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July 14, 2007
Pricing pills
The story in today's New York Times by Andrew Pollack -- Pricing Pills by the Results -- reports that one prescription drug company is offering a money-back guarantee. Johnson & Johnson has proposed that Britain's national health service pay for the cancer drug Velcade, but only for people who benefit from the medicine, which can cost $48,000 a patient. The company would refund any money spent on patients whose tumors do not shrink sufficiently after a trial treatment. Several economists, including Nobel Prize winner Joe Stiglitz (commentary) and Jamie Love of Knowledge Ecology International (KEI's prize fund page), have suggested replacing patent-financed prescription drug research with a medical innovation prize system. As Stiglitz explains: Such a fund would give large rewards for cures or vaccines for diseases like malaria that affect millions, and smaller rewards for drugs that are similar to existing ones, with perhaps slightly different side effects. The intellectual property would be available to generic drug companies. The power of competitive markets would ensure a wide distribution at the lowest possible price, unlike the current system, which uses monopoly power, with its high prices and limited usage.
In a paper, economist Dean Baker of the Center for Economic and Policy Research explains and compares four alternative methods including the prize system and finds that all do a better job than the current system: a proposal to require employers to contribute funds to drug researchers, a proposal to compensate patent holders based on the quality and extent of use of their drug, a proposal under which the government would purchase most drug patents and place them in the public domain, and a legislative proposal to establish a group of publicly supported pharmaceutical research centers, which would develop patents for public use...Dr. Baker concludes that all proposed alternatives "hold clear advantages over the patent system," in part because each would allow drugs to be sold in a competitive market unhindered by government-granted monopoly rights. Senator Bernie Sanders (I-VT) is expected to re-introduce HR 417, the Medical Innovation Prize Act of 2005, which he had filed while in the House of Representatives.
Posted by Ed Mierzwinski at July 14, 2007 12:49 PM
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