Matthew Yglesias » Domenech vs. McArdle on Medical Research

Jul 31st, 2009 at 11:27 am

Domenech vs. McArdle on Medical Research

I was expecting the Internet to bring forth a good blog post explaining how wrong Megan McArdle is about how medical research works in the United States, but I really wasn’t expecting that it would be written by Ben Domenech.

Comments
79

79 Responses to “Domenech vs. McArdle on Medical Research”

Duvall Says:
July 31st, 2009 at 11:33 am
I was expecting the Internet to bring forth a good blog post explaining how wrong Megan McArdle is about how medical research works in the United States, but I really wasn’t expecting that it would be written by Ben Domenech.

To be fair, he probably just copied it from someone else.
LaFollette Progressive Says:
July 31st, 2009 at 11:35 am
Did somebody spike my morning coffee with acid, or has the entire world actually gone mad this morning?
Craig Says:
July 31st, 2009 at 11:36 am
And yet, this fact-free nonsenese continues to be a staple of commentary on the Right. I guess Ayn Rand must have said something about it once, so it has the authority of a pronouncement by Aristotle.

Just one data point–go look at Wikipedia’s list of the largest pharmaceutical companies in the world: http://en.wikipedia.org/wiki/List_of_pharmaceutical_companies

Yes, Pfizer, yes J&J…and then a run of six non-American companies in a row. Sum up their revenues and their research expenditures and tell me again how “socialism” is going to destroy the American pharmaceutical industry.
megan fan Says:
July 31st, 2009 at 11:38 am
What exactly does that refute? That pharma companies want to make money, and orphan illnesses are funded by the government? Megan’s point was that government research is not a perfect substitute for private research, as the latter involves a lot of tinkering that, though it does not generate any breakthroughs, is useful for putting drugs to the market.

Of course, you can argue that it’s worth trading off perhaps a little bit of innovation if it allows us to cover millions; or that high drug prices are a very expensive way of funding innovation (we could lower health care costs and fund research directly through the gov or prizes). But there are differences between government and private sector research.
BradyB Says:
July 31st, 2009 at 11:39 am
Being a researcher myself, I was very impressed with Domenech’s takedown of McArdle. It’s well written and accurate.

That being said, this seems to be another case of a conservative who actually has experience in a field adopting the liberal perspective.
BradyB Says:
July 31st, 2009 at 11:41 am
@megan fan

McArdle’s argument was that the government research doesn’t produce lifesaving drugs, whereas Pharma does. That is about as wrong as it gets.
zic Says:
July 31st, 2009 at 11:46 am
Thank you for this. I’ve been trying to make this argument on McArdle’s blog for some time, and I’d take it a step further: NIH funded research provides significant economic benefit to both pharma and device manufacturers; a form of corporate welfare that goes unrecognized and undervalued.
megan fan Says:
July 31st, 2009 at 11:52 am
@Craig,
Many of those non-American based companies do a good chunk of their business in America. Margins, especially, are much higher in America.

@BradyB,
So she was wrong about orphan diseases. The vast bulk of usable drugs are produced by the private sector. There are differences between what private and public researchers do, generally. It’s not crazy to think that lowering costs and imposing more government control could lower innovation. Other countries have done so, and the US now funds (though high drug prices) and is the site of much of the world’s pharma innovation.

It is crazy, IMO, to think that spending that last dollar of spending on research should outweigh covering millions of uninsured people.
Anonymous Says:
July 31st, 2009 at 11:52 am
zic: Calling it corporate welfare seems wrong. Medical research is a public good. Everyone benefits from it. For-profit corporations are simply well equipped to jump in and benefit disproportionately from it. The mechanisms which allow them to do so might reasonably be called corporate welfare, but I wouldn’t call the research itself that.
Craig Says:
July 31st, 2009 at 11:52 am
God, I can’t believe I actually started reading the original McArdle piece.

This is, allegedly, a professional economics writer at work. How does she decide that a government health system would be bad–does she go out into the world and look at, oh, any other industrialized nation on Earth and see how it works for them? Does she compare private insurance in this country to Medicare or the Veteran’s Administration? Does she, in short, gather a scrap of damn data and try to follow it to understanding?

Of course not, silly. She starts from _philosophical principles_ and conducts a _thought experiment_. Because that’s how you know that like cures like, or planets move in perfect circles, or “atoms” can not exist–just like Aristotle knew.

Let’s auto-summarize a few paragraphs of Megan’s “argument:”

“For me, it all boils down to public choice theory…what are the govenrment’s incentives?…I think they’re bad…I’m afraid that…my assumption is…”

She almost gives us about half of a single anecdote about a single drug and Britain’s NHS, which isn’t even releavant to the discussion. Data: none. Analysis: none. Just the uninformed musings of someone who wouldn’t know Science if it smacked her in the face.

Which it ought to do.

And yet this woman is _paid_ to understand, explain and write about this stuff.

There should be a way to end this comment with some kind of riff on “Physician, heal thyself.”
Helter Says:
July 31st, 2009 at 11:54 am
Megan’s entire business plan is now oriented in saying something particularly stupid and then hoping to get traffic when someone points out how wrong she is.
ostap Says:
July 31st, 2009 at 11:56 am
People read long McArdle posts on policy? Go figure!

I only read her posts about her difficulties with modern life. If I have to, say, get my car repaired, register to vote, or keep my bike from getting stolen, I just do it. As far as the little things go, life in America is grand. The small stuff is rarely any sweat.

McA, though! It takes her months to accomplish anything other than writing blog posts on subjects she knows precious little about.

