Deborah Orr discusses why the breat cancer treatment she had was just fine but why a more expensive one that might save the lives of other women wouldn’t be. And while my description of her argument might sound cruel and her argument itself might sound cruel she is in fact correct. Resources are limited and a cost benefit analysis has to be applied as to where and upon what they should be expended. However, there’s one little point she makes that really gripes my goat:
But Roche seems pretty good at recouping them. It made a profit of 11.4bn Swiss francs (£7.7bn) last year. As its chairman, Franz B Humer, said in his 2013 letter to shareholders: “In a challenging, increasingly cost-sensitive environment, our focus on targeted medicines and diagnostic tests has allowed us to expand our strong market position and to significantly improve net income. In light of our strong performance, the board of directors is proposing – for the 27th consecutive year – an increase in dividend.” It’s worth bearing in mind, reading this, that a 2012 report called The Research and Development Cost of a New Medicine reckoned that, on average, only about 10% of the overall cost of developing a new drug is taken up by research and development. Much more is spent on attracting and servicing investors. Quite a bit is spent on PR.
It’s that “attracting and servicing investors” part that so annoys. For this is exactly the same cost benefit analysis leading to the efficient deployment of resources that Ms. Orr is so praising. Hoffman La Roche employs some 80,000 people around the world and has, if I’ve read their accounts correctly, some 40 billion Swiss francs in capital to back up their work. And we do need some system to try and decide how much of the accumulated wealth of the species is tied up in trying to create cancer drugs to save the lives of Ms. Orr and other unfortunates who lose that crap shoot with their health.
Please note that while we do have a mixed capitalist/market based system doing that allocation for us here the problem doesn’t go away if we try to move to some other system. Perhaps worker based socialism where that 40 billion has to come from the pockets of the workers who work in the company, perhaps some planned system whereby taxes are raised to provide that capital. But however it’s done we still need the cost benefit analysis to tell us that we’re allocating that capital optimally. And we still need to pay the price too: by devoting 40 billion to the treatment of breast cancer we’re not allowing it to be used to create vaccines, or for people to consume now, or on beer, or space rockets.
In fact, simply and purely the fact that capital is scarce means that we both have to calculate how best to use it and also pay the price for with holding it from other uses, whether we have a capitalist/free market economy or not.