Why do people become angry about some issues and not others? Take drug pricing by major pharmaceutical companies. Anger that prescriptions cost more in the United States than in Canada helped elect a U.S. senator in Minnesota last year. An abortive suit by pharmaceutical firms against the government of South Africa drew outraged comments around the world. Locally, the University of Minnesota has been the target of numerous protests against the high prices of an anti-AIDS drug from which the U receive patent royalties.
So why was there no protest a few weeks ago when St. Jude Medical announced FDA approval of a small metal clip for attaching blood vessels in heart bypass operations? The TV news stories about it focused on its innovative technology but ignored the exorbitant $450 price tag that St. Jude has put on the little gizmo.
Now I’m neither a cardiac surgeon nor a rocket scientist. But I have bought a lot of hardware in my life as a farmer and handyman. I can go to any number of hardware stores or surplus outlets and buy little metal clips that must cost at least as much to manufacture as this new St. Jude device, and pay less than a buck.
Yes, I know that it has to be made out of specialty steel, be heat-treated and be placed in sterile surgical packaging. So make the cost $5 or $10. But where do these profit-maximizing corporate bloodsuckers come from with their $450? With multiple bypasses, some patients will be charged between $2,000 and $3,000 for dinky spring clips. With a name like St. Jude, doesn’t the company have any sense of the Christian concept of a just price?
Now, if you think I am setting St. Jude and their new clip up as a straw man, you are right. The actual cost of manufacturing most medical devices is small compared to the huge up-front investment in research, engineering and regulatory approval for an invention such as this. St. Jude and other manufacturers would go out of business in a hurry if they set prices considering only the average direct cost of manufacturing a product.
Moreover, while St. Jude has beaten competitors to market with a patented, FDA-approved device, there is no guarantee that it will become a commercial success. Some other firm may come out with a slightly better substitute six months from now that will dominate the market. In that case, the tens or hundreds of millions of dollars that St. Jude has sunk into developing this device will be down the drain.
Patents provide protection for 20 years, but the pace of innovation in medicine is such that very few patented devices, or drugs for that matter, sell commercially for the life of the patent. A new invention must be priced low enough to sell in quantity, but high enough so that there is a reasonable chance of recouping a good portion of the firm’s development costs before it becomes obsolete and valueless.
I am not saying that medical devices are somehow different from more traditional pharmaceuticals, but rather that they are not.
If we who live in a state whose economy depends much more on pacemakers, heart valves, stents and aorta clips than on iron ore or soybeans find the prices of such devices reasonable, why should we work ourselves into a state of high dudgeon about the prices of drugs made in Missouri, New Jersey or Switzerland?
Here some may interject that while such cost recovery is defensible in wealthy, developed countries, drug manufacturers should make an exception and sell at marginal production cost or less in places like Africa, where millions of people are HIV positive but cannot afford expensive medicines.
Perhaps they should. But why is there so much public outrage about pricing of anti-AIDS drugs and so little about the pricing of other health-related goods and services in poor countries? Yes, many Africans and Asians die of AIDs every day, even though their lives might be extended with drugs. But they also die of diabetes, malaria and cholera, which might similarly be avoided if common, inexpensive drugs such as insulin were available.
Thousands of Africans still go blind each year due to river blindness, an insect-transmitted infection that is easily treatable. Millions of African, Asian and Latin American infants still die of simple diarrhea that could be treated with packets of salt, baking soda and sugar that cost only pennies. And the incidence of these diseases might be drastically reduced by relatively small investments in sewage and water treatment facilities.
Why do we excoriate drug firms such as Glaxo for not discounting their prices to poor countries, but not the Neenah Foundry or Bechtel International for not supplying or building water treatment plants below cost? Constructing 200 water treatment plants in the neediest cities of the Third World would extend many more years of human life than all the anti-retrovirals ever produced.
It is common–and easy–to criticize firms that do not lower prices of certain drugs in poor countries. But over the last 30 years, U.S. foreign aid has declined to the point that the bulk of it goes to Israel and Egypt as payment for not fighting each other and to a handful of South American countries where coca is grown.
Our unwillingness to fund health and education programs in other poor countries says more about us as citizens than the price of anti-retrovirals does about drug manufacturers.
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.