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Profits and Progress Cannot Be Separated

Robert Goldberg, Ph.D.
August 5, 2004

These days the media is full of critics and complainers who, like Marsha Angell, former editor of the New England Journal of Medicine, believe that drug companies deliberately market medicines that add little or no value to the public health. Worse yet, Angell and others accuse pharmaceutical and biotech companies of conducting their research in ways that pervert science and scientist alike. Their criticism amounts to a demand that the entire pharmaceutical industry should either be replaced by a government run drug development agency or neutered through a strong system of compulsory government licenses.

Critics like to argue that drug companies spend little money on real innovations, and that government and academic researchers could provide better medications much more cheaply than for-profit corporations. In fact, they argue that the only thing keeping drug prices from falling to affordable levels is that drug companies use their immense lobbying power to get the government to give them patents on their nearly useless products.

For good measure, they allege that any researcher who receives some form of financial support from pharmaceutical or biotech firms is tainted. By definition, the research produced by drug companies is as suspect as the medicines they produce. Indeed, another significant critic, Sidney Wolfe, who works with the Nader group, Public Citizen, has gone so far to make the paradoxical assertion that no one should take a drug until it has been on the market for seven years. (Then how would anyone know if the drug works?)

Unfortunately for the critics, the facts weigh heavily against them. First, American drug companies and biotech firms spend about $60 billion each year discovering, testing, and researching new drug targets, finding new ways to determine which drugs work best for which patients, and finding better ways to identify what parts of the human genome are the best candidates for new medicines. In the pipeline for development are hundreds of potential new drug compounds for the most expensive and intractable illnesses of our time: cancer, AIDS, Parkinson's, Alzheimer's, heart disease and diabetes.

Another $5 billion or so is raised each year by venture capitalists and advocacy groups for biotechnology that goes to researchers in universities and other non-profit research centers. There are also about 600 joint ventures and other research programs between biotech and drug companies worth an additional $25 billion.

This vast amount of money ($90 billion all told) is not going - as critics claim - to roll-on forms of Viagra or Prozac. The money is going into the next generation of medicines and the technological tools that will help reduce the cost and time required to find drugs that are more powerful and more innovative than anything we've ever seen before. And while the government may spend $30 million to map out the genes in the brain linked to schizophrenia, it will take 20 times that much money from the private sector to bring real treatments to market.

Critics assert that drug development is not as expensive as companies and economists in fact say it is. But this begs the question: if it is so cheap and easy to develop groundbreaking new medicines, then why are there so many failures and why is so much money spent every year by companies trying to fine-tune the development process?

If the critics were right, a single innovative new company or university research lab would flood the market with powerful new patented drugs, putting the lie to the drug manufacturers and raking in the profits at the same time.

Advocates for government price controls and weakening drug patents think that the government can decide which drugs to invest in and deny patents whenever convenient without affecting medical innovation. But government labs have developed thousands of compounds that now sit on the shelves gathering dust. And, despite the fact that industry critics complain that patents for government funded discoveries are essentially given away, companies would curiously rather invest and develop their own medicines than market government-derived compounds.

Evidence has repeatedly shown that the government is less - not more - productive than private industry.

But the current animosity towards drug and biotechnology manufacturers really misses the central issue. If the medicines of the last decade were so useless and the researchers who produced them were so corrupted by pharmaceutical funding, than why has study after study established that new medicines are largely responsible for reducing the rate of death and disability due to cancer, heart disease, depression and HIV/AIDS?

Are the hundreds of thousands of people whose lives have been saved by new statins, chemotherapy drugs, and anti-retroviral treatments living an illusion?

This isn't to say that industry doesn't have plenty of room for improvement. Industry and the FDA are hard at work trying to pare down the cost of drug development, encourage wider publication of solid clinical research from all quarters, make medicines more affordable, and encourage competition based on the real value of treatments. But critics have gone from making fair criticisms of industry to embracing an anti-capitalist screed.

If the critics have their way, we will forfeit the future of medicine.

Canada and Europe have already forfeited the future of their pharmaceutical industries and the lives of many of their patients by imposing price controls and crippling medical innovation. Biotech firms abound in Europe, but they lag in new drugs, patents and drug development compared to the U.S. The suffer from an innovation deficit because they lack access to our capital markets and alliances with drug companies willing to stay the course because they believe they will get a return on their investment commensurate with the risks they bear. In Europe, investor faith has fled and human health has suffered as a result.

America is the last best hope in the fight against disease both by default and design. If we abandon our faith in this critical market sector, we will disarm civilization in the war against drug resistant pathogens, cancer, AIDS, and bioterrorism by destroying the ability of private companies to invest in critical medical discoveries. Critics of industry would be well served to look into this abyss very carefully before they rush into it.

Robert Goldberg is Director of the Center for Medical Progress at the Manhattan Institute for Policy Research.

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