Cutting High Drug Prices, Yes or No?

We have been out of continental America for the past three weeks, without internet and unable to blog. Sorry.

Hence, we pick up the load once again with this article from a recent Sunday New York Times, which explains why we should hesitate, in light of current medical research funding (or the lack of it), before agitating for lower drug prices. The article explores potential negative consequences of our insistence.  

By  Sunday, July 2, 2017, for The New York Times

It’s easy to be outraged by high drug prices. Yet under current circumstances, simply slashing them could make matters worse. . .

What’s more, while high drug prices evoke strong emotions — with lives at stake — sober economic analysis also reaches a similar conclusion. Drug pricing appears to violate basic cost-benefit principles: The cost of new drugs is often higher than the health benefit they provide, compared with the alternatives that are already on the market.

The infamous over-priced epinephrine auto-injector that began all this brouhaha

Taking action to rein in high drug prices seems to be a slam-dunk: a chance to do something that is both fair and fiscally prudent, not to mention wildly popular.Despite all of these compelling arguments, cutting prices for novel new drugs would exacerbate another problem: the government’s shrinking role in biomedical research. According to a recent article in the Journal of the American Medical Association, private sources accounted for 58 percent of medical research funding in 2012, up from 46 percent in 2004. Public resources for such research would drop much further if President Trump’s budget proposal to slash National Institutes of Health funding by nearly 25 percent were adopted.

Because industry pays for a large share of research, high drug prices do not just generate profits; they also become a funding source for important scientific work. In some cases, the experimental drugs that provide meager benefits to the patients taking them are indirectly providing a much broader public good.

Take Inclisiran, a drug that recently completed Phase 2 trials in which it showed remarkable reductions in LDL cholesterol levels. Since cholesterol levels are only a marker for disease, more trials are needed to determine how the drug actually affects more consequential outcomes such as heart attacks and strokes.

It’s possible that these future trials will yield disappointing news: Cholesterol reductions may simply not translate into particularly impressive health benefits. Yet whatever its ultimate health benefits turn out to be, Inclisiran is anything but incremental. To the contrary, it is cutting edge in one important way. It relies on a novel mechanism for producing its effects, directly targeting genes that are known to increase cholesterol levels via a mechanism known as RNA interference.

Biologists have known about RNA interference for some time: Andrew Z. Fire and Craig C. Mello shared the 2006 Nobel Prize for their 1998 work on it. But translating these insights into medical advances is an arduous process. The Inclisiran effort is not only one of the largest drug trials that exploits this mechanism, but it also manages to target an ailment that afflicts a broad swath of the population.

In short, the drug’s ultimate value cannot be measured in its immediate benefits to patients alone. The research that went into this drug — from basic science all the way through to the clinical trial — can have ripple effects. Work like this expands our understanding of how to harness a biological mechanism into a practical therapeutic. Who knows how many unexpected therapeutics based on RNA interference will build on the lessons learned in the process of producing this and other drugs like it?

Research is not just about what is discovered but facilitating others’ discovery. Groundbreaking work is needed to lay the foundation for someone else’s skyscraper: The wonder drugs of today are built on previous failures and marginal successes.

Perversely, curbing prices risks squeezing out this kind of innovation. The consequences will not be felt today, but it could be a disaster in years to come. Constrict that research pipeline, and we reduce our chance of future breakthroughs.

Of course, research that benefits many others, not just the researcher, is exactly what government should be funding. Such research is a public good, yet we are relying largely on the private sector to provide it. Huge pharmaceutical profits from overpriced drugs are an extremely indirect way to fund the foundational research.


Now let me be clear. I am not supporting the current setup. It’s an extremely indirect and wasteful way to build the foundation of knowledge. Most of the additional profits from overly lucrative drugs go elsewhere, not to research.

Even the dollars that are funneled toward research and development do not go toward the cutting-edge foundational research that others can build upon. Worst of all, even when the money does go toward such research, no one else may ever benefit from it. The Inclisiran trial was published in The New England Journal of Medicine, but pharmaceutical research is not always so public: Results may never be published. Hidden discoveries or failures do not contribute to the public good.

Despite these glaring problems, current policy choices must confront the real world we are living in. In the current situation, drug pricing and research funding are intertwined.

This link is only becoming more important. But, unfortunately, the Trump administration has been considering an executive order that eases regulations on drug companies, even as it has proposed cuts in federal funding for drug research. The net effect would increase our reliance on private companies to provide public research.

Instead, we should look to cut drug prices, but couple those cuts with increased funding, in some form, for work on novel drugs that lay the foundation for future discoveries.

While the current setup may be a foolish way of funding research, it would be much worse to have no funding at all.

Sendhil Mullainathan is a professor of economics at Harvard. Follow him on Twitter at @m_sendhil.


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