response to economic
reality. It
is the critics’ explanation of motives that fails to persuade. Why do
big drug
companies compete fiercely to supply what we don’t much need, but not
what we really
need? Because, comes the response, they are greedy and profitable,
spending
huge amounts to flack their unneeded products, and jacking up their
prices to
cover all those unnecessary costs.
Industry
flacks do
indeed spend a great deal to sell us better sex and thinner thighs. But
does
that mean they also contrive to suppress demand for drugs to induce
labor,
steroids for premature infants, or childhood vaccines? The more
plausible story
is that big drug companies shun some drugs and embrace others because,
collectively, the FDA, doctors, patients, insurers, and juries push
costs
higher, and prices lower, on some categories of drugs and not on
others, to the
point where some make economic sense and some do not. Universities and
small biotechs license their innovations
to Big Pharma because they lack the
capital, scale, and expertise
required for mass manufacturing, because they wouldn’t know how to sell
the
same drug five times in succession (to the FDA, doctors, patients,
insurers,
and juries), and because a vast and swampy system separates
pharmaceutical
innovation from the treatment of real patients at prices that will
cover cost
and earn a profit. The little guys just don’t have what it takes to
finish the
job. When Big Pharma is waiting, Godot
comes running.
Big Pharma
spends as much as it does on pink-and-lavender branding because Vaniqa economics rule; because price
discrimination, though
economically essential, is difficult to sustain; because big insurers
have so
much power to flatten prices; and because patent laws are too porous to
fend
off me-too competitors. Few companies manufacture vaccines because
vaccines are
so essential that they are sold mainly to the government, at
reasonable-and-uniform—which is to say rock-bottom—prices, and because
the
seller may well be bankrupted by lawsuits if a problem is uncovered
only after
tens of millions of healthy people have been vaccinated.
The critics
say that
pricing complexity is so much fog, created by big drug companies in
order to
hide what they spend seducing regulators and academics, corrupting
doctors, and
beguiling patients. The industry’s economic fundamentals suggest
precisely the
opposite. Fog is essential to sustain price discrimination—which is
good, not
bad, when the first pill costs a million times more than the last. Many
small
drug companies, government labs, and academics pursue drugs we really
need. Aid
organizations like WHO were keenly interested in getting eflornithine
to Africa. But none could get it there, not for love or money. That
required Vaniqa.
Today’s
health-care dollars mainly buy not drugs but time and
beds.
Hospital care accounts for about 30 percent of on-budget health
spending;
physician and clinical services account for another 20 percent. The
money pays
mainly for manual labor—the cost of one person laying hands on another,
working
from the outside in, with the medical equivalents of wheelbarrows,
shovels, and
picks. There are no cost cliffs in this line of work. When the matron
pays her
plastic surgeon in New York, he doesn’t throw in a free resurrection
for the
afflicted in Ouagadougou.
Prescription
drugs
currently account for well under 20 percent of the health-care budget.
Within a
generation or two, they will undoubtedly account for most of it—which
will be
another good thing. Pharma’s biochemical
cures always
end up far cheaper than the people-centered services they ultimately
displace.
Moreover, while much hands-on care only drags things out or soothes,
the best
medicines really cure. It is true that, early on in the pharmacological
assault
on a grave disease, drugs also stretch things out and can fail to beat
the
disease, so we often end up buying more drug and more doctor, too. But
eventually drugs improve to the point where they beat the disease and
thus lay off
both doctor and hospital.
None of this
can be very
welcome to people who believe that the most important thing about
health care
is that it be uniform and universal. If you like the way Canada
operates its
health-care system, you will never like the way Big Pharma
does drugs. And yet, step by inexorable step, advocates of Canadian
health care
are losing everywhere, and Big Pharma is
taking over
the business.
Big
Government makes
health care fair, transparent, and reasonable by making it flat. Big Pharma exploits the cliffs and valleys of Vaniqa economics. Big Government makes
collective calls
about safety, efficacy, cost, and insurance coverage. Big Pharma
tweaks, tinkers, packages, and brands in order to load the pharmacy’s
shelves
with mind-numbing arrays of very similar medicines sold at very
different
prices. Flat drug prices are not good for us; price spreads, wide
enough to
cover first-pill costs and meet last-pill pocketbooks, are good for us.
Biochemical
tweaking is
good for us, too. People and their diseases vary, often in small ways.
Biochemical effects are hard to predict. Even trivial changes can make
big
differences, and medical progress often depends on trial and error.
Developed
for insomniacs, thalidomide now treats leprosy. First revealed in the
human
womb, the drug’s extraordinary power to halt cell division also holds
promise
in the treatment of brain and breast cancer, macular degeneration in
the eye,
and immune-system diseases. AIDS patients organized buyers’ clubs to
bootleg
the drug from Brazil because of its powerful effect on the immune
system. Drugs
and drug cocktails are now being matched to genotype. Stem-cell
scientists are
moving beyond chickens and mice to cultivate genetically customized
therapies
from human ovaries.
Over the last
decade,
extraordinary advances in bioengineering have transformed pharmacology.
Sooner
or later, the industry and its pilot fish will surely find drugs that
can halt
colon, breast, and lung cancers, that can curb obesity and thus heart
disease,
and that will not merely suppress the HIV virus but purge it from the
body
completely. A new pharmacology of the
brain may cure depression and stop the onset of Alzheimer’s. These and
other
once inscrutable scourges are now—essentially—becoming problems in
diligent
engineering.
They are very
difficult
and expensive problems, as engineering problems go. And government
funding did
indeed pay for much of the underlying science, and continues to pay for
it,
just as the industry’s critics charge. Some 600 publicly traded
pharmaceutical
and biotechnology companies worldwide, however, are now capitalized at
over
$1.5 trillion. The industry’s critics would subordinate current
management to
public-utility regulation. We will fare better, much better, if we
streamline
regulation, curb litigation, and unleash prices to make vaccines as
alluring to
Big Pharma as Viagra and Vaniqa.
* The Truth About the Drug Companies: How They Deceive Us and What To Do About It by Marcia Angell (Random House, 319 pp., $24.95). On the Take: How Medicine’s Complicity with Big Business Can Endanger Your Health by Jerome P. Kassirer (Oxford, 251 pp., $30.00). The Big Fix: How the Pharmaceutical Industry Rips Off American Consumers by Katharine Greider (Public Affairs, 189 pp., $14.00). Big Pharma: Exposing the Global Healthcare Agenda by Jacky Law (Carroll & Graf, 266 pp., $15.95).
* “How a Beauty Regime Salvaged a Cure for Sleeping Sickness,” New York Times, March 29, 2006.
* This episode is described in The Cutter Incident: How America’s First Polio Vaccine Led to the Growing Vaccine Crisis by Paul Offit (Yale University Press, 256 pp., $27.50).
* See The Vaccine Controversy: The History, Use, and Safety of Vaccinations by Kurt Link (Praeger, 208 pp., $34.95).
PETER
W. HUBER is a senior
fellow of the Manhattan Institute. His contributions to Commentary
include “Telecom Undone—A Cautionary Tale” (January
2003), “Guns,
Tobacco, Big Macs—and the Courts” (June 1999), and, with Mark P. Mills,
“Getting Over Oil” (September 2005).
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