Healthy Skepticism Library item: 12645

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Fantasy Pharma Economics from The Atlantic
GoozNews.com 2008 Jan 30
http://www.gooznews.com/archives/000956.html

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Follow link to Gooznews for discussion of this article

Full text:

Must medical innovation be expensive? The pharmaceutical industry flacks, lobbyists and paid academic consultants who endlessly peddle that myth were joined today in a blog post by Megan McArdle on The Atlantic magazine website. Since that magazine is one of the few journalistic outlets left in the nation where ideas are taken seriously, I thought I ought to treat her musings seriously, too. You can read them here.

To summarize briefly: The clinical trials to develop a new drug cost $500 million alone, she asserts. If you take that money from shareholders by stealing their intellectual property, innovation will dry up. And if you expect government to step in the breach, forget about it because a) government doesn’t produce new drugs, it only produces molecular targets for new drugs; b) when it does come up with some basic science insights, it takes the private sector to make marketable goods out of them; and c) if you try to force innovation into the public sector, you’ll wind up with one of everything — like in the military.

This misconstrues everything we know about the pharmaceutical innovation process. First, on costs. Why does industry spend $20 billion a year on clinical trials? Is it because the cost of trials has skyrocketed? Or is it because the new drugs that industry is bringing to market are such minor innovations or no innovation at all compared to previous drugs that it takes trials with literally thousands of people in them to prove something works. Take trials for drugs that reduce heart disease by lowering cholesterol, for instance (a hot topic these days). Do you know how many people must be treated for one year to eliminate one death by heart attack with a cholesterol-lowering drug? 750. No wonder the clinical trials to approve a new medicine in this category must enroll 6,000-8,000 patients to have statistical validity. And why do we need another cholesterol-lowering drug anyway? If your previous cholesterol-lowering drug that generates billions of dollars in sales is coming off patent, you might need one. But does the public?

Now let’s take a truly innovative drug to cure a rare form of leukemia that might strike 15,000 people a year. A clinical trial proving such a drug works — like the trial that showed Gleevec worked in chronic myelogenous leukemia, for instance — might only have to enroll a couple of hundred patients. Indeed, the better it works, the fewer people you need to enroll since the statistical significance needed to convince the FDA will be easier to reach. So from that standpoint, the more effective the new therapy, and cheaper it is to develop. (For the complete story on how a publicly-funded researcher forced Novartis to bring Gleevec through clinical trials, see my chapter on “The Failed Crusade” in “The $800 Million Pill,” still available from the University of California Press if you click on the book ad to the left on my website.)

The idea that the government can’t produce new drugs is a hoary myth. We have systematically undermined the government’s capacity to produce new drugs in recent years. That’s true. But historically, the government has produced some of the most important breakthrough drugs. Its efforts range from the Walter Reed Army Institute of Research (responsible for most new anti-malarials in the second half of the 20th century) to the National Cancer Institute (largely responsible for 50 out of 59 of the first cancer chemotherapy drugs) to the National Institute of Allergies and Infectious Diseases (the first HIV/AIDS drugs, which were actually recycled failed molecules taken from an NCI program). Indeed, the manufacturing process for penicillin, brought to U.S. shores during World War II by scientists working on the British government nickel, was developed in a U.S. Agriculture Department laboratory in Peoria, Ill.

However, McArdle is right in asserting that the locus of development of new drugs and biologics has shifted to the private sector in recent years. But as that shift has occurred, the rate of innovation has declined sharply, a point I discussed in depth in my essay “The Pharmaceutical Innovation Conundrum.” Suffice it to say here that science and public health drive real innovation, while the market innovates products that satisfies a demand that may or may not have anything to do with public health. Alas, private sector innovation often does not, as in the case of useless me-too drugs or drugs for conditions that are either barely existent or have been over-dramatized through advertising. For a discussion about how a government take-over of final clinical trials that are financed by industry user fees can actually help industry improve its output of significant new therapies, see my discussion of the recent “Trials of Vytorin.”

In her conclusion, it’s ironic that McArdle should attack our inefficient military procurement system (no argument there) and lambast its poor record on innovating inexpensive new products (“This is how we spend four percent of our national income on something that most of the American public never sees,” she writes. “Forgive me if I’m not excited about applying the same process to health care.”)

Health care is now 16 percent of our national income. The drug component alone is about 2 percent of national income, and if you include all the drugs purchased by physician offices (most cancer drugs) and hospitals, which are subsumed within those categories of spending, it is probably closer to 3 percent of national income. That’s nearly three-quarters of what we spend on national defense.

And what do we get? The Defense Department, under the stellar leadership of Donald Rumsfeld (who for a while was a drug industry CEO!) and his boss George W. Bush, gave us the War in Iraq. Remember Rummy’s innovative hit-and-run army? Iraq was going to be the proof of that pudding. Oh well. Back to the drawing boards.

Meanwhile, our private health care system, which has put pharmaceutical innovation near the top of its priority list for a generation as a way of prolonging lives, has delivered us shorter longevity, higher infant mortality and worse general well-being (high obesity, cancer, and asthma rates, for example) than most other advanced industrial nation in the OECD.

On the innovation front, when it comes to public and private sector ineptitude, I’d say they’re running neck and neck.