[Editors] MIT: Rx for high drug prices

[Elizabeth Thomson]

MIT News Office
Massachusetts Institute of Technology
Room 11-400
77 Massachusetts Avenue
Cambridge, MA  02139-4307
Phone: 617-253-2700
http://web.mit.edu/newsoffice/www

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MIT: Rx for high drug prices

--New book presents a solution
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For Immediate Release
MONDAY, MAR. 17, 2008
Contact: Elizabeth A. Thomson, MIT News Office -- Phone: 617-258-5402  
-- Email: thomson at mit.edu

PHOTOS AVAILABLE

CAMBRIDGE, Mass.--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.

Following the utility model, Finkelstein and Temin propose  
establishing an independent, public, non-profit Drug Development  
Corporation (DDC), which would act as an intermediary between the two  
new industry segments - just as the electric grid acts as an  
intermediary between energy generators and distributors.

The DDC also would serve as a mechanism for prioritizing drugs for  
development, noted Finkelstein.

“It is a two-level program in which scientists and other experts  
would recommend to decision-makers which kinds of drugs to fund the  
most. This would insulate development decisions from the political  
winds,” he said.

Finkelstein and Temin's plan would also insulate drug development  
from the blockbuster mentality, which drives companies to invest in  
discovering a billion-dollar drug to offset their costs.

An example of the blockbuster mentality is developing a new drug for  
hypertension, one that varies only slightly from those already on the  
market, but that can bring in huge profits if aggressively marketed.

For Finkelstein, a physician, and Temin, an economist, societal needs  
for medicines are swiftly extending beyond national boundaries:  
Diseases affecting the developing world--afflicting people too poor  
to make drug development attractive for businesses--will soon affect  
health inside the United States.

“Global travel and climate change both require that U.S. drug  
development and innovation policy rethink the way drugs are  
developed, and for whom. Air travel, migrations, a global workforce-- 
all these mean unusual diseases could become usual here,” Temin noted.

Climate change also may affect drugs their proposed DDC would select  
for funding.

“Especially in the southern states, tropical diseases are likely to  
increase with global warming, and people will need treatments for  
them.  In our plan, the DDC would encourage research in advance of  
the market - and, we hope, in advance of disaster,” he said.

--END--

Written by Sarah H. Wright, MIT News Office