In a much-praised piece, Jon Cohn argues that the NIH, not commercial incentives, is the key to American medical innovation. He writes:
The great breakthroughs in the history of medicine, from the development of the polio vaccine to the identification of cancer-killing agents, did not take place because a for-profit company saw an opportunity and invested heavily in research. They happened because of scientists toiling in academic settings. "The nice thing about people like me in universities is that the great majority are not motivated by profit," says Cynthia Kenyon, a renowned cancer researcher at the University of California at San Francisco. "If we were, we wouldn’t be here." And, while the United States may be the world leader in this sort of research, that’s probably not–as critics of universal coverage frequently claim–because of our private insurance system. If anything, it’s because of the federal government.
The single biggest source of medical research funding, not just in the United States but in the entire world, is the National Institutes of Health (NIH): Last year, it spent more than $28 billion on research, accounting for about one-third of the total dollars spent on medical research and development in this country (and half the money spent at universities).
A few points should be made:
1. The strength of American medical innovation stems from the combination between the NIH, private philanthropy, and commercial incentives. Cohn has lots of (just) praise for the NIH, as basic research is often a public good. But he doesn’t say enough about philanthropy, and he confuses pro-NIH evidence with showing the superfluity of commercial incentives.
2. Send some flowers to Cynthia Kenyon, whom I could not personally quote in this manner with a straight face. You would never know that universities are profiting from drugs, and patenting them, at an unprecedented rate. Universities are also forming partnerships with drug companies at an unprecedented rate.
3. Companies must work very hard to translate basic research into usable applied form and the U.S. is a clear world leader in this regard. A drug idea is not the same as a drug. Cohn at times admits this, but is he really denying that the supply curve here slopes upward with regard to expected profits? You can cite all kind of "mixed" factors about commercial incentives but at the end of the day that is the basic question.
4. Statins, Prozac, and anti-AIDS drugs are notable examples of #1. Or try this list of Merck products. Merck and Pfizer are much more than simply marketing or doctor bribery machines, although admittedly they are that too.
5. The standard arguments against commercial "me-too" drugs are considerably overrated.
6. FDA restrictions are at least partly responsible for the costly, overly concentrated, and blockbuster-oriented nature of U.S. and other pharmaceutical companies. Tight regulations discriminate against the small company and the small idea. Even if you think tight regulations are a good idea, don’t blame these tendencies on the big bad corporations.
7. It is odd for Cohn to cite me as his libertarian foil, since the referenced piece very clearly cites the NIH as a critical factor behind American medical innovation. This odd citation again represents the desire to replace "anti-commercial" arguments with an easier-to-make "pro-NIH" case.
9. The NIH works as well as it does because the money is mostly protected from Congress. It is not a success which can easily be replicated. The more money is at stake, the more Congress wants to influence allocation. We should guard this feature of the system jealously and try to learn from it. If we can.
The bottom line: Arguments for the NIH are not arguments against the importance of commercial incentives for medical innovation.
Addendum: Read Clive Crook too.
Maybe I’m just simple, but I’d prefer that public institutions (with majority pubic funding) put their innovations in the public domain. If anyone wants to develop intellectual property, let them do that with a majority of their funding from the private sector.
I fear that ‘public goods’ are locked under patents and only sometimes sold (what percentage sit unlicensed?)
When they are licensed, they are very much less ‘public goods.’
“The nice thing about people like me in universities is that the great majority are not motivated by profit,”
Perhaps not, but the $150,000/year plus salaries and discretionary funds to travel to conferences throughout the world don’t hurt.
The phrase “single biggest source of medical research funding”, in reference to the NIH, is potentially misleading. Pharmaceutical companies spend about twice as much on R&D as does the NIH.
If Cynthia Kenyon were correct, that would be great. We could halve all their salaries and hire twice as many researchers and they’d work just as hard and be just as easy to recruit.
Two facts:
1. NIH is good. NIH is government. You libertarians stop whining and learn from it.
2. Cynthia Kenyon knows better than anyone reading this where she prefers to work (academia or industry). The duties and reward structures are different between the two. I get a kick out of libertarians telling others they are wrong about personal preferences.
