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Drugs and Costs


Don Boudreaux posted an interesting blog entry at Cafe Hayek (forwarded to me by two different e-mailers who wanted a response) with a link to a New York Times article quoting Columbia economist Frank Lichtenberg as stating, "In general, the benefits of new drugs outweigh the costs by a substantial margin." Call me a little skeptical of this last statement (leaving aside the question of whether Lichtenberg's econometric analysis really supports such a conclusion and how relevant it is to the U.S. today).

There was a fascinating article in the Dec. 8, 2003 UK Independent on drug efficacy. It is now only available via paid access, so here are two passages (and a reprint):

For years, the drugs industry has grown fat on a myth - the false belief that all drugs will work on just about everybody...Yet it has been an open secret within the drugs industry that most drugs do not work for most patients, a secret that has now been publicly aired for the first time by Allen Roses, the head of genetics at GlaxoSmithKline, Britain's biggest drugs company....
But even when a drug has been approved in terms of safety and "efficacy" - whether it does what the label says it should do - few people realise just how poorly they perform in real life. Dr Roses cited a study published three years ago by Brian Spear, a senior scientist at Abbott Laboratories, a medical diagnostics company in Chicago, on the efficacy rates of a range of different drugs. It found that drugs vary enormously in terms of how well they work, with efficacy rates varying from as low as 25 per cent for cancer drugs to 80 per cent for painkillers. For many drugs, however, the efficacy rates hover around 50 per cent or lower, meaning that, for most people, these drugs just don't work. As Dr Roses puts it: "The vast majority of drugs - more than 90 per cent - only work in 30 or 50 per cent of the people."

Dale Steinreich is an economist and an Associated Scholar of the Mises Institute.

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