In my post of November 6, 2014, I linked to an interesting BBC story
that pointed out that pharmaceutical companies are highly profitable in
comparison with other industries and that pharmaceutical
companies generally spend more on marketing than on research and development
(in the case of Pfizer 72% more and in the case of Novartis 47% more). This is unfortunate, but inevitable when
companies with very similar drugs and relatively little data that support a
physician’s preference for one drug over another are fighting for market
share. At the same time, pharmaceutical
companies are being criticized for their high prices and for their slow pace of
investment in developing drugs and vaccines for Ebola. The New
York Times on October 24, 2014, provided extensive coverage of a number
of Ebola issues, including a story
on a vaccine that had shown great effectiveness in a primate study but then
had gone undeveloped for ten years. The
New York Times story pinned the blame for the delay in development on the lack
of a significant commercial market for the vaccine. The Director-General of the World Health
Organization (WHO), Dr. Margaret Chan, had this to say in her November
3rd address to the WHO Regional Committee to Africa:
The second argument is this. Ebola
emerged nearly four decades ago. Why are clinicians still empty-handed, with no
vaccines and no cure?
Because Ebola has historically been
confined to poor African nations. The R&D incentive is virtually
non-existent. A profit-driven industry does not invest in products for markets
that cannot pay. WHO has been trying to make this issue visible for ages. Now
people can see for themselves.
Dr. Chan is correct that “a
profit-driven industry does not invest in products for markets that cannot
pay.” However, to the extent that she
implies that this is a moral failure on the part of the pharmaceutical
industry, I believe she is wrong. Pharmaceutical
companies may spend more on marketing than on R&D, but they spend a lot on
R&D. To do so they need more than
simply high profits on their successful drugs-- they need to compete in the
capital markets with other investment opportunities. Even if every scientist in the virology and
infectious disease research programs at major pharmaceutical companies would
rather work on drugs for Ebola than on drugs and vaccines for Herpes Simplex 1 and 2
(genital herpes), the simple fact is that either research is expensive and
the capital markets will fund the company pursuing the most profitable
opportunities.
To illustrate this point, as well
as other issues surrounding pharmaceutical company social responsibility, I
often use the comparison between the companies that develop and sell violent
video games (which arguably make little or no contribution to increased social
welfare) and those that sell pharmaceuticals (most of which clearly provide
significant benefits to human health).
Pension funds and large institutional investors are obligated to invest
in those opportunities that will maximize the return to the persons for whom
they are investing. So, if pharmaceutical companies reduce their rate of return
relative to video game makers by allocating a significant percentage of their
efforts to socially responsible but financially unprofitable diseases such as
Ebola rather than potentially lucrative opportunities such as Herpes Simplex,
then investors will provide more capital to the video game makers and less
capital to pharmaceutical companies. It
is an inevitable rule of capital markets: investments seek the highest return
just as water seeks its own level.
So, if the pharmaceutical industry
is now investing a small amount of its overall research efforts in Ebola, it is
likely to be, at least in part, a “marketing” effort to shore up their
increasingly battered public image and hold on to its very significant political
clout (industry newsletter the Gray Sheet
entitled a post-election-day story “FDA Will Face Reforms, Oversight In
Republican Congress, Analysts Say”). The simple fact is this: Ebola and other
diseases prevalent in the developing world is an issue of national security and
public health that can only be addressed by efforts in the government and
not-for-profit sector. The solution is to
view biodefense as a greater and broader priority than it has been despite all the
attention paid to that problem since 2001.
According to a paper
by Franco and Sell, the 2013 budget for civilian biodefense was $574.2
million, while the overall budget for related programs was an additional $4.96
billion. However, given the stagnation
and even decline in the general NIH budget since 2003, much, much more can
be done.
Perhaps one bipartisan measure
that the Congress and the President can agree on is that research on antiviral
technology and effective antivirals for broad families of viruses, as well as
the basic mechanisms of immunology and their application to the rapid development
of effective vaccines, is a major priority for the national security of our
country (and global health). To
paraphrase the line from Field of Dreams:
If you fund it, they will apply (and the resulting research may save us from a
future global pandemic). Both the
for-profit and not-for-profit sectors would welcome the funding opportunities.
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