The ethics of alternative business models in the pharmaceutical industry

Hi all,

I’m Mark. I am a rising sophomore and though I am an undecided major, I have developed some key areas of academic interests since coming to Duke. I am interested in the economics of healthcare, in particular within a rural setting. In terms of economics, I am focused on the distribution and access to a healthcare system and how the level of access impacts the community from both social and health standpoints. I grew up the Appalachian region of north-east Tennessee and south-west Virginia. While growing up, I was able to witness first hand some of the issues surrounding access within the scope of the free health clinics periodically held in the region. While I have an interest in medicine and work experience in labs at both the Duke Medical Center and Georgetown Medical Center, I have been drawn to the policy side of healthcare because of the accessibility of the policy debate at this point in my education.

Before discussing my project, I’d like to highlight a few components of the current pharmaceutical industry and the US healthcare system as a whole.

While I will be explaining the economics of the industry in more detail next week, it is important to understand the current reliance on intellectual property. Because of the high costs associated with research and development (R&D) of drugs, there must be certain incentives in place for businesses to decide to enter the pharmaceutical market. To recoup high costs of R&D, companies receive a temporary monopoly that allows them to price the medicine at their own discretion. Companies have the incentive to price their product much higher than production cost to receive a greater profit. This pricing in turn places the medication out of reach to populations who cannot afford the high prices. It is widely noted that production costs are less than 1% of patented prices in the US. Simply, the system for innovation of new medicines requires limited access to this innovation.

Regarding the healthcare system as a whole, the US was ranked 37^th of 191 countries despite spending the highest percent of GDP (16%), according to the World Health Organization. While there are many areas cited as the causes of the US system’s shortfall, much attention over the past decade has shifted towards the pharmaceutical industry. As a result, several proposals have emerged as possible alternative solutions to the high price, low access set up of the industry.

My project this summer will be driven by two questions: what role do ethics play in the decision making process of individuals within the industry and what is the awareness level of the alternative proposals to finance R&D?  In my consideration of the industry, I will be focused on individuals who are in a position to affect business and policy decisions.  This will include business executives as well as proponents of the industry (lobbyists). As such I will largely be working within Washington, D.C. and the Research Triangle Area of North Carolina to conduct interviews.

I hope to gain insight into the ethical viewpoints of people tied to the current pharmaceutical system. What ethical viewpoints are present in the industry? How do ethical concerns affect the policy, practices and discourses employed by key players of the pharmaceutical industry?  In addition, I have decided to focus on the alternative models of financing R&D because while there are other proposed areas of reform, the current system heavily revolves around the R&D costs.

The end goal of the project is to address the ethics of alternatives within the context of the pharmaceutical industry. By understanding the role of ethics and the knowledge level of alternative models, I hope to evaluate the ethics of the current system in relation alternatives. Is there a philosophy of professional ethics where individuals with a capacity to affect the lives of others possess an ethical obligation to be active in a pursuit of alternatives when there are ethical concerns?

I have already started work in Durham to further my understanding on the subject of alternative plans of financing R&D, as well as the economics behind R&D in the current system. So, look forward to next week when I will provide more insight into both of these areas.

Mark Herzog is a rising sophomore at Duke University interested in the economics of healthcare focusing on distribution and access to healthcare systems and the subsequent impact on effected communities. Mark grew up and lives in the Appalachian region of North-East Tennessee/South-West Virginia. Apart from his studies, he can be found enjoying the outdoors whether running, hiking or climbing. Throughout his project, Mark will be based in Durham, NC and Washington, DC where he will be conducting research and interviews. He also enjoys a good discussion, so if you have any questions or comments feel free to comment on his posts or email him at mark.herzog@duke.edu.