Drug Companies “Just Say No” to Cures
I don’t mean for this to be another stem cell post, but the impetus for this idea comes from an argument about stem cells, so I must… One of the arguments against over-reacting to President Bush’s ban on additional embryonic stem cell research is that state- and privately-funded universities, individual states, private foundations, and drug companies can still decide to conduct such research, so the lack of federal funding will not grind all stem cell research to a halt, but merely dry up one source of funding for one type of research. I find this argument persuasive, but after some thought, I have discovered a hole in the argument.
What on earth would make drug companies, or any corporate entity whatsoever, want to conduct stem cell research that could cure everything? These companies would be playing with fire, at the risk of torching their consumer base, if they became successful in finding cures for many common diseases.
Anecdotal research (my favorite) has shown some pharmaceutical company employees in my circle of acquaintances embittered with their employers, who allegedly keep cures and groundbreaking drugs under wraps in favor of treatments that keep the customer/patient coming back for more.
Ulcerative Colitis is a ready example. If Proctor & Gamble decided to dedicate billions to stem cell research and found the cure for UC in the process, would they make this cure available, or withhold it so that they could continue to receive a steady stream of income from the thousands of people who take P&G’s Asacol for maintenance of their disease? This example is easy to extrapolate to the drug industry in general. Cures and radically new treatments may come across chemists’ eyes daily, but under what circumstances will a pharma company develop and market a treatment that erodes the company’s target market?
More to the point of the pharma business generally and less to stem cell research, the appropriate questions for the pharma industry are “what role should pharmaceutical companies have in the health care process?” and “how can society hold them to that role?” Can we trust them to research and develop cures, or even create more effective treatments that might erode consistent business? Or will they perfect the art of improving treatment just enough to keep us jumping from drug to more expensive drug? (query if they have already perfected same)
That last question’s not very fair to the drug companies, who have made life fair to normal for millions who otherwise would be miserable. The pharma companies have an interesting dilemma. Drugs keep getting more and more effective, and companies compete in the market based on the effectiveness of their drugs. If a cure is found, and the science used to make that cure is relatively easy, P&G will have to wonder “what if Merck has this technology and wants to use it? We’re sunk… unless…” One of two things happens then: P&G wants to make some money off the cure instead of risking completely losing it to Merck, and gets FDA approval to market it; or we enter a pharmaceutical cold war, where everyone knows what the cure is, but nobody wants to use it because it will mean the end of the gravy train. I think it likely that this cold war is already happening. Maybe Bristol Myers already has the cure for cancer but keeps it locked in a lab in New Jersey. Should they, as participants in the capitalist system, keep it there? Or do they have some social responsibility to heal? At no point does a chemist take an oath to heal the sick, solve the world’s problems, or cure Ulcerative Colitis. Should we make her take such a responsibility just because she is working on drugs instead of pesticides?
What’s the solution to the pharmaceutical cold war (assuming it exists or will someday exist)? The government could force drug companies to disclose all research, but that would be intrusive, not to mention anti-competitive. Without some intervention, however, the drug companies are going to continue competing in business models instead of a health care paradigm. Universities and physicians have to get more involved in drug research. Universities need to be involved because of their public service mission, and physicians because they, unlike scientists, have a duty to heal. Then we might see truth in research and real breakthroughs.
12 Responses to “Drug Companies “Just Say No” to Cures”
Is there a foundation, in fact, for this post? Having reviewed the drug industry relatively extensively most of your conjecture seems absurd. Drug companies regularly release what they refer to as a “pipeline” which is a list of pharmaceutical products under developement and their status as it relates to FDA approval. Since approval can take as much as a decade, no one really sits on drugs when they think they are market ready, they submit them to the FDA ASAP.
The drug industry is not a cold war, it is an arms race. Being the first to market can mean billions of dollars, and folks in the pharmaceutical industry have a pretty good grasp of the fact that they will never “Cure everything.” That is a rediculous comment. Viruses and bacteria adapt. New conditions arise. Hell, when they solve real problems of health they know people will find cosmetic, aesthetic, or secondary problems to fix (i.e. Viagara) and that is ignoring the booming biotech industry and the refinement of gene technology as well as psychotherapy drugs for conditions that, fundamentally, cannot be “cured”.
