The AIDS protest against the drug companies
by Walter Block, The Fraser Institute, Vancouver, B.C.
Recently, a group of people picketed the North Carolina offices of Burroughs Wellcome
Co., manufacturer of AZT, the only drug so far known which gives any measure of relief to
AIDS sufferers. These protesters, composed of members of the homosexual community, their
friends and supporters, and others who are at their wits end with horror and grief at the spectre of
this dread disease, were morally outraged. A year's supply of AZT costs some $7000, and this
was deemed as highly excessive.
In their view, it is ghoulish to earn profits at the expense of those threatened by AIDS.
Ideally, AZT should be distributed as a free public service; at the very least, its manufacturers
should content themselves with a modest return on their efforts.
This sentiment is easy to understand. Apart from bigots and misanthropes, there is no one
whose heart does not go out to those suffering from this plight. The thought of anyone worsening
the welfare of these unfortunates is beyond toleration.
Nevertheless, these protestors are tragically mistaken. Although their goals are eminently
justified -- the alleviation of suffering -- their means will not attain these worthy ends.
Denigrating the drug company is like killing the goose that lays the golden eggs.
First of all, it is by no means true that the pharmaceutical company has been overcharging
for AZT. The returns on this drug have to pay for many failed experiments and for future R&D
as well. But even if they were, it is counterproductive to object. This paradoxical conclusion
follows from a premise that may be obscure to the general public, but is actually one of the most
basic building blocks in all of economics: the law of upward sloping supply. Other things equal,
the higher the price of any given good or service, the more likely it is that additional amounts of
it will be offered for sale.
In the case of AIDS, what is fervently desired by all people of good will is a cure. No
more and no less. Anything, therefore, which renders such a situation more likely must be
counted as a positive; anything which reduces the probability of this event, a negative.
What, then, will be the result of large scale protests aimed at the pharmaceutical industry?
Will it enhance incentives to invest more and more money into R&D for an AIDS cure? Hardly.
All available economic theory and evidence, to say nothing of sheer common sense, indicates the
very opposite.
What is needed, if AIDS is to be stopped in its tracks, is for millions of high powered
people to drop all other considerations, and devote their lives and their fortunes to the eradication
of this scourge.
Throughout all of human history there has been one and only one motivation that can be
relied upon to mobilize concerted action for such essentially commercial purposes: the lure of
profits. Vast profits, that is, not "reasonable" returns. Yes, the quest for fame and recognition and
the desire to do good can also motivate people; and it goes without question that the Dr. Jonas
Salk of AIDS will be given these in practically unlimited measure. But the addition of monetary
rewards will move people even further in this direction, and every bit of help is desperately
needed.
In contrast, the protests have a chilling effect on promoting investment. They send out the
wrong signals. Instead of denigrating the entrepreneurs who so far are the only ones to have been
part of the solution, the protesters should organize ticker tape parades in their honour. When an
outright cure for AIDS is one day brought to market, we should lavish an immense fortune on the
discoverer, rather than complain about "profiteering." Holding out this prospect may be the last
best hope for those who now suffer from this mortal infirmity.
What of those who may still continue their protest against the pharmaceutical companies,
despite the overwhelming evidence of its counterproductivity? One explanation is that however
much they support the victims of this plague, they hate the marketplace even more. They would
rather rely on the system that has made a basket case of the nations of Eastern Europe than on the
one that has made our own economy so prosperous. But AIDS is so serious a threat to humanity
that we simply cannot afford to indulge the socialist ideologies of the protestors.
So great a hindrance to our goal of curing AIDS is the present protest that, on the
assumption that the free market could not be relied upon, it would be far better to insist upon
minimum AZT prices, to boost drug profits even more, rather than to call for their reduction.
This, too, would misallocate resources, but at least it would do so in the direction of more R&D,
not less.