Palfreman is the producer of FRONTLINE's "The Other Drug War" and spent eight months researching and reporting on the high cost of prescription drugs for Americans. In this article he offers his reflections on the powerful and closed pharmaceutical industry and weighs the five most common arguments heard against it.

+ Argument 2. Profiting from public research

The fact that Americans pay the highest drug prices in the world is doubly unfair, say critics, because drug companies base many of their breakthrough drugs on discoveries made by university-based medical researchers, Because this research is financed by the US tax payer, critics say, the public is paying twice.

Evaluating this argument:

Are the drug companies simply acquiring innovative science from publicly funded researchers rather than doing their own drug discovery, as the critics charge? There is no doubt that the pharmaceutical industry is a net purchaser of intellectual property. While drug companies do their own basic research, many novel ideas for new drug targets for important diseases such as AIDS and cancers come from academia and also from biotech companies. There are several much-cited examples where academia appears to have done most of the heavy lifting and even started clinical research. For example, NCI spent 15 years and $32 million of taxpayer's money developing the drug Taxol for breast cancer, a drug which later made Bristol Myers billions.

Over and above such examples, critics argue that the industry's talk of innovation is something of a fraud. Much of what the drug industry in actual fact does is not "invention" but translation of basic research done in academia.

There is some truth to this viewpoint. Drug development cannot proceed faster than the state of scientific knowledge and most of this basic research is publicly funded. Without the myriad discoveries of molecular biology, for example, which emerged from academic laboratories over the past 30 years, the drug companies would not even be able to contemplate drugs for Alzheimer's and diabetes.

But the industry contends that this is not the whole story. Without its input, countless brilliant scientific discoveries would be gathering dust in scientific journals.

So how exactly are scientific ideas turned into marketable drugs? In short, through a long, and expensive, process of trial and error. The process of zeroing in on a new molecule that is both active and safe is extraordinarily tedious, mechanical and joyless. It is highly organized and systematic, it takes a long time and, according to the industry scientists, nearly always ends in failure.

Inside Merck and Lilly, I observed robotic machines toil 24 hours a day testing molecules in test tube assays. Tens of thousands of molecules, I was told, must be screened to yield just one good candidate worth testing in animals. Only one out of 50 drugs on average pass animal toxicity tests and move on to clinical trials in humans. For every five drugs entering human clinical trials, only one makes it through. And of every ten drugs that receive eventual FDA approval, only three are profitable. All in all, it's a pretty dismal picture. According to Merck's Tom Saltzman, "there are excellent scientists at Merck who can pass their entire career without being associated with a drug that makes it to market." But, fortunately for Merck, every so often they hit a winner; a drug that improves human health and makes the company a lot of money.

Is this view a little self-serving? In search of an impartial view, I looked for someone who had worked both in academia and in the drug industry. Lee Rosenberg is now Head of Biochemistry at Princeton, but once he was Head of R&D for Squibb. According to Rosenberg, drug development is not for the softhearted. "One day you're convinced that a molecule is going to be a new and effective treatment for depression. And the next day you find out that it produces modest liver injury in your healthy volunteers, and so that's the end of it. And you go through this again and again."

Rosenberg fully accepted that the drug industry couldn't succeed without a healthy publicly funded basic research system. But I asked him about the converse. Could Princeton or Harvard turn scientific discoveries into commercial drugs by themselves?

Rosenberg found the idea vaguely ridiculous. "Academia doesn't develop drugs, because the culture of academia is not oriented toward the teamwork that you need to develop drugs. People in academia are interested in knowledge."

To this I would add that academia is unlikely to play a major role developing drugs because most basic scientists would find it far too boring.

So this issue, in my view, is a split decision. The industry does exploit publicly funded fundamental research. As to whether you call the industry contribution "innovation" or "development," I'm not sure it matters. Currently, a private drug industry seems to be the only entity capable of turning ideas into drugs.

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posted june 19, 2003; last updated july 8, 2003

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