Can you imagine if she went to live in a third world country for a while?
Ken Says:
July 31st, 2009 at 11:59 am
I am, for some reason, reminded of the opening of “Idiocracy,” where the narrator intones, “The years passed, mankind became stupider at a frightening rate. Some had high hopes that genetic engineering would correct this trend in evolution, but sadly the greatest minds and resources were focused on conquering hair loss and prolonging erections.”
Sebastian Says:
July 31st, 2009 at 12:04 pm
“Yes, Pfizer, yes J&J…and then a run of six non-American companies in a row. Sum up their revenues and their research expenditures and tell me again how “socialism” is going to destroy the American pharmaceutical industry.”

And they all earn the vast majority of their profits in the US.

Where they are headquartered isn’t the issue. The issue is what mechanism pays for their research. The answer is: the US market pays for their research.
Benny Lava Says:
July 31st, 2009 at 12:06 pm
McArdle clearly doesn’t understand what she’s writing about

Ok, now that Ben Domenech has proven this, can Matt please stop linking to McArdle? She gives bloggers a bad name.
LaFollette Progressive Says:
July 31st, 2009 at 12:07 pm
Whether the world has gone mad or not, I have to admit that Domenech (or whoever actually wrote the article) got this just about exactly right.

BradyB makes a good point at number 5. The conservative movement seems to be rife with people who hew to right-wing dogma on every issue that lies outside their area of expertise, or doesn’t impact themselves or their family in any significant way, but have a strange affinity for big government in the small number of policy areas where they have some actual first-hand knowledge.

You won’t find a whole lot of bankers who want to abolish the Fed, or Pharma executives who want to cut NIH funding and let the market work its innovative magic, or defense contractors who believe that government spending can’t stimulate the economy. Sarah Palin won’t cut funding for your special needs children, and Bob Dole wasn’t outraged about the nanny-statism of the ADA.
J.W. Hamner Says:
July 31st, 2009 at 12:08 pm
I used to be one of those people who didn’t “get” all the hate directed towards Megan McArdle. I’m now a convert. Her recent posts on obesity and healthcare are such a perfect illustration of the term glibertarian that you almost have to feel like they have to be parodies.
That Donkey Benjamin Says:
July 31st, 2009 at 12:11 pm
Amongst all the bitching, I see not a single fact penned by you preening morons.
Eric Says:
July 31st, 2009 at 12:12 pm
Why should the US market pay for the development of drugs from which the whole world benefits?
j mct Says:
July 31st, 2009 at 12:14 pm
If I were a NIH funded researcher doing stuff not on McArdle’s list the smart thing to do would to not advertise it. Washington seems to be zeroing in on eliminating waste in the med biz, and since the stuff not on her list would be done more efficiently by the private sector, advertising one’s activities might lead to getting one’s budget cut.
frankie d Says:
July 31st, 2009 at 12:16 pm
“McArdle clearly doesn’t understand what she’s writing about,” one former NIH colleague said today… but I don’t think anyone in the field could read what she wrote without laughing.”

anytime i read anything by that idiot, that is my general reaction.
i always ask myself who she knows and how she maintains her job.
nepotism? dispensing sexual favors? some sort of quota system for six-foot tall white females?
for a few weeks, i tried to read her blog, expecting that sooner or later, something…anything of substance would land on her page. how wrong i was!
the only thing worse than the nonsense she writes is the fact that too many people are too polite to accurately describe her blog. instead of saying that it is utter nonsense, they tend to walk a fine line. typically they do what matt does, which is to present it, without comment, but usually pointing to someone who describes how big of an idiot she is.
the fact that she is considered to be one of the creative, “ideas” people on the right is mindboggling.
Rum raisin Says:
July 31st, 2009 at 12:18 pm
Ms. McArdle first concludes on an issue. She then works back to analyze and cherry-pick facts (or not) so that she can prove what she already knows (in her mind) is correct. Critical thinking usually runs the other way. She is an MBA by training so I guess I am not surprised. Snark aside, like J.W. Hamner I didn’t get the hate directed at her.. but now do and avoid her like the plague.
LaFollette Progressive Says:
July 31st, 2009 at 12:26 pm
Sebastian — “And they all earn the vast majority of their profits in the US.”

An ignorant, self-assured, evidence-free assertion worthy of Megan herself.

Let’s suppose, for a moment, that this statement is factually accurate and all Pharma companies in the world earn the vast majority of their profits in the US.

Now let’s suppose that you’re in the market to buy a specialized widget. All the nations of the world have agreed, through a variety of treaties and international agreements, to respect a monopoly license for the widget maker. And the widget-maker decides to arbitrarily set the price for the widget at $50 in every other country in the world, but sets a $100 price in the US. Widget lobbyists convince Congress to ban the reimport of widgets from overseas to ensure that Americans must pay the higher price.

When Americans complain, the widget maker says “Hey, if we charge you the same price we charge everyone else, we’d go out of business and you won’t get any widgets at all. You’re responsible for the vast majority of our profits!”

I suspect that no one would find this argument to be very compelling.

I work in the pharma field. I can assure you, with 100% confidence, that Big Pharma will not significantly cut back on R&D if a public health insurer negotiated lower drug prices in the US. Because R&D is responsible for ALL of their profits. If prices come down here, they will be driven upward everywhere else.
Patrick Says:
July 31st, 2009 at 12:26 pm
The entire piece is a straw man. Having listened to every single one of Megan’s Nuanced points, she is well aware of the research process that goes into drug creation.

Her point is that the FINAL stage of drug creation is the one that matters most for majority of medical conditions, and the loss of profitability in this stage would significantly reduce long term medical innovation.

