Commentary

Punishing Drugmakers for Doing Good

This article originally appeared in the San Diego Union-Tribune on December 16, 2004.

Create a company. Spend billions of dollars. Develop lifesaving products. Be vilified. That seems to be the lot in life of pharmaceutical firms.

In early December a newspaper article headlined: “Chemical Compound Shows Promise Against Tuberculosis: New Medicine Is Best Hope Against Disease in 40 Years.”

But Democratic presidential candidates routinely criticized drugmakers in the last election. Legislators of both parties continue to target drugmakers. Seniors demonstrate against them.

Marcia Angell, author of “The Truth About the Drug Companies,” is basically upset that drug companies are private. They decide what to research, set pharmaceutical prices and advertise their wares. That’s the way most of the economy works. But Angell, along with a gaggle of activists and politicians, would turn drugmakers into public utilities and regulate prices.

In her view, the companies spend too much on administration and marketing. They produce too many “me-too” drugs. Patents are restrictive; advertising is excessive.

Too much and too many compared to what, however?

All firms have administration and marketing expenses. However, drugmakers devote a larger percentage of their resources to research and development than does any other industry. Criticize promotional practices that bias treatment decisions, but don’t expect firms to hide their products. Marketing is intended to sell medicine; otherwise, there would be no money to make drugs.

Marketing and research and development are complementary. More products require more advertising; more advertising generates demand for more products. Anyway, two-thirds of pharmaceutical marketing expenses are for free samples, which act like a price cut.

Angell complains that the industry develops too many “me-too” drugs, which treat conditions for which other medicines are available. Meeting the demand for competitive products does not diminish the incentive to create blockbuster drugs - like a new tuberculosis treatment - however.

Unfortunately, medical research is uncertain. Developing new remedies requires drilling thousands of dry holes. Price controls would discourage firms from investing in products with more uncertain, though potentially more lucrative, payoffs. Anyway, me-too drugs often offer important therapeutic advantages. The more drugs available to treat a given condition, the more options a doctor has in treating a patient.

Sometimes, a slightly different formula proves substantially better for some people. Explains rheumatologist John H. Kippel, “It’s not unusual for patients to try several options before finding one that works.”

Multiple drugs have proved invaluable for AIDS patients as treatment resistance increases. Merck’s withdrawal of Vioxx because of adverse side effects illustrates the importance of having numerous medical options. Patients requiring relief from inflammation but who are vulnerable to stomach problems still can choose Pfizer’s Celebrex. A half-dozen more COX-2 inhibitors are being developed.

Further, “me-too” products help lower prices of existing therapies. Ironically, The New England Journal of Medicine, which Angell used to edit, recently observed that me-too drugs had driven down the price of statins. Added the journal, “Lower costs for me-too drugs are also seen in other commonly used classes of drugs.” One could imagine asking: Why produce more than one brand of automobile or computer?

Angell’s desire to limit patent protection is similarly myopic. Patents provide temporary protection from knockoffs to encourage innovation. There’s no escaping the trade-off: Cut the patent life and cut the incentive.

Ultimately, Angell believes that patients should have little say in what medicines they receive: The Food and Drug Administration should approve fewer drugs and limit what consumers are told. Yet every day that a lifesaving medicine sits unused means more suffering and dying patients.

Angell is particularly critical of direct advertising to consumers. But patients should learn about available treatments. Anyway, doctors remain gatekeepers by prescribing medicine. Angell dismisses the threat. “Give us everything we want, or we might have to stop producing miracle drugs,” she says.

But medicines don’t spontaneously generate. Politics is no way to pick drug winners and losers.

Pharmaceuticals, including generics, make up 10 percent of total health care spending - hardly the driving force in rising medical costs. In fact, hospital prices rose almost three times as fast as drug prices last year.

These medicines lengthen lives, improve the quality of life, and reduce hospitalization and surgery. Americans might prefer to pay less for their medicine. But they will be the biggest losers if they myopically kill the golden pharmaceutical goose.

Doug Bandow, a syndicated columnist, is a senior fellow at the Cato Institute and James Madison Scholar with the American Legislative Exchange Council.