Monday, January 14, 2008

Derek Lowe looks at the emotional limits of market driven pharma pricing

Very thoughtful essay; please read the whole thing:
Imagine that if you wanted to buy a car, you had to first visit a car consultant. This would be an expert who would place your order with a car dealer, after first looking over your transportation needs, financial status, and other factors. No one would be able to order a car on their own. Advertisements for cars would look similar to the ones we have today, except there would be a phrase at the end to “Ask your car consultant”. Much more advertising and promotion, though, would be directed at the consultants themselves, as you’d figure.

Let’s move the analogy over to something a bit more realistic: mortgages. Given the current subprime meltdown, it wouldn’t surprise me much if someone, somewhere, has called for the creation of a class of mortgage advisors. Anyone looking to borrow money for a real-estate transaction would be required to go through at least a cursory visit with one. And the bulk of the promotion money would, again, surely find it way to trying to influence the mortgage advisors themselves. Lenders would come in with figures showing how few people had defaulted with them, what percentage of the loans in a given market they underwrote, and so on. As gatekeepers in an important industry, they’d be much in demand.

Of course, in the world we live in, we trust adult consumers to be able to make decisions about which car to buy. And (for now, anyway) we trust adult consumers to be able to decide for themselves if they’re ready to buy a house, which houses they might be interested in purchasing, and how they might wish to do so. This is a harder decision, since it involves a much greater commitment of time and money than purchasing a car, and there are many more options available.

So we finally come to prescription drugs. Medical care is even more complicated than real estate – you can obtain licenses to sell properties or mortgages far more easily and with far less schooling than you need to obtain one to practice medicine, and that’s a good thing. You also cannot obtain new medicines, or any drugs for major diseases, without seeing a doctor first, both to make sure of the disease and to advise on its treatment. Consumers – and by this time, we use the word “patients” – are free to follow or not follow this advice, or to shop around until they find a doctor whose opinions they like better (if any), but they are not free to purchase and dose themselves (or others) with prescription drugs.

The difference is, as anyone will tell you, that health is an intensely personal category unto itself.

The unusual quality of a medical transaction is understandable for another reason as well, since traditionally the course of a physical ailment has been uncertain, and the ability of medicine to do anything about it has been likewise in doubt. For most of human history, seeing a doctor has been very much like seeing a priest. It has not been looked at as a business interaction, and in most cases it had no hope of ever being one in the usual sense.

People will spend terrifying amounts of their own money in the hopes of helping themselves or close family members, even in cases where the probability of success is tiny. Huge sums are spent in this country on people who are clearly near death. A person who would never dream of taking their savings to the racetrack and betting it all on a 50-to-1 longshot horse will take the same amount and put it down, with hardly a second thought, on a 500-to-1 chance of a successful medical treatment. This changed attitude extends further: medical personnel are often paid well for their efforts, but they can also give a great deal of themselves in the process, since lives are at stake. There’s an urgency, a justifiable sense of importance, which is hard for people in other professions to feel as often or as intensely.

Physicians deserve to be compensated for their work, proportional to its value and difficulty, and to their skills in performing it. And drug companies should be compensated for their efforts in discovering new drugs, also according to their value. Not even the harshest critic of the industry would balk at that last statement, but that because we haven’t come down to numbers yet. If you believe that virtually all the work of drug discovery is done through federal funding, with the drug industry stepping in at the end to decide on the price and the packaging, then you will feel that this compensation should be rather minimal. (If you think that, you’re mistaken, but that’s another topic).

How, then, to decide how much a given drug therapy is worth? Any economist will tell you that the price of some good is, finally, what people are willing to pay for it. This principle works silently, for the most part, until someone offers to resell tickets for the big game for five times what they paid for them, or when the price of lumber and gasoline goes up after a hurricane comes through.

My industry realizes this (any fool realizes this). But it’s never known quite what to do about it. Pointing out that drug discovery is expensive has been a traditional argument, and it’s one that I’ve made myself. But that doesn’t address the underlying reasons for the uneasiness. Paying money for health care does not descend to the same mental category as paying money for car repairs just because someone has tried to make a case for the accounting involved. People don’t believe the numbers, anyway, but even the most believable numbers in the world would not do the trick.

This is where I should come right out and say that I don’t have a solution to this problem. But I think that it’s worthwhile to consider why it exists, and where (to my mind) it’s coming from.

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