Tag Archives: for-profit

Pills and Profits

One of the many aspects of America’s mess of a healthcare landscape–a mess that the Senate GOP is trying to make much worse– is the issue of drug prices. Pharmaceutical companies defend that pricing by pointing to the significant costs of research and development.

That argument seems persuasive–if we ignore the inconvenient fact that taxpayers fund a considerable amount of that research. As Fran Quigley recently wrote in the New York Times, 

How’s this for a great deal? The United States government funded research and development of a new vaccine against Zika. But the Army, which paid a French pharmaceutical manufacturer for its development, is planning to grant exclusive rights to the vaccine to the manufacturer, Sanofi Pasteur, along with paying Sanofi up to $173 million.

Sanofi will be free to charge the United States American health care providers and patients any price it wishes. Although American tax dollars funded the vaccine, and the United States took the economic risks, history suggests that many Americans would not be able to afford it.

This is a negotiating strategy of unconditional surrender. Although President Trump said before taking office that drug companies were “getting away with murder” and had campaigned on lowering drug prices, his administration is doing the opposite. A draft order on drug pricing that became public in June would grant pharmaceutical companies even more power to charge exorbitantly. For example, it could shrink a federal program that requires companies to sell at a discount to clinics and hospitals serving low-income patients.

Another major problem is the fact that for-profit drug manufacturers have little incentive to produce medications for which there are no markets, so diseases that are widespread in poorer countries get little attention. Quigley notes that, of the 756 new drugs approved between 2001 and 2011, fewer than 4 percent targeted so-called “neglected” diseases, despite the fact that those diseases afflict one out of every six people in the world.

A new drug company intends to change that reality.

Pécoul and Doctors Without Borders decided to tackle the diseases that were killing the global poor. Doctors Without Borders dedicated its 1999 Nobel Peace Prize award money to providing seed funding for the Drugs for Neglected Disease Initiative, known as D.N.D.I. The aim was to see what could be accomplished when research priorities ignore questions of profitability, and the price of medicines is “delinked” from research costs, which are instead shouldered by public financing or philanthropy.

An immediate challenge was that D.N.D.I. possessed none of the required hardware for the expensive drug research and development process: It had no labs, no manufacturing facilities, and no distribution process. It fell to Pécoul to recruit partners, including private pharmaceutical companies he persuaded to share drug compounds that had been uncovered but abandoned because of lack of profitability…

D.N.D.I. has already delivered seven new patent-free, low-cost treatments for neglected diseases.

Interestingly, D.N.D.I. has created these seven drugs, with 30 more in testing, at a cost of $290 million to date. For-profit pharmaceutical manufacturers have long claimed that it costs them $2.5 billion to develop a single drug, although critics insist that the figure is an exaggeration intended to justify higher-than-necessary prices.

D.N.D.I. conducts “open source” research, and does not patent its drugs.

Pécoul and his D.N.D.I. colleagues say their biggest challenge now is securing sustainable funding for research — another illustration of the limits of a model with no profits to invest in research. But the government funds research all the time — it’s just often turned over to for-profit companies. The Zika vaccine is one example. The prostate cancer drug pacilataxel, the leukemia medicine imatinib and many mental health and H.I.V. medicines and vaccines can all trace their origins to government-funded research — only to be handed over to industry to charge what they want.

As the article makes clear, this model cannot replace for-profit drug manufacture. But if governments provide more resources to nonprofit companies modeled after D.N.D.I, their products, at least, would be available and affordable to everyone.

Some economists have argued that since Medicare and Medicaid are the leading purchasers of drugs (and Medicare is forbidden by law from negotiating on price), the money saved by buying from nonprofit drugmakers could easily replace all privately funded research and development. The increased public research dollars could then be applied, D.N.D.I.-like, to develop the medicines that would have the most significant public health impact.

Focusing tax dollars on the public good…what a concept!