This is the sort of unintended consequence that conservatives and libertarians love to rail about. The theory is that pressure to reduce prices on drugs, so that the poor can afford them, has discouraged pharmaceutical companies from investing in research for newer, better drugs.
This article points out that AIDS drugs in development are down by 33% over the past 5 years. On course, the reason for the decline is a matter of opinion. No drug company has officially blamed price pressure. However, an anonymous drug company executive said,
Furthermore, the article argues that the focus on evading drug patents misses the point.
So, have the AIDS activists’ efforts been counter-productive? Are efforts to provide cheap AIDS medicine hurting AIDS sufferers? Should compassionate people begin defending the ability of drug companies to maintain patent rights and to charge high prices?
Man, that just really bugs me. Why bother to be a doctor if it’s not profitable? Why bother helping people if it’s not profitable? I understand it’s a business, but it’s a business of healing, is it not?
I find the implication that there was a “battle” to provide good drugs, but now the activists have ruined our benevolent plans by stomping on profit margins, so they’re to blame when people don’t get the drugs they need to be very insulting, especially when this guy all but says that the drug companies’ motives are not benevolent at all but are solely profit driven.
Well, I haven’t quite followed the logic that says pressure to lower prohibitive drug costs has hurt AIDS sufferers. Reading the whole article, the only statistic is that of AIDS research. Not once does it mention how many people are being treated today as compared to 10 years ago. Not once does it actually say how specifically the “activists” have affected pharmasutical companies.
That’s reality. You may not like the profit-based drug research structure, but it has been very successful. It’s easy to criticize drug companies for not acting out of charity, but it would be a lot harder for you to set up your own unprofitable drug-research company.
Your point is that the AIDS acitivists haven’t caused a reduction in current treatments. I agree.
The logic of the cited article (which you are free to disagree with) says that pressure to cut profit margins (and anticipation of continued such pressure) led to a reduction in research, which means that more-effective treatments will not be developed or will be developed later. That means that AIDS sufferers are stuck with today’s medicines, instead of the hypothetically better ones that could be devised, given enough research.
The OP’s linked article lays out its thesis: What the industry is unwilling to admit is that drug activists have been successful in their campaign of demanding lower prices for AIDS drugs. The result is that in some drug company boardrooms, investment is obviously switching from AIDS research into areas where profits can still be made.
If the industry doesn’t want activists forcing it to lower its prices, and if their doing so has had negative consequences for drug development, why would the industry be “unwilling to admit” that?
[…] most of this year’s focus (and indeed last year’s as well) has been on drug patents, and the allegation that they are the cause of the inability of the poor to access drugs. […] The real causes of lack of access to drugs are poverty, […]
Right, poor people can’t afford high-priced drugs. And patents give drug companies monopolies on their drugs, so they price the drugs high. Seems like a pretty clear link to me.
december:Should compassionate people begin defending the ability of drug companies to maintain patent rights and to charge high prices?
You mean, should we accept that our only choice is between drug companies’ doing AIDS research to produce drugs that poor sick people can’t afford, and drug companies’ not doing AIDS research at all?
Fuck no. Sounds like a classic case of market failure to me. If the drug companies that advertise themselves as heroic humanitarians improving the world can’t actually manage to produce drugs that poor sick people can afford, let them stick to creating yet more Viagra knockoffs and designer antidepressants, while we fund research for drugs for poor sick people in a more efficient way.
This is a huge overstament, Kimstu. Drugs are priced for their market. For some drugs, the profit is largely gained in countries like America, while only a little is gained in other countries. In the matter of AIDS drugs, as I understand it the problem is that, even given such subsidy-like behavior, the price still wouldn’t be low enough to please those who need it most since the major market for the drug is not in a place where the price can be set so high.
Otherwise, I agree with your points. And, I should add, I have a very hard time believing that the drugs must be priced so high as to be out of reach of even poor countries. But, I seem to recall that even if the companies agreed to sell such drugs at cost that this still wouldn’t be good enough. I must admit I don’t recall all the finer details.
I’ll agree with this to an extent. Obviously, if a company goes out of business, or can’t afford to do research and hire competent scientists then nobody benefits. But, I do question the benefit of a health care industry that pursues profits by way of health care rather than health care by way of profits.
Well, first of all, the only evidence in the article which leads to that conclusion is the word of one anonymous exec about the actions of “activists.” I still don’t trust that as conclusive or even indicitive of what the truth may or may not be.
I do think the question of resource allocation in regards to treatment is an interesting one. Abandon current suffers in order to achieve better treatment in the future, or treat as effectively as possible now, even if it means less money for research into better treatments. I’d go with option two personally. Especially as the resources for research and for production of current treatments of all sicknesses are coming out of the same pot, it doesn’t make any sense that cheaper AIDS drugs must equal less AIDS research, even if it becomes less profitable. It’s a very viable business model to support product lines that lose money with ones that are profitable, if there’s a benefit to be gotten from the money loser.
Not taking sides here, just throwing a fact into the loop.
The overwhelming majority of proposed drugs fail sometime during the R&D process, either pre-patent or during one of the three stages of drug testing. Particularly if the drugs reach Stages 2 or 3 of testing before they are determined to be ineffective/dangerous, the cost is enormous.
