Big Pharma
The term "big pharma" seems to refer to the upper tier, for-profit pharmaceutical companies. Like many other "big" industries, such as "big tobacco" and "big oil", big pharma takes some criticism.
Last week, I ran across a post on Andrew Sullivan's blog, In Defense of Big Pharma. I clicked through the links to read the original article and most of the comments. I must say, the comments were nearly 100% pro-"big pharma", and I didn't even see anything in the original article that was overtly anti-"big pharma". Most of the criticism of the criticizers seemed to me much ado about nothing. However, it did get me to thinking about the pharmaceutical industry, and whether or not it exists in a fashion that best serves everyone. Obviously, competition is fierce, R&D is out of sight and it is a high-risk, high-reward enviornment for investors. Also, the industry has been extremely beneficial to the health of the country (note I'm not saying it has been optimally beneficial, but there is no doubt it has produced amazing drugs.)
No industry is going to be 100% completely free of crooks. So, there is inevitably going to be abuses in an industry and regulatory environment where conflicts of interest abound. However, I tend to the school of thought that believes the profit-motive is a good driver of innovation in the drug industry, and that the profits realized by these companies are a just reward for the large R&D outlays and risk. If these companies were not producing drugs that were valued by the health care community, they would not be able to survive long-term. Sure, their pharm reps may be able to wine and dine doctors into prescribing their version of Viagra, but long-term, if the product is unsafe or ineffective, eventually the truth would emerge, and the company would go out of business. That being said, I think that there should be safeguards in place to minimize the amount of abuse by those willing to "game the system" for their own advantage.
With the advancement of biotechnology, the question of drug development is destined to become more complicated. Eventually, drugs are going to be able to be produced to target very specific systems, conditions and gene pools. Taken to its extreme, a different drug could theoretically be produced for each individual human being that eliminated side effects and produced results. This may sound like science fiction, but the general direction is toward these types of drugs. How are large R&D costs to be recouped when the beneficiaries of drugs consist of a small pool of patients? What are the public policy implications? Should the small pool of patients bear the entire cost of the R&D for the drug that treats their specific and rare condition, or should it be spread among users of some of the more widely used drugs? Should it be spread among society in general?
Somebody, somewhere must bear the cost of drug development. This cost includes paying people for willing to assume the risk of financing the development of a failed drug. Although it is annoying to see so much money spent on advertising (money that could be channeled into more R&D or used to offset existing R&D and reduce prices), this is the by-product of a competitive environment, which in itself should help to drive down the prices of drugs to their end users. Overall, I think the current model does a pretty good job of organizing the inputs and factors of production (scientists, capital, testing methods, facilities, etc.) to produce a highly-valued product for society.
In rummaging through the comments from the post that ignited this reflection, I thought the following anonymous comment stood out as the most creative proposal for potentially changing the current system:
Last week, I ran across a post on Andrew Sullivan's blog, In Defense of Big Pharma. I clicked through the links to read the original article and most of the comments. I must say, the comments were nearly 100% pro-"big pharma", and I didn't even see anything in the original article that was overtly anti-"big pharma". Most of the criticism of the criticizers seemed to me much ado about nothing. However, it did get me to thinking about the pharmaceutical industry, and whether or not it exists in a fashion that best serves everyone. Obviously, competition is fierce, R&D is out of sight and it is a high-risk, high-reward enviornment for investors. Also, the industry has been extremely beneficial to the health of the country (note I'm not saying it has been optimally beneficial, but there is no doubt it has produced amazing drugs.)
No industry is going to be 100% completely free of crooks. So, there is inevitably going to be abuses in an industry and regulatory environment where conflicts of interest abound. However, I tend to the school of thought that believes the profit-motive is a good driver of innovation in the drug industry, and that the profits realized by these companies are a just reward for the large R&D outlays and risk. If these companies were not producing drugs that were valued by the health care community, they would not be able to survive long-term. Sure, their pharm reps may be able to wine and dine doctors into prescribing their version of Viagra, but long-term, if the product is unsafe or ineffective, eventually the truth would emerge, and the company would go out of business. That being said, I think that there should be safeguards in place to minimize the amount of abuse by those willing to "game the system" for their own advantage.
With the advancement of biotechnology, the question of drug development is destined to become more complicated. Eventually, drugs are going to be able to be produced to target very specific systems, conditions and gene pools. Taken to its extreme, a different drug could theoretically be produced for each individual human being that eliminated side effects and produced results. This may sound like science fiction, but the general direction is toward these types of drugs. How are large R&D costs to be recouped when the beneficiaries of drugs consist of a small pool of patients? What are the public policy implications? Should the small pool of patients bear the entire cost of the R&D for the drug that treats their specific and rare condition, or should it be spread among users of some of the more widely used drugs? Should it be spread among society in general?
Somebody, somewhere must bear the cost of drug development. This cost includes paying people for willing to assume the risk of financing the development of a failed drug. Although it is annoying to see so much money spent on advertising (money that could be channeled into more R&D or used to offset existing R&D and reduce prices), this is the by-product of a competitive environment, which in itself should help to drive down the prices of drugs to their end users. Overall, I think the current model does a pretty good job of organizing the inputs and factors of production (scientists, capital, testing methods, facilities, etc.) to produce a highly-valued product for society.
In rummaging through the comments from the post that ignited this reflection, I thought the following anonymous comment stood out as the most creative proposal for potentially changing the current system:
I'm sure there are many hooray stories and horror stories about "Big Pharma",
but they all presume there is no other way. Take a global view: Big Pharma has
the wrong business model.Three scenarios:1. I'm healthy, I need a pill to make
me feel better.2. I'm ill, I need a pill to cure me.3. I have a chronic
condition, I need a pill to keep me alive.All 3 pills come to market from a
business model where only 8 or 10 companies can afford to make that happen. It
takes around a Billion cash to get a drug approved, and the only way to recoup
that investment is to sell the pills at a commensurate price while patent
protection exists. Once generic comes in, the pill cost falls into the
competitive commodity market levels, much more affordable to the guy who needs
it.If you're in situation 1, and can't afford the pill, you pass. Situation 2,
you give up food for a while (you can't afford insurance, or insurance can't
afford to pay for the pill), Situation 3, government (read taxpayer) steps in or
you die.New business model: Have Pharma submit R&D proposals for development
(to the FDA?). Fund the good ideas, give a "home run" bonus to pills that make
the market. Government (read taxpayer) owns the patent, and pill production is
generic from the get-go. Risk/reward incentive for Big Pharma is there, pill
production is always commodity level pricing, and the sick guy can pay for the
pill in all three scenarios. Schedule D Medicare is not needed, everybody is
happy, even Big Pharma?
posted by Eric | 3:50 PM
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