Two weeks ago, an inside-the-Beltway magazine ran a headline that said “hell, yes” one of the major political parties should “politicize the coronavirus.”
We respectfully disagree. There will be time for ideological arguments after the crisis has passed. (After all, this year is an election year.)
The John and Laura Arnold-funded group Patients for Affordable Drugs (P4AD) apparently concurs with the magazine, however. At the height of a national pandemic, the organization could not resist the opportunity to make a political argument about pharmaceutical companies. Its blog post came as industry employees—who have been deemed “essential” by their federal government—are working overtime to find a cure and a vaccine and to help others in the health care community prepare to serve Americans who are already sick. (Click here to read our blog post from last week that reviews these efforts.)
P4AD’s post is full of the organization’s usual arguments. By warning lawmakers to avoid the “all-too-common situation where taxpayers help invent a medicine and drug companies make unjustified profit,” for example, it asserts that the National Institutes of Health is responsible for drug development in the United States.
While it is true the federal government and private sector are working closely to develop treatments and vaccine for COVID-19, it remains untrue that government research organizations “invent” medicines.
As PureTech Ventures Senior Partner John LaMattina has explained, drug development is a marathon. With taxpayer money in hand, the NIH runs the first (very important) mile, but “you still have 25.2 miles to go and each mile gets more difficult.” In other words, without significant additional private sector investment, cures never would make it to market. And drug companies spend more than almost any sector on research and development (R&D). According to a 2017 report, pharmaceutical companies spent $71.4 billion on R&D that year, a record amount. BioPharma DIVE noted: “R&D spending was up in not only absolute terms as total spending, but also in relative terms as percentage of total sales. Proportionally, companies spent 21.4 percent of total sales on R&D.”
P4AD also argues that if “appropriate regulatory guardrails” are not established, drug companies will earn “massive and unjustified private profits, as they have with so many other drugs.”
Some drug companies make profits—that is true. But many more go years without earning a cent. During that time they are pouring millions of dollars and thousands of hours into an effort to find a new treatment or a new cure. Some never make a profit. There is no guarantee of success.
P4AD’s argument also comes after STAT News reported that AbbVie waived restrictions on licenses for its Kaletra HIV pill so that other companies can supply the medicine anywhere in the world. There is little reason to believe drug companies are looking for COVID-19 treatments simply to get rich. Their mission is to cure. That is true during this pandemic, and it always has been true.
P4AD also says, “Drug corporations are notoriously uninterested in vaccines, treatments, and cures for emerging infectious diseases.” The statement is false, but P4AD also failed to explain what might cause a company to become “uninterested” in the market.
As we noted in this blog post, drug companies have been working for decades to develop new vaccines. In 1996, a new vaccine for chicken pox came onto the market. New vaccines also can help prevent cancer. In 2018, Business Insider reported vaccines are in development that could help prevent malaria, ebola – even heroin addiction.
But the larger problem is that P4AD does not acknowledge why companies could leave the market.
As we noted two weeks ago, before COVID-19 took over the headlines, there was a growing number of news stories about vaccine shortages. And, as we also noted, the type of price controls that P4AD has argued for, are exactly what has caused the shortages that exist. In a 2012 column in The Wall Street Journal, Columbia Business School Professor Awi Federgruen explained: “Low prices induce drug makers to exit various markets, or at least to reallocate their manufacturing capacity toward more profitable, patented pharmaceuticals. Low prices also tend to eliminate the rationale for investments in better manufacturing technologies and processes.”
Companies cannot stay in business long if they cannot recoup its costs. That’s an outcome that, given the current crisis, is simply too horrific to consider.