Saying that other stages of medical research exists, or that saying that for some projects research is done into drug creation, or that thanks to legal problems pharmacutical companies are not as profit seeking as they could be, does not dismiss or disown Megan’s argument.

The only responses I’ve seen to Megan’s post have been pedantry.
“Megan is wrong because she doesn’t have three paragraphs explaining this fact here I know about, that is some what tangential to the point. Therefore she’s wrong and stupid and ignorant.”
But she does know about that. Addressing all possible arguments in a post like that, even a long post like that, would effectively take about 70 pages.
I know, because I used to write like that. Writing posts like that does nothing because at the end of the day, even if you do write the longest post in history covering all possible nuisances and addresses, people just go: TL;DR or make stuff up about what you say.

In the context of Megan’s post, qua the entirety of her pundinty career, it works fine. It explains a few of her major concerns, and addresses where she expects the major problems to resolve. It’s not meant to be seen as a long essay on why National Health care will fail, but rather is a signal to her readers of for why she opposes the program, and as such can be seen as a beginning of a longer argument, not an end.
David Says:
July 31st, 2009 at 12:27 pm
For those of you seething at the stupidity of Megan’s post go read Ezra’s extended post on it: http://voices.washingtonpost.com/ezra-klein/2009/07/on_megan_mcardles_case_againt.html

Trust me, it will be cathartic.
Joe Strummer Says:
July 31st, 2009 at 12:31 pm
Note, and note well: Ben Domenech, plagiarist, wrote a decent piece because 1) he worked around the NIH and apparently learned shit from those experiences and 2) he knows people who know shit and who told him shit. This is called “reporting” and look how it produces a piece that is informed.

Megan McArdle, glibertarian, wrote another just-so story littered with grandmoms and their pound cakes and ex nihilo philosophizing. That’s because Megan McArdle doesn’t know shit, and, what’s more, she is too lazy to go ask people who do.

Such qualities have served her well, however, landing at one of the country’s preeminent publications.

These people are rolling in their graves:

The Atlantic was the first to publish Julia Ward Howe’s “Battle Hymn of the Republic” (on February 1, 1862), and William Parker’s “The Freedman’s Story” (in February and March 1866). It published Charles W. Eliot’s “The New Education” (a call for practical reform) that resulted in his appointment to Presidency of Harvard University in 1869. It also published some of Charles Chesnutt’s tales before they were collected for The Conjure Woman. The associative vision As We May Think by Vannevar Bush appeared in July 1945. The magazine published Martin Luther King, Jr.’s defense of civil disobedience in “Letter from Birmingham Jail” in August 1963. The magazine was a point of connection between Emily Dickinson and Thomas Wentworth Higginson; having read an article in the Atlantic by Higginson, Dickinson asked him to become her mentor. It has also published many of the works of Mark Twain.
That Donkey Benjamin Says:
July 31st, 2009 at 12:31 pm
“anytime i read anything by that idiot, that is my general reaction.i always ask myself who she knows and how she maintains her job. nepotism? dispensing sexual favors? some sort of quota system for six-foot tall white females?”

Now that’s Progressive (TM).
fostert Says:
July 31st, 2009 at 12:35 pm
“The issue is what mechanism pays for their research. The answer is: the US market pays for their research.”

That is often not the case. I’m in the medical device field, which is a little different but has many of the same issues. I work for American companies, but our first trials are usually outside of America. The FDA requires the most stringent clinical trials in the world. Such trials are extremely expensive and nobody wants to fund them unless they are sure the trial will go well. So, we do trials in other countries first to work the bugs out and get some insight into how well the product works. If those go well, then we get the money for the American trial. And less of our money has to come from investors because we already have a revenue stream from Europe. Sometimes, we just skip the initial research and buy a product from Europe that is already approved there. Then we push that product through the FDA ourselves and pay a licensing agreement to sell it in the US. Either way, we need the European market to get products through our own market. And either way, it is the European market that pays for our clinical trials, not the other way around. The American market provides more profit-based incentive for product development, but it does so at far greater risk to the manufacturer. So we go through a low risk, low reward stage before we go for the high risk, high reward stage.

I’d also note that those European companies do create a lot of new products. Our companies create more, but the vast majority are “me-too” products. If Pfizer has an erection pill, then Merck needs one too. But do you need two of them? No, only Merck needs the second product. And only because they aren’t making the first one. With a handful of major companies, it’s a guarantee that any successful product will come in a handful of brand names. And it’s a guarantee that most of the research will go into making multiple versions of the same product.
pseudonymous in nc Says:
July 31st, 2009 at 12:36 pm
From the piece:

The truth, as anyone knowledgeable within the system will tell you, is that private companies just don’t do basic research.

Kudos to Domenech for saying this, and it’s a well-written piece, but this is the kind of thing that anyone with a college education simply ought to know — not because the details are taught in class, but because at college you are around people who do exactly that kind of research as grad students or post-docs. If you get a degree without having a conversation with a research scientist, you’ve really sheltered yourself a bit too much. Perhaps Megs never wanted to be seen with the scientists at Penn.

That being said, this seems to be another case of a conservative who actually has experience in a field adopting the liberal perspective.

True, though it’s not so much the “liberal perspective” as the “should be self-evident” perspective.

One thing I will take issue with in the piece:

They do productization research, and only for well-known medical conditions that have a lot of commercial value to solve.

That’s not quite true, particularly in mental health, where diagnostic definitions are more protean, and the relationship between the editors of the DSM and their friends in Pharma has been problematic. Social affective disorder, anyone?
pseudonymous in nc Says:
July 31st, 2009 at 12:43 pm
Having listened to every single one of Megan’s Nuanced points, she is well aware of the research process that goes into drug creation.

