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Home Publications Blogs Beat the Press Fighting Corruption in the Pharmaceutical Industry With a Water Pistol

Fighting Corruption in the Pharmaceutical Industry With a Water Pistol

Wednesday, 12 June 2013 04:13

The NYT ran a column that discussed the massive corruption in the pharmaceutical industry and using a water pistol to rein it in. The basic story is straightforward. As a result of government provided patent monopolies (i.e. not the free market), drug companies can sell drugs for hundreds or even thousands of dollars per prescription. In most cases these drugs would sell for a few dollars in a free market.

According to textbook economics, the enormous gap between the price and marginal cost of these drugs gives their manufacturers an enormous incentive to lie, cheat, and steal and find other ways to get more people to buy their drugs. This is the point of the column, the industry is spending a fortune trying to mislead doctors about the safety and effectiveness of their drugs so they will prescribe them more widely.

In a normal world we would be talking about alternative mechanisms for financing prescription drugs. If research was not supported by patent monopolies then drug companies would not spend tens of billions of dollars each year trying to mislead doctors about the quality of their drugs. But it is too great a leap to talk about changing the structure of incentives so instead we get the water pistol:

"The pharmaceutical industry figured that out decades ago, deploying tens of thousands of sales representatives, or “detailers,” to promote their products directly to doctors in their offices. For years, my colleagues and I have been using a similar approach through the nonprofit Independent Drug Information Service, now financed by the governments of Pennsylvania and the District of Columbia. Our “academic detailing” program assesses the medical literature in a non-product-driven way and then deploys a “docent service” of pharmacists and nurses to visit doctors in their own offices and guide them through the resulting therapy recommendations."

Yeah, somehow I don't think this crew will be up to the task.


Comments (7)Add Comment
real politik in writing...
written by Alex Bollinger, June 12, 2013 5:25
is bothersome. Getting rid of drug patents will be an uphill battle, but my god some people have to dream and there's no reason the NY Times can't allow some of that.
Meta problem with patents and cost of drug development
written by Robert Salzberg, June 12, 2013 5:54
Because a new drug costs $500 million to $1 billion to develop and bring to market in the U.S., drug companies tend to only develop drugs with large market potential.

So if you have a relatively rare disease or disorder, it's not likely U.S. drug companies are looking to help you.

We know from NASA research and other research in drug development that sometimes pure scientific research about one issue stumbles upon the solution to a different problem and sometimes solves a much larger problem.

If we funded drugs based on what could potentially help humanity the most and not what would make the most money we'd likely have far more cures for diseases and far fewer drugs that just treat the symptoms.
written by Last Mover, June 12, 2013 5:57
"The pharmaceutical industry figured that out decades ago, deploying tens of thousands of sales representatives, or “detailers,” to promote their products directly to doctors in their offices.

It's not just for health care anymore. This phenomena has spread to just about anything essential to the American standard of living. It's equivalent to ramping it up to the point that the sales representatives and detailers might as well treat the patients directly given the dominance they have over health care providers.

Think of anything essential economically whether from the private or public sector. Think of the call center service that will respond to your questions. Think what the result will be.

Unless you're in the 1% you're very likely to end up on a long merry-go-round ride with a list of pre-determined responses or a bot-like person who responds with pigeon hole solutions, either sending you back to where you started from.

It's not just exploitive and humiliating, it's maddening, absolutely maddening.
Follow the money
written by Jennifer, June 12, 2013 8:00
The lack of real discussion regarding drug patents is very depressing. Even as momentum builds to try to reign in "trolls" and software patents those leading the fight are quick to qualify their criticisms of patents-it's something that is being "abused" in this particular instance (software) and is not a problem in and of itself.

The problem is that the big pharma companies are some of the most powerful (i.e. most money) companies in the world-they own most politicians (which is why there was no attempt to reign in drug costs in the ACA) and they either own or have tremendous influence in most advocacy/professional medical groups. There is some sense of this power among in the people working in this area but what what is lacking is the understanding of how they have gained this power, it's not because the drugs themselves are particularly effective http://pharmagossip.blogspot.c...a.html?m=1 it's because of patents.
This kind of analysis is lacking in the corporate media, well because it's the corporate media. If you suggest the drug companies are doing awful things just to make money, it's a conspiracy, but it's not a conspiracy for a publicly owned, publicly traded company to put all it's energy into making money and that's what they do. They are not under any other obligation.
errr What about government's role in drug company monopolies?
written by Capt. J Parker, June 12, 2013 6:52
Two things about big pharma you'll never read in the Times or on left leaning blogs:
Thousands to buy and pennies to produce BUT HUNDREDS OF MILLIONS TO GET FDA APPROVAL. (thats one) FDA CREATES monopolies by acting as a big time barrier to entry. (thats two)
written by watermelonpunch, June 12, 2013 9:34
What Last Mover said.

Comcast immediately came to mind.
Salesmen & bill/equipment collectors who come to your house are about the only real people you can interact with.
The salesman sells you the cable internet. One speed is promised, but that never happens. Then, because they screw up your bill, and you wind up in a phone tree for 3-4 hours over a period of 3 weeks, being redirected between tech support in india and billing in north carolina... then the bill/equipment collector starts visiting your house & calling you. Which leads you to have to find the local office... where they don't have any information either. Finally you have to ask the salesman to contact them again for you. If you get a mistake they made fixed in under 4 months, that's probably the best you can hope for.

Hmmmm... there IS a similarity with prescription drugs.

The doctor gives you a prescription, you find out many more horrible things about it from the pharmacist. But you think, well, they're prescribing it, so these potential side effects or whatnot, must be pretty rare. Then you take it. Then you wind up with your mucous membranes peeling off, at the ER, with a doctor telling you to just keep on taking the medication, you just have a yeast infection & canker sores, you silly thing. Two days later you wind up in hospital with lots more sloughing of skin, and being diagnosed with Stevens-Johnson Syndrome.

I'm sorry, did I just say that out loud?

I wonder if someone clever can make one of these:
But for pharmaceuticals and the health care industry.
Of course if someone did, it would likely need to be rated "adult" and filed under the Horror section. :/

Now what was that all you libertarians, the stuff about free markets?
Corruption or Banditry?
written by nassim sabba, June 13, 2013 7:58
I know Dean Baker would never cross the line of politeness, but it is banditry rather than corruption that reeks in the pharmaceutical business. Bandits hold a gun to your head and if you don't pay up, you die. Pharma does the same, if you don't pay the exorbitant prices they want, backed by government's guns, you also die. So, it is indeed banditry.
So, fighting bandits with water pistols is what we should really say.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.