Killing Rewards For Medical Innovation Will Kill People

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  • 03/04/2014
There's been a spate of stories attacking high drug prices and the profits that new treatments generate.   But is there a better way of attracting the talent and capital required to cure scourges like polio, HIV, Hep C, cancer and Alzheimer's?  

The launch of Human Longevity Inc., by Craig Venter, Bob Hariri  and Peter Diamandis is predicated on the assumption that the only way to get enough people take enough risk for such undertakings is to create a commercial enterprise.   Calico (the Google anti-aging venture) and HLI are examples of how private companies and capital markets can achieve what governments and anti-capitalist types can only talk about. 

Recently, a news account implied that there was something wrong in the CEO of Gilead being worth over a $ billion.   As if somehow someone who invested 20 years and billions in developing treatments that are effectively cures for AIDS and Hep C should be not be rewarded.  We celebrate the Forbes 400 Richest People in the world  for their billions and their charity but not the people who lead firms that make longer life possible for billions.

Yes, many new medicines have retail prices that make one gasp.   Cancer drugs that cost $90K and Hep C drugs that ring in at $84 K.  They could be cheaper but that would require cutting the amount of time and money needed to pass through the FDA.    (By comparison, average cost of private four year college is $160K)  Setting aside that on average the sticker price is about 20-50 higher than actual charges these new medicines  displace more expensive and less effective treatment and allow people to lead healthier, longer lives.  

These new treatments are a bargain.  We forget that while medicines may be pricey,  disease is always much more costly.    Unfortunately, under Obamacare health plans are sticking more people with a bigger share of the cost.   This moved is designed to discourage use by the people in greatest need and direct outrage away from insurers to drug companies, their executives and their net worth.   That's bad policy and immoral to boot. 

Some want to tie higher executive compensation to lower prices of medicines.  Apart from the bureaucratic nightmare such a system would require, that would mean eliminating the connection between return on investment and the value of innovation.  Would anyone think of requiring that the compensation of Steve Jobs or Elon Musk should increase only if they make cheaper products?  All such proposals do is drive the capital, risk taking  and profits into other industries like apps,  entertainment and fashion.  

In announcing the launch of HLI Craig Venter noted: “This is a very expensive undertaking. The only way to do that is to make it so the data is so meaningful that it has commercial value,” Dr. Venter said. “If it doesn’t, then this will be a very short-lived phenomenon.”

Translation:  if we don't reward risk taking on behalf of human health,  both will shrink.    Killing rewards for medical innovation kills people.  

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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