Thursday, December 16, 2004

Becker/Posner Blog II-A: My Modest Proposal

by Tom Bozzo

Gary Becker notes that the pharmaceutical industry's R&D expenditures run around $30 billion annually. This must, of course, be recovered through drug markups, which Becker rightly notes does not constitute price "gouging."

Now, once you add in the costs of additional safety testing and post-approval monitoring of drugs for safety and effectiveness, I don't see how Becker's plan would achieve a savings of, say, $10 billion, other things equal.

It would seem just as easy to (bad word coming) socialize the early phases of drug R&D. Among other things, drug R&D has collective good aspects, it could be efficient to shift the risk of dead-end compounds off of private industry, and production of much of the basic science already is publicly funded to a considerable extent.

Nor are amounts on the order of $10 billion that would be better spent on drug R&D impossible to locate in the federal budget, given the political will to do so. My druthers would be to reprogram the vast majority of the expenditures on ballistic missile defense, which is almost pure boondoggle — though, sadly, a religious line item for the ruling party. Agriculture subsidies and the adventure in the Middle East would also make excellent candidates.
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