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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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May 11, 2005

Public Utility, You Say?

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Posted by Derek

I wanted to return to that idea of Merck (and the other drug companies) settling into a role as a "regulated public utility." You can find calls for that sort of thing (in Marcia Angell's writings, for example), and there seem to be people who find the whole idea really appealing.

Me, I find it disgusting. And I don't even know which part of the idea I find most revolting. Is it the thought of working for a pharmaceutical version of the Post Office, with what would surely be a dynamic risk-taking culture? Is it the thought of waiting. . .waiting. . .while higher and higher bureaucratic commissions and review boards grind slowly on to tell us what we should work on next?

Or is it just that the idea is so unworkable that I feel pity for a person who advocates it? Look, electricity and water are utilities. Rail service can be treated as one (and doesn't Amtrak do a fine job at it?) But these are mature industries whose task is to deliver steady amounts of known goods. The drug industry doesn't fit any of those criteria.

We argue about what diseases to treat, and how to attack them. We argue about which drugs to try, and how to use them. We disagree about the best ways to start finding the drugs in the first place. We don't even understand many of our therapeutic targets that well, and there are many others that we haven't even heard of yet. Different populations need our products in completely different ways at different times, and vary widely in their ability (not to mention their willingness) to pay for them. Does this sound like a good candidate for public utility theory?

Only if you imagine a big machine, grinding away and producing grey blocks of something called "Health Care." It all reminds me of what someone said about Woodrow Wilson, that he had the most abstract mind the speaker had ever encountered. A normal person might watch a train go by and see a train, he said. Wilson, though, saw Transportation.

Comments (4) + TrackBacks (0) | Category: Business and Markets


1. David Govett on May 12, 2005 2:27 PM writes...

Who wants to work for a regulated utility? Where's the adventure? Where's the profit? Feh!

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2. Brendan on May 15, 2005 4:50 PM writes...

No idea if this is feasible, or even advisable, but ...
What if you separated the creative / value-added side (drug discovery) from the more efficiency & reliability-focused side (drug production and marketing)?

This isn't far off of what the business model for the small biotechs is, although they keep drug production and farm out only marketing, in most cases. A better analogy would be the semiconductor world where there are capital-intensive contract manufacturers and creative semiconductor design firms. This idea seems to work there.

Any thoughts on this?

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3. weirdo on May 15, 2005 8:27 PM writes...

Not really sure how that would lead to cheaper drugs. And, many pharma already do it that way (the drug discovery "company" is separate from the development and sales "companies", and taxed differently). The expensive part, the clinicals, is still the expensive part. (Contrast that with semiconductors!!!)
Something Congress and your average consumer still doesn't get. And if prices get controlled, there will be fewer and fewer companies willing to take the huge risk of clinical trials with the prospect of an ever shrinking return. Better off making tennis shoes.

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4. markm on May 21, 2005 10:56 AM writes...

A better analogy than the post office might be AT&T before the breakup. It provided good quality telephone service at a quite high price - and it took decades>/i> to deploy new technology across the country, even after it was proven.

Not quite the model someone waiting for a cure for his disease would like, eh?

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