Brad DeLong's Semi-Daily Journal: A Weblog

Or maybe the safety argument is just more convincing to economically illiterate voters, even if it's not true.

"But the fact that opponents of drug importation are using the fake argument that Canadian drugs are unsafe —... does tell us a great deal about the strength of the anti-importation arguments"

or maybe it just tells us about the weakness of the audience they're addressing.

When it comes to health the emotional argument normally trumps the economic.

Nice start. This may be the first article I've seen in a general forum on U.S. consumers subsidizing the First World. It would be an even nicer start if it gets picked up elsewhere.

I'm not holding out much hope though, as I suspect that the Brad DeLong "hey look at this rationally" meme marketing fund is woefully underfunded compared to the Big Pharma "import scary bad" meme marketing fund.

Did you tell John Edwards?

Brad: Is Kinsley auditioning you to be the LA Times' Krugman?

I'll have to agree with Ed here. Most people don't model others as responding to incentives. How does one put the innovation argument into a 30-second sound bite, especially when we have to distinguish this from our usual arguments for free trade?

This would probably be especially hard for a semi-sophisticated person to understand since it runs so counter to the usual economic prescription against monopolies or trade barriers.

Then, there's the whole set of issues regarding optimal patent institutions themselves. Ditto for the approval process. This is enough to give even an economist a headache.

As I live in Canada, I must say - I certainly don't hear the drug companies jumping up and down about how the drugs they sell to us are unsafe here.

> or maybe it just tells us about the weakness of
> the audience they're addressing.
>
> When it comes to health the emotional argument
> normally trumps the economic.

Problem is that unlike any other foreign country a lot of USians HAVE travelled to Canada and are well aware it is not a 3rd-world hellhole of disease and corruption - if anything, too much the opposite.

The idea that I would have any concerns about medication I might have picked up at a pharmacy (or is it chemist up there) in Toronto is ridiculous and most US citizens know that.

Cranky

If you examine the SEC filings of companies in the pharmaceutical industry, you find something fairly interesting. The companies are Abbott Labs, Alcon, Aventis S.A., AstraZeneca PLC, Bayer AG, Bristol-Myers Squibb, GlaxoSmithKline PLC, Johnson & Johnson, Eli Lilly & Co., Merck, Novartis AG, Pfizer, Roche Holding AG, Schering-Plough Corp, Schering AG, and Wyteth.

A standard way to evaluate the coverage of specific costs (e.g, interest) is to calculate the "cash flow coverage" of the cost. Cash flow coverage is defined as "cash flow from operations plus the specific cost in question, divided by the specific cost in question."

If you calculate cash flow coverage of R&D expenses for the companies named above, over the last 10 fiscal years, you find that the industry average annual cash flow R&D coverage ranges from 2.348 to 2.944, with a mean of 2.591 and a standard deviation of 0.763. In other words, if you add the funds spent on R&D to the operating cash flow (after R&D costs) of these companies, they're covering their R&D costs by an average of 2.59 times. This doesn't sound like an industry that's starving for internally generated cash, does it?

Let me know if you'd like to see the data.

Two more questions-- How much of 'innovation' is really just making a small change to get a patent? Do we really need a half-dozen statins when the original (Lipitor) works just fine? On other side: How much of the cost is due to FDA requirements? Are you willing to pay less for drugs that may not be quite as safe or effective?

http://www.nytimes.com/2004/10/02/opinion/02topol.html

Good Riddance to a Bad Drug
By ERIC J. TOPOL

Cleveland — After three years of denying that the arthritis drug Vioxx could induce heart attacks and strokes, this week Merck bowed to reality: it withdrew Vioxx from the market.

The impact of this decision is far-reaching, and not only because tens of millions of people have tried Vioxx. It also highlights the absence of Food and Drug Administration oversight of the pharmaceutical industry as well as the lack of comprehensive long-term studies of not only Vioxx but its entire class of arthritis drugs.

