Solving the drug price crisis

The mounting U.S. drug price crisis can be contained and eventually reversed by separating drug discovery from drug marketing and by establishing a non-profit company to oversee funding for new medicines, according to two MIT experts on the pharmaceutical industry. Stan Finkelstein, M.D., senior research scientist in MIT's Engineering Systems Division, and Peter Temin, Elisha Gray II Professor of Economics, present their research and detail their proposal in their new book, "Reasonable Rx: Solving the Drug Price Crisis," published by Financial Times Press.

Finkelstein and Temin address immediate national problems--the rising cost of available medicines, the high cost of innovation and the 'blockbuster' method of selecting drugs for development--and predict worsening new ones, unless bold steps are taken.

"Drug prices in the United States are higher than anywhere else in the world. Right now, the revenues from those drugs finance research and development of new drugs. We propose to reduce prices, not at the expense of innovation, but by changing the way innovation is financed," said Temin, also the author of "Taking Your Medicine: Drug Regulation in the US."

"Nationally, if we keep the current structure, in 50 years only hedge fund managers will be able to afford prescription drugs. Drug development will focus on therapies for those small groups of people who can pay a thousand dollars a pill. With income distribution widening and insurance carriers already refusing some coverage, this would be a disaster," said Temin.

"Prescription drugs have been left out of previous efforts to reform the delivery of health care. New initiatives to expand coverage must include a plan to reduce the high cost of drugs," Finkelstein added.

The book, which draws on the researchers' expertise in the realms of medicine and economics, proposes eliminating the linkage between drug prices and the cost of drug discovery while financing innovation and addressing the needs of society.

Their first bold step is conceptual, recognizing that we all have a critical stake in the products of pharmaceutical research.

Next, drawing on recent history, they propose dividing drug companies into drug discovery/development firms and drug marketing/distribution firms, just as electric utility firms were separated into generation and distribution companies in the 1990s.

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