(Roughly) Daily

Who benefits from the commercial biomedical research and development (R&D)? Patients-consumers and investors-shareholders have traditionally been viewed as two distinct groups with conflicting interests: shareholders seek maximum profits, patients – maximum clinical benefit. However, what happens when patients are the shareholders?…

Adding investments by governmentally-mandated retirement schemes, central and promotional banks, and sovereign wealth funds to tax-derived governmental financing shows that the majority of biomedical R&D funding is public in origin. Despite this, even in the high-income countries patients can be denied access to effective treatments due to their high cost. Since these costs are set by the drug development firms that are owned in substantial part by the retirement accounts of said patients, the complex financial architecture of biomedical R&D may be inconsistent with the objectives of the ultimate beneficiaries…

It has been estimated that of the total $265 billion spent annually on biomedical research worldwide, over a third – $103 billion comes from public sources. Nevertheless, as public input capital is allocated predominantly into early stage research, nearly all output – medicines – is ultimately brought to the market by private firms. Importantly, these firms are not independent agents. They have owners-shareholders to report to. Until the end of the previous century the major type of owners-shareholders were individual households. At the turn of the millennium, however, they have been displaced by institutional investors, the largest of which are public retirements schemes or quasi-public funds, such as occupational pensions.

First, government money underwrites the basic R&D that goes into drug discovery and development, then public pension monies fund the private companies that bring those drugs to market. As the private companies are solving for highest profits, as opposed to optimal public health, those drugs are often priced out of the reach of the very people whose pension contributions funded their development. Drugs “priced out of reach” is certainly not a new phenomenon; AIDS drugs (to take one example) were priced by Western pharma companies at prices that rendered them inaccessible to most citizens of low-income countries in Africa and Asia. The pensioners in wealthy nations were, effectively, living off of the misery of those in poorer companies.

But the dynamic has continued, deepened– and come home to roost. Now patients in high-income countries are denied access to effective treatments due to their high cost, while these costs are being set by the drug development firms, owned in substantial part by the retirement accounts of those same patients, and benefiting from direct and indirect governmental support.

Investing in one’s own misery– the painful irony of pharma funding: “Pension and state funds dominating biomedical R&D investment: fiduciary duty and public health.”

[Image above: source]

* Ben Elton, Meltdown

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As we untangle unintended consequences, we might send healthy birthday greetings to Charles Value Chapin; he was born on this date in 1856. A physician and epidemiologist, he was a pioneer in American public health. He co-founded in first bacteriological laboratory in the U.S. (in 1888) in Providence, were he was Superintendent of Health– a position he held for 48 years. In 1910, he established Providence City Hospital where infectious disease carriers could be isolated under aseptic nursing conditions; his success inspired similar health control measures throughout the U.S. A professor (at Brown) and prolific writer, his impact on health policy and practice was so broad that he was hailed as “the Dean of City Public Health Officials.”

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