In 2001, I was part of a team from the Cleveland Clinic that published a paper demonstrating the significant heart attack risk of Vioxx. Our research, published in The Journal of the American Medical Association, found that compared to naproxen, a commonly used over-the-counter anti-inflammatory drug with similar benefits, Vioxx has a five times greater heart attack risk. In response, Merck claimed that early conclusions about the risk were flawed, and attributed the comparatively high heart attack rates to an unproven protective effect of naproxen. Our study was followed by several others demonstrating Vioxx's dangers. Each time Merck had a similar reply: the study was 'flawed.'

Merck finally had to acknowledge the truth, but only by accident. The company undertook a large, randomized trial of 2,600 patients with colon polyps in hopes of proving that Vioxx could help their condition. In the process, though, Merck discovered that 3.5 percent of patients taking Vioxx suffered heart attacks or strokes as against 1.9 percent taking a placebo. Merck at last did the right thing by voluntarily and abruptly taking Vioxx off the market.

There are two important issues to consider here. First, the risk of heart attack or stroke found in the Merck study, at 15 cases per 1,000 patients, may be greatly underestimated. Merck's trial did not include anyone with known heart disease - patients who might be expected to have the highest risk.

And the problem may extend beyond Vioxx and its users. While it's true that when compared to the other Cox-2 inhibitors, Vioxx has repeatedly carried a far greater risk of heart attack and stroke, none of the manufacturers of Vioxx's class of drugs, called Cox-2 inhibitor agents, have studied patients who already have heart disease. The number of patients who may have sustained heart attack or stroke as a result of using these drugs could be tens of thousands. It would be premature to conclude that the other drugs still on the market, like Celebrex and Bextra, do or do not carry some risk of heart attack until sufficient testing is done.

While we remain in this zone of uncertainty, people with arthritis should remember that conventional over-the-counter agents like naproxen (as in Aleve) or ibuprofen (as in Advil) work extremely well, are much cheaper than the Cox-2 agents, and are not known to have any risk of heart attacks. In addition, one of the most-cited benefits of the Cox-2 agents - that they are less likely to cause stomach ulcers than over-the-counter drugs - may ben grossly exaggerated.

Second, and what may be more alarming, is that despite studies showing the magnitude of the public health problem, for several years Merck did nothing to investigate. This surely represents a conflict between the interests of the public and the interests of a company with a blockbuster drug that had sales of $2.5 billion in 2003.

Instead of doing the requisite research in patients with heart disease - who frequently have arthritis as well and are thus prime users of anti-inflammatory medicines - the company undertook studies that avoided them. At the same time, Merck spent at least $100 million a year for direct-to-consumer Vioxx advertising, while the company's employees and their consultants published several papers in medical journals rebutting studies reporting Vioxx's heart attack risk. The Food and Drug Administration could have forced Merck to do the appropriate research studies, but instead it was a bystander.

As the Vioxx debacle shows, we have a long way to go in this country to get on track with prescription medications. Most important, we need a stronger regulatory agency to compel pharmaceutical companies to do the proper studies and force these companies to stop direct-to-consumer advertising unless a drug has major benefits for patients and negligible increased risk of heart attacks and strokes.

Our two most common deadly diseases should not be caused by a drug.

Eric J. Topol is chairman of the department of cardiovascular medicine at the Cleveland Clinic.

That's a great primer on the issue. I'm going to spread it around.

The drug importation issue has always seemed to me a strange sideshow. Its only value is to focus discussion on the essential unfairness of the U.S. shouldering the rest of the world's drug development costs. But of course, discussion has not been focused there.

Wouldn't drug importation force the drug companies to strong-arm Canada into raising its price caps, or essentially going out of business? Are the Canadian price caps politically untouchable? Why aren't we making this part of NAFTA?

cranky:- Which should we have more of? Disease or corruption?

I think it would be helpful to review dsquared's one-minute MBA before considering "people are too stupid to understand the real argument, so just lie to them" position.
http://tinyurl.com/5ghz4

R&D cost are very low compared to marketing costs. If I remember correctly Dr. Jerry Avorn said on Fresh Air that R&D was only about 12% of revenues while marketing costs were near 30%. He also mentions that drug companies have been the most profitable companies over the last 30 years.

Drugs look like physical goods, but they're not. They're essentially "knowledge goods" -- discovered/invented/engineered, approved (and prescribed) at high cost, but replicated (and applied) at comparatively de minimus unit cost.

