There are a number of myths about the pharmaceutical industry, both among its supporters and its critics. We will not be able to understand how to fix what is wrong, if we are mistaken about what is wrong.
The free market myth
The proponents of the PHRMA perspective and the free enterprise view think that the best defense of the pharmaceutical industry (PI) is the value of free market capitalism. But of course this is a myth; the PI is one of the most highly regulated industries in the US. Patent life is a government intervention, and prices are fixed. There is no competition anywhere near what Adam Smith had in mind. Extensive political lobbying of Congress and in elections is a reflection of the dependence of the PI on a highly regulated market. (Some relevant facts: some high level Bush administration officials are former PI executives; former politicians become leaders of PHRMA; the PI has the largest lobbying group in Washington DC - about 675 lobbyists; and 80% of political donations from the PI go to Republican politicians, who more strongly support current regulations than many Democrat). All this free market mythology is most clearly seen as nothing but rhetoric when one observes how closely the PI was involved in writing the Bush administration's Medicare bill, which added more regulations, produced higher profits, and was completely accepted by the PI without any apparent concern about what Adam Smith might say.
The drug price myth
The PI claims that high drug prices are meant to recover research costs. Yet most companies spend as much, if not more, on marketing drugs than on research. We think banks are wealthy, but they come after the PI in profit margins. According to critics, the average CEO of a pharmaceutical company makes a salary of $40-70 million, excluding stock options. The very high profit margins of the PI (and their popularity on Wall Street), the reality of price controls with government regulation, and the absence of any competition during patent life, also leads to the absence of any countervailing forces to limit drug prices. There would seem to be room for lower prices; the PI would survive.
The academic-pharmaceutical complex
Critics of the PI have also turned their guns on their colleagues in academia who have gotten cozy with the PI. Some claim that any academic who gets a dime from the PI is, ipso facto, biased. Some, like Marcia Angell (whose book I have reviewed in more detail elsewhere), even recommend that patients should ask about whether their doctors have any relationship with the PI, and should change doctors immediately if any such relationship exists.
Broadly, the claim is valid, in my view. Money can corrupt. However the narrow claim - that this is always, or even mostly, the case - is not true. A few years ago, a pharmaceutical company asked me to lecture at the national meeting of the American Psychiatric Association (APA); I reported the results of their drug correctly and straightforwardly, showing a small benefit that was not clinically meaningful. They never asked me to speak again. I took their honorarium. Why then did I not trump up their drug? Am I still biased given that I was financially compensated, even though what I said was critical of their drug?
Skeptical readers might say, okay, you gave us one example, and maybe there are even more; perhaps we will even grant that you are an exception. But most speakers are shills, or, at least, most speakers are influenced in some way to make the drugs look better, otherwise they would not receive continued income from the PI for future talks. This is logical. But the assumption here is that the relation between an academic speaker and the PI is always one-sided: the academic first finds, or is approached by, a company and then devises and gives lectures that promote its drug. There is another way: the academic can give lectures that stick with the realities, as best we understand them, and some pharmaceutical company or another may have some interest in sponsoring some of those lectures. Either way, the academic is compensated; one way he is biased; the other way, he is not.
Lack of innovation
Another claim made by critics like Marcia Angell is that there is no real innovation in the PI. New drugs that are breakthroughs are developed in academia or the NIH; the PI only produces me-too drugs to make profits, without really advancing the public health. The PI is like a hoary grandmother, living in the next room and paying no rent but getting all the benefits of our hard work. This view seems ignorant of the history of psychopharmacology, at least. The first antidepressants and antipsychotics were developed by the PI, not by academia. In fact, in the 1950s, academics were so psychoanalytic and antibiological that they had to be dragged, kicking and screaming, by the PI, into even considering the use of these drugs. The PI made the breakthrough in psychiatry, not the academic leaders. The me-too argument, nonetheless, has some merit; we really don't need the 16th serotonin reuptake inhibitor (SRI) and the 1523rd study on sexual dysfunction comparing one SRI and another. Part of this reality has to do with the fact that the PI is conservative; most of those large corporations, with billions of dollars at stake, are afraid to try new ideas. They use the same animal models that have always been used, and thus produce the same kinds of drugs that have been produced before, with tweaks. Yet perhaps this is more a problem of business strategy (entrepeneurship versus management), rather than ethics (more evidence of evil), a matter for business schools rather than newspaper exposes.
In part III I will discuss the profit motive in medicine and the pharmaceutical industry.