Merrill Goozner, former chief
economics correspondent for the Chicago
Tribune and professor of journalism at New York University, and Andrew
Sullivan, senior editor at the New
Republic and daily writer for andrewsullivan.com, this week are engaged
in a Slate.com "dialogue"
on whether the high drug prices charged by the pharmaceutical industry
are necessary to protect innovation. Slate.com's "dialogue" section is
a regular section featuring debates between experts in various areas. Goozner
writes, "The campaign to make lifesaving AIDS medicine available to the
world's poor has chalked up major victories in recent months." The media
"debunk[ed] the drug industry's logic on each of its key objections" to
making affordable drugs more widely available, and the industry's recent
offers to discount anti-AIDS drugs for developing countries "represented
a tacit admission that many of their arguments simply couldn't withstand
scrutiny," he adds. To "outline the state of the debate," Goozner says
that the "first and foremost" issue is price. Drug firms are charging medicines
at "exorbitant levels" by claiming they need investment return on millions
spent during drug research and development. But as government agencies
like the NIH and not-for-profit institutions provide significant drug research
funding for AIDS and other disease, as well as perform considerable portions
of that research, "industry claims that it costs over $500 million to bring
a single drug to market are preposterous." He adds, "Despite an AIDS drug
market that has grown to more than $7 billion a year in the United States
alone, this imbalance in effort continues. The [NIH]
will spend $2.3 billion in AIDS-related research next year." Further, he
estimates that more than 40% of R&D is spent on the production of "copycat"
drugs for conditions such as heartburn. Goozner adds, "[T]he development
of anti-AIDS drugs, like the public awareness campaigns that have largely
stopped the spread of AIDS in the developed world, should be seen for what
they are: a triumph of public health -- not private sector R&D."
The Other Side
Sullivan responds to Goozner's argument that "achievement
shouldn't be rewarded in the marketplace because the government actually
did most of the research for our pharmaceutical revolution" by noting that
"over 70% of pharmaceutical research and development comes from the private
sector -- and that proportion is growing. [Pharmaceutical companies] take
huge risks and occasionally reap the rewards." Drug prices have not been
pushed up beyond inflation because as consumer prices rose 19% between
1993 and 1999, drug prices only increased 18.1%. Adjusting for R&D
shows drug company profit margins at 9%, "still a healthy margin" but needed
"to offset the epic risks that drug research entails. ... One of the reasons
for patents and profits on successful drugs is to balance out the huge
losses and bankruptcies that occur every day in this industry for the failed
drugs," Sullivan writes. Hesitancy to provide discounted drugs to poorer
nations stems from the concern that Americans will demand to receive the
"same rock-bottom prices -- thereby eviscerating the very incentives that
made the drugs possible in the first place." Sullivan concludes, "Far from
being overpriced, the current prices for new drugs are actually massively
underpriced when you factor in the benefits" of saving hospitalization
costs. "The bottom line is that if you factor in increased longevity, productivity,
and declines in hospitalization, every new, expensive drug on the market
saves far, far more than it costs." To weigh in on the drug pricing debate,
enter http://slate.msn.com/code/thefray/thefray.asp?post=1&t=dialogues
into your Web browser (Slate.com, 4/9).
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