Alright. I am, admittedly, not an economist or health care expert. But I’ve spent an above-average amount of time drinking with people of both persuasions. And I read the same Derek Lowe post as Megan. But I was struck with a pretty different thought as I read it, which I will now bore you with.
The question at hand is whether it would be a good idea to give the U.S. government the power to bargain on behalf of prospective drug buyers. Right now Europe may be getting a free ride thanks to the relatively high prices we pay in non-monopsonistic system, the thinking goes. Empower U.S. consumers (by, uh, de-empowering them), get them lower domestic prices, and perhaps European prices will be driven up to compensate.
Megan and Dr. Lowe both say that’s silly, and I buy their arguments — it’s more likely that the total market size would shrink rather than automatically rebalancing itself in a zero-sum manner. But Megan also says this:
What we are losing through Europe’s refusal to pay higher prices for drugs is not help covering the cost of the drugs that our buying funds; it is the never discovered drugs that a larger and more lucrative market would have supported.
So, alright, I’m willing to believe that there’s a socially optimal size for the pharmaceutical market. If the drug companies get more money they can spend more on R&D and we’ll get better drugs. Conversely, if they get less money (because we’re paying less per pill) we’ll be able to give the currently available drugs to more people who need them..
But here’s the thing: if you’re a regular reader of Lowe’s blog, you know that the drug industry has been doing terribly at coming up with useful new drugs recently. At ITP this is usually expressed in terms of concern over what big companies are going to do when their blockbuster patents expire and they have nothing to replace them with. But it also means that recently the social benefit we get from each dollar of pharma R&D has been relatively low. In the past few years a lot of new drugs have proven to be dangerous, or less useful than the ones they were supposed to replace, or have failed in the final stages of the regulatory process.
The line about drug companies profiting off of publicly-funded research is a canard — Lowe has convincingly explained this again and again. But all the indications are that the admittedly intensive process of turning “basic research” into usable drugs has been working less well than usual recently — from failed inhaled insulin to cholesterol-lowerers that don’t affect artery blockage to weight loss pills that make patients want to kill themselves, it’s been a pretty dismal period. So dismal, in fact, that at the moment it seems that, if anything, we’re spending too much money on drug development — if there’s a real tradeoff here, it sounds to me like we should be foregoing some of that expensive and currently unproductive research in favor of buying generic statins by the truckload.
If the progress of the related science occurs in a perfectly linear order then I suppose there’s an argument for pushing through this dry spell. But it seems likely that it doesn’t; that instead the aforementioned “basic research” informs the drug development process, and that if we just sit back and wait for a bit we might end up getting more bang per buck across time.
UPDATE: Also, this seems crazy:
So the most probable outcome of introducing monopsony power here [in the U.S.] is that the market for drugs shrinks to the point where it will support few-to-no new drugs.