Thursday, August 6, 2009

Pharma companies

The Atlantic on why drug companies aren't evil. A little snarky but well done, I think.


  1. I don't think that article was done well at all. She comes across as a nincompoop who compensates for a lack of thorough research into her subject with seething contempt for someone who, frankly, has accomplished a lot more than she has within the realm of healthcare and the pharmaceutical industry (the subjects on which she purports to be an expert given the arrogant tone of the piece). Have you seen Ezra's response?

  2. Hmm. There are elements I agree with Klein on and there are elements he's weaker on. I agree with him on marketing spend - to be "efficient" on a societal basis, it has to prompt more additional revenues into the pharma industry than it costs (as opposed to substituting from other firms, which is useless societally), and from what I understand empirically (Pakes, et al), that isn't the case with pharma marketing.

    However, his argument on demand under universal insurance misses the point that demand has both a price and a quantity component. If you have universal health insurance but you use the increased quantity and market power to bargain down the price, then demand drops, and Finkelstein and Gruber are wrong. This hasnt happened with Medicare bc Medicare a) explicitly prohibits bargaining and b) has an entire private sector to reference what a fair price is. With universal health insurance, even if it DOES prohibit 'bargaining', we have no idea what that means because there's no efficient reference price, and political considerations inevitably mean that price goes down over time, stifling innovation. So the argument isn't great there.

    Funding innovation in the public sector is great, but it's a drop in the bucket compared to the private sector, which does most of the R+D heavy lifting. Klein's trying to make the point that the industry's not entirely laser-focused on making innovative drugs, which is true, but national insurance won't help it, it'll hurt it. He misses that disconnect.

    Thanks for posting!