[Except that they're not goods either ... but that's a different issue.]

Like knowledge goods generally, we really haven't figured out how to settle the question of who gets and who pays.

September 14, 2004

A Doctor Puts the Drug Industry Under a Microscope: MARCIA ANGELL
By CLAUDIA DREIFUS - New York Times

A. If you look at the new drugs marketed over the last six years, 78 percent weren't even new chemical compounds. They were just new combinations or different formulations of old drugs. And 68 percent were classified by the F.D.A. as unlikely to be improvements over drugs already on pharmacy shelves.

At the same time, there are shortages of some important drugs that the pharmaceutical companies aren't much interested in making because they are not as profitable as the me-too's. But the companies don't have to turn out needed drugs, if they are not lucrative. And they don't.

Q. How much of the high cost of drugs is the result of marketing and sales expenditures?

A. The companies spend over 30 percent of their revenues on marketing and administration. Their marketing budgets are so enormous because they have to persuade doctors and patients to prescribe one me-too drug over another. If you had a truly innovative drug - a cure for cancer, for instance - you wouldn't have to market it much. The world would beat a path to your door....

Q. The first phase - the discount card phase - of the new Medicare drug benefit is about to go into effect. Do you, as a newly minted senior, believe it will make prescription drugs more affordable?

A. It's not going to have a major effect. These discounts are very small, maybe 10 to 15 percent. At the rate of inflation of drug prices, they'll be overtaken in a very short time.

Now, the main Medicare drug benefit that goes into effect in 2006 is designed to funnel billions of dollars to the pharmaceutical industry. It's an absolute bonanza for it. The pharmaceutical industry's lobbyists made certain that the legislation contained a provision barring Medicare from negotiating drug prices.

Interestingly, the federal government negotiates drug prices for the Veterans Affairs system and gets very low prices because it is a bulk purchaser. And Medicare would have been the biggest bulk purchaser of all - so it could have negotiated very low prices. That provision allows the drug companies to continue raising their prices faster than the inflation rate, and the drug benefit will soon become unaffordable.

Brad calls an extra tax on the foreign labor to protect American jobs a trade restraint - *bad thing*. However the *prohibition* (ultimate trade restraint) to buy drugs in Canada to protect the profits of US drug companies is an argument that deservs serious attention. How he considers himself in any way liberal is beyond me.

Is anyone else sick and tired of being lied to by our own government? Isn't there anything at all we can do to slow down the spew of utterly transparent falsehood that our own government subjects us to?

I'm a little disappointed that no recent law school graduate has yet filed some sort of high-profile class action against any of these liars.

Or is it simply the case that most American voters can be made to believe that the same companies that supply safe, effective drugs to us at exorbitant prices also supply drugs that are killing thousands of Canadians every year, at low prices?

If developments costs, rather than marketing costs, are the primary costs of Big Pharma, then we should be seeing a flood of innovative new drugs on a fairly regular basis. Is that happening? Of all the new drugs introduced to the market in the past 10 years, how many are truly innovative and how many are just re-formulations of existing drugs? I think it's important to know just how successful Big Pharma is in its research and development efforts that they should charge consumers such high prices for its drugs.

Another factor here is that a lot of the basic drug research isn't done by private enterprise at all, but is conducted at graduate schools by underpaid and underfunded graduate students using government grants, who if they are lucky are floated out on the laurels of their advisors into the private world where they can reap huge profits at little expense.

Double-dipping, anyone?

"These are all good questions." I beg to differ! The view expressed strikes me as the same kind of American paracholialism that gets the U.S. into all kinds of trouble, including Iraq. Put baldly, the U.S. consumer is supposed to spend more on drugs than everyone else so that basic research can be financed, so that everyone (including all the other rich countries) can benefit. How generous! How altruistic! How stupid!

Unless the U.S. does something to stop freeloading, other countries will freeload, and the American consumer - and worker - will lose out. One possible solution: the federal government could say that the amount it reimburses for a drug will be limited by the lowest amount any other G7 country pays for the same drug. (This isn't at all unreasonable. Almost all other goods are cheaper in the U.S. than elsewhere.)