Uh, no. She thinks that it’s like manufacturing, whereby Galtian jeenyuses turn raw materials into world-altering stuff. Domenech makes the point that it ain’t that way, and every fucking research scientist will back him up.

But you’re welcome to join the gathering of McAddled fanbois here to defend their dimwit princess.
Connor Says:
July 31st, 2009 at 12:45 pm
What was it like to work with McArdle?

Was it awkward?
slag Says:
July 31st, 2009 at 12:49 pm
…this seems to be another case of a conservative who actually has experience in a field adopting the liberal perspective.

Yup.
raylward Says:
July 31st, 2009 at 12:50 pm
Andrew and Megan agree about health care reform (they are against). But with Andrew it’s philosophical (he’s against expansion of government, period, whatever the subject). Indeed, he has acknowledged many times that he knows next to nothing about economics (it shows). Megan, on the other hand, takes a few grad courses in economics and fancies herself an expert on the subject. Watching Noam and Megan do their bloggingshead discussions is a must see, if for no other reason that to see Noam’s expression every time Megan says something incredibly stupid. Megan’s only, I repeat only, talent is that she reflects the views of her very small group of twenty to thirty somethings who, fresh from elite colleges, wish to share their “wisdom” with the rest of us. My only question is, how long will the Atlantic risk credibility by having her as “expert” in economics.
John B Says:
July 31st, 2009 at 12:51 pm
These would all be fine arguments against McArdle’s piece.

Except for the fact that McArdle doesn’t care about solving problems.

She cares about pushing a radical ant-government viewpoint.

If you see that as her main agenda, everything else falls into place.

Basically, if you imagine a libertarian Bill Kristol, you’ve got McArdle.
Tinare Says:
July 31st, 2009 at 1:02 pm
My only hope for the future is that McMegan and her fiance do not reproduce. The stupid needs to be contained.
JohnMcC Says:
July 31st, 2009 at 1:06 pm
Megan’s blog used to be right next to Ross Douthat’s on the Atlantic home-page. She seemed a lot smarter then….
ibc Says:
July 31st, 2009 at 1:06 pm
In the context of Megan’s post, qua the entirety of her pundinty career, it works fine.

I wish you had put this sentence at the beginning of your comment. That way I would have known to skip it.
LaFollette Progressive Says:
July 31st, 2009 at 1:17 pm
“Except for the fact that McArdle doesn’t care about solving problems. She cares about pushing a radical anti-government viewpoint… Basically, if you imagine a libertarian Bill Kristol, you’ve got McArdle.”

Kristol is a good comparison, but I’m not sure I’d call her viewpoint “anti-government”. She seemed perfectly content with the Iraq War and joked about bashing in war protesters’ skulls. Really, as the “Jane Galt” handle would suggest, she’s radically opposed to social democracy. Government is fine as long as it runs on the cheap, protects her inherited privileges, hurts people she doesn’t like, and never asks anything from her in return.

“Glibertarian” fits the spirit of the worldview to a T.
fostert Says:
July 31st, 2009 at 1:24 pm
Megan’s article has one use: it is a great example of a trend in conservatism that is pretty scary. Conservatives honestly believe that people who work in a given field are the least qualified to speak about that field. Climate science? Can’t ask a climate scientist, you need to ask an oil industry accountant. Medical science? Can’t ask a medical researcher, you need to ask an insurance industry executive. Evolution? Can’t ask a biologist, you need to ask a priest. This is why when the want to know about economics, they’ll chose Megan over a Nobel Prize winning economist like Paul Krugman. They need to put their money where their mouth is. When they have a heart attack, they need to go to a dermatologist for their bypass surgery. After all, a cardiologist can’t possibly know anything about heart surgery.
Will Allen Says:
July 31st, 2009 at 1:53 pm
If all the people in this thread really believe that private capital is trivial to producing health care technology which hugely improves millions of lives, why won’t they demonstrate the courage of their convictions and simply propose that patents no longer be issued for such technology?

Look, determining just how much protection the government should provide for intellectual property, in order to find the optimum spot on the price/innovation curve, is really, really hard. Really. Why is there such a silly need to pretend otherwise?
fostert Says:
July 31st, 2009 at 2:03 pm
“If all the people in this thread really believe that private capital is trivial to producing health care technology…”

Nobody is saying that, Will. It’s just not the driving force. The private research comes in at the end when investors are already confident that the product works. Without the earlier government research, private investors would just move their money to less risky industries. The people who supply us the private money usually don’t know anything about the medical industry. They could just as easily put their money in communications, oil, or agriculture. They choose the medical industry because the government research reduces the risk enough to make it worthwhile. We could do without the private money, but the industry would collapse without the government money. That doesn’t make the private money trivial, just non-essential.
Cyrus Says:
July 31st, 2009 at 2:05 pm
If all the people in this thread really believe that private capital is trivial to producing health care technology which hugely improves millions of lives, why won’t they demonstrate the courage of their convictions and simply propose that patents no longer be issued for such technology?

