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February 04, 2007


Jake Briskman

Thanks for the great postings. This is an awesome blog.

Before addressing the merits of Prof. Epstein's claims regarding the stifling of innovation, his argument, that there should be less government intervention (citing that the government should not go as far as allowing negotiation or allowing the re-importation of pharmaceuticals) is inherently flawed.
In 2003, with the Medicare Modernization Act, Congress enacted 42 USC 1395w-111(i)(2) ( the ‘non-interference’ clause) prohibiting the secretary from negotiating on behalf of seniors. The Food, Drug and Cosmetics Act prohibits the parallel trading of pharmaceuticals into the US. Negotiation and trading are realities of free markets, but somehow it is argued that to allow this to happen is ‘government intervention,’ when the reality is that not allowing these things to happen is government intervention.

On the merits of the argument (which is basically: anything done to lower profits will stifle innovation) the problem is that this argument contains the underlying assumption that the pharmaceutical companies fiduciary duty is to the general population to produce innovative drugs and not to their stockholders to increase profits. Their fiduciary duty is in fact to their stockholders to increase the share price, and this is done by investing the lionshare of their money into drugs that treat chronic conditions that are not even necessarily an improvement over the drugs already on the market. This is done for obvious reasons.

I invite comments.

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