September 6, 2004

Indicting the Drug Industry's Practices
By JANET MASLIN - New York Times

In the past, drug discoveries made through government research remained in the public domain. Beginning in 1980 those breakthroughs could be patented, even if their research was sponsored by the National Institutes of Health.

A Doctor Puts the Drug Industry Under a Microscope: MARCIA ANGELL
By CLAUDIA DREIFUS - New York Times

A. As a journal editor, I witnessed a disturbing trend in pharmaceutical research. Twenty years ago, most drug trials were conducted at academic medical centers and the pharmaceutical companies tended to stand back during the testing period. However, in recent years, the companies have succeeded in attaching strings to research contracts, often designing the studies themselves, keeping the data in-house and deciding whether or not to publish the results. They also began to contract with private research companies for testing. Moreover, the medical schools and even individual researchers began to enter into entrepreneurial arrangements with the drug companies.

While all this was occurring, I began to see bias creep into medical research. And I saw a lot of it. The most obvious example were studies comparing a new drug to a placebo. That may be enough to get a drug F.D.A. approval, but it should not be enough for The New England Journal of Medicine. Doctors don't want to know whether a drug is better than nothing. They want to know if it's better than what they are already using.

Even taking all the arguments at face value, poor Americans (as soldiers, patients, and the unemployed or underemployed) are the losers in all these altruistic global schemes. At some point the mules are going to break down or rebel.

The US as a whole may benefit from all these schemes, and is not necessarily an altruist at all. But a lot of Americans do not benefit.

It is my belief that free trade has done low-wage American workers, on the average, more harm than good so far -- through unemployment and various deteriorations in the situation of the average worker (wages, benefits, security, access to education). Some deny that this as happened at all, and others say globalization had nothing to do with it, but I'm not convinced.

For Mushinronsha.
A report by LSE's Julian Le Grand and others in 1997 found that 85% of biotech blockbusters were of U.S. origin. ("European Pharmaceutical Research, Development and Innovation; ..."). I think a Google search would confirm that the U.S. has increases its lead since that report.
As the late Uwe Reinhardt of Princeton said, "We Americans fund the bulk of the research for the rest of the world, so everyone else can mooch."

Ian, thank you but Anne at 11:33 answered the questions I had. The answers, which I didn't have before, were as I expected they would be however.

September 14, 2004

A Doctor Puts the Drug Industry Under a Microscope: MARCIA ANGELL
By CLAUDIA DREIFUS - New York Times

A. The fact is that for the last two decades the drug companies have been hugely profitable. Last year there was a little wiggle downward, but in 2002, the 10 biggest American drug companies had a median profit of 17 percent of sales compared to a median of 3 percent for the other Fortune 500 companies. In the 1990's, profits ran between 19 and 25 percent. Prices are high to keep profits high.

Q. Exactly what are these "me too" drugs you argue against?

A. They are minor variations of old drugs already on the market. Sometimes a company creates a "me too" drug as a way of extending a patent on an older one. For example, AstraZeneca created Nexium to replace the virtually identical Prilosec when its patent was about to expire. By putting out these me-too's, the companies can get new exclusive marketing rights on what are essentially the same old drugs.

Other companies come in with their own me-too's because markets are expandable. It's been shown that when you advertise one me-too drug, you increase the sales of all of them.

Q. Why do you have a problem with this?

A. The prevalence of the me-too's really says an awful lot about the lack of innovation within the pharmaceutical industry.

Agree with those who said that:
1. most of the R&D is financed by the taxpayers
2. pharma spends most money on marketing and
3. pharma has the highest (or one of the highest) ROI of all industries.

On the grand scale of things they don't really create drugs. They are not heroes, they are not geniuses. Private sector sucks at the R&D. They get R&D results from universities, do some final (mostly routine) tuning, clinical tests, legal paperwork - and, of course, mass production and marketing - which is what private sector does best. Big deal. They don't deserve any special treatment whatsoever.