This is a really stupid strawman. Smarter trolls, please.
Will Allen Says:
July 31st, 2009 at 2:05 pm
Fostert, do you grasp that it is the markets which holds the prospect for large profits which attracts large amounts of private capital? That where the clinical trials take place is irrelevant to that question?
Will Allen Says:
July 31st, 2009 at 2:09 pm
Fostert, if no person is saying that, why then do you say…

“We could do without the private money,…”

Perhaps you speak a diffeent language than I, but when someone tells me they could do with out x, when producing y, they are saying that x is trivial to the production of y. Please explain.
Henry Says:
July 31st, 2009 at 2:26 pm
I used to agree with Megan on occasion, but the reality is that since she has been living with the Suderman guy she has become a lot more wingnuttier.
Will Allen Says:
July 31st, 2009 at 2:27 pm
Domenech’s piece really is a strawman, in that it seems to imply that McCardle argued that government funded medical research was not essential to producing innovation in medical technology.
Aqua Regia Says:
July 31st, 2009 at 2:29 pm
fostert @ 39;

You’ve hit on something that’s been bugging me for a while. I don’t know if its the American Idol-ization of politics, or what, but where has the denigration of experts come from? This may be “elitist”, but I feel strongly that when discussing climate change you should ask a climate scientist, or discussing health care you should ask a health care expert. Not everyone is qualified to opine on every issue! The pizza guy is not an expert on health care, and neither is megan mcardle, so why exactly should we listen to either of them on this issue?
Willie Says:
July 31st, 2009 at 2:42 pm
Domenech’s piece really is a strawman, in that it seems to imply that McCardle argued that government funded medical research was not essential to producing innovation in medical technology.

Seems to imply? Look there’s no need for such vague weasle words. Ms. McCardle makes very specific claims about how drug development works, such as:

In the case of pharma, what an NIH or academic researcher does is very, very different from what a pharma researcher does. They are no more interchangeable than theoretical physicists and civil engineers. An academic identifies targets. A pharma researcher finds out whether those targets can be activated with a molecule. Then he finds out whether that molecule can be made to reach the target. Is it small enough to be orally dosed? (Unless the disease you’re after is fairly fatal, inability to orally dose is pretty much a drug-killer). Can it be made reliably? Can it be made cost-effectively? Can you scale production? It’s not a viable drug if it takes one guy three weeks with a bunsen burner to knock out 3 doses.

Mr. Domenech quotes some of her claims, links to the rest of her article and then claims that she is wrong. No strawman there. He is directly refuting her points, despite whatever it is you think he seems to be sorta-kinda maybe implying.
Will Allen Says:
July 31st, 2009 at 2:56 pm
Re-reading both pieces, it becomes puzzling as to why Domenech, and then Yglesias, think Domenech’s piece refutes McCardle’s argument in an important way. It is as if Domenech thinks that asserting that diseases which don’t afflict a large number of people, and thus don’t attract a lot of private capital, means that McCardle’s argument invalid. McCardle’s point is that private capital has been essential to all manner of medical technology innovation as well, and that making the U.S. market become a lot less profitable will mean that a lot less private capital will be attracted to medical technology innovation, and people will suffer as a result.

Now, someone above (but Domenech did not) asserted that if the U.S. market became less profitable, prices would simply be raised elsewhere. Maybe this is true. Then again, maybe a government, faced with a large number of citizens clamoring that a critical drug not have it’s price raised, or not have their taxes raised, would tell a pharmaceutical company that the price better not be changed, or the government would manufacture it’s own generic. Uncertainty is the nemesis of private capital, and losing what is by far the largest very profitable market is the epitome of uncertainty.

It may well be true that we are providing more protection to intellectual property than what is necessary to still obtain a very high pace of innovation. That doesn’t mean that a national health care system is the best way to test that proposition.
Will Allen Says:
July 31st, 2009 at 3:03 pm
No, Willie, Domenech makes a point of saying that private capital is only attracted to research which concerns diseases which afflict a large number of people, as if that is a refutation of McCardle’s argument.
Aqua Regia Says:
July 31st, 2009 at 3:06 pm
Will Allen,

You’re assuming that the current system is the best method for producing medical advances. What if instead of the money spent making and marketing 28 different kinds of boner pills, we collected that money and spent it on malaria research? We might only have one new drug instead of 28, but it would be of much greater benefit to humanity.
fostert Says:
July 31st, 2009 at 3:12 pm
“but when someone tells me they could do with out x, when producing y, they are saying that x is trivial to the production of y.”

Not at all. What I am saying is that the funding for the last research phase could be supplied by either the government or the private sector. That the private sector currently supplies most of the money for the final phase means that the money they are supplying is not trivial. It’s most of that money after all. And if that money came from the government instead, it would still not be trivial. But with the earlier research phases, the money only comes from the government, and it can only be that way. The early research phases are unlikely to lead to viable products, so no investor wants to put money into it. Private investors are only willing to put money in after all the non-viable ideas are weeded out. Essentially, the government is taking the risk, and the private investors are making the money.

Essentially the money is not trivial, but it is not necessary that it come from private sources.
Will Allen Says:
July 31st, 2009 at 3:17 pm
Aqua Regia, you have just illustrated what is so incredibly frustrating about political dialogue in this forum, and in so many like it. I write…..

“It may well be true that we are providing more protection to intellectual property than what is necessary to still obtain a very high pace of innovation. That doesn’t mean that a national health care system is the best way to test that proposition.”

…..and you reply…..

“You’re assuming that the current system is the best method for producing medical advances.”

For the life of me, I can’t understand how you gleaned the latter from the former.
ed Says:
July 31st, 2009 at 3:20 pm
For a dissenting view, see Derek Lowe, who is a scientist doing drug-discovery for Pharma:

http://pipeline.corante.com/archives/2009/07/31/where_drugs_come_from_and_how_once_more_with_a_roll_of_the_eyes.php

(He agrees with McArdle more than with Domenech.)
Will Allen Says:
July 31st, 2009 at 3:21 pm
Why then, Fostert, would you oppose ending patents on medical tachnology? If the private capital is merely engaging in risk free rent seeking, why do we need patents?
Cyrus Says:
July 31st, 2009 at 3:25 pm
You’re assuming that the current system is the best method for producing medical advances. What if instead of the money spent making and marketing 28 different kinds of boner pills, we collected that money and spent it on malaria research? We might only have one new drug instead of 28, but it would be of much greater benefit to humanity.

