There is a sweet spot for businesses who have massive regulatory protection the way pharma does, and who want to maximize rent extraction from society as much as possible.
For big pharma, this peaked in the past few years. The Mylan lawsuit and the outrage about Martin Shkreli are flare-ups that signal that public outrage is on the horizon.
In terms of social benefit, the trade-offs are not optimal at all. We are overly risk-averse to the point where FDA bureaucrats needlessly hold up drug approval, yet once a drug is granted approval we are very slow to sound the alarm if it turns out that additional data shows unanticipated risks. For example, the risks of Vioxx (as with many other NSAIDS) were well known to physicians long before the drug was taken off the market.
There is no such thing as a single wise entity that can appropriately vet all drugs for maximal societal value. Different people have different levels of risk-aversion. Our system exists to maximize the winner-take-all aspect of intellectual property protection for pharma, not to maximize the benefits of innovation to society or maximally incentivize innovation.
Certainly, someone who is 80 might be more willing to try a new drug with unknown 20 year side-effects than the parents of a 10 year old. The single regulator model is deeply flawed and creates massive harm on both ends of this risk spectrum.
But there is no need for big pharma to worry. We have broad bipartisan support of massive, long-term sponsorship of big pharma companies. Unlike Martin Shkreli, these companies play a longer-term game and for the most part avoid embarrassing fiascos such as the one that impacted Mylan.
But yet, in spite of this, they are insulated from competition by regulators and manage to extract sweeter and sweeter deals. Note the way Mylan gradually ramped up the cost of epi-pens following ACA? Mylan was just trying to get its share of the pie. Other firms, like health insurance firms, got their piece of the pie "de-contenting" bronze plans and removing high deductible options from ACA. The government got its share by being able to claim credit for passing a landmark law, etc. Like tigers tearing chunks of flesh from a fallen gazelle, the powerful interests manage to get what they came for, which is why the ACA passed in the first place, they all knew/expected the benefits to occur. The only group who got a bad deal were Americans relying on the ACA who were not poor enough to get a heavily subsidized plan... these people just had a massively regressive additional tax.
For big pharma, this peaked in the past few years. The Mylan lawsuit and the outrage about Martin Shkreli are flare-ups that signal that public outrage is on the horizon.
In terms of social benefit, the trade-offs are not optimal at all. We are overly risk-averse to the point where FDA bureaucrats needlessly hold up drug approval, yet once a drug is granted approval we are very slow to sound the alarm if it turns out that additional data shows unanticipated risks. For example, the risks of Vioxx (as with many other NSAIDS) were well known to physicians long before the drug was taken off the market.
There is no such thing as a single wise entity that can appropriately vet all drugs for maximal societal value. Different people have different levels of risk-aversion. Our system exists to maximize the winner-take-all aspect of intellectual property protection for pharma, not to maximize the benefits of innovation to society or maximally incentivize innovation.
Certainly, someone who is 80 might be more willing to try a new drug with unknown 20 year side-effects than the parents of a 10 year old. The single regulator model is deeply flawed and creates massive harm on both ends of this risk spectrum.
But there is no need for big pharma to worry. We have broad bipartisan support of massive, long-term sponsorship of big pharma companies. Unlike Martin Shkreli, these companies play a longer-term game and for the most part avoid embarrassing fiascos such as the one that impacted Mylan.
But yet, in spite of this, they are insulated from competition by regulators and manage to extract sweeter and sweeter deals. Note the way Mylan gradually ramped up the cost of epi-pens following ACA? Mylan was just trying to get its share of the pie. Other firms, like health insurance firms, got their piece of the pie "de-contenting" bronze plans and removing high deductible options from ACA. The government got its share by being able to claim credit for passing a landmark law, etc. Like tigers tearing chunks of flesh from a fallen gazelle, the powerful interests manage to get what they came for, which is why the ACA passed in the first place, they all knew/expected the benefits to occur. The only group who got a bad deal were Americans relying on the ACA who were not poor enough to get a heavily subsidized plan... these people just had a massively regressive additional tax.