The price of AIDS drugs
should be more, not less
R
ecently a group of people picketed the North Carolina offices of Burroughs Wellcome, the
manufacturers of AZT, the only drug so far known that gives any measure of relief to AIDS sufferers.
These protesters, 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 $7,000, and this was deemed 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 these unfortunates. The thought of anyone worsening their plight 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 manufacturers have been overcharging for
AZT. The returns on this drug have to pay for many failed experiments and for future research and
development (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 being
equal, the higher the price of any given product 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 protest 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 unfailingly
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 farther 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 pan of the
solution, the protesters should organize tickertape parades in their honour. When an outright cure for
AIDS is one day brought to market, we should lavish a 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 illness.
What of those who may still continue their protest against the pharmaceutical companies despite
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 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.
Dr. Block is an economist at the Eraser Institute.
BRITISH COLUMBIA REPORT, MAY 7, 1990 f 7