Dolan May Need an Excedrin...

Big Pharma…I know it’s an old topic, but it’s in the news again today. Peter Dolan, CEO of Bristol-Myers Squibb, stepped down today amid a federal investigation into some shady business dealings undertaken to keep a generic version of big-seller Plavix off the market. The FBI even came knockin’ at (actually, knockin’ down) the door of his NY office. Here’s the background: Bristol’s biggest money maker is a heart pill called Plavix. Something like 1/3 of their profits are derived from this drug alone. The company expected its patent to remain safely in their hands for another couple of years, but recently a generic drug maker announced it would release a version of Plavix this year. Dolan scrambled and put together a deal to pay-off the generic drug maker to keep their version off the market. This, if you haven’t figured out, is not really the way the Feds like to see business run.

Drug makers are simply incapable of innovating (read finding new ways to dupe consumers) fast enough to beat the expirations of their big money patents. They can only invent new diseases…ehem, excuse me, drugs…so fast. I heard the argument made by a few analysts today that the problem is in the “old guard CEOs.” Drug companies, they say, need new blood…they need risk takers and innovators heading up the ranks. This makes sense from a market perspective; drug companies are profit driven. But does it really make sense as part of the big picture? We’re operating under the assumption, here, that markets are a sufficient and efficient motivator for the correct type of innovation…yet we see time and again that the innovation they motivate manifests itself as shady business and marketing ploys to sell drugs to people who don’t need them…not to mention creating drugs for diseases that no one really knew were a problem until the drugs arrived.

Why is the motivation misdirected? Why does the market, with so many obvious pressures toward profit, not guide drug makers toward the altruistic ends intended for medicine? It’s quite simple, really. The people who need the most help, who suffer from the most diseases, who have the highest death rates, who live with the most ailments are also the people with the least purchasing power. There is no profit to be realized in helping them. Profits are to be found in clever marketing to the middle and upper classes of society. Those with less ailments, but with money to pay to cure those lesser ailments. When a drug is developed that could help the downtrodden, it’s so outrageously priced that very few can find a way to afford it…of course, this is because R&D is so expensive and it takes so long to develop a new drug (i.e. – we must protect our profit margin and keep our investors happy…if the stock price falls, I’m out of a job). The simple truth is this: incentives of a free market align terribly with the altruistic goals that medicine should cling dearly to.

So what’s the answer? I’m not sure really. Would non-profit drug makers more efficiently meet the needs of a wider range of consumers? Probably not, because some incentive is better than none at all…relying purely on charity and good-will is scary, and drugs still are expensive to make. Should drug companies be part of the government sector? Well, we’ve seen how good they are at R&D and providing for the common good…it’s questionable. Anyone have any ideas to bat around? We know it won’t ever happen, but it’s fun to think about…is there a more efficient incentive structure than the free market to drive drug makers to act toward the common good?