The real problem, if there is one, is that the more governments interfere with pharmaceutical companies the more they stifle innovation and CREATE monopolies. Ever wonder why so many drug companies are merging, and a few key players have come to dominate the market? FDA approval can cost more than $1 billion PER DRUG. That means that smaller firms with good ideas rarely have the capital to submit to government regulations. What do they do? They sell either the product idea or the company to a mega-firm like Pfizer.
I find it hilarious that the folks who assault the private drug companies and call for more governmental responsibility are creating precisely the right circumstances for the formation of a drug oligopoly–and stifling innovation in the process.
As another thought experiment, ask why like 90% of innovation occurs in the U.S.–the last major drug market in which drug prices are negotiated by consumers rather than the government (though Medicare is changing that). Also ask why it is fair that U.S. consumers are paying outrageous premiums for drugs because foreign governments are coercing companies into forcing down prices.
You also should remember that the Feds subsidize most (if not all) of drug research and something around 40% of all medical research.
So no federal funding is not necessarily a kiss of death, but close.
Lee,
Ok…great. Can we see a citation for that funding statistic? You see, I was under the impression that Research and Development was one of the largest expenses faced by every major pharmaceutical firm in the country. And just how do the feds decide which firms to subsidize? And why do they make firms pay for expensive FDA field trials if they are going to foot the bill for the research?
“…subsidize most (if not all) drug research…”
Are you in the U.S.? Did you just make this up?
John,
Lee is largely correct. I work in the industry. While pharma firms do spend an enourmous amount on research, very little is spent on basic research. Pharmaceutical R&D is largely spent on already promising drugs or technologies. Even then, most of that spending is focused on the development of a commercial process and optimizing production. Basic research, which forms the basis for new generations of drugs is the province of university and government labs. The vast majority of that funding comes from the federal government.
G.,
Absolutely. The government does subsidize substantial governmental and university research–particularly on pressing health issues, national security issues, etc. And none of my comments should be taken as a note that the pharma companies don’t have HUGE margins. When I was consulting one of the biggest problems was that firms couldn’t see the rocks for the tide, i.e. they had high enough profit margins that they ignored a number of inefficient processes in favor of not rocking the boat.
But to say that they “…subsidize most (if not all) drug research…” is ludicrous. This is the stuff of conspiracy theories. FDA rules differ greatly by type of drug (i.e. patient population, etc.), but every year FDA regulations and the costs they impose keep viable drugs off the market. They also make pharma development so risky (particularly for small firms) that mergers and acquisitions take place at a faster pace than in almost any otherr industry. Some of this would happen without the FDA, but a lot of it is a result of governmental action–actions creating the artificial terrain necessary for oligopoly. Most of the management literature I have read tells big firms to use this to their advantage, buying out small firms earlier in the development process as they are willing to pay a larger premium to hedge risk.
But back to the primary issue, G., have you ever seen any evidence whatsoever of drug companies sitting on potential blockbusters for long periods of time in a kind of “cold war”. No way. Companies do time drug releases to some extent when they have a preexisting drug to treat the same condition, because the tradeoffs of cannibalizing their own drugs are bad for revenues; but this is usually a matter of months, not years. The industry is so competitive on big issues, in particular, right now that sitting on a cure would be impossible. PArticularly since you couldn’t just release it when you want to. Once a drug goes to the FDA it makes the orange list and it is publicly available (even though it will likely be two to ten years before release). Try playing with that kind of futures hedge in a market that rewards first responders with 100% of the market for years after introduction. Again, this is almost strategically impossible, I think. I could be wrong, but I would have to see a few cold hard facts (I only spent a short time working on the industry, so, I will admit that you veterans have the pre-existing knowledge to show me up).
I very much agree with John’s basic skepticism about Adam’s drug-companies-holding-back-breakthroughs. But I think there must be some sort of misunderstanding between John and Lee, with regard to the claim that “the Feds subsidize most (if not all) of drug research”. First of all, the FDA is pretty much irrelevant to the question of government funding of drug research — I take it that Lee means funding agencies like the NIH, and not the FDA, whose mission is primarily regulatory. (If you’re going to evaluate the FDA’s economic impact, btw, you would need to find some way of estimating what the costs would be of more unsafe drugs being released on the market, and staying on the market longer before being recalled. Those figures are probably out there somewhere, but I couldn’t google anything like it up just now.)
