Words by c.z.robertson

Drugs and incentives

2003-01-03 12:10:36 UTC

Arguing with Zimran Ahmed is probably not a very good idea. He's a rather smart person and he knows a hell of a lot more about economics than I do. But I do want to comment on something he says about patents on drugs:

I was chatting with another smart friend (who also happened to be a physician) who was adamantly in favor of revoking all patents on drugs so they could be given to the poor. In her mind, the tradeoff was between poor people having drugs vs. drug companies having profits, and the choice was pretty straightforward. The real tradeoff of course is between people having drugs now vs. people having (new) drugs later, since drug companies only invest in developing new drugs if they have the opportunity to profit off them. Now, I'm not saying sacrificing some benefit in the future for some benefit now can't sometimes be a good idea, but it's the sort of thing that can go either way (dare I mentioned the word "balance?")

This is all well and good, assuming that having drug companies motivated by profit is the only way to develop new drugs. But I'm inclined to believe that publically funded research would also be a viable way of funding drug development.

Now, a free-marketeer might argue that government-funded bodies, being guaranteed the money regardless of commercial success, wouldn't have the incentives to do cost-effective research into useful drugs. But, personally, I think it's actually not difficult to motivate a good scientist (and you don't need much money to do it).

I'd also point out that the incentives on drug companies are pretty screwed up. Weren't people saying a few years ago that 50% of the money spent by drug companies on "R&D" was actually being spent on marketing?