TCS Daily


Peddling Dope: Open Source Drug Development

By James V. DeLong - May 18, 2004 12:00 AM

A recent article in The Guardian was entitled "We're patently going mad - Lifesaving drugs must be developed differently - for all our sakes." Written by James Love and Tim Hubbard from, respectively, the Consumer Project on Technology and the Wellcome Trust Sanger Institute, it advocates that the existing system of patents and private production be scrapped in favor of a model that relies on GDP-related contributions to R&D by individual nations, non-profit collaboration, and prizes for exceptional ideas.

The current system, the authors claim, increases global prices by an unnecessary $300 billion per year, whereas theirs would allow drugs to be sold close to the cost of manufacture. Part of their argument is that experience with the open source software movement demonstrates that alternative business models are possible, and they cite a 2003 letter in which 69 "respected scientists and economists" asked that the World Intellectual Property Organization examine collaborative open models as an alternative to property-based regimes. The letter cited not only software, but the Internet, the human genome project, and other ventures.

Socializing an important area of invention and commerce -- for that is what this recommendation entails -- is a dangerous prescription. One would have thought the world would have learned from the utter economic failure and vast human tragedy of the nations that embraced socialism as a basic organizing principle, and would be wary when the same mechanism is advocated for any single sector. A character in George Bernard Shaw's Saint Joan asks: "Must then a Christ perish in torment in every age in order to redeem those who have no imagination?" The answer, apparently, is, "yes"; there is no end of need to relearn.

This proposal is closely connected to a phenomenon called the Free Culture Movement, which was profiled in the New York Times Magazine in February, and which seems to be opposed to intellectual property and markets as a means of organizing any economic activity involving creativity. Most of its attention has been focused on music and movies and the issue of P2P file-sharing (they are for it), and on software. The pharmaceutical issue is a new departure, but it is not a surprise to find that among the 69 "respected scientists and economists" who signed the WIPO letter are many familiar names from the controversies over entertainment and software, including a passel of law professors, "public interest" advocates, and free software gurus. A couple of prominent economists did indeed join, though their ability to retain the title "respected" if they continue to travel in such company is in doubt.

A major weakness of the Love/Hubbard proposal is in its assumption that open source software is an example of the production of an important economic good by the actions of people operating outside of the economic system and free of the crass constraints of financial considerations. Much open source software is technically fine, and its development represents a complicated and interesting phenomenon, but this immaculate conception version of its origin and contemporary situation bears about as much relationship to reality as the legend of Camelot bears to the reality of Dark Ages Britain. (For more of this history than you probably want to know, see The Enigma of Open Source Software.)

To begin, all current open source programs, included Linux, which is the flagship of the movement, are variants or dependencies of the Unix operating system developed by the great Bell Laboratories in the 1970s. Bell was, of course, a well-funded part of AT&T, which, under government compulsion, licensed Unix to all comers at bargain rates. Thereafter, hundreds of millions of dollars were spent on developing it, with money coming from multiple IT companies, universities, and DARPA.

In the course of this development, Unix splintered badly, and a major benefit of Linux, which was indeed developed from the bottom up in the 1990s, was to provide a standard form of Unix around which the community could rally.

But Linux did not go big time until a couple of years ago, after IBM made a strategic decision to support its continuing development and marketing with billions of dollars, a move which forced other hardware companies, such as HP, Sun, and Dell, to follow.

IBM is not an eleemosynary institution, and it did this for good commendable motives of capitalist greed and a desire to dish its competitors, including Sun and Microsoft. As industry observer Joel Spolsky noted, the "myth" is that "Lou Gerstner read [an open source] manifesto and decided he does not actually like capitalism," whereas the reality is that "IBM needs to commoditize enterprise software" so as to promote their consulting division and "the best way to do this is by promoting open source."

At present, most of the work on Linux is being performed by a relatively small cadre of people, almost all of whom are on someone's payroll for respectable money. Serious writing and maintenance of software that can power the world's business is not an activity for hackers who flip hamburgers and sleep on steam grates to support their hobby. In other words, it requires an economic process running in the background to support the programmers.

The suggestion that this software experience, interesting as it is, provides evidence that we can scrap a system of drug production that is turning out extraordinary benefits on a regular basis is scary.

The Love/Hubbard recommendation is even more problematic if one looks at their numbers. The "$300 billion" in savings supposedly available is a strange figure. The total annual value of pharmaceutical shipments from U.S. companies is around $200 billion, and the U.S. provides about one-third of the world's drugs, so the assumption must be that detailed distribution should cost close to zero. And it encompasses the left's usual hostility to advertising, seeing it not as an important channel of information but as wasteful effort to persuade people to buy things they don't need. (The government will tell them when they need something, just as governments will decide how much to spend on pharmaceutical research.)

The authors also object that considerable research goes into products that have "no significant benefit" over existing treatments; they claim three-quarters of new drugs are in this category. The source of this number is not given and it seems questionable, but it also creates a "wait a minute" frisson -- a couple of paragraphs before, the problem was the unconscionable monopoly created by the patent system. Now all of a sudden, the problem is wasteful competition. Again, one is reminded of the old left's objection to the waste inherent in having more than one brand of anything, but the more important point is that the authors cannot have it both ways. If multiple treatments are available, then patent monopoly is not a problem.

They also raise the issue of drugs and Africa, and the fact that Africans cannot afford life-saving medicines, which is, apparently, somehow the fault of the pharmaceutical industry. But the reality of Africa is not that drugs are expensive but that Africa is miserably misgoverned and desperately poor. The drug companies are delighted to make the drugs available to the extent they can be used, for both PR and humanitarian reasons, but even this will not be enough until the governments of that continent permit its development. It is not clear when that will happen, but in the meantime the last thing we need is to import any part of the philosophy that has caused this continuing disaster.

On one point the authors are dead right. They say: "It is hard to avoid the suspicion that the dogged advocacy of intellectual property law as the only way to stimulate innovation is more about maintaining world economic power than anything else."

Yes. Absolutely right. The great thing about capitalism, based on property rights and the free market, in all its messy, wasteful, and often irritating splendor, is that it puts world economic power in the hands of the people. The pharmaceutical companies are greedy -- let us stipulate to that. Therefore, they will do what the people tell them to do, voting through the medium of their spending. Obviously, there are many technical issues involving the length of patent protection, its scope, differential pricing mechanisms and so on, and these need continuing adjustment, but the last thing the health care system needs is more economic power in the hands of governmental opportunists, third world kleptocrats, bureaucratic functionaries, and academicians who live in a Camelot of their own imagining. Yes indeed, let us maintain world economic power firmly where it belongs -- in the hands of the people of the world.

James V. Delong is a frequent contributor. He recently wrote for TCS about Today Linux, Tomorrow the World?


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