Second, note that there are at least two ways of interpreting Lee’s remark:
(i) the government provides most (if not all) of the funding for drug resaerch; versus
(ii) most (if not all) drug research is conducted with substantial government funding.
I would agree that (i) is pretty much crazy. But (ii) is both highly plausible and (I think) what Lee meant in the first place; certainly the principle of charity dictates that we interpret Lee as meaning the more probable/less insane version of the claim. Just to start with some figures reported in an industry source
http://www.thepfizerjournal.com/pdfs/TPJ32.pdf
we see a 36% contribution from the NIH (p. 8). Now, that does not seem to include all sorts of significant funding from other government agencies (such as the DoD, which sponsors a tremendous amount of cancer and HIV research; or the NSF). Also, a significant amount of the industry funding in that figure is spent on ‘me-too’ drugs and tweaking existing drugs to extend copyright. See, e.g.,
http://www.nybooks.com/articles/17244
though I didn’t see any specific figures in there. But I’m just citing it to try to motivate our taking the figures reported in the Pfizer Journal and adjusting upwards to get a better idea of the real percentage of the government’s contribution to research into novel drugs.
So, once we understand it properly as (ii), we see that Lee’s claim that “the Feds subsidize most (if not all) of drug research” is not “the stuff of conspiracy theories”, but in fact looks pretty plausible.
A pill that cures would command a much greater price than a pill that only holds a disease at bay.
You apparently don’t understand the issue. If a pharma company’s product a cures to an actual disease, the pharma’s product will be used for a limited period of time. On the other hand, if the pharma company’s product provides a palliative that responds to a symptom for a limited period of time, the product will, more likely than not, be used for decades. That’s where the money is–a product that will be used for decades. So-called “lifestyle drugs.” Viagra. Ciallis. Nexium. They’ve been advertised all over cable TV. (Get a big erection! Don’t have a problem with your pizza!) That’s where the money is for the pharma companies. Lifestyle drugs. Tne analog to, for example, Ritalin that is being used to sedate boys merely for the convenience of their elders. I hate that. I really do.
BTW, I have a personal interest in the big-pharma companies’ policies. Their palliative for my younger brother’s high blood pressure caused more problems than was warrented–he just needed to lose some weight. He did, and now he’s doing fine, without the pills.
Grandma was right-it really will make you blind?
if the pharma company’s product provides a palliative that responds to a symptom for a limited period of time, the product will, more likely than not, be used for decades.
Possibly…but the company that develops the drug will only reap major profits for roughly 10 years before their profit margin plummets due to generic competition. And if it’s a blockbuster drug, the profit margin will decrease before then due to “me-too” drugs coming on the market.
Adam’s cold-war thesis is highly implausible. If a firm had sunk hundreds of millions of dollars into research and discovered a cure rather than a palliative, they’d be acting against both ethics *and* financial interest to sit on the cure and try to find a palliative. For starters, a competitor could (and probably would) discover the same cure and bring it to market. There would have to be a vast conspiracy to keep these cures under wraps.
As for federal funds going into commercial drug research, I believe it’s usually basic biomedical research that discovers the *targets* for pharmaceutical treatments, then pharma companies develop the molecules to hit those targets (i.e. the for-profits do the applied research). Of course, this goes on in a lot more places than the drug industry, but people are a lot more concerned right now about the price of prescription drugs than they are about the price of other consumer products.
Eric Seymour at June 7, 2005 02:52 PM |
Possibly…but the company that develops the drug will only reap major profits for roughly 10 years before their profit margin plummets due to generic competition
Um, and, why do you think that the pharma companies are advertising the hell out of their lifestyle drugs? Using their trademarks? To create a market for them–the brands–among the general public. Viagra. Ciallis. Nexium “the purple pill.” When was the last time that you saw somebody advertising aspirin?
You’re kidding, right? Nope, I never see ads for Bayer, St. Joseph’s, Aleve, Tylenol, or Motrin!
Oh, and Nexium is not considered a lifestyle drug. Unless you think it’s a “lifestyle preference” to not have daily symptoms of heartburn.