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Who innovates in the drug business?

Posted by Christopher Shea  August 4, 2009 09:45 AM

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Megan McArdle argues, in a much-circulated post, that private industry does much of the work that drives the creation of new drugs, so any policy moves that would undermine the incentives that motivate the private sector -- notably some of the cost-cutting efforts proposed by Democrats in their health-care-reform proposals -- will reduce the number of new treatments we see. The greater the government role in health-care insurance, the fewer new drugs. And despite the claims of some liberals, she continues, the prominent role the National Institutes of Health plays in the development of new drugs does not contradict her argument:

In the case of pharma, what an NIH or academic researcher does is very, very different from what a pharma researcher does. They are no more interchangeable than theoretical physicists and civil engineers. An academic identifies targets. A pharma researcher finds out whether those targets can be activated with a molecule. Then he finds out whether that molecule can be made to reach the target. Is it small enough to be orally dosed? (Unless the disease you're after is fairly fatal, inability to orally dose is pretty much a drug-killer). Can it be made reliably? Can it be made cost-effectively? Can you scale production? It's not a viable drug if it takes one guy three weeks with a bunsen burner to knock out 3 doses.

Ben Domenech, a conservative, takes her on, citing, among other things, a source at the NIH, who says: "McArdle clearly doesn't understand what she's writing about … Our academic researchers run clinical trials and develop drugs. I'm not trying to talk down Pharma, which I'm a big fan of, but I don’t think anyone in the field could read what she wrote without laughing."

As it happens, Domenech himself opposes President Obama's plans. But he thinks policy questions about insurance ought to be separated from discussions about research and innovation:

While I consider myself a pro-market and pro-consumer conservative, specialized medical research is one area where government funding is still needed. And to be honest, I see no inconsistency between holding that view and also holding the view that a government takeover of our health insurance system is a bad idea. McArdle intends for the point of her post to be about the nationalized health care system, but talking about government-funded advanced medical research is an entirely different arena, and it just doesn't have anything to do with how our health insurance system is run. It's a red herring …

It does not bolster my confidence in McArdle's knowledge of these issues that she opposes public-health campaigns to reduce obesity, including childhood obesity, on the libertarian grounds that they represent an attempt to "expand the cultural hegemony of wealthy white elites." (McArdle is white.)

PS Also, the passage on obesity contains the most gratuitous (and shameless) reference to 9/11 I've seen in a while:

When you listen to obesity experts, or health wonks, talk, their assertions boil down to the idea that overweight people are either too stupid to understand why they get fat, or have not yet been made sufficiently aware of society's disgust for their condition. Yet this does not describe any of the overweight people I have ever known, including the construction workers and office clerks at Ground Zero.
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