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InsiderOnline Blog: March 2013

Pharmaceuticals Are Curing AIDS Today, but Will the Innovation Keep Coming?

“A Mississippi baby born with the AIDS virus appears to have been cured after being treated with an aggressive regimen of drugs just after her birth 2½ years ago, an unusual case that could trigger changes in care for hundreds of thousands of babies born globally each year with HIV,” reports Ron Winslow: “The new case was discovered after the baby girl’s mother stopped treatment on her, and doctors realized that the virus was undetectable even without drugs, which HIV patients normally must take for the rest of their lives.” [Wall Street Journal, March 3]

This breakthrough should be a “teaching-learning moment” for critics of the pharmaceutical industry, says Paul Howard:

After HIV antivirals lose patent protection, of course they are cheap permanently, meaning that a relatively few years of high prices leads to enormous social gains down the road that aren't captured by the manufacturers. Indeed, in a 2005 NBER paper researchers at the University of Chicago estimated that manufacturers only capture about 5 percent of the social value of HIV medicines. The rest goes to patients, current and future, who benefit from the medicines. […]

[P]olicymakers who advocate plans to lower drug prices now – through price controls or other strategies – ignore the dynamic effects of drug pricing on future innovations, and the enormous gains to future patients that accrue from innovation. Price controls assume a static stock of innovations, and push costs much closer to the actual marginal cost – the cost to manufacture each pill – of producing those medicines today.

Such policies are pennywise, but pound foolish. As today’s announcement shows, gains from HIV antiretrovirals continue to accrue to patients decades after the original discovery. Medical innovation is dynamic, and as economists know well, very responsive to pricing signals. Price controls would diminish the number of future innovations, leaving us with fewer new medicines – and more lost lives. [Medical Progress Today, March 4]

Posted on 03/07/13 08:48 PM by Alex Adrianson

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