Sunday, December 31, 2017

What to do about Big Pharma?

CBS MoneyWatch reports that
Prices for a cancer drug called lomustine have skyrocketed nearly 1,400 percent since 2013, putting a potentially life-saving treatment out of reach for patients suffering from brain tumors and Hodgkin’s lymphoma. Though the 40-year-old medication is no longer protected by patents, no generic version is available.
Bristol-Myers Squib (BMS), who had sold the drug for $50 per capsule sold the rights to a Miami startup called NextSource, which hiked the price on nine occasions, to $768 per pill. That is cumulative hike of 1,536%.

The stated reason for the price-gouging was typical coporate gabbledigook:
NextSource CEO Robert DiCrisci, told the [Wall Street ] Journal that the company sets its prices based on the costs it incurred in developing the medication and the benefits it provides patients. Ibid.
Of course, the company did not develop the medicine; it bought the rights from BMS, instead. Basing the price on “the benefits it provides patients” can only be described as extortion. According to its website, the company apparently markets only one product: Gleostine, the same drug that BMS sold under the brand name CeeNU. The actual manufacturing is performed by CordenPharma. The patent has long-since expired.

I daresay that NextSource was formed for the sole purpose of acquiring the rights to lomustine and squeezing cancer patients relying on the drug to the extent the traffic would bear. That some patients cannot afford the drug is immaterial. Let them die and reduce the surplus population.

Big Pharma is clearly out of control. NextSource is a perfect example of corporate greed in action. Any truthful economist would classify this as market failure. It is a particularly loathsome failure when it causes people to die for inability to pay a grossly inflated price for medicine1
Because Big Pharma controls the prices of drugs upon which people rely in order to live, it has the power to decide who will live and who will die. No business should have this power without constraints, as is the case today in the U.S. The moral justification for all businesses is that they—in some way—promote the common good. NextSource has that power, at least until competitors receive authorization from the FDA to manufacture and market the drug. You can be certain that NextSource will use all its legal and political power to delay that authorization.

Something should be done to change this system. There is nothing just or fair about it, as its main purpose is the upward distribution of wealth from the public (either directly, or through insurance companies or the government) to the officers and shareholders of Big Pharma.

There are other ways to develop new medicines besides patents. Because so much medical research is performed by the National Institutes of Health, much of which the drug companies would have to do themselves without the NIH, all patents could be granted only on the condition that the government receives a non-exclusive transferrable license to manufacture and distribute the drug.

Another remedy would be to simply abolish medical patents, place responsibility for developing new medicines on the NIH (which could contract with non-governmental entities to do some of the research), and require the pharmaceutical companies to license the drugs from the government. Once a pharmaceutical company licenses a drug, it would be allowed to set its own price without limit, but with the knowledge that the government could also manufacture and market the same drug at a far lower price or license it to competitors.
We desperately need to get it into our heads that the way something is done now is not the only way it can be done or should be done. That applies particularly well to the economy and commerce, where the powerful players frequently oppose change because it is disruptive and may affect their profits2.
Monopolies of human necessities, like water, food, electric power and medicines, are parasites, extracting from society far more than they contribute. To align their incentives with the public good, societies must clip their wings. The pharmaceutical corporations, with their patent monopolies that enable them to extract far more from society than they contribute, are economically and morally indefensible. Their wings can only be clipped by the people, acting through their government. It is time to move on this front.

  1. For an excellent discussion of this topic, see Dean Baker’s article Drugs are Cheap: Why Do We Let Governments Make Them Expensive? .  ↩
  2. I have no doubt that the makers of buggies opposed allowing automobiles upon public streets and highways. They knew that once people started driving cars their days of manufacturing buggies was over. Many of the buggy makers switched over to automobiles, but most of them quietly went out of business, confirming the economist Schumpeter’s theory of creative destruction.  ↩

No comments: