Every time we talk about drug patents
and the healthcare industry, without fail, someone shows up in the comments and makes the same simplistic claim: "you have no idea how much it costs to bring drugs to market!!!" Of course, that's arguing a slightly different issue, and it's important to break down what's being discussed. First of all, there's the question of how much does it really cost to bring medical innovation to market. There's a great book from a few years ago, called The $800 Million Pill
, by Merrill Goozner, which debunks many of the claims about how much it really
costs to bring a drug to market, which we noted recently has been updated in recent studies
. What you realize is that (surprise, surprise) the pharma industry vastly exaggerates what it really takes to bring a drug to market. That's not to say it's cheap
. It's not. But it may be an order of magnitude lower, and that makes a big difference. On top of that, a large percentage of the actual research budget comes from universities and is funded by the government anyway.
But... the defenders respond, the big expense isn't always research, it's clinical testing. And, in many cases that's true. Clinical testing is quite expensive. But why is it so expensive? That's another area worth exploring, and you begin to discover all sorts of issues that suggest this is a case where government regulation can often do more harm than good. David Levine
points us to an excellent piece by Carl Schramm at Forbes pointing out how the ridiculous level of controls by the FDA aren't just making this process crazy expensive
, but it's also limiting medical and healthcare innovation. And for what benefit? Obviously, the initial response many have to this is that the FDA and massive expensive clinical testing is necessary to protect people from dangerous drugs. But there are serious questions about how effective the FDA actually is in doing that. The clinical testing process often focuses too much
on performance against a placebo, and not one whether or not people actually get healthier
. On top of that, we've see that the FDA often seems to focus on helping pharmaceutical companies
, rather than helping keep people healthy.
Schramm points out that the way to drive innovation is through "messy" capitalism, where lots more players get to test a lot more things -- the exact opposite of what the expensive FDA process entails. And while the obvious retort is that this will create much more dangerous drugs, it's not clear that's necessarily the case:
In any industry within a free-market society, the innovative process works best when it is allowed to be "messy." Lots of people are constantly trying new things, starting new companies and subjecting them to the test of the marketplace. From the cauldron of this market testing a higher order emerges, and the march of progress ensues.
And so it was in the early days of the pharmaceutical industry. Before FDA control, which took hold in the years after the Pure Food and Drug Act of 1906, the market was largely without barriers. A pharmacist might bring forth Bromo-Seltzer, or Noxzema, or Coca-Cola, or little liver pills or laudanum. Market forces would then determine if the product had value. Only tort liability acted as a check on the manufacturer, and, interestingly, there were few lawsuits.
Although extravagant claims were often made for "patent" medicines, the consumer was presumed to have common sense and to undertake some risk in all things. It was also presumed that manufacturers would follow high standards if they wished to stay in business, and indeed many firms and products from that era are still with us today. The Smith Brothers were trusted to make cough drops in a clean factory with good ingredients. Johnson & Johnson became a trusted name -- as did Eli Lilly.
Again, there are obvious problems with the way things were done a century ago. It doesn't mean we need to go back to that entirely, but at some point it should be realized that perhaps we're losing out on the cost side of the cost-benefit equation. Obviously, those making medical products have every incentive to have those products actually work. Rather than saddling them with massive clinical testing regimes, why not focus on transparency, that would provide more data and opportunities for everyone to properly evaluate the effectiveness and risks of certain products? As it stands now, the data from most clinical trials is totally hidden away. Imagine a much more open process that would allow people to access the data, share their own data and determine what really is and is not safe.
Andy Kessler's excellent book The End of Medicine
does a nice job highlighting how the FDA's process is also so focused on drugs
rather than actually making people healthy that it has created massive stifling effects on non-pharma
medical advances. The book highlights all sorts of technological health care advances that could bring the same sort of computer/technology revolution to healthcare (making things faster and
cheaper at an exponential rate), but so much of it is stifled by the FDA clinical trial process, meaning all sorts of useful products never actually make it to market.
And while I'm sure I'll face accusations of this in the comments, I am not
saying that we should just wipe out the whole FDA process. I'm just suggesting that perhaps it's time to rethink how it works and what the real costs and benefits are... and if there might be a better way that is cheaper and actually encourages much more medical innovation.