Another Example of the Free Market Failing Society
I've blogged previously about how a free market doesn't necessarily produce the best results for society at large. In particular, I mentioned how new antibiotics weren't being developed because they just don't offer the same return on investment to pharmaceutical companies as other types of drugs. To reuse the same quote from an article from Innovations-Report.com:
FDA approvals of new antibiotics declined 56 percent during the past 20 years (1998-2002 versus 1983-1987). Looking to the future, the researchers found only six new antibiotics in the R&D pipeline out of 506 drugs being developed.
Well, now a new article from Nature News, Pfizer slashes R&D, gives more depressing news on the failure of free markets when it comes to new medicines. To quote two passages from Nature's article:
Yet the dire consequences for drug research — and the scientists behind it — still took many by surprise last week. With key patents about to expire, Pfizer, the world's largest pharmaceutical company in terms of sales, unveiled plans to slash its research and development (R&D) spending by billions and cut thousands of jobs.
"The pharma industry is deciding its core capabilities are marketing and dealing with regulatory bodies," says Judy Slinn, a business historian at Oxford Brooks University, UK. "Pharma companies will still do development work. They won't do discovery."
So, now it's not just research into new antibiotics that's going to suffer. Research into all new types of medicine is going to suffer, because it's just not profitable enough.
I would think that we as a society would like to see new medicines be developed, and it seems that some type of government intervention is necessary if we want to see development continue at the pace it has been. So, to echo my questions from my previous entry, what type of intervention should that be? Regulations? Tax breaks? Direct investment of public funds? Whatever the case, the free market is failing us in this regard.
Don't take this entry the wrong way. I'm not against capitalism. I think there are many, many ways that capitalism and free markets do provide good results to society. Competition does force companies to improve their products and services. However, I think it's naïve to assume that a free market will always produce outcomes that are best for society, so government intervention is sometimes called for.
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