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9/19/2003 05:34:00 PM | Brad Plumer Is R&D a sham? Following Andrew Grossman's advice, I checked out Gregg Easterbrook's new blog and came across this little entry railing against price controls for pharmaceuticals: Canadian and European Union price-controlled pharmaceuticals are taking a free ride on new-drug research and development that is funded by the high prices paid by American consumers and insurers. Essentially, the United States consumer is subsidizing drug development for the world of the world. Stop the high prices paid for U.S. drugs and the pace of new-drug development will slow.The R&D line is used to justify drug prices that are hundreds of dollars higher in the US than they are in Canada. Cut the prices, the story goes, and R&D will vanish, and everyone will die of cancer and heart disease and malaria and maybe if you're not lucky smallpox. But is this really true? The first counterargument is perhaps the most common, as articulated by Congressman Bernie Sanders (I-VT). Pharmaceutical companies already have ridiculous profit margins-- higher than any other major industry in the US. Sanders claims that only 20 to 30 cents of each prescription drug dollar is spent on research, and that price controls would cut into profit margins more severely than they would limit R&D spending. Joseph Mercola makes more or less the same point. Fine. There's that. There's also point number two, which might be more interesting. This one comes from a friend who worked at a biomedical consulting firm, doing market analysis on just this subject. He claims that pharmaceutical R&D is overhyped. As far as he could tell, the bulk of research money is spent on lucrative but non-vital drugs like Propecia, Rogaine, Viagra... The most pressing R&D concerns are hair loss and impotence, not cancer or heart disease. Is that really worth having a nation of people that can't afford prescription drugs? Of course, the counter-counter argument is that if profits and R&D expenditures do go down, then even less money will be spent on the vital drugs, and corporations will place an even greater importance on Rogaine-like drugs. I don't really know how to get around that... but the R&D argument isn't nearly as straightforward as Easterbrook makes it out to be. perma link |
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