Break Up the Rx Industry?

A new book by two Massachusetts Institute of Technology professors is calling for the break-up of the drug industry into separate research and marketing/manufacturing arms to promote both innovation and lower prices. Stan Finkelstein, a physician, and Peter Temin, an economist who has studied the drug industry for decades, in their newly published "Reasonable Rx: Solving the Drug Price Crisis," propose:

. . . dividing drug companies into drug discovery/development firms and drug marketing/distribution firms, just as electric utility firms were separated into generation and distribution companies in the 1990s.

Following the utility model, Finkelstein and Temin propose establishing an independent, public, non-profit Drug Development Corporation (DDC), which would act as an intermediary between the two new industry segments -- just as the electric grid acts as an intermediary between energy generators and distributors.

The DDC also would serve as a mechanism for prioritizing drugs for development, noted Finkelstein.

"It is a two-level program in which scientists and other experts would recommend to decision-makers which kinds of drugs to fund the most. This would insulate development decisions from the political winds," he said.

Finkelstein and Temin's plan would also insulate drug development from the blockbuster mentality, which drives companies to invest in discovering a billion-dollar drug to offset their costs.

An example of the blockbuster mentality is developing a new drug for hypertension, one that varies only slightly from those already on the market, but that can bring in huge profits if aggressively marketed.