Communist!
fostert Says:
July 31st, 2009 at 3:27 pm
“Fostert, do you grasp that it is the markets which holds the prospect for large profits which attracts large amounts of private capital?”

Umm, capital is attracted on a risk/reward basis. If there are high risks, investors expect a high reward. If the risks are low, they expect a lower reward. Government bonds don’t offer high rewards, yet people still invest a lot of money in them. More money than they invest in the medical industry by far. Why would they do that? Easy, no risk. What makes the European system work is that it is easier to get a product through the system. The costs of the trials are less and the expectations are lower. You make less money in Europe, but there is less risk you’ll develop a product that can’t be sold. Without Europe to test our products, we would develop fewer products. The problem in America is that it is very hard to assess the risks associated with a clinical trial. If we do a foreign trial first, we get a better understanding of the risks associated with the FDA trial. There are two things that greatly increase the cost of medical products in America: advertising and the cost/risk of clinical trials. And advertising is the big one at about 30% of the cost of a product. If we used comparative effectiveness research to replace advertising in informing doctors and patients, we’d take a lot of cost out of the system. We’d also eliminate the market for “me-too” products, which in turn would eliminate most of our research costs.

The health care market does not function like most consumer markets. Work a few years in the field, and you’d know that.
Will Allen Says:
July 31st, 2009 at 3:28 pm
Cyrus, I fully support you supplying as much capital as you wish to the purpose of malaria research.
fostert Says:
July 31st, 2009 at 3:36 pm
“If the private capital is merely engaging in risk free rent seeking, why do we need patents?”

It’s not risk free, it’s just risk reduced. No product is risk free, and patents are needed to get investors to take a risk. The risk we are dramatically reducing is the risk that a product might not be approved. But there still is the risk that nobody will buy it. And there is a risk that without patent protection, someone in China will copy your product and sell it. We have patents in all fields for this reason. Let’s say I want to create a new data storage medium. There is no risk that the government won’t let me sell it. Well, unless I make it out of plutonium, of course. The risk in my product is that maybe people will buy someone else’s new data storage technology instead. Medicine is different. There’s a risk that you won’t even be able to enter the market, much less compete in it. To alleviate that risk, we have massive government research spending and we have lower risk markets that we can enter first.
Will Allen Says:
July 31st, 2009 at 3:39 pm
Wait, Fostert, you just informed me that government took the risk in developing new technology, and private capital just made the profits. Now you are telling me that the risk of private capital being used to develop a product which then can’t be sold is higher in the U.S..

If you are correct that regulatory hurdles to bringing a product to market in the U.S. are too high, then that should be changed.
LaFollette Progressive Says:
July 31st, 2009 at 3:43 pm
McCardle’s point is that private capital has been essential to all manner of medical technology innovation as well, and that making the U.S. market become a lot less profitable will mean that a lot less private capital will be attracted to medical technology innovation, and people will suffer as a result.

The first half of her point, as expressed here, is banal and uncontroversial. None of McArdle’s detractors are claiming that private capital has not been essential to medical technology innovation. What Domenech and countless others have objected to are her efforts to emphasize this point with a blatantly ignorant false description, to wit: “An academic identifies targets. A pharma researcher finds out whether those targets can be activated with a molecule. Then he finds out whether that molecule can be made to reach the target.”

Her goal here is to wildly overrepresent the relative importance of pharma R&D to academic research. When I was involved in academic research, I had colleagues who received funds from the NIH to identify targets and find out which molecules activate those targets. I had other academic colleagues who attempted to engineer ways for drugs to cross the blood-brain barrier and reach targeted receptors. In other words, McArdle is being paid by a fairly prestigious magazine to pretend to explain a subject she knows very little about in misleading ways, for the purpose of creating a deceptive argument against universal health care.

The second half of her point is that making the US market less profitable will stifle innovation. This is a common argument advanced by libertarian types. But this is misleading in several ways:

1. There is no reason to believe that universal health care, per se, will make the US market less profitable. There are 40-50 million Americans who lack health insurance, and therefore have limited access to preventive care, such as specialists who will put them on a statin BEFORE they get heart disease. The various mandates and subsidies and exchanges may help to drive down medical costs by providing less treatment in the emergency room. But it will increase the market for prescription drugs, which helps explain why the Pharma lobby is not opposed to mandates and subsidies.

2. A strong public option with bargaining power, or linked to Medicare rates, WOULD reduce pharma revenues, which is why their lobbyists are fighting it tooth and nail. But whether it would reduce their profits in the context of a larger market of insured Americans is less clear. Increased demand has to be considered along with the stronger downward pressures on prices. Naturally, McArdle ignores these matters entirely. She started with a pre-ordained conclusion based on knee-jerk antipathy to government services, and mustered an argument based entirely on assumptions, anecdotes, and purely fictional explanations of how clinical research happens.
David Says:
July 31st, 2009 at 3:44 pm
Megan, on the other hand, takes a few grad courses in economics and fancies herself an expert on the subject.

