The entrepreneurial state and Big Pharma
You never let a serious crisis go to waste, as Rahm Emmanuel once said. Mariana Mazzucato fully agrees, and thus she replies to a question of the British Medical Journal: “Is it time to nationalise the pharmaceutical industry?” with a resounding “yes!”
It is easy to imagine that calls such as these will multiply, in the Coronavirus epidemic. In her contribution, Mazzucato writes about the misalignment between the pharmaceutical industry (that prioritizes “blockbuster drugs”) and real public health needs.
An answer to Mazzucato (who writes together with her colleague Henry Lishi Li) is provided by Ara Darzi, a former Health Minister with the Labour Party and the director of the Institute of Global Health Innovation at Imperial College London.
The profit driven pharmaceutical industry is the worst system for discovering new drugs—apart from all of the others. This is a familiar trope, but it contains an important truth. There are downsides to any system. The challenge is to manage them.
Over the past 50 years, big pharma has delivered transformative improvements in global health. That is incontestable. The eradication of smallpox, the discovery of HIV drugs, the introduction of monoclonal antibodies: these three alone have saved millions of lives. The UK’s long history of drug discovery and development is the envy of the developed world. The life sciences industry employs 140 000 people in one of the most productive sectors of the economy.
Drug companies do make big profits, but these are necessary to fund the enormous costs of developing new medicines.
I find this persuasive and Darzi’s reply well worth reading.
One point Mazzucato makes may have some merit: “patents are often abused, being too upstream, wide, and strong, and high prices can persist even as generic competition kicks in, as a result of occasional cases of inefficient competition”. Yet I don’t quite understand why and how direct government intervention (i.e. the establishment of a government-owned pharmaceutical company) could solve this problem, which looks to me a normative and regulatory one.