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The Washington Post

New Drugs: The Right Remedy
July 7, 2001

by Robert Goldberg and Frederick Goodwin

Marcia Angell and Arnold Relman -- "Prescription for Profit," op-ed, June 20 -- claim that prescription drug costs are rising at an unsustainable rate -- 19 percent a year -- and will soon exceed payments to doctors as the largest item on the health bill after hospital costs. In fact, in 1999 prescription drugs were 8 percent of total health care spending compared with 22 percent spent on doctors. By 2010, the government estimates 14.6 percent of health care spending will go to medications, while 20.5 percent will go to physician services.

Angell and Relman ignore the value of increased pharmaceutical investment, research and drug utilization. They rightly note that many new drugs originate with small biotech companies. But many of these drugs would be unavailable to patients if biotech firms lacked significant financial and scientific support from pharmaceutical companies throughout the development process.

Also, while their attack on excessive pharmaceutical profits reflects a popular view, it is off the mark. Duke University economist Henry Grabowski found that while drug profits can be as high as 20 percent, the real return on investment in research and development is about 9 percent. Indeed, Grabowski found that only the top 10 percent of all drugs actually bring a return on investment. The hefty profits from these blockbusters in any one year have to cover the costs of the other 90 percent, even while drug companies must spend billions more on future research for such diseases as cancer, AIDS, Alzheimer's and schizophrenia. Hence, that 9 percent return is venture capital for medical progress.

The authors allege that drug profits are excessive because many important pharmaceutical innovations come from federally funded research at the National Institutes of Health or in academic laboratories supported by NIH. In fact, one of us (Goodwin) ran an NIH lab and routinely collaborated with drug companies to get access to their unparalleled expertise in medicinal chemistry and drug synthesis. Congress passed legislation encouraging such collaboration to ensure our basic research would not languish in the lab. Now, with the explosion of drug companies using genomic data to develop more effective drugs at the molecular level, NIH will need to collaborate even more closely with industry to realize its basic science potential.

The authors dismiss many new drugs as simply "me-too" variants of drugs already on the market. But many patients benefit from such variants. For example, in calling the selective serotnin reuptake inhibitor (SSRI) antidepressant Zoloft a "me too" drug, they ignore medical literature showing that many patients who fail to improve with one SSRI do well with another SSRI. Practicing physicians encounter this all the time.

Studies by Columbia University economist Frank Lichtenberg show that using new drugs -- true breakthroughs and variants of existing drugs -- reduces medical costs, increases productivity, improves quality of life and boosts life expectancy. Why do these two respected scholars ignore this and other studies in an article that claims to provide the facts?

©2001 The Washington Post

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