Richard Epstein had a piece in the Boston Globe’s “Ideas” section Sunday, called “What’s good for pharma is good for America.” He seems terrified that “the new Congress will seek to intervene on such hot-button issues as FDA oversight of drug safety, patent protection, and drug pricing.” Horrors! How dare the US Congress take an interest in drug safety or patents? As one might expect from someone who has just published a book on the subject and (according to the biographical note buried where most people won’t read it) “has from time to time consulted for Pfizer and PhRMA” Epstein’s presentation of the facts is a little one-sided and his arguments a little less than completely forthright. I’ll try to address the worst of his transgressions against civilized discourse.
The huge profits of major drug firms are often tied to one or two drugs, such as Pfizer’s Lipitor or Viagra – profits that evaporate when their patents expire and generics enter the market.
No, not really. For example, I can still find brand-name Zantac at the supermarket, and it’s still priced at a premium over generic equivalents. Brand loyalty is a powerful thing, and the company is still making plenty of money from it even though the patent has expired.
products with $21 billion in US drug sales are going off patent in 2006, wich another $24 billion to follow over the next three years – a sharp dent for an industry that today generates about $250 billion in revenue.
That’s losing something less than 20% in revenue over four years. Sounds serious, doesn’t it? Well, not really. For one thing, as noted above, not all of that $45B will simply evaporate. For another, much of it is likely to be replaced by revenue from other drugs as they hit the market. Lastly, is that 5% revenue “loss” per year the difference between an overall net profit and loss, or the difference between a modest profit and an obscene one? Notice how Epstein doesn’t pause to consider any of these issues. He has an agenda to push, and a family to feed from the proceeds for pushing it.
All the while, the pharmaceutical houses also must absorb the legal and business risks needed to identify, patent, test, license, and market any new drug.
Yet again, not really. In fact a substantial portion of those costs, particularly during the test phase, is borne by others. The National Institutes of Health in the US, and similar bodies elsewhere, spend billions funding various aspects of this activity. The pharmaceutical is quite heavily subsidized by US taxpayers, which fact surely should be accounted for as Epstein tries to raise the alarm about how vulnerable drug companies are.
surely oncologists can do a better job calculating the odds [of a drug's effectiveness] than the FDA, which has to deal with averages, not individual cases
One of the first things most people learn in their first statistics class is the danger of small samples. “Better” when applied to calculating odds means smaller margin of error, and the margin of error decreases with increasing sample size. The fact is that a particular oncologist, presented with only one or even a dozen cases, can not calculate the odds better than the FDA can with a larger sample. What Epstein is attempting is appeal to emotion, putting the image before us of a patient and doctor making hard decisions, and not appeal to the reason of statistical reality. One could counter with an image of a patient harmed by a drug that was inappropriately put on the market, but then Epstein would bring out the trusty double standard to accuse others of what he has already done.
Often they [personal injury claims] are propelled by inflammatory trial techniques that obscure the scientific evidence, which lay juries find hard to assess in the first place.
What “inflammatory techniques” are these, exactly? How are they different than the techniques that drug-company lawyers might use to bamboozle juries the other way? Epstein doesn’t say. Yes, general scientific and statistical illiteracy is a problem, but it’s a problem for both sides. What kind of evidence of harm, exactly, would Epstein suppress? What other evidence would he prefer to see accentuated, that’s not just as obfuscatory as what he’s complaining about? Does he really want anything other than license to mislead and intimidate jurors?
It is stark evidence of how dire the situation is for pharmaceutical companies that the FDA, typically no friend of the drug companies on safety issues, has now actively intervened on their side in personal injury suits that attack the adequacy of FDA approved warnings.
It’s evidence of no such thing. The FDA is countering claims that they didn’t do their job. Why is any explanation other than self-defense necessary? If we were to dismiss that obvious motivation, we still might not go where Epstein wants because, contrary to how he puts it, the Bush-administration FDA (like every other Bush-administration department) has actually been quite “friendly” to big business. Their first motivation is to protect themselves, their second to protect their friends. Sadly, serious concern for the truth or for the impact of such cases on the public is likely to be a distant third on the list of reasons why the FDA might involve itself in such cases.
Critics also naively assume that investors and firms will continue to make huge investments in new products without any assurance of recouping their costs in the marketplace.
On the general issue of price controls, I almost agree with him. The market, not the government should set prices. It should not hold them artificially low, nor should it push them artificially high by subsidizing drug trials or offering patent protection that contravenes the public-interest reasons for having a patent system in the first place. Here, though, Epstein simply overplay the only decent hand he has seen. It is not the government’s job to shift corporate risk onto taxpayers, or to guarantee markets for anything. “Making huge investments … without any assurance” is exactly what companies are supposed to do, and if the risk/reward ratio is good enough they’ll take the risk. After all, we certainly hear enough “ownership society” rhetoric about how it’s bad for the government to assume personal risk e.g. in the form of Social Security or health care. Why should the government do more to eliminate financial risks for corporations than for flesh-and-blood people?