April 29, 2004,
The pharmaceutical sector deserves its own Lee Iacocca. Just as Chrysler's former chairman personified his company and business in 1980s TV commercials, drug makers need a top executive as their industry's instantly identifiable human face.
Such a spokes-honcho could battle what I call the "Free Drugs Now!" movement. This claque of activists, generic producers, public-interest lawyers, and politicians is arranging the slow-motion nationalization of this vital sector. The Free Drugs crowd demands roughly this of big pharma: "Help Granny stay wise and witty past age 100. Guarantee every American couple a sizzling sex life until the very moment one's spouse expires. Cure AIDS, cancer, and the common cold. Let anyone who wishes copy these discoveries. Give us these remedies for little or nothing. Do it at once. And no, you may not make any money in the process."
This oversimplifies the activists' wish lists, but not by much. Pressure groups hypocritically scream for low-cost breakthroughs while excoriating drug companies for being whirlpools of sheer, unvarnished greed. "Patients or profits?" Doctors Without Borders wondered in a recent statement on HIV-AIDS drugs.
After Pfizer agreed to distribute Fluconazole free to South African AIDS patients in 2000, Eric Sawyer of ACT-UP New York still complained: "Pfizer's market-driven genocide continues in poor countries like Guatemala and Kenya, where life-saving therapy costs anywhere from $10 to $20 per day."
Activists and officials are weakening the pharmaceutical labs. Drug reimportation, for example, would let consumers purchase lower-priced medicine from suppliers in Canada and beyond. Of course, these prices are fixed by lawmakers and medicrats. They reflect political pressures, not economic fundamentals such as supply and demand, R&D, ingredients, and production.
While we're at it, why not make Manhattan cinemas sell tickets at Montreal prices? Yes, Gotham's rents, property taxes, and advertising costs are higher than Quebec's, but so what? It's not fair!
"We are deeply concerned about proposed legislation to remove pharmaceutical companies' ability to control the importation of their products," wrote Dr. Milton Friedman the legendary Nobel laureate in economics and Hoover Institution scholar in an open letter signed by 165 academic and business leaders, published November 20 by techcentralstation.com. "The goal of this legislation will be to reduce prices in the American market by imposing other nations' price controls on us. If this attempt succeeds, American consumers would get the short-term windfall of lower prices, but they would end up unnecessarily suffering and living shorter lives because promising new therapies would be delayed or not even developed. Even the threat of price controls reduces the incentive to develop new drugs."
Equally brilliant ideas include abbreviating patents and even adopting an "open source" model in which drug makers would invent new cures, then have their creations transferred to anyone who wants to copy them in exchange for royalty payments of perhaps 2 to 5 percent.
"We need to implement business models for financing R&D that do not depend upon marketing monopolies [i.e. patents] for approved products," James Love of Ralph Nader's Consumer Project on Technology told a Columbia University forum last December 4. "Open source" is another fine piece of work by the Left's wordsmiths: It is a phrase that connotes transparency, sharing, and even love. What's not to like? This idea would be far less appealing, however, if it were described as what it is: laboratory socialism.
Rather than combat these notions, drug-company chiefs usually cower under their desks. Maybe they think that staying quiet will make the Free Drugs mob disperse. Wrong! They will holler until Congress empowers the Health and Human Services Secretary to assign drug makers their prices and product lists. Only then will this gang declare victory and seek fresh prey.
To prevent this scenario, pharmaceutical leaders must demonstrate why these ideas are dangerous and potentially deadly. Drug-company CEOs regularly need to look straight into TV cameras and say:
The Free Drugs Now! movement is superficially appealing but, on reflection, childish.
Just because a pill resembles a One-a-Day vitamin doesn't mean it's easy or cheap to produce. Tablets that control hypertension and shrink tumors, among other things, cost so much because they have to carry the $802 million in R&D pumped into the average medication (as Tufts University scholars estimated in November 2001), plus additional sums behind "blind alley drugs" that die in testing. Each pill also contains part of the cost of completing FDA approval applications that can span 100,000 pages.
Most people misunderstand the economics and rigors of medical creativity. A Research! America poll of 1,000 adults published March 21 in Parade magazine found that 59 percent of respondents believe government and taxpayers finance medical research while only 9 percent think drug companies do. In fact, pharmaceutical firms fund more than half of U.S. medical research. While 69 percent think new compounds take nine years, tops, to reach patients, that road typically winds for 12 to 15 years.
Are drugs expensive? Compared to what? Yes, some drugs are pricey, but remember the often higher costs they obviate, financial and otherwise.
"Anyone with high levels of bad cholesterol who takes drugs such as Lipitor or Zocor reduces the probability of heart attack by 30 percent and also sees a 30 percent reduction in the need for heart surgery," says Dr. Robert Goldberg, a Manhattan Institute health-policy analyst. "If you spend $800 annually on cholesterol medicine, you'll forego $100,000 worth of other treatment costs throughout your life. This avoids open-heart surgery, angiograms, and stent implantations." And
Goldberg's conclusions are drawn from research that summarizes 116 cardiac studies. He also is excited about the potential of unfettered innovation in this area alone.
"The next generation of drugs will raise good-cholesterol levels and address the role that inflammation plays in causing coronary disease," Goldberg says. "This will do to heart bypass surgery what word processing did to typewriters."
If demonized drug companies don't develop tomorrow's cures, who will? Congress? Perhaps Sen. Ted Kennedy and Rep. Henry Waxman will set aside small sections of their offices for Petri dishes and Bunsen burners.
Thanks to genetic mapping, bioengineering, and other techniques, drug companies are uniquely poised to extend longevity, treat maladies such as Alzheimers, and brighten the quality of life tomorrow. But they only can do so if they are sufficiently profitable to fill their test tubes today. They need to pay employees and shareholders without congressmen, protesters, and mischief-makers panting down their backs. The alternative is for drug makers to decide that medical innovation does not merit the PR stress and political headaches that have become its side effects.
Sadly, some companies have already reached that conclusion. They have been stung by AIDS activists who heckle industry executives and even by Brazil, the world's tenth-largest economy. Brazil threatens to seize Merck's and Roche's patents unless it can buy HIV drugs below the "no-profit" prices these companies offer to destitute sub-Saharan African nations. As HIV-research incentives evaporate, new AIDS drugs in development have dropped 33 percent since 1997, according to the American Enterprise Institute's Dr. Roger Bate. He also sees 25 percent fewer companies hatching AIDS treatments and vaccines. Heartless? It may look that way, but how exactly are companies supposed to fund difficult research if its output is expected to be given away? Sadly, there are limits to the pharmaceutical industry's masochism.
"Why would companies, or investors, want to go near such a politically radioactive disease as HIV?" one pharmaceutical executive asks me while what else? requesting anonymity. "You risk confiscation of your property rights, profits and pitch forks at your company headquarters."
"Never mind the golden goose," he continues. "How about the golden lab technician? Let's just squeeze him and squeeze him until he goes home, spent and demoralized, as the microbes celebrate, mutate, and multiply."
It is crucial for top drug executives to address domestic and international TV audiences with similar candor. If their industry is to remain vibrant, these miracle merchants must emerge from beneath their desks and defend their life-saving products from those who would hand them out like perfume samples.