Slate.com Features Debate on Pharmaceutical Drug Pricing for AIDS
Merrill Goozner, former chief economics correspondent for the Chicago Tribune and professor of journalism at New York University, and Andrew Sullivan, senior editor at the New Republic and daily writer for andrewsullivan.com, this week are engaged in a Slate.com "dialogue" on whether the high drug prices charged by the pharmaceutical industry are necessary to protect innovation. Slate.com's "dialogue" section is a regular section featuring debates between experts in various areas. Goozner writes, "The campaign to make lifesaving AIDS medicine available to the world's poor has chalked up major victories in recent months." The media "debunk[ed] the drug industry's logic on each of its key objections" to making affordable drugs more widely available, and the industry's recent offers to discount anti-AIDS drugs for developing countries "represented a tacit admission that many of their arguments simply couldn't withstand scrutiny," he adds. To "outline the state of the debate," Goozner says that the "first and foremost" issue is price. Drug firms are charging medicines at "exorbitant levels" by claiming they need investment return on millions spent during drug research and development. But as government agencies like the NIH and not-for-profit institutions provide significant drug research funding for AIDS and other disease, as well as perform considerable portions of that research, "industry claims that it costs over $500 million to bring a single drug to market are preposterous." He adds, "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 [NIH] will spend $2.3 billion in AIDS-related research next year." Further, he estimates that more than 40% of R&D is spent on the production of "copycat" drugs for conditions such as heartburn. Goozner adds, "[T]he 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."
The Other Side
Sullivan responds to Goozner's argument that "achievement shouldn't be rewarded in the marketplace because the government actually did most of the research for our pharmaceutical revolution" by noting that "over 70% of pharmaceutical research and development comes from the private sector -- and that proportion is growing. [Pharmaceutical companies] take huge risks and occasionally reap the rewards." Drug prices have not been pushed up beyond inflation because as consumer prices rose 19% between 1993 and 1999, drug prices only increased 18.1%. Adjusting for R&D shows drug company profit margins at 9%, "still a healthy margin" but needed "to offset the epic risks that drug research entails. ... One of the reasons for patents and profits on successful drugs is to balance out the huge losses and bankruptcies that occur every day in this industry for the failed drugs," Sullivan writes. Hesitancy to provide discounted drugs to poorer nations stems from the concern that Americans will demand to receive the "same rock-bottom prices -- thereby eviscerating the very incentives that made the drugs possible in the first place." Sullivan concludes, "Far from being overpriced, the current prices for new drugs are actually massively underpriced when you factor in the benefits" of saving hospitalization costs. "The bottom line is that if you factor in increased longevity, productivity, and declines in hospitalization, every new, expensive drug on the market saves far, far more than it costs." To weigh in on the drug pricing debate, enter http://slate.msn.com/code/thefray/thefray.asp?post=1&t=dialogues into your Web browser (Slate.com, 4/9).