It’s easy to hate Big Pharma. Drug prices are absurdly high compared to the rest of the world. Executive salaries can be stomach-churning. Lobbyists treat Washington like it’s their own personal client state. To any sentient observer, it appears the biomedical industry has gotten greedy.
Yet as we sit here in the throes of a global pandemic, we must confront an uncomfortable truth: A vaccine is the only real hope for beating the coronavirus, and only the pharmaceutical industry has the human capital and physical infrastructure to create one. The difference between waiting four months and four years for a vaccine could be millions of lives and trillions of dollars.
The cost of producing a vaccine, in other words, is priceless. But expecting Big Pharma to deliver a cure means acknowledging how Big Pharma works. The economic logic that drives up drug prices and fuels constant political outrage also makes rapid drug development possible. They’re two sides of the same coin.
Multiple studies show that you can only trim pharmaceutical profits so much before innovation slows, which means fewer new medicines and diminished capacity to solve problems such as SARS-CoV-2 (the virus that causes the COVID-19 disease). The National Bureau of Economic Research has found, for instance, that cutting drug prices in the U.S. by 40 to 50 percent would lead to 30 to 60 percent fewer R&D projects. Another study found that Germany lost 23,000 pharma jobs after it implemented price controls in the 1990s, and Germany slipped from first to third place among the continent’s top drug innovators. As the nonpartisan Information Technology and Innovation Foundation concluded in a white paper last year, “For the issue of pharmaceutical drugs, an overwhelming body of academic research shows that price controls will significantly restrict the number of new drugs in the future.” Every decision involves tradeoffs.
Nobody doubts that inequality is baked into this incentive structure—that the same profit motive that makes the U.S. pharmaceutical industry the best in the world also leads to unjust outcomes, especially for the poor. Nor is it a secret that American R&D effectively subsidizes Europe. The question is whether that system can be reformed in a way that doesn’t endanger innovation.
Sally Susman, Pfizer’s head of corporate affairs, recently came on my podcast to talk about Pfizer’s efforts to develop a vaccine for COVID-19. She confidently said that a vaccine could be available by Q4 of this year. But even attempting that has required Pfizer to shift a great number of resources toward new research areas. If they succeed, they’ll have to radically transform their manufacturing process to produce the vaccine.
Let’s be clear—drug makers are not saints. If Pfizer develops an effective vaccine, they’ll benefit from it financially and reputationally.”
Let’s be clear—drug makers are not saints. If Pfizer develops an effective vaccine, they’ll benefit from it financially and reputationally, as they should. But they’re only in a position to dedicate their resources to creating a vaccine because they already have an immense, full-scale infrastructure of scientists, researchers, factories, labs, protocols, lawyers, and everything in between. That infrastructure is costly. It exists because some nongeneric prescription drugs are very expensive. Those revenues don’t just pay executive salaries—they also fund the 9 out of 10 drug trials that fail.
Demagoguery is easy. I spent 15 years working directly in government and politics before becoming a venture capitalist. I know a lot about demagoguery firsthand because I’ve engaged in it countless times. But if half the policies I called for in press releases had ever been implemented, we’d be years away from a vaccine right now, not (hopefully) months. We’d lose millions of lives, instead of hundreds of thousands. The economic cost to society would last for generations.
Some may argue that we should nationalize the drug companies and have government handle all research, development, drug trials, and manufacturing. I’m not convinced. In my four years as deputy governor of Illinois, in my time at New York’s city hall under Mike Bloomberg, and in my time in the U.S. Senate working for Chuck Schumer, I developed a true appreciation for the things government does well (national defense, public health, redistributing resources, emergency management, and law enforcement, among others) and the things it does poorly (almost everything else). Government-led drug manufacturing would be about as well funded and administered as most public housing, school systems, and public hospitals. In the face of a pandemic, that’s not a risk I’m willing to take.
None of this excuses bad behavior by Big Pharma or any industry when they do something wrong. But pretending that any industry can withstand any amount of regulation and still be able to do what we need them to do, when we need them to do it, is worse than wrong. It’s intellectually dishonest. And right now, dishonesty is the last thing we can afford.
Bradley Tusk is a venture capitalist, writer, philanthropist, and political strategist. Neither Tusk Ventures nor Bradley Tusk have any investments in pharmaceuticals or biotech. Tusk does own a digital archive company that has consulted with Pfizer on document storage issues related to Pfizer’s headquarters relocation.