Thursday, October 05, 2006


Whose Ox to Gore?

National Public Radio (NPR) Marketplace featured a report today, with a very scant review of an Congressional Budget Office (CBO) report, a gratuitous reference to Brad Delong (super, the folks at NPR read blogs, at least if they’re “reality-based”), and a curiously one-sided attack on Pharmaceutical money that gets spent in Washington.

NPR reported neither the name of the report, nor provided an online link, but it’s this one, found via DeLong and Greg Mankiw.

I suppose it’s predictable that a mass consumption outlet like NPR’s Marketplace would probably want to skirt or completely ignore the complex economics issues that fill the CBO’s report, but turning this piece into an attack ad against Pharmaceuticals seems too much, even for NPR.

Marketplace Economics Correspondent Chris Farrell explains the CBO report in one paragraph:

Their bottom line is, there's a reason why the industry charges high prices. Profitability is exaggerated. Profitability is not the measure of whether or not this industry is charging too much for drugs, too little, whether as a society we're spending too much on drugs or too little.

Perhaps understandable that an anti-marketeer wouldn’t want to dwell on that. Indeed, Farrell wastes no time in the interview shifting focus from profits to political malfeasance, throwing in all the anti-free market theology we’ve long grown accustomed to on the left:

The amounts of money that big pharma spends lobbying to get the rules in its favor — whether it's an international trade agreement, whether it's to prevent cheaper drugs from Canada being re-imported into the country — that's where we should get upset. Limit the competition that are negotiated in Washington in return for campaign contributions and other forms of contribution. That is wrong, that we should be upset about.

Farrell makes another half-hearted attempt to characterize all this political influence as actually counter competitive, “there's some fascinating things going on with the industry and I think to a large extent, we should be applauding what's going on.” Of course, we can’t evaluate how fascinating those things are, as Farrell neglects to mention them or explain why we should applaud. That would get in the way of his attack:

You can still say they're taking an arm and a leg, maybe it's just not an arm and two legs. But it's still incredibly profitable.

Damning with faint maim, I suppose. That arm and leg the Drug Companies charge?

They send your arm and leg off to Washington.

Let’s play a little thought experiment, courtesy of Farrell’s own Economics guru, DeLong, who frames his concerns thusly:

Greg [Mankiw] would say (and I would agree) that high average pharmaceutical company profits are not the thing we should be looking at to determine whether drug prices are too high or too low, or whether we as a society are investing too much or too little in new drugs, or whether we are providing too much or too little in the way of intellectual property protection.

What should we look at? That's a harder question.

But there is one rule of thumb that is, I think, reliable: when (as under the current administration) the laws Congress passes are in large part drafted by the lobbyists of PhRMA, then there is a very strong presumption that the members of PhRMA:

1. Enjoy too much intellectual property protection, and

2. Able to set their prices of drugs too high.

But I have no clue as to whether we are collectively investing too much or too little.

Is there a national newsreporter who covers a Washington beat who doesn’t already know, that lobbyists write the overwhelming majority of legislation in Washington, across all industries and special interest groups? Why pick on the Pharmaceuticals, in particular, especially in the context of a piece that comments on a CBO report?

Why, it’s a matter of who’s ox is being gored, of course.

Sure, Pharmaceuticals have donated to politicians, and while I’m sure many Dems are beholden, the GOP has had the advantage. And there’s money to be had, for sure.

But think about the nemesis of Big Drug Companies: Trial Lawyers, Litigators, and other Class Action Extortionists. Pharmaceuticals will tell you the biggest threat to profitability is liability cases where any isolated occurrences of adverse events within those taking drugs can be grossly exploited by Class Action litigants, seeking obscene wrongly injury or death claims for clients, for whom the traceability for ultimate causation is dubious, non-existent, or even fraudulent.

I speak as a victim of the unintended consequence of the overly litigious approach to pharmaceuticals, a patient who saw great benefit from Vioxx, and was deprived its benefits because of what are largely spurious legal claims. Call me a statistical outlier if you want, but I think I paid the price for somebody else’s greed, and it wasn’t the owner of Pharmaceutical Company stock. It was a Lawyer.

Farrell is all vexed about Drug Industry money in Washington? I’m more dismayed about the Lawyers and law firm lobbyists who keep blocking tort reform. But most of their money goes to the Democrats.

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