Here's a quote from http://www.ornl.gov/sci/techresources/Human_Genome/home.shtml

"Begun in 1990, the U.S. Human Genome Project was a 13-year effort coordinated by the Department of Energy and the National Institutes of Health. The project originally was planned to last 15 years, but effective resource and technological advances accelerated the completion date to 2003.
[...]
An important feature of this project was the federal government's long-standing dedication to the transfer of technology to the private sector. By licensing technologies to private companies and awarding grants for innovative research, the project catalyzed the multibillion-dollar U.S. biotechnology industry and fostered the development of new medical applications."

On a related topic. Yesterday, Maine's local NPR news show ran an item on Mainers (who go by the busload to Canada for drugs, bravely risking all the safety issues) are now going to Canada for dental care. One woman interviewed said that dentists in town were quoting her $1200 per crown while Canadian dentists two hours away were quoting $500 Canadian per crown.

I realize this is comparing apples and oranges from an economist's point of view, but from a Maine health care consumer's point of view it's not. What explains the huge disparity?

I am quite fed up with the argument that allowing market demand to dictate the price of pharmaceuticals (capitalism, anyone? unimpeded market operation?) will diminish Big Pharma's motivation to develop innovative new drugs. Newsflash, people: they aren't doing that now. What they are doing is rushing to develop "me too" drugs and patent extensions on currently marketed drugs. If you don't believe me, look at Viagra. Come one, do you REALLY think that the world needs three or more different drugs for erection maintenance? No. Why did Pfizer's competitors rush to market with them? Money. Viagra wasn't intended for this use, it was a drug developed to help people with low blood pressure and circulation problems. Wood was just a pleasant side effect. And how does Big Pharma keep their tentacle on the patent life of their drugs? By changing or improving them? Please. By reformulating them towards a different dosing schedule (the words "extended release" or "once daily" are the giveaway here) or a different target therapeutic area (hmmm, it's approved for depression and it's ready to go generic, let's get it approved for...social anxiety disorder! ADHD! PTSD!).

Also, the drugs manufactured and/or sold in Canada are EXACTLY the same as those manufactured/sold in the U.S. Each drug has only one chemical formulated and all nations must manufacture drugs according to the international protocol knows as GMP -- Good Manufacturing Practices.

Hmmm. I wish this administration would pay as much attention to really dangerous drugs from Afghanistan as they do to the fantasy of dangerous drugs from Canada.

Of course, the resulting price rise in the street opiates market might create inflationary pressure...

Sabreean, marginal-cost pricing will not allow fixed costs of research to be recovered; therefore research will be underfunded. That is why we have patents, which allow for a temporary monopoly if someone invents something. Same thing with copyrights or other intellectual-property laws. As you no doubt learned in introductory micro, a monopolist sets the price (or the quantity) along the market demand curve to maximize profits. So of course market demand sets the price.

Having other countries free-ride under the current regime causes the return to innovations to fall. All else equal, we then expect the amount of innovation to fall. Lots of other posts have said this already so I'll leave it at that.

If reimportation becomes a major issue, several things may happen. One possibility is that companies cease to do business in Canada altogether. Another possibility involves sucking it up and taking lower profits. Either way returns and therefore research will fall as a result.

As regards the actual efficiency or inefficiency of our intellectual property laws, that is up to debate. It is possible that there is too much innovation from patents lasting too long, or there is too much rent-seeking (patenting public-domain materials). The regime for testing drugs also matters; it all boils down to what our loss function is (how do we weigh different effects). These are all separate but related issues that give headaches to very smart people.

Finally, I'll note that the existence of advertising or loads of marginally useful drugs does not invalidate any of this. Rational companies will produce marginally useful drugs by the truckload and only occasionally hit on something big. We're talking about the right tail of the distribution of outcomes here; most drugs don't make it, and most that do just make it by a hair. It's just too hard to tell before the research is done what the effects will be. The drawback is that we get ex-presidential candidates hawking male enhancement products. Future employment opportunity if Kerry loses the election?

I will not go much further than this because to do so requires quantitative knowledge that I don't have. But I've gone through the basic economics of the problem, something that Brad did very well and very realistically. Wishing for things to be different does not make it so. Incentives matter.

A note for those quoting 'marketing and administration' costs in the 30% range. You realize what administration covers in a big company right?

