October 07, 2014
That would be the logic of his Wonkblog column arguing that specialty drugs are worth the cost. The basic point is that some of these specialty drugs constitute radical breakthroughs that substantially extend or improve the quality of life. The $84,000 Hepatitis C drug Sovaldi is the case in point. After all, isn’t it worth a great deal of money to save a life?
By this same logic when the firefighter shows up at our burning house with our family and dogs inside we would gladly pay her millions of dollars if we had the money or insurance that covered the cost. Certainly saving their lives would be worth the cost.
Of course we don’t typically pay firefighters millions of dollars a year. Rather than negotiating a payment at the point where our house is burning down and our families’ lives are at stake we pay them a salary. Saving the lives of our family members is part of their jobs. We don’t hand over our life savings when they show up at the door, they have already been paid.
If we had a little clear thinking in policy circles it would be the same story with prescription drugs. It doesn’t cost Gilead Sciences (the patent holder for Sovaldi) $84,000 to manufacture each patient’s dosage. Based on the price of generics elsewhere, it probably only costs about 1 percent of this amount. Almost all of this $84,000 price tag is ostensibly due to Gilead Sciences need to recoup research costs, which it can do because the government issued it a patent monopoly. (This means competitors get arrested if they try to produce the drug without Gilead Sciences’ permission.)
Financing drug research with patent monopolies is equivalent to arranging terms to pay firefighters when they show up at our burning house, except it makes less sense. Unlike the case of the burning house, which we can usually see pretty clearly, patients don’t really know how effective the drugs are that the pharmaceutical companies try to sell us. After all, they are the ones who did the research. The have to show results to the Food and Drug Administration to get approval, but what they disclose to the public is up to them. And when you can make $83,000 on every sale ($84,000 minus $1,000 for production costs) there is a substantial incentive not to disclose information that may raise questions about your drug’s safety and effectiveness. And, if you don’t think drug companies would conceal information, then you probably have not been alive very long.
We would be stuck if patent monopolies were the only way to finance research, but fortunately they are not. There are many other ways to support research funding, most obviously through public funding, like the $30 billion that goes to the National Institutes of Health (NIH) every year. There is no reason in principle that the public money used to support research could not be doubled or tripled. The research could even be done by the same drug companies who do research now. The difference is that they would be paid upfront. In this situation all their findings would be fully available to the public and all patents would be placed in the public domain. Then we could all buy generic Sovaldi at $1000 a dosage and we wouldn’t have to waste so much time debating the value of a human life.
The drug industry will of course fight this change to the death. They will pay billions to politicians and advocates to argue that we could never have successful research without patents. After all, if government bureaucrats touch the money then it is worthless (except for the $30 billion that goes to NIH, which they always lobby to increase).
Anyhow, we all recognize the power of the pharmaceutical industry and the corruption of the political system. But folks should know that the problem of high-priced specialty drugs is a result of this corruption, not some inherent paradox of modern life.
Comments