At the Freakonomics blog there is a fascinating “quorum” (four people answer the same question) about the drug industry. “What can you tell us — good or bad — that we don’t know about drug companies?” was the question. Three of the answers were bad things, one was a good thing — pretty predictable given who was asked. What interested me was how bad were the bad things (very bad) and how good was the good thing (barely good). The answers make the drug industry look very bad, in other words.
You are reading this because of my fear and dislike of pharmaceutical drugs. Long ago, I had trouble sleeping through the night. If I went to a doctor, I knew I would be given a prescription for a drug that would be ineffective (long-term) and dangerous (due to biases in the way drugs are tested). So I struck out on my own and via self-experimentation eventually found several solutions that did not involve drugs. (The first was to stop eating breakfast.) This is how I realized the power of self-experimentation to find unusual solutions to everyday problems.
Why does an industry entrusted with something so precious — our health — come across so badly? In Systems of Survival, Jane Jacobs pointed out two moral “syndromes” (sets of values): the commercial syndrome and the guardian syndrome. The commercial syndrome (e.g., be honest) was appropriate for businesses; the guardian syndrome (e.g., be loyal) was appropriate for governments. Why just two? Because there were two fundamental ways of making a living, Jacobs said: trading (business) or taking (government). She pointed out the trouble that arises when governments act like businesses or businesses act like governments. It is bad news, for example, when policemen are given ticket quotas. Quotas are a business tool.
I recently experienced the problem Jacobs pointed out when my scooter was towed by Avenue Tow Service (Berkeley, CA) — using power given them by the city government. They broke the windshield. No surprise they lied about it. Why should they bother telling the truth? Unlimited power is a government tool.
The drug industry is a much larger example of the same thing. What is trading? You trade voluntarily. The two parties are roughly equal in strength. What is taking? The powerful take from the weak. Although drug companies are businesses, they deal with people who are weak (sick) and have no other choice. So in essence, they take rather than trade. One of the Freakonomics examples of bad behavior was price gouging.
The federal government has given drug companies this power, just as the Berkeley city government gave Avenue Tow Service the power to tow my scooter. The federal government has done so because it has failed to effectively support research into non-drug solutions. (Norman Temple and I wrote about how almost all research money goes in the wrong direction.) This leaves the drug industry, like the company that towed my scooter, with a monopoly. Unlike a conventional monopoly (a single company) it is industry-wide. But the effects are the same — a business starts to take rather than trade. And they do things that, when exposed, make them look very bad.