Those who are counting huge drug profits percentages--are you including failed companies? I doubt it. Pharma research is carried out in large portion by small companies which hope to get bought out by the big companies. A huge portion of those get backers and then never discover anything. That ends up not being particularly great.

These questions have all been answered, a long long time ago, in a land far far away. To say that the drug cartels haven't tried making this case is wrong, they have and continue to argue this case, part of a longstanding propaganda campaign that is just patented bullshit like the more recent, more effective american-made-canadian-drugs-will-kill-you bullshit.

Drug development of the useful, difficult kind is paid for with taxes:

"The federal government funds about 42 percent of all U.S. health care research and development (R&D) expenditures, including a significant portion of R&D costs for new drugs.The government plays a particularly important role in the highest risk research projects, including basic research, where commercial payoffs are least certain. It also pays a significant share of the later stages of drug development. For example, in the area of federal expenditures on human use clinical trials, a relatively advanced area for drug development, the National Institutes of Health (NIH) will spend an estimated $868.8 million in fiscal year 1993."

New variations of existing drugs to get around patent laws are paid for by the industry:

"While the FDA approves hundreds of drugs every year, the number of new or important drugs is relatively small. For example, in 1991 the FDA approved 327 new and generic drugs and biologic products. Only 30 approvals were for new molecular entities (NMEs)--drugs distinctly different in structure from those already on the market. Only ten of these drugs received a priority rating, which is reserved for drugs that afford a "significant therapeutic gain," treat "severely debilitating or life threatening illness," or treat AIDS. For the group, seven of the ten priority drugs were developed with significant federal funds."

see:
http://www.prospect.org/web/printfriendly-view.ww?id=5121

And, furthermore:

"The drug industry's top priority increasingly is advertising and marketing, more than R&D. Increases in drug industry advertising budgets have averaged almost 40 percent a year since the government relaxed rules on direct-to-consumer advertising in 1997. Moreover, the Fortune 500 drug companies dedicated 30 percent of their revenues to marketing and administration in the year 2000, and just 12 percent to R&D."

See: http://www.citizen.org/publications/release.cfm?ID=7065

After, and only after, I stop subsidizing marketing costs--
because drug choices should be made by doctors based on peer reviewed literature,

And after, and only after, I don't pay for drug development twice--
once for the university research lab, and then once more after the drug is licenced cheaply to a large manufacturer,

Then I'm willing to talk about how much I subsidize drug costs in other countries. Especially as Canada, the EU and Japan certainly do quite a bit of drug development themselves.

And even second and third world countries, while not doing as much drug development (although China and to some extent India are building up in this area) are certainly helping with the human drug testing side of the equation.

Drug development is partially a public good, and any analysis has to take into account all the externalities flying about.

Nicely put Kathryn.

Well put, but disconnected from reality. Please look through sites like Derek James before you make suggestions that the government does lots of useful drug research.

"Especially as Canada, the EU and Japan certainly do quite a bit of drug development themselves."

If 'quite a bit' means 'much, much less than the US', I suppose you are correct.

How much of drug R&D is done at publicly funded universities?

except maybe the EU countries have figured out the correct level of contribution for R&D and the US is just being taken for a ride because the drug lobby has captured the government.

Re Kathryn's claim that she is subsidizing drug companies' marketing costs,it is a fallacy that less money spent on promoting drugs would mean more money for drug research. Less money spent on promotion means fewer sales means less revenue means less investment in drug research means fewer drugs. The bottom line is that by any measure almost all the breakthrough drugs that save lives, and make living those lives more bearable, are American. If US drug prices are set in Canada, where will that bounty come from in the future?

"Less money spent on promotion means fewer sales"... for me-too drugs, sure. But who needs to send doctors to Hawaii just to get them to prescribe a true blockbuster?

"who needs to send doctors to Hawaii...?"
That trip to Hawaii did not come at the expense of research into the next blockbuster -- contrary to the usual populist hue and cry about drug marketing.

The drug companies primary claim now is not that drugs *from Canada* are dangerous, but that when you try to buy "drugs from Canada" you often really get inferior stuff from Mexico or China instead. I don't know how true that is, but at least the point of "spoofing" ought to be addressed - agree?

