Wednesday, September 02, 2009

Cancer Drugs and The Smell of Profits

NY TIMES -- About 860 cancer drugs are being tested in clinical trials, according to the pharmaceutical industry’s main trade group. That is more than twice the number of experimental drugs for heart disease and stroke combined, nearly twice as many as for AIDS and all other infectious diseases combined, and nearly twice as many as for Alzheimer’s and all other neurological diseases combined.

Pfizer has amassed about 1,000 researchers for an all-out effort to develop drugs for cancer, a disease the company once largely ignored. Virtually every large pharmaceutical company seems to have discovered cancer, and a substantial portion of the smaller biotechnology companies are focused on it as well. Together, the companies are pouring billions of dollars into developing cancer drugs.

But for all the industry’s spending and effort, only a trickle of new cancer drugs make it to market. Last year there were two, and this year there has been only one.

MP: Why all of the sudden interest and investments of billions of dollars in cancer drugs by private companies? Federal funding? Funding from charitable nonprofit foundations? Subsidies, grants or tax breaks from the government like for the ethanol industry? Corporate social responsibility? Love of mankind? Nope. It's the good old "smell of profits":

Two industry trends are driving the push. Recent scientific discoveries have suggested new targets for cancer drug researchers to attack. And as drug companies see profits beginning to wane from mainstays like Lipitor, the high prices that cancer drugs can command have become an irresistible lure. Cancer drugs have been the biggest category of drugs in terms of sales worldwide since 2006 and in the United States since 2008.

Thanks to Ben Cunningham and Ariel Goldring (
Free Market Mojo blog) who both pointed me to the article.

3 Comments:

At 9/02/2009 3:38 PM, Blogger Colin said...

And when government starts cutting down on those profits via health care "reform" I wonder what will happen to the incentive to research new drugs?

 
At 9/02/2009 3:58 PM, Blogger 1 said...

'Corporate social responsibility? Love of mankind? Nope. It's the good old "smell of profits"'...

Yes indeed, nothing like the stench of filthy lucre to get a collection of folks of their butts and busy trying to turn out a product or service...

Samuel D. Uretsky notes some problems though: It's only when it comes to drugs, and the companies that make them, that governments assure affordability by a process of direct confrontation with the manufacturer. Meaning that only in drugs there's no guarantee of profitability. In each of the above examples, the investor is assured of a fair price – even if it's the price paid for the whole company. In most nations, healthcare is nationalized, so the market is controlled by a single buyer, a monopsony. There are many end-users, but they buy at government controlled prices. This situation gives the buyer tremendous leverage in setting prices, even in the poorest nations. Drug prices are set at what the buyer is prepared to pay, even if it falls below the actual cost of the drug, including the development costs. "Negotiated prices" becomes a euphemism for "take it or leave it." Drug companies will sell to underdeveloped nations as long as the offered price is above the direct costs of production and will attempt to make back development costs in richer markets...

 
At 9/02/2009 10:34 PM, Blogger BxCapricorn said...

Most of these companies started with Venture Capitalist money in the late 90's, and burned through investor contributions (as they got continuously duped into thinking the big breakthrough was right around the corner). These companies diluted their stock values with repeated stock offerings, and here we are...a decade later. If the pharma still can muster several million dollars, it can get an NDA, and then wait 6 months for fast-track FDA review, or 10 months. After 7 years, the break through drug is forced to go generic, and made by TEVA (Israel) or other (Indian, mostly) pharma...I don't know why they bother. Profits? Hilarious, MP, you are obviously not an investor.

 

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