Of minimum wage and cancer drugs

They may not seem to be 'two great tastes that go great together' but columnist Peter Kissinger has some lessons and thoughts that arise from considering boosts to minimum wages and the costs of cancer therapeutics

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Demands to raise the minimum wage and lower the cost of cancer drugs have engendered considerable public noise all summer. How can I possibly relate them? A politician has also suggested that university tuition be free to all. Oncologists are anxious about cancer drugs at Ferrari prices. Others decry that you can’t support a family of four at the federal minimum wage. We’ve thrived, relatively speaking, in a system where we want to be paid more and our employers see reasons to not comply. We’ve thrived when customers want to pay less and manufacturers want to charge more. In every case, given some time, we arrive at a compromise.
When we value the product more than we pay for it, we buy it. When our employer values our efforts more than not having us at all, she pays us. Whether we are earning a living or buying a product or service, we have choices. We can work elsewhere or buy elsewhere and should exercise that right. The expectation of a good living from a fast-food job should suggest becoming the manager or owning a series of restaurants, not throwing in the towel on learning more. Yes, you can. Entitlement to the latest cancer drugs is likewise an attractive, but equally false, notion.
As a scientist and engineer, I like the idea of stress-testing both systems and ideas. For example, we could do the thought experiment of demanding that fast food wages rise to $100/hour; after all, this is only 10 percent of the fee schedule of many reputable corporate lawyers. With respect to cancer (throw in hepatitis C as well), a stress test would be an upper level of $100/dose. It is immediately evident we’d be in deep trouble, so let’s back down on fast food to $25/hour and up on cancer to $400/dose.
We could go further to $1.25/hour (the minimum wage I enjoyed in my high school years) and up to $100,000/dose for cancer treatment. Under the latter rules, no one would work at fast food until the pay went up and very few patients would get treated until the price came down. What works very well is the “invisible hand” of free markets ascribed to Adam Smith in the 18th century (The Wealth of Nations, 1776, a banner year for free markets). A challenge with the invisible hand is that it is indeed invisible to many scientists and physicians. Politicians derive much of their power from denying its existence.
That minimum wages or price controls provide any real benefit is an illusion. It’s best to eliminate them. On the other hand, all the yapping about fast-food wages has caused them to go up. All the noise about drug prices stimulates them to go down as competitive forces come into play. We now have more transparency with disease-free and progression-free survival data. That helps, too. Discussions about paying for outcome vs. treatment reflect that drug responses are variable.
That debate is good, it’s another component of the invisible hand at work. The minute the debate presses for a controlling rule, the invisible hand stops working. The legions of complaining oncologists likely have a good deal of their 401k assets in biopharma companies. Their kids are expecting R&D jobs in San Diego for more than a minimum wage. Scientists from a prestigious institute in Europe recently asked to know to what extent drug prices were the result of innovation vs. satisfying shareholders. They apparently do not appreciate that without satisfying shareholders, innovation will stop. Do cancer patients and their caregivers think about such a consequence? Do they ask about the notorious medical device tax? Do they also realize that income from oncology funds research on Alzheimer’s disease should they survive their cancer? Know the hand!
Nothing has ever worked better. Gleevec and the rest will be generic, but not soon enough for some. That’s the problem. There is no alternative to accepting the natural time constant of 20 years. Let life-science innovation stay free from price controls, but encourage open debate and stay tuned to www.clinicaltrials.gov.

Peter T. Kissinger (who can be reached at kissinger@ddn-news.com) is professor of chemistry at Purdue University, chairman emeritus of BASi and a director of Chembio Diagnostics, Phlebotics and Prosolia.

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