Have you ever donated a few dollars to some kind of research for a cure, only to realize later that a large publicly-traded company is making billions of dollars off that research? If you’ve ever paid U.S. taxes, the answer should be yes.
I’m rooting for pharmaceutical companies to find a cure and a vaccine for Covid-19 as much as the next person, but let’s be clear about who paid for much of the research: You. And who will benefit from the windfall profits: pharmaceutical companies, especially their executives and shareholders.
The short version of this long story is pretty easy: As in many areas of American life, when it comes to drug development, we’ve socialized the risk and privatized the reward.
Basic, very risky medical research is conducted at universities and government labs with funding from taxpayer-funded organizations like the National Institutes of Health. When there’s something promising, drug companies take that research and run with it, conducting trials, getting government approvals, and eventually, hopefully raking in enormous profit margins.
This isn’t necessarily a bad system. Much NIH-funded work is so fundamental, such a Haily Mary pass, that no for-profit company would ever spend money on it. Conversely, conducting large clinical trials is really expensive — this Tufts study says it coss $1.4 billion — and the industry argues it must have the carrot of tens of billions in profits to invest that much in drug development.
People can, and do, take issue with that assessment. Perhaps there’s a cheaper way to move from laboratory breakthrough to mass production of pills you can buy in a store. Or there’s a better way to spread the spoils around. This is another big topic for discussion America should have, and one that is blocked by screams of “Socialism!” or “Big Pharma!” Refrigerator magnet, bumper-stick believers should be on notice: drug development in America is hardly a free market.
But at a time like this, I want American taxpayers to know they provide the “angel investment” money for many of the drugs that earn big profits for pharmaceutical companies. The dividend they receive is a potential life-saving drug, a decent bargain, for sure. But like many early-stage investors, they aren’t really getting the returns that later investors do.
As we root for pharmaceutical companies to develop a whole host of treatments for Covid-19, don’t believe anyone you watch on television talking about the sacrifices that pharmaceutical companies are making. I heard one anchor today, in cheerleader fashion, suggest Big Pharma is spending money like the U.S. Treasury in the race for cures. There was no mention of Big Pharma spending the Treasury’s money.
If you want to read more about this issue, here’s a study by the Proceedings of the National Academy of Sciences of the United States of America on this issue. The report boldly claims to show that:
“NIH funding contributed to published research associated with every one of the 210 new drugs approved by the Food and Drug Administration from 2010–2016. Collectively, this research involved >200,000 years of grant funding totaling more than $100 billion.”
The report was published in 2018, and seemed designed in part to convince the Trump administration not to follow through with proposed budget cuts to science spending.
“This work demonstrates that NIH funding was associated directly or indirectly with every drug approved from 2010–2016 and suggests that the scale of this contribution is larger than generally appreciated,” the report concludes. It also claims that fully 20% of NIH spending led to published research that contributed directly or indirectly to “new molecular entities” that were eventually approved for public use. That’s a heck of a return.
So, give yourselves a pat on the back for funding great research. And let’s have a real discussion about who deserves to benefit from the Coronavirus gold rush that’s going on right now.
For more reading:
Here’s a more aggressive take on one side: Why taxpayers, not big pharma, have funded research behind every new drug
And here’s what DrugCostFacts.org, a DC-based advocacy group that tells the Big Pharma side of the story, says: R&D Funding: Private Sector vs NIH