The Necropolitan Sentinel

Is the drug industry starting to hollow out? Is the rate of innovation declining? Megan McArdle raises the alarm in The Atlantic:

Worried about me-too drugs? The medicalization of human variability in order to medicate them into compliance and/or sell them quack cures of dubious value? Ever-rising prices for brand name drugs pushing seniors into penury?

Well, you can breathe a (slight) sigh of relief. For the first time ever last year, the global drug industry cut its R&D spending. The trend is expected to continue, at least in the near term.

If you’ll excuse me, the rest of us will be over here in the corner, freaking out a little bit.

It’s tempting, of course, to blame this on Obamacare, and I certainly wouldn’t rule out the possibility that this is at least part of the explanation. But there’s no evidence that this is the case, other than the crude time correlation. Derek Lowe suggests that the answer is simpler: the return to R&D spending in the industry has been falling for a long time, as many therapeutic areas are crowded with generics (or soon-to-be generics) that already do a very good job. The remaining areas (cancer, central nervous system, obesity) turn out to be very tough, and there’s no guarantee that we’ll ever find pharmaceutical interventions that do what we want.

There’s an interesting discussion to be had about whether the market outcome differs from the socially optimal outcome–whether falling returns to pharmaceutical R&D mean that we should be putting more resources into it, or fewer. But I’ll leave that aside for the nonce, because I’m not sure what I think, and talk about what this means for the rest of the health care system.

You might initially think that this is good news for cost control–the expensive brand name drugs will all go generic, and we’ll save a bunch of money on prescription drugs. And indeed, this is absolutely true. But this will have repercussions for other areas of health care, and those repercussions are not good. While some drugs are simply an added expense (think chemotherapy prolonging the lives of people who would otherwise have died sooner), many of the real blockbusters substitute for labor-intensive treatment. Statins instead of cardiac catheterizations or coronary bypasses. Avandia instead of amputations. Hydrochlorothiazide instead of nursing home care for your massive stroke.

We’ll still have all those drugs, of course. But with less R&D, we’ll presumably see fewer pharmaceutical substitutes for the expensive conditions we still spend a lot of money treating, like Alzheimer’s. Which means that health care expenses might actually rise faster than we expect.

Read the whole thing; she’s got graphs, too. It may be that the drug companies are, in a certain sense, about to go into the weeds and slow down the amazing progress we’ve made in the past few decades. Which is a depressing thought indeed.

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