Thursday, June 14, 2018

Basic Cancer Research Funding: Don’t Forget Pharma

The New Jersey Star-Ledger ran a guest column by Phyllis Salowe-Kaye, the executive director of the political activist group New Jersey Citizen Action, titled “N.J. needs to fund critical research.” (The piece ran on May 13, 2018. As of this writing, it has not been published online.)

Salowe-Kaye opens her article with:

Four years ago, I shared my story about how our family, like nearly every other family in New Jersey, has been touched by cancer. My mother had lung cancer, my father had bladder cancer, and three of my four grandparents died of cancer. My husband of over 40 years has leukemia.

In 1985, I was diagnosed with a rare form of cancer usually found in the extremities of black males over 50. I was a 38-year-old white woman, and the malignant fibro sarcoma was growing in my head. It still is. And then in 1998, I got breast cancer from a completely different tumor.

So in our house, we definitely care about cancer research. But we’re not unique, as this issue is personal for everyone and there are thousands of stories that can be told.

She then goes on to complain about state government cuts to funding for the New Jersey Commission for Cancer Research (NJCCR). Former governor Chris Christie had previously cut $10 million, subsequently restored. But current governor Phil Murphy cut state funding altogether.

Salowe-Kaye’s article coincided with President Trump’s announcement of new federal policies designed to bring down prescription drug prices. (See The Trump Plan To Reduce Prescription Drug Prices Will Have A Major Impact and President Trump's Plan to Lower Drug Prices Spares Pharma Industry for different takes on the plan.) Trump had previously smeared the pharmaceutical industry as “getting away with murder” and called for federal price controls on drugs masquerading as “direct price negotiations between Medicare and pharmaceutical companies.”

If I could leave a comment on the article, this is what I would have said:

Anyone concerned about basic cancer research funding should be very concerned about the pharma-bashing going on in Washington. As Ayn Rand has observed, “

The professional businessman is the field agent of the army whose lieutenant-commander-in-chief is the scientist. The businessman carries scientific discoveries from the laboratory of the inventor to industrial plants, and transforms them into material products that fill men’s physical needs and expand the comfort of men’s existence.

The pharmaceutical/biotechnology companies are the field agents of the cancer research scientists. Basic research is a vital starting point, but in and of itself does nothing for cancer patients. The pharma companies do the years-long investment, risk-taking, and work to transform the research into real cancer treatments. Remember that the Scientific Revolution led by Isaac Newton didn’t begin to yield benefits to consumers until the rise of the entrepreneurial businessman under capitalism a century later.

The threat of price controls coming to America, as well as damaging patent attacks, threaten these companies’ ability to fund their vital work. Unlike government grants, private companies must get their funding from prior products sold in the voluntary market. They can’t simply seize it through taxes. Problems in the pricing system exist, to be sure--thanks to all of the market infringements imposed by the regulatory welfare state (such as the existence of government programs like Medicare, which drives a wedge between the producers of medical products and the consumers, thus short-circuiting the crucial function of free markets). But the worst “solution” is to blame the pharma companies, especially in view of the price controls imposed in most other countries.

The pharma companies have a moral right to price their products, and take advantage of their limited patent protection, according to their own judgement. As observed, we’re all touched by cancer. At 69 years, I’ve had my share of personal encounters with cancer. We just lost a close friend after a 3-month battle. As such, I believe anyone concerned with basic research funding should be doubly concerned about the vital link between this research knowledge and the patients--the pharmaceutical,biotech companies--and the growing political attacks on this vital industry.


On the issue of allowing Medicare to “directly negotiate drug prices,” the idea is a sham. Medicare is a coercive monopsony. A monopsony is the buyer's equivalent of a monopoly. Medicare, having taken over the market for drugs for the senior market, has a dominance not achievable in a free market., It’s enormous buying power was achieved at the point of a gun, via its taxing powers and forced conscription of every American into the program. Having commandeered its enormous monopsony power, it is disingenuous, to be polite, to claim that you can have genuine negotiations between Medicare and private companies.

In effect, Medicare would be able to dictate prices. Allowing “direct negotiations” is back-door price controls, an immoral and economically destructive abuse of government power. True, private companies can say no if Medicare demands too low of a price. But then, where would the companies sell their products, given Medicare’s takeover of such a large segment of the drug-makers’ market? What repercussions would be forthcoming from other powerful government agencies, such as the antitrust, FDA, or IRS branches of government--not to mention the wrath of business-hating political statists in Washington--in reprisal for saying “no” to Medicare’s pricing demands? It would be like “negotiating” with a Mafia boss.

Related Reading:

On Mylan’s EpiPen Pricing Controversy

Merck- Villain or Victim?

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