Fighting Corruption in the Pharmaceutical Industry With a Water Pistol

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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.