Do We Need State-Run Pharmaceutical Companies?

A says that perhaps the answer to the dilemma of getting generic medicines approved for new uses is some kind of state-run firm:

Since you tend to espouse some left-field ideas on occasion, here’s one: how about start a government-operated pharmaceutical firm precisely for that purpose: i.e. produce cheap drugs for diseases and treatment regimes that aren’t patentable and are deemed unprofitable by big pharma? The infrastructure is already there (think the vast R&D funding that NIH etc gets) and clearly the moral imperative is there (this is especially true for third world diseases — but that’s wholly different problem)… I’m no economist (only a biochem grad student), but presumably this is a win-win for gov’t — it’ll reduce health costs in the medium/long term and should pay for itself… I mean this happens for other (natural) resources, why not make it for pharmaceuticals as well?

I always hesitate to argue that improved health care will “reduce health costs.” It’s always quite possible that developing some new and better way to prevent breast cancer will lead people to develop even more expensive diseases over the course of their lifetime. Developing cost effective medical treatments is good, because it helps improve people’s lives. Whether or not it actually saves money sort of just depends. At any rate, I don’t have an objection in principle to this idea but I imagine it’d be hard to make it work. The NIH is very good at what it does, but this isn’t actually what the NIH does. Building effective government agencies from scratch is a challenging task. It’s easy to say as a pundit that the government should set up something like this and make it work, but you’d need to somehow heavily recruit people with appropriate industry experience who were also public spirited and not just exploiting conflicts of interest.

In general, I think the most promising avenue is to try to shift the monetary awards away from patents and toward prizes as espoused by Senator Bernie Sanders (D-VT) and Dean Baker. That’s not a tailored solution to this particular problem, but it would mitigate a lot of what’s wrong with the current system while keeping in place the fundamental division of labor between basic research and operational drug creation that works pretty well.