Public Goods/Pharma’s Research

Having read the Matt Ridley’s the Rational Optimist, one thing I noted was that he emphasizes that progress comes from learning and ideas can be shared easily.  When I tell you how to use a new way to make arrows, I haven’t lost the ability to do so.

In other words ideas are public goods, they can be consumed with out rivalry.  My having it doesn’t mean you can’t.  That would seem to suggest that generating new ideas creates more benefits than those to the thinker.  So is there enough incentive for private creation of ideas, for reasearch?

Ridley seems to not see this as a concern and argues government research doesn’t contribute much as I recall.  Is that true?

One area to consider is drug research discussed below.  One question I had on the graph is if citations are the best indicator of contribution.  I suspect private money would be a bigger share of the funds than of the citations, thought that might not be an indication of the amount of output for all our benefit.

The Incidental Economist (Posts)

via Pharma’s Research.

Kevin Drum has a piece up discussing Megan McArdle citing Derick Rowe:

Via Megan McArdle, Derek Lowe blogs today about an entire field of pharmaceutical research revolving around PPAR ligands that pretty much went nowhere and cost drug companies a bundle:

Allow me to rant for a bit, because I saw yet another argument the other day that the big drug companies don’t do any research, no, it’s all done at universities with public funds, at which point Big Pharma just swoops in and makes off with the swag. You know the stuff. Well, I would absolutely love to have the people who hold that view explain the PPAR story to me. I really would. The drug industry poured a huge amount of time and money into both basic and applied research in that area, and they did it for years. No one has to take my word for it — ask any of the academic leaders in the field if GSK or Merck, to name just two companies, managed to make any contributions.

….Honestly, I don’t understand where these they-don’t-do-any-research folks get off. Look at the patent filings. Look at the open literature. Where on earth do you think all those molecules come from, all those research programs to fill up all those servers? There are whole scientific journals that wouldn’t exist if it weren’t for a steady stream of failed research projects. Where’s it all coming from?


Anyway, I do think, as Kevin says, that the relative contributions of public and private sources aren’t necessarily appropriate given the sums of profit involved.  I could counter Derek’s anecdote, but prefer to use some data.

In 2001, Darren Zinner published a study in Health Affairs that addressed this very question.  Here’s what he did in plain English.  He looked at all clinical patent applications in 1998, and carefully examined all the scientific research cited in those applications.  It’s important to remember that this would include all research, not just those for approved drugs, so it even includes the research for drugs not getting to market.  He then classified where that research was done.  Here’s what he found:

Funding 1

The majority of research cited in patent applications was done in academic centers.  Some more was done in other non-profit or government research centers.  Only 15% of the research was done by industry.  That’s not a very compelling argument for the indispensable contribution of industry to research.

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