"That trip to Hawaii did not come at the expense of research into the next blockbuster"

This completely sidesteps my point: marketing is most necessary for Big Pharma when it's there to invent a frivolous "need". Lowering that kind of marketing may result in lower sales of drugs people don't actually need, but I fail to see why that's going to lead to lower R&D into drugs they do.

"This completely sidesteps my point"
Pardon me, I thought it was my point that was being sidestepped. I don't hold a brief for the drug industry. I just think that the relative amounts drug companies spend on promotion and research -- and the implied trade-off -- is a red herring.
But, not to sidestep your point that sidestepped mine, "frivolous need" is wrong. Me-too drugs are usually drugs that treat real conditions, but which offer only marginal (if that) improvements over other drugs that are already available. Why do drug companies inundate us with me-too drugs? It is not good enough to scapegoat corporate greed and leave it at that. Thanks to corporate greed we also have breakthroughs like Enbrel, Herceptin, Avonex, Crixivan and many more. The real villain is a health insurance system that offers few if any incentives for lower prices and rewards companies for bringing out me-too drugs. (Another villain is the teflon-coated medical profession -- which after all makes the bulk of the purchasing decisions). RAND's Dr. Steven Long makes my point. He says that doctors, "assuming that their patients want the best and fearful of malpractice suits if they recommend anything less, may disregard prices when they prescribe drugs. Doctors sometimes prescribe an expensive drug when a cheaper one is better. Cardiologists continue to prescribe TPA, a drug that dissolves blood clots, for $2,000 a dose, even though studies have shown that streptokinase, at $200 a dose, serves heart attack patients even better."
Re-importing drugs from Canada is a classic case of treating the symptoms and leaving the real disease untouched. But, heck, if you want to get re-elected....

The me-too argument is generally superfluous.
Usually, a so called 'me-too' drug is often a nice improvement upon previously marketed compounds.

Take statins for example, the class started with a relatively weak statin that was prone to drug interactions and needed to be dosed in the evenings. This was followed by improved models that were more potent and/or safer, and only THEN did Lipitor come out, being an even more potent drug yet. Other statins then have hit the market, the worst being removed for safety reasons and the best being even more potent than Lipitor.

So to call all these drugs 'me too' compounds is just plain wrong.

It sure looks like Vioxx and Celebrex arent 'me too' drugs anymore...

I work in the drug industry. I'm a medicinal chemist and I spend my time doing discovery research in cancer, diabetes, and other diseases.

The argument that Canadian drugs are unsafe is, as Brad points out, hooey, and I've said so many times on my own site. (See http://www.corante.com/pipeline/archives/cat_drug_prices.html). I think my industry is making a terrible mistake by calling this a safety issue instead of an economic one, because this is a bluff that can be called.

But some of the arguments being made here by others are specious, too. Paul is right in the above comment: just the fact that Vioxx is being pulled while Celebrex appears to be safe is enough to refute the claim that all "me-too" drugs are worthless. We don't know what these things are really going to do until they hit the patient population. Clinical trials just give you the broad strokes of the picture.

And the claim that the NIH funds most drug development is flat-out wrong. (http://www.corante.com/pipeline/archives/2004/09/09/how_it_really_works.php) The distance between an academic discovery and a drug is much, much larger than many people seem to think. I've been doing this for fifteen years, and I have yet to make anything that a sick person has even put in their mouth in a clinical trial. What am I doing, then, if the NIH has already done the work for me?

So - since I'm not really up to speed on this - just what are the substantiative differences between Viagra, Cialis, and Levitra? I know the companies spend billions marketing those three, and I certainly know what they're intended to do, but I couldn't tell you their unique selling points vs each other to save my life.

The point of the Vioxx tragedy was that the drug was never shown a significant improvement on drugs already in use, and there was no follow through by Merck in tracking the effects of the drug. The only reason Vioxx was pulled was that Merck began testing the drug for use on colon polyps. Merck had continually resisted looking at reports of problems with the drug. Vioxx is a tragedy.

