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Of Pills and Profits: In Defense of Big Pharma

July 01, 2006

By Peter W. Huber

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 Carre 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. [1] Conflating the four into one, one might tide 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 anticlotting 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 cliffis 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." [2] 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. [3]

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. [4]

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 ignoting 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 tittle 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 or 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.


1. 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).

2. "How a Beauty Regime Salvaged a Cure for Sleeping Sickness," New York Times, March 29, 2006.

3. 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., 527.50).

4. See The Vaccine Controversy: The History, Use, and Safety of Vaccinations by Kurt Link (Praeger, 208 pp., $34.95).

Original Source: http://www.manhattan-institute.org/html/_commentary-of_pills_and_profits.htm

 

 
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