Small correction:

Megan, on the other hand, takes a few MBA courses in economics and fancies herself an expert on the subject.
Will Allen Says:
July 31st, 2009 at 3:49 pm
O.K., Fostert, you now seem to have backed off the assertion that the “government is taking the risk, and the private investors are making the money.” Well, I agree, as I stated above, that it is very hard to determine exactly how much protection to afford intellectual property, to strike the right balance bewteen price competition and innovation. I think having the government negotiate prices is a very opaque way of getting to the answer, however. It seems to me that an incremental decrease in patent protection, combined with lowering the regulatory hurdles in bringing a drug to market, followed by observing changes in capital allocation, would be a better approach.
LaFollette Progressive Says:
July 31st, 2009 at 3:50 pm
“Then again, maybe a government, faced with a large number of citizens clamoring that a critical drug not have it’s price raised, or not have their taxes raised, would tell a pharmaceutical company that the price better not be changed, or the government would manufacture it’s own generic.”

Sure, it’s possible that the EU and Japan would sabotage their own pharmaceutical companies by pulling out of the WTO and abrogating international agreements on patent law. It’s also possible that rabid monkeys will invade Ohio. These are risks I’m willing willing to endure.

There are already plenty of concerns about knockoff drugs in the developing world and I’m sure there will continue to be. But I find the idea that all Americans have some sort of fiduciary duty to Pfizer to subsidize drug development for the rest of the world to be utterly ridiculous. I don’t want to make drug companies less profitable, but if they can’t figure out how to profit in an environment where American customers have more bargaining power, then too fucking bad.
Will Allen Says:
July 31st, 2009 at 4:10 pm
LaFollette, your oversimplification of the spectrum regarding the possible outcomes of trade disputes and intellectual property disputes is useful to your rhetoric, of course, but not really illuminating. Look, if you think too much protection is afforded intllectual property, then by all means advocate lowering it. I’m inclined to agree with you somewhat.
Will Allen Says:
July 31st, 2009 at 4:15 pm
No, LaFollette, Domenech went out of his way to point out that if an insufficient amount of people suffered from a disease, then research into treating that disease won’t attract private capital, which means that government will have to fund the entire process. This is true, but entirely tangential to McCardle’s point.
Will Allen Says:
July 31st, 2009 at 4:22 pm
As ed notes, Lowe’s piece is an effective rebuttal of Domenech’s.
fostert Says:
July 31st, 2009 at 4:23 pm
“O.K., Fostert, you now seem to have backed off the assertion that the “government is taking the risk, and the private investors are making the money.””

No, what I’m saying is government is taking the risk of researching products that won’t be viable. Essentially, they are turning the medical industry into an industry like all others where risk is associated only with the ability to compete in the market. So given that, why should the medical industry be more profitable then other industries which face the same risks from competition?

As for the regulatory hurdles, they aren’t too high. The FDA let Vioxx through after all. The hurdle for Vioxx was obviously too low. The problem is that the regulatory hurdles are often defined by the manufacturers to keep out competition. Merck knows that Pfzizer will have to tweak a product a little to get around Merck’s patents. And they have a pretty good idea what those tweaks will be. So they pressure the FDA to set up hurdles that make it harder for Pfizer’s tweaked product to get through without affecting Merck’s product. This isn’t the government stifling private industry, it’s private industry using the government to stifle competition. And if you reduce the patent protection, companies will only manipulate FDA regulations more to protect their status. The problem here is that when new products come out, the FDA doesn’t know how to regulate them. So they work with the first company to develop the product to create standards that all future products must meet. This gives the first company the chance to make the regulations such that their product always looks the best and other companies have trouble getting through.
MQ Says:
July 31st, 2009 at 4:23 pm
This is classic Megan — she makes a false but authoritative-sounding statement about something she knows nothing about, pulled directly out of her ass with no source. I sort of wonder what she does all day besides just type whatever flits through her head, since she doesn’t read or talk to experts. She’s an embarassment. Even when she posts on stuff where all the evidence is right in front of her, she can’t interpret it coherently.
Ben Domenech Says:
July 31st, 2009 at 4:44 pm
Actually, I plagiarized it from Francis Collins.
Aqua Regia Says:
July 31st, 2009 at 4:46 pm
McArdle’s argument was: “In the case of pharma, what an NIH or academic researcher does is very, very different from what a pharma researcher does. They are no more interchangeable than theoretical physicists and civil engineers.”

Domenech, correctly points out that that is not true. It is true that a pharma company could not do what an academic researcher does, but Domenech points out that academic researchers do, in fact, do all the time exactly what McArdle says that they can’t.

It should be pointed out that most major medical breakthroughs in the past century or more have come from academic research. Not just the basic part of the research, finding the targets and pathways, which mcardle says is the only thing that academics can do, but isolating the drug, and doing the clinical trials were also funded primarily by public money. The first antibiotics? Public funding. The first vaccines, including polio? Public funding. Diabetes treatments? Public funding. The first statins? Public funding. I am not saying that privately funded drug research is not important, or not essential. Privately funded drug research has improved the quality of life of many people and saved many lives, provided that people can afford its benefits. But it is not true that drug innovation would grind to a halt if the drug companies’ profits were hampered.

Miss McArdle also says: “The government is not going to price to some unknowable socially optimal amount of pharma market power. It is going to price to what the voters want, which is to spend as little as possible right now.”

Which is just blatantly not true. Taxpayers are already fine with paying billions of dollars a year for medical research through the NIH, over and above the private research they are funding through their health costs. If McArdle was right, the NIH wouldn’t even exist, because taxpayers wouldn’t tolerate it.
Njorl Says:
July 31st, 2009 at 4:51 pm
Will,
I think the refutation that Domenech is making, and it is narrow, is that creativity would not be stifled if the profit motive in the pharmaceutical industry were reduced. The creativity is almost entirely govenment funded.

The distinction is a fine one, so I may have trouble explaining.

