'Big Lie' Enough to Make Drug Industry Ill

'Big Lie' Enough to Make Drug Industry Ill

July 15, 2005
Originally published in Investor's Business Daily

Activism can be a good thing. We all benefit from getting to shop in the marketplace of ideas.

However, all is not good-faith activism. Take, for example, the growing attacks on the drug industry.

Activists accuse the industry of over-selling the safety and efficacy of their products, of profiteering and cover-ups, and they blame it for escalating drug costs.

The media sharks smell blood in the water and regularly churn out anti-drug-company jeremiads, often using material from self-interested trial lawyers.

Even spy novelist John Le Carre took a swipe, making a fictional, greedy global drug company the villain in "The Constant Gardener."

Killing The Goose

It's not unreasonable to want lower costs and wider availability of drugs, but some activists demand nothing less than the slaughter of a goose that has been laying golden eggs for half a century.

This is an industry whose innovators on average expend 12-15 years and upwards of $800 million to bring a drug to the American market.

Only about 20% of drugs that begin clinical testing eventually are approved; even more ominously, only three out of ten drugs that are finally marketed recoup their development costs.

The stock-in-trade of many of

the drug industry's attackers is The Big Lie, repeated again and again, with endless variations. These include the myth that innovator drug companies are really sponging off government-funded academic research, so, in effect; patients pay for drugs twice; fail to make expensive drugs available to developing countries; irresponsibly suppress the results of "negative" clinical trials; are cozy with the FDA; and reap an unfair "subsidy" by claiming protection for their intellectual property, primarily via patents.

One fallacy is the idea that proprietary data submitted by innovative companies to regulatory agencies comprises a "public good" analogous to national defense. A public good is defined as something that cannot readily be withheld from one individual consumer without withholding it from all, and for which there's no marginal cost of another person consuming it, once it has been made.

The argument goes that commercially sensitive information about drug development should be transferred from shareholders (including workers and pensioners) of innovator drug companies to manufacturers in developing countries. The rationale?

To enable them to stimulate their own businesses so they can compete with the multinational companies that first discovered and developed the product.

That only makes sense if you believe that the $30 billion spent on pharmaceutical R&D annually comes from the tooth fairy.

The ability of the developers to own their inventions and data, which is currently a contentious issue in bilateral and regional trade negotiations, is essential. It enables innovators to support sales, marketing and post-marketing surveillance activities — not to mention providing the resources for R&D on new products.

The compulsory transfer of proprietary inventions, technologies and data into the public domain constitutes a seizure of assets.

Some might find destructive opposition to the drug industry difficult to explain, but the underlying theme of anti-technology, anti-business activism is not new.

Paranoid Style'

It resonates well with historian Richard Hofstadter's classic analysis of religious and political movements in American public policy, "The Paranoid Style in American Politics."

Hofstadter called the religious and political activists' obsession "paranoia," and observed that "the central image is that of a vast and sinister conspiracy, a gigantic and yet subtle machinery of influence set in motion to undermine and destroy away of life."

He identified a characteristic "leap in imagination that is always made at some critical point in the recital of events."

How ironic that these activists imitate the very conspiracies they imagine are threats to society. Viewed from Hofstadter's model of the paranoid style, the "conspiracy" here is large, profit able, multinational companies deciding which products to pursue in order to maximize profits, and over-promotingthem.

Meanwhile the leap in imagination resides in believing that stimulating competition and letting markets decide on drugs' success or failure somehow is bad for patients, doctors and those who live in poor countries.

Marketplace Of Ideas Anti-technology, anti-business activists fear a world in which exploitative, multinational corporations conspire to strip away individual choice from the world's farmers and consumers.

Yet it is they who are guilty of the mendacity and manipulation they imagine in others; they who are guilty of stripping away the freedom of researchers to research, doctors to doctor, and consumers to consume vaccines and drugs that can be life-saving.

Like cheap knockoffs of designer goods, some offerings in the marketplace of ideas maybe attractive at first glance but not stand up to scrutiny.

Only if we learn to tell genuine from fake will we be able to protect ourselves — and our supply of new drugs and other products — from the tyranny of activists.