Procopius in comments yesterday raised a point I’ve seen around a couple of times that I want to address as the logic is internally inconsistent with a core underlying assumption of the statement.
I believe all the pharma companies have one thing in common. I believe they search for treatments that ameliorate, but do not cure…. The pharma companies have, since then, been able to recapture patent control of the treatments and are raking off monopoly rents…
The core underlying assumption is that Big Pharma Company Execs are profit maximizing, rent extracting sociopaths who are seeking to make as much money as possible for as little work as possible. And the secondary assumption is that it takes less work to produce treatments rather than cures.
I could see this argument actually working to some extent if there was both only a single Big Pharma Company and infinitely high barriers to entry from any other entity that wanted to be a Big Pharma Company.
But that is not the world that we live in.
Let’s run with two assumptions to look
What does that world look like?
It looks like companies will try to undercut their competitors. It looks like a lot of me-too drugs of using slightly different molecular pathways to attack a set of problems. It looks a lot like this world.
Let’s assume Company A has a decent but not great non-curative treatment for Itchy Elbowitis that it thinks it can sell for $20,000 per year for 50 years per patient. At a 5% discount rate that is a revenue stream worth $370,000. That looks pretty damn valuable to me.
Now Company B is working on a technology that it thinks will cure Itchy Elbowitis. It thinks it can price the treatment for $300,000 for a single afternoon that will produce lifetime benefits. Company B’s stock price will go up, Company’s B’s executives will get better hookers and more blow and they’re happy to undercut Company A.
Company A should be able to figure out what Company B is doing through public filings, clinical trials and Company B’s merger and acquisition sprees that serve as a component of Company B’s research and development budget, Company A may also be looking at cures so that they don’t lose the entire Itchy Elbowitis revenue stream to Company B.
As long as we assume that there are large profits to be made in pharmacy development and that the barriers to bring a drug to market are not insurmountable, someone will be working on a cure. The big challenge is that the science is tough, the clinical trials are tough, the pricing is tough. And yeah, Pharma does not help itself when it engages in pay for delay, patent evergreening and other rent collection strategies, but those strategies confirm the first assumption that the senior leadership is profit maximizing rent seekers. Being able to find a cure when there is another company with a fat, lazy monopoly is a profit maximizing behavior.
I think that the assumption that Pharma wants to develop only life long treatments for a continual revenue stream instead of cures runs hard into the internal contradiction of assuming that Pharma is run by evil profit maximizing bastards. The big caveat is this assumes there is no industry wide, universal price fixing scheme in play. That assumption is one I am not addressing in this post.