What the government researchers do would not be done if the government didn’t do it. What the private pharma companies do would still be done without them. I am a firm believer in markets (just not to the exclusion of all else), so I believe that the more profit that is in the pot, the more effective private drug development (and it is development, not research) will be. However, if that pot of profit is zero, the job will still be done. The optimal amount of money to put in that pot is, as you said, a difficult judgement call, but the possibility that the proper amount is zero does exist.
Aqua Regia Says:
July 31st, 2009 at 4:59 pm
Njorl, I think, said more or less what i was trying to say, except he said it shorter, and better.

Scientists, whether they work for universities or industry, are basically the same everywhere. As long as you fund them they will do research. Most of them got into it in the first place not to get rich (or if they did they quickly realized their mistake), but because they want to contribute. So as long as someone is funding them, they will contribute. Whether the money comes from private industries or the NIH, new drugs will continue to come out.
LaFollette Progressive Says:
July 31st, 2009 at 5:12 pm
Will, I still haven’t identified a single word or phrase in either McArdle’s article or your comments to support the claim that any current health care reform proposal will stifle drug development research, and certainly not to a degree that outweighs the benefits of the legislation. You both simply assume this to be the case, and proceed from those assumptions in various unenlightening directions.

“As ed notes, Lowe’s piece is an effective rebuttal of Domenech’s.”

No, it really isn’t. Domenech calls out McArdle for seriously understating the role of public funding in drug development. Lowe calls out Domenech for understating the role of drug companies in basic research. But Lowe’s defense of McArdle’s original article isn’t even remotely convincing.

He brushes off McArdle’s description of academic research as nothing more than identifying targets for drugs as “this does pass by the people doing some drug discovery work in academia… but overall, it’s basically how things are.” This is extremely disingenuous. As he concedes in later paragraphs, there is a HELL OF A LOT of drug discovery work going on in academia that goes well beyond identifying targets.

Lowe then takes much greater umbrage at Domenech’s much less inaccurate description of pharma research. Which is his prerogative, I guess. But the point Lowe ends up defending is that public and private sector money fill overlapping roles in the drug development process. Which is directly at odds with the quote from McArdle that he claims to be defending.
Derek Lowe Says:
July 31st, 2009 at 5:17 pm
LaFollette (comment #61) says:

“When I was involved in academic research, I had colleagues who received funds from the NIH to identify targets and find out which molecules activate those targets. I had other academic colleagues who attempted to engineer ways for drugs to cross the blood-brain barrier and reach targeted receptors.”

Glad to hear it! How long ago was that, by the way? And how many molecules did your colleagues screen, and where did they get them from? I ask because in the drug industry we routinely screen targets past compound collections that run into the high hundreds of thousands/low millions of different molecules, and come up empty. I’m not aware of any academic screening effort that can put up those numbers, although there’s now an effort to beef things up. And I ask about the compounds because a lot of academic screening has been done against commercial compound collections – and that’s OK as far as it goes, but then you’ll need teams of medicinal chemists and pharmacokinetics people to develop that lead into something that’s potent, long-lasting, selective, and nontoxic enough to recommend to the clinic. And you’ll also need teams of formulation scientists, animal handlers, process chemists, toxicologists, and clinicians to get you anywhere at that point.

Academia does not have these people. We do. While there have been some excellent examples of drug discovery from academic labs, too much of it has led only to publications on small screens of commercial libraries, leading to ugly micromolar compounds (that no drug company team would work on if they had any choice at all) that have not even been taken ten per cent of the distance they’d need to go to be drugs. Sad, but true. The standards are improving, but there’s a much larger gap than many people here seem to realize.
wiley Says:
July 31st, 2009 at 6:02 pm
The pharmaceutical companies benefit from all kinds of academic work that doesn’t show up directly in the studies they use—for instance, a mathematician comes up with a better model for predicting growth rates of bacteria, and that is adopted as a method by the researchers targeting a new antibiotic.

Big pharma couldn’t afford the research it benefits from if it stopped bribing doctors to name-drop.
Will Allen Says:
July 31st, 2009 at 6:46 pm
Well, Njorl, let us then directly experiment, slowly, with how much we should protect intellectual property, and see what happens, instead of setting up a system of government price controls, or if it please you, government negotiated prices, drug by drug, which will make it much harder to infer cause and effect.

Fostert, if regulatory capture is a problen which cannot be mitigated in our current world, why are we to suppose that it will be under the various reforms proposed?
fostert Says:
July 31st, 2009 at 8:48 pm
“Fostert, if regulatory capture is a problen which cannot be mitigated in our current world, why are we to suppose that it will be under the various reforms proposed?”

I don’t think any of the current proposals will help there. But it wont be solved by loosening patent protections either. In fact, loosening patent controls will only dramatically increase prices. If the time a product is financially viable is reduced, then the profits have to be increased during that period to get investment. It would be helped by tying comparative effectiveness research to what the government will pay for (which is off the table right now). That would reduce the incentive for the “me-too” products that create the problem.
Peter in Kobe Says:
August 2nd, 2009 at 1:25 am
Are we supposed to be surprised that she got this one wrong too? I am getting the feeling that if one continues to approach a question with a ready made dogmatic answer the results will always look the same. I certainly do not claim to be an expert in all things Megan. But I am just never convinced that she starts any of these investigations with the intention of finding something out. Her format resembles not so much an essay, but rather some kind of parlor game in which the objective is show how all things go better with libertarianism. Perhaps it is the more intellectual version of the seven degrees of Kevin Bacon. And like many games, I imagine it is a real hoot, but you rarely learn anything after the fun has been had.

Matt Yglesias

Domenech vs. McArdle on Medical Research

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