Philip Morrising the drug companies - Part 3

The vilification of the pharmaceutical companies continues apace.

In a recent front page story in the New York Times, it was revealed that not only do drug companies charge exorbitant prices for drugs that cost them only pennies per dose to make, but also some of those drugs were invented at taxpayers' expense.  

In the early 1980s Dr. Laszlo Bilo, a relatively obscure researcher at Columbia University, made a key discovery about a new class of substances that could successfully treat glaucoma.  His research was funded with American tax dollars through the National Institutes of Health. 

Subsequently, the pharmaceutical giant Pharmacia purchased the rights to Bilo's discovery for a mere $150,000.  Based on Bilo's work, eventually Pharmacia released the anti-glaucoma eyedrop preparation Xalatan.  Xalatan rapidly became a worldwide best-seller, yielding over $500 billion in sales last year alone. For their part in this wondrous success story, Columbia University has netted over $20 million in licensing fees and royalties, and Bilo himself has become a millionaire.

Meanwhile American glaucoma sufferers are forced to spend upwards of $50 every six weeks for a drug whose discovery they paid for out of their tax dollars (and whose manufacturing cost is only a small fraction of that amount.)   And in Canada, France, and most other countries around the world (where taxpayers did not support the discovery of the drug), patients pay less than half what American patients pay for Xalatan. 

It seems, the NYTimes points out, that the American taxpayers are the only parties in this little scheme who reap no financial return on their investment.  All they got were some expensive eyedrops.

DrRich Comments:

This is a compelling new twist on the evil nature of the pharmaceutical industry.  Not only, it seems, are the drug companies mercilessly  profiteering from the sick (especially sick Americans), they are picking the pocket of every American by spending our tax dollars to invent new drugs, then selling those drugs back to us at exorbitant prices.  This, one could reasonably argue, is at least as sociopathic as anything the tobacco companies ever did.  (At least the tobacco companies, for instance, had the good graces to stop claiming, a couple decades ago, that they were a major boon to public health.)

The clear subtext of the NYTimes report is this: If this doesn't give our government the right to control the prices charged by drug companies, one would be hard pressed to say what does.

DrRich certainly doesn't want to absolve the pharmaceutical industry of all responsibility for the pricing disparities we see between the U.S. and other countries.  Nor does he wish to claim that the high price of prescription drugs in America is completely justified.  He has read the complex economic explanations, published by apologists for the pharmaceutical industry, as to why drugs in Canada cost so much less than in the U.S., and why a drug that costs $.05 a tablet to manufacture is sold to the elderly sick for $5.00.  DrRich suspects that, despite all the pretty justifications for these "seeming disparities," drug companies simply do what every other industry does - they charge the price that the market will bear.

So if what we're seeing is simply the market rising up and saying, "We're not going to bear the current prices anymore," and thus wheedling certain pricing concessions from drug companies, that's probably okay.

But DrRich strongly suspects that what we are actually seeing is yet another escalation of the war against drug companies, a war that will follow the model of the war recently waged against big tobacco.  And the first step of such a war (as in any war) is to dehumanize the enemy so that it's okay to slaughter them.

The big difference between drug companies and the tobacco companies is that drug companies greatly benefit society.  While there are certainly inequities in drug pricing that ought to be worked out, we should be careful that in fixing those inequities we don't throw the baby out with the bath water.  If we're going to alter the arrangement we have with the pharmaceutical industry, let's be clear on how that arrangement works, and why we set it up in the first place to operate as it now does. 

As just one example, let's take Xalatan, and consider how Dr. Bilo's discovery was used by Pharmacia.  Bilo did not discover a finished product. Instead he identified a new class of compounds that looked promising for the treatment of glaucoma - but that were highly irritating to the eye and were not at all suitable for use clinically.  It was up to Pharmacia to figure out how to make a synthetic molecule that would have all the benefits described by Bilo, but at the same time would not have prohibitive side effects.  Then they would have to take that compound through the time consuming and costly regulatory gauntlet, and hope it gained FDA approval. The task was enormously difficult and expensive, and took several years - and it was by no means a sure winner.  (On average, developing a new drug costs drug companies $500 million dollars).  Bilo's (tax supported) idea was a promising one, but developing that idea was very risky, and Pharmacia took on that risk only after difficult internal soul-searching.  If not for the prospect of garnering large profits if their work paid off, they certainly would have walked away.

Before 1980, it is likely none of this would have happened.  The Bayh-Dole Act of 1980 was passed expressly to encourage the marketing of federally financed, university-based research.  Until then, a large proportion of basic university research was never "translated" into marketable products.  Such translation of basic research was recognized by Congress to benefit society not only by advancing the practice of medicine, but also by stimulating the economy.  Industry was encouraged to take on the risk of developing promising ideas that came out of federal research.  And the profit that greeted successful enterprises was designed to be the one thing that would lure industry into taking that risk.

So when the NYTimes "discovers" a company "profiteering" from work done with tax dollars, it should not be a revelation, nor should it be an unmistakable sign that that company is inherently evil or dishonest.  That's the deal we taxpayers made with industry (through our elected officials), because we felt, in the long run, that it would benefit American society.  If we want to change that deal now, so be it.  It is within our right.

But we shouldn't vilify the drug companies for taking us up on the deal we offered them. 

05/06/2000

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