So the successful drugs must not only pay for their own R&D costs, but for the R&D costs of the failed drugs. Plus profit, of course.
erl:But, I seem to recall that even if the companies agreed to sell such drugs at cost that this still wouldn’t be good enough. I must admit I don’t recall all the finer details.
That’s okay, I think you’re quite right in the basic point that the drugs would still be too expensive for poor people to afford even without price-inflating patents (although, of course, the price-inflating patents put them even farther out of reach). It’s just not cost-effective to do this kind of research for this kind of market.
But that just emphasizes my point that this is a case of market failure: the market can’t produce drugs that poor sick people can afford even if it makes no profit at all. Fine, then let’s stop pretending that this is a need the market is competent to address. It’s well understood that markets can’t accomplish everything that a society needs, and if the OP’s article is correct, this is just another of the things they can’t do.
True. It cannot provide an education to ensure people don’t engage in such risky behavior on such a grand scale, and then it pulls an Alfred E Neuman when these people want to be treated.
This substitutes high-minded wishful thinking for grubby reality. The fact is we (whoever “we” are) have not had the success of the profit-based drug companies in developing new drugs. Nor, are any of us prepared to replace the intensity of research done by the drug companies.
december, I know you like finding cites. Can you find one that details what kind of money big pharmas get from governments to research things like AIDS medicine?
I don’t know that they get any. This cite addresses “the NIH AIDS effort, which incorporates funding for outside investigations as well as for projects within the Institutes’ walls, accounts for more than 85 percent of the world’s publicly funded AIDS research.” It doesn’t mention any money going to big pharmas, although it dosn’t explicitly address the question.
december:This substitutes high-minded wishful thinking for grubby reality. The fact is we (whoever “we” are) have not had the success of the profit-based drug companies in developing new drugs. Nor, are any of us prepared to replace the intensity of research done by the drug companies.
Actually, the consumers group Families USA recently released a report indicating that big-pharma profits are used for advertising, marketing, and hefty executive compensation packages much more than for “the intensity of research”:
In other words, if they can’t be far and away the most profitable industry in the US, with budgets for marketing and CEO salaries far in excess of what they spend on research, they don’t consider it profitable enough to do research? Aw, poor babies.
And as for your suggestion that market forces are the only way to get significant drug research done: nonsense. As this Public Citizen article points out,
Taxpayer funding already provides a significant chunk of drug research, especially on AIDS. (The report cited in your own link in your last post makes it clear how much progress on this front is directly due to the NIH.)
Pharma companies spend far less than half of their money on R&D.
Their profits are extremely high compared to other US industries.
They can’t make high profits (or in some cases, any profits) making drugs for poor sick people.
Like I said: classic case of market failure. If they can’t make affordable drugs for poor sick people when they are permitted to have monopolistic patents, and they won’t bother researching new drugs if they’re not permitted to have monopolistic patents, it is very clear that they can’t make affordable drugs for poor sick people—even with all the help they get from taxpayer-funded research.
In that case, if we want affordable drugs for poor sick people, producing them in a different way is not “high-minded wishful thinking”, it’s the only practical course to pursue.
Well, let’s stop supposing that “the market” is limited to a profitability scenario.
In a major natural disaster, “the market” is not able to restore the status quo ante – too many people have lost too much of their assets and are without resources to bootstrap themselves back to their previous economic state. Government and charity make up the difference.
It seems to me to be absurd that GSK or Merck is expected by itself to bite the bullet and take a major loss in order to make its medicines available to all who need them. This is not to say that it is not scandalous when such a company makes a massive profit at the cost of major human tragedy. But the other, non-for-profit-private-sector groups have a significant role to play that seems to be not taken into account in this discussion.
My wife, a biostatistics Prof is one of these not-for-profit folks playing such a role. She said that it’s her understanding that NIH does fund some drug trials or comparisons. Of course, these trials do benefit the drug companies who own those drugs, as well as the patients.
Kimstu argues that the public sector could supplement or replace the private sector in developing new drugs. Maybe they could, or maybe they wouldn’t do it as well.
However, what has actually happened is that drug companies substantially reduced their AIDS research, but the public sector has not made up the difference (whether or not they coulda, woulda, or shoula.) So, AIDS sufferers will die, because medicines that presumably could have saved them won’t be developed in time.
Yes, once again the government has not looked at the law of unintended consequences. It should have been clear that making AIDS drugs more ‘affordable’ would have resulted in less private funding into AIDS because of vastly reduced profits. This clarity should have lead to the government putting up the money that the private firms would have taken out. The government, obviously has not done so.
Why should the private sector have the sole responsibility for developing drugs? Or, more acurately, why should drugs be developed at public expense, only to be turned over to private profit when they are profitable?
There has actually been some good research done in the public sector, you know, lilke ALMOST ALL OF IT. The lack of sufficient funding for AIDS research has nothing to do with market pressures. It is a public policy decision.
The NIH is already spending over 2 billion dollars per year in regards to AIDS. About 1.5 billion goes to actual research, the rest goes to education and whatnot.
1.5 billion a year, from just the NIH. What makes people think that more money will produce more results?
Forget profit. Why should any company do any research on AIDS when they know that any big breakthrough is going to be stolen from them at gun point by the government?