American drug companies can be a wonder for us, for all the world, but as other institutions that have immense influence they can be abusive of trust. Balance is always needed. Lobbying and advertising do not insure that our drug companies stay a wonder.

Thanks folks!

http://www.nytimes.com/2004/10/06/health/06flu.html?hp

U.S. Will Miss Half Its Supply of Flu Vaccine
By ANDREW POLLACK

Nearly half of the nation's expected supply of flu vaccine will not be available this winter because the British government has suspended the manufacturing license at the factory in Liverpool that makes it, federal officials said yesterday.

The unexpected development, coming just as the flu season is starting, means there will almost certainly be a significant shortage this winter. The authorities urged the public yesterday not to rush out to get vaccinated but instead to save the scarce supplies for those most at risk, like adults 65 and older and infants 6 to 23 months old.

"This is very disappointing news that creates a serious challenge to our vaccine supply for the upcoming season,'' Tommy G. Thompson, secretary of health and human services, said at a news conference yesterday. Mr. Thompson added, "Our immediate focus will be on making sure the supply of vaccines we do have reaches those who are most vulnerable.''

The manufacturing license was suspended for three months because of concerns about sterility. As a result, the Chiron Corporation, the American biotechnology company that owns the factory, said it would not be able to supply any of the 46 million to 48 million doses it had planned to sell in the United States this year.

Federal officials had been hoping to have 100 million vaccine doses available this winter, up from 87 million last winter, when an early outbreak of flu and well-publicized deaths of some children contributed to a shortage. Now they expect to have just 54 million doses from the other major manufacturer, Aventis, and one to two million doses of a nasal spray vaccine from MedImmune.

In late August, Chiron said it would delay shipments of its vaccine until early this month and cut the number of doses it would supply by up to four million because it had found some contamination in a small number of batches. But the company and federal officials said publicly as recently as last week that they expected the problem to be resolved.

So the suspension of the license by the Medicines and Healthcare Products Regulatory Agency in Britain appears to have caught both the company and the United States government by surprise.

"We had no idea," Mr. Thompson said, explaining that the British agency did not inspect the factory until late last week. "In fact we didn't get notified until this morning.''

The federal authorities are now scrambling to find additional supplies. The other manufacturers are not expected to be able to increase supply that much because vaccine production takes time. Tests run by the government a few years ago suggested that half the usual dose would suffice for healthy people.

The Food and Drug Administration is dispatching a team to Britain to learn more about the problems found with the vaccine. The trip is being made in part, it seems, in the hope that the F.D.A. will find that the sterility problem is not too bad and that it can persuade its British counterpart to release some of the vaccine for use in the United States. But federal officials said it was too early to tell whether this would be the case.

There are also more than a million doses - officials would not say how many - of the Chiron vaccine already in the United States. But the authorities said that vaccine would not be distributed unless the F.D.A. determined it was safe.

Responding to questions about marketing costs as a form of subsidy...

Where does "marketing" fit into choosing drugs for a patient? At what point does a drug company get to say "We know you have a choice in narcolepsy treatments, we thank you for choosing modafinil" as if drug choices were like airline choices?

Medicine choices should be a matter of risk-benefit, cost-benefit, and peer reviewed studies analysis. How do advertisements contribute to these analyses? Medicines aren't stylish or fashionable. Your choice of medicine does not put you into a demographic category. Your color of medicine doesn't say anything about you.

" marketing is most necessary for Big Pharma when it's there to invent a frivolous 'need'."

A lot of marketing is education of the physicians who will be prescribing the drugs. A well prepped pharma sales rep is a godsend to physicians. The rep knows more about how the drugs work than the doctors do.

I know this because a pharma sales rep saved my mother's life several years ago, by stopping a resident physician from giving her a drug that would likely have killed her.

Importing drugs from CAnada is stupid.
Instead we should address the "rules" that the drug companies operate under, such that the Americxan consumer doe not have to subsidize the development of drugs that are then licensed worldwide at cut-rate prices.
Perhaps we should up the prices of licensing and charge more to our European, socialized medicine, living under US protection and planning a Mars mission, allies.
And give the oldsters a real discount for god';s sake.

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