I've been involved in the comments section of another blog, a discussion of pharmaceutical prices which took off from the posts over here. Things have taken a turn that I didn't expect, so I thought I'd run it past the readers of this site. There's a specific misapprehension that I'm running into, one that I've never quite seen before. Am I right to be puzzled? Read on.
Things got underway when the blogger Prometheus 6 picked up a link to my recent drug and research cost pieces from Sebastian Holsclaw's site. (There are a number of comments over there, which are rather easier to deal with than the ones we're coming to.) P6 started off with a blast at the concept of using imputed interest rates to calculate drug costs. We both reference Marginal Revolution on that one, but he's not buying it.
The discussion then split up into a couple of issues. The first was the whole imputed interest / opportunity cost issue, which ended up in another post. Sebastian Holsclaw reappeared to take P6 to task in the comments section, but I don't think that anyone is going to convince anyone else on this issue. This part is worth reading if you want to see some of the difficulties people can have when discussing economics (no doubt my fellow Corantean Arnold Kling gets this kind of thing all the time.)
The other issue arose from P6's final contention in that initial post above. He finished up his take on research costs by saying that "Most of the money spent was federal money." That, as you can imagine, set me off pretty quickly in his comments section. Here's some of what I wrote:
"As for your second question, there are a lot of people claiming that most new drugs are really straight from the NIH, or some such. This is not true. Even if you get an idea for a drug target right out of a paper in the Journal of Biological Chemistry, from an academic lab funded 100% by government grants. . .even then, you're still looking at, on average, that 800 million dollar figure to find a drug and develop it. The amount spent in grant money pales, imputed interest rate and all.
To pick a recent example, the University of Rochester did not develop a COX-2 inhibitor, although they discovered the COX-2 enzyme. Drug companies did - and a majority of companies that tried to make one failed, and all the money they spent to do it is gone.
Academic labs rarely, if ever, come up with a compound that is ready to go to clinical trials. They're doing academic research, as they should: broad fundamental studies that point the direction you should go in to spend your 800 million.
When a drug company does the fundamental research part as well, the costs are even higher."
This spilled over into yet another post, and here's where I've come to realize that I'm not making any headway. P6 seems to believe that most pharmaceuticals should be in the public domain, unless every single bit of every idea along the way was generated inside a drug company. Here's some of his take:
"Let corporations have process patents on the ways they've developed to mass produce the drug, but if it was developed in government funded research the drug itself should be in the public domain."
"My reasoning is, the risk pharmaceutical companies undertake is in creating the processes whereby the drug is produced, packaged and distributed safely (I include testing in this). They are entitled to a process patent. But in most cases the company neither discovered the compound nor ascertained its primary effects."
What's happening here, I thought, is that he's assuming that academic labs produce drugs. And drug companies, it seems, just test them some more and find ways to manufacture them. What a life we'd lead then! So off I went again, in his comments section:
"Unfortunately, you are wrong. In the huge majority of cases (well over 95%, off the top of my head), the compound was discovered by the drug company. Academic labs do not, as a rule, discover drugs. They are not in that business. They discover biological pathways, new behaviors of known proteins, interesting biochemical regulatory mechanisms. Interesting stuff, valuable stuff. But they do not discover drugs. I can think of almost no exceptions. . .
That's how we can patent the compounds, you know. If anyone else has made a compound before and described it in any way, we cannot own the chemical matter by a patent. And we will almost never go ahead with a project unless we're absolutely sure that we own the chemical matter.
Whoever told you otherwise is gravely misinformed. You would do your source a favor by correcting them."
P6's most recent reply to all this begins:
"Sadly, I have no source. I just know what is done in academic research and give it more weight than you."
Well, we can finally agree on something: that's sad, all right. My first impulse was to have him show me some of this academic research that lead right to a new drug, but I wanted to take this over to my readers first, for either irritation or entertainment value as the case may be. As I mentioned, I haven't come across this delusion - that drug companies don't actually discover drugs - at quite this level of virulence before. Is this something widespread? And if it is, how did we in the industry let things get to this state?