The Pharmaceutical Industry

Merrill Goozner, former chief economics corrrespondent for the Chicago Tribune, is a professor of journalism at New York University. Andrew Sullivan, a senior editor at the New Republic, writes daily for andrewsullivan.com. This week, they discuss whether the pharmaceutical industry needs to charge high prices to protect innovation.

The campaign to make lifesaving AIDS medicine available to the world’s poor has chalked up major victories in recent months. The tireless efforts of the Nobel Prize-winning Doctors Without Borders and its allies finally convinced (or should we say shamed?) the global pharmaceutical industry and its apologists in the U.S. government that tired arguments about pricing, patents, and Third World readiness for using these drugs shouldn’t stand in the way of mobilizing to fight the global AIDS crisis.

The humanitarians’ plea was aided by numerous reports in the media debunking the drug industry’s logic on each of its key objections (see my “Third World Battles for AIDS Drugs,” Chicago Tribune, April 28, 1999, for an early account of the issues). Indeed, the drug industry’s offers over the past year to supply anti-HIV drugs at low- or no cost to developing countries represented a tacit admission that many of their arguments simply couldn’t withstand scrutiny.

To start this dialogue, allow me to outline the state of the debate on each of the key issues. First and foremost is price. Do HIV-fighting drugs (and all drugs, for that matter) need to be priced at exorbitant levels to generate the next generation of cures? You artfully repeated the industry’s main argument last month in the New Republic when you wrote, “The reason we have a treatment for HIV is not the angelic brilliance of anyone per se but the free-market system that rewards serious research with serious money.”

Really? Ask the thousands of AIDS activists who spent the better part of the 1980s demanding that government pour money into AIDS research. Better yet, ask drug companies that wouldn’t conduct clinical trials until they were publicly humiliated into doing so. Or ask Sam Broder, the former head of the National Cancer Institute, who publicly castigated Burroughs Wellcome, now part of Glaxo Wellcome, for claiming it discovered and developed azidothymidine (AZT), the first effective treatment for slowing the onset of AIDS. Drug identification, dosing levels, and initial clinical trials “were accomplished by the staff of the National Cancer Institute working with the staff of Duke University … in response to a public health emergency. Indeed one of the key obstacles to the development of AZT was that Burroughs Wellcome did not work with live AIDS virus nor [did it]wish to receive samples from AIDS patients,” he wrote.

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 National Institutes of Health will spend $2.3 billion in AIDS-related research next year. PhRMA, the industry trade group, proudly claims its members have 73 AIDS drugs in development and then quietly admits that most firms are receiving substantial government aid (usually through collaboration with NIH-funded researchers) as they try to move them from the laboratory to the marketplace.

Identifying the true source of inspiration for pharmaceutical progress is relevant for two reasons. First, it helps us understand why industry claims that it costs over $500 million to bring a single drug to market are preposterous. This bogus number is based on an industry-funded study that assumes all industry research is relevant and all its new drugs are clinically important. Nothing could be further from the truth. Much industry research is aimed at bolstering marketing claims for its existing products (“secondary science” in the words of Harvard public health researcher David Blumenthal). And nearly half is aimed at developing minor variations of existing drugs. Indeed, one of the authors of the original study has corroborated my own estimate that in excess of 40 percent of industry R&D is aimed at producing such “me-too” drugs (“The Price Isn’t Right: the drug industry’s huge profits are rooted in taxpayer-funded research,” the American Prospect, Sept. 11, 2000). How many people in the developing world should be denied lifesaving medicine in the name of funding copycat drugs for heartburn?

The second reason has to do with patents, many of which are owned by public and nonprofit institutions and licensed to the big drug companies. If industry research budgets don’t need the marginal profits generated by selling vital medicine into developing world markets, then they have nothing to fear from giving local manufacturers in countries like South Africa or Brazil the right to make generic versions of their products. These generics are not piracy. International intellectual property law allows countries to issue “compulsory licenses” to local firms to combat national emergencies. If 4 million HIV carriers in South Africa do not constitute a national emergency, the exception is meaningless. Of course, the whole problem could be avoided if companies would simply sell the drugs at their marginal cost of manufacturing, which to their credit some are finally beginning to do.

The drug industry is also backing away from claims that the lousy health systems in developing nations make it risky to give them advanced medicines to fight AIDS. The idea here is that impoverished Third Worlders will botch the complicated drug regimens and develop mutant strains of HIV. However, the doctors who treat these patients say they can effectively deploy these medicines because many of the developing world’s capitals and major cities and towns do in fact have the necessary clinics and patient support systems. And these doctors also understand that access to medicine is just one component of developing the comprehensive public health infrastructure these countries need to combat the disease.

Indeed, the 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. This is not to say that private firms won’t continue to play a role in drug development and shouldn’t be compensated for their work. But groundless fears for their collective bottom line shouldn’t be allowed to obscure the urgent task now before us: to deploy the principles of public health against the worldwide AIDS epidemic before the bodies are stacked like cordwood.