And one opinion:
1. Cynthia Kenyon would probably find Tyler’s flowers patronizing and ask him to shove them up his a–.
Of course, how many of the drugs produced are of marginal or no benefit? How much research is faked? After having practiced medicine and done research, I would suggest a lot. There are a lot of rent-seeking losses in the private market, there are huge incentives to treat rather than cure, and, arguably, the commercialization of university research may have contributed to the slowdown in the pharma sector just as much, since profit incentives are quite different than those involved in research.
“Of course, how many of the drugs produced are of marginal or no benefit? ”
Please give examples. Having taken multiple medicines (many different ones, as new better ones have come out over the years) every day for 16 years, I have no idea what you mean.
In many science/engineering fields including mine, new academics make more in salary than new industry scientists (community colleges and small/medium liberal arts schools excluded). The same is true of experienced academicians vs. experienced non-managerial industry scientists. They also have more potential to earn profits from their inventions than do industry scientists whose contributions are essentially owned 100% by their employer. True, academics work much longer hours, so the discrepancy doesn’t surprise me, but I would argue just the opposite of Cohn, that the more money-driven and entrepreneurial science Ph.D.s actually now choose academia over industry. This certainly jives with what I saw my student colleagues choose as they found jobs.
Mr. Cohn, Ms. Kenyon, please may I introduce you to Mr. Venter….
Crud, I meant both a result and a means.
Phillipe Aghion and coauthors have an excellent paper on this subject: “Academic Freedom, Private-Sector Focus, and the Process of Innovation” (available on his Harvard webpage).
Their model turns on the fact that academics are free to research more-or-less whatever they please (which is great for early stage research) but that private sector firms can direct scientists towards higher-payoff activities (and pay them extra to compensate for the reduced freedom). The bottom line? There comes a point in the development process where it’s better for private firms to pick up the baton.
Ken–
I apologize. I should not have used the term “libertarian” in my message. I forgot the cardinal rule: Don’t attribute characteristics to or belief in an -ism that you are not yourself committed to.
I’m honestly reassured that you and others who believe as you recognize that some government programs are beneficial. This isn’t always clear from the timbre of the comments on this site.
Speaking of academics, it’s odd to see such an overlap between the people who believe academic bioscientists are selfless do-gooders and the people who believe academic economists are libertarian ideologues who only rarely and surpisingly give credit to the government.
My experience is that the Tylers and the Cynthias of the world have a similar mix of motivations for improving the world, truth-seeking, and income-seeking. But, I’m still waiting for Cynthia to demonstrate her altruism by sending us some restaurant recommendations.
Ned wrote: “Biomedical innovation is one of the few bright spots in the American economy – it’s one industry that doesn’t seem to be exporting itself to China.”
True for now, kind of. But wait and see what happens when the stem cell breakthrough finally comes that enables real therapeutic usage. The US is (by some estimates) about 10-12 years behind other research powerhouses like China and Europe because of restrictions surrounding use of federal funds for research involving ESC’s. Private research foundations are trying to pick up the slack here, so will be interesting to see if we can catch up.
LP wrote…
The US is (by some estimates) about 10-12 years behind other research powerhouses like China and Europe because of restrictions surrounding use of federal funds for research involving ESC’s.
How is that even possible, given that Bush only cut off fed funding six years ago? Or are you suggesting that US scientists were ignoring embryonic stem cell research for 4-6 years during the Clinton administration?
(I just love internet statistics)
kwo,
I phrased it wrong. What I’ve actually heard are industry experts predicting that if all stem cell research restrictions were lifted tomorrow, it would take the US research community 10-12 years to catch up to research organizations in Europe and China. This is not quite the same thing, sorry to mislead. And I don’t vouch for the accuracy of these expert opinions, but am very interested to see what happens.
Of course, as I mention here, there is good reason to doubt that medical innovation is a significant factor in population health.
The question isn’t whether government programs can be beneficial, of course they can. It is a question of opportunity costs. Are the benefits provided by government the most efficient use of the tax payers money, and could the private sector provide those same benefits. That is where most libertarians question the utility of government.
Whoa. This is an atrocious argument about the NIH. The real question is would that money have been better allocated elsewhere — and did the benefits accrue because of the NIH or despite it? One could similarly say we gained jobs in the Clinton era because of the minimum wage but it would be a huge error.
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