High cost of low-cost drugs

Buried a little bit in the pages of the Advocate last week was an article about the growing unavailability of several common cancer drugs.

Buried a little bit in the pages of the Advocate last week was an article about the growing unavailability of several common cancer drugs.

Unfortunately, the article didn’t delve into the reasons for the increasing scarcity of large numbers of common and often lifesaving medicines.

One of the most powerful forces behind the disappearance of some drugs is simple economics. For several decades now, governments have been coercing drug companies into releasing large numbers of drug compounds from patent protection with the stated goal of driving down drug costs.

This particular practice demonstrates the common lack of intellect and general grasp of economics which pervades so much of our public sector. It illustrates a simple lack of understanding of how the world works.

Proponents of the stripping from drug companies of property rights in order to drive down drug costs make two grossly erroneous assumptions. The first is that actual net profit at the wholesale manufacturer level might constitute a significant cost factor to the end user of any drug. The other is that by forcing the company that has often spent millions in research and development in order to bring a drug to market, to forego the right to recoup those costs, we can somehow achieve a higher level of supply security.

Aside from the fact that the political parties that spend the most political capital exhorting Canadian industry to spend more on research and development are also the ones that have been the strongest advocates of the expansion of the generic drug industry, is that the general public policy of government agencies dictating drug pricing has simply undermined the ability of drug manufacturers to stay in the business.

Worse, by trying to control pricing via price controls, governments are driving the manufacture of essential life-saving drugs to offshore sources such as in China.

You should start thinking about melamine-tainted dog food right about here.

Frankly, it beggars the imagination that governments that have been so active in trying to limit the actual price of large numbers of drugs could not foresee that the eventual effect of this would be to simply destroy the ability of drug manufacturers to do just that.

Drug manufacturing is a lot like any other manufacturing, with the added burden of having very high research and development costs, comparative to other manufacturing. After that, lower costs are achieved by being able to re-invest in continuous improvements in process. At some indefinite point, the actual cost per unit will drop through the floor and the retail price can come down. Think plasma TVs.

By depriving the initial manufacturer of the benefit of this process by legislating the manufacturing rights over to the generic industry, the government actually contributes to artificially high prices (gee, who’d a thunk?) and undermines the ability of drug companies to engage in future research and development.

There’s another twist to this that’s equally vexing. It may come as a surprise to you, but many common drugs are derived from chemical byproducts of various manufacturing processes not even related to the drug industry.

For example, one common cancer drug can only exist due to an automotive plastic manufacturing process. When the auto industry suffered a major slowdown in 2009, that particular drug literally disappeared from production for several months.

Many of you might be surprised to know that a very great number of highly effective and essential drugs routinely used in our health0care system have their origins as chemical byproducts of all sorts of manufacturing processes. That they come to be used as life-saving and life-altering medicines is remarkable in and of itself, and speaks volumes about the vagaries and random chance that so much research and development entails.

Research and development is tremendously expensive simply because it involves hunches, dead end searches, and plain old dumb luck.

Right now, several commonly used cancer drugs are on the cusp of extinction as the manufacturing processes that generate the building blocks of these drugs as byproducts are under the gun. They’re under the gun not because the processes are pollution prone, but because the processes aren’t greenhouse gas friendly.

The bottom line here is that governments trying to save money are costing us a fortune and trying to save us from global warming is going to kill lots of us. Does that sound real smart to you?

As I’ve said before, much of government is useless, and some of it is even dangerous.

Bill Greenwood is a local freelance columnist.

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