Who pays for tomorrow’s drugs?

The Problem

From the Telegraph (originally spotted at Environmental Health News):

Millions of lives could be at risk because the plants which provide the basis of more than half of all prescription drugs face extinction, a new report warns.

The loss of plants and trees which provide natural medicines could provoke a global healthcare crisis, says Botanic Gardens Conservation International (BGCI).

…

Scientists had predicted that biochemistry would allow most drugs to be produced synthetically in the laboratory but in many cases it has proved impossible to reproduce the beneficial compounds found in plants.

The report cites as an example the world’s most widely-used cancer drug, Paclitaxel, which is derived from the bark of several species of yew tree. Its complex chemical structure and biological function has so far made it impossible to produce artificially.

Until recently it took an average of 6 trees to produce a single dose resulting in the decimation of wild yew populations across the world. In China’s Yunnan Province, once famous for its yew forests, 80 per cent were destroyed within a three year period.

“The dramatic decline in a range of yew species, highlights the global extinction crisis that is facing medicinal plant species.” said Sara Oldfield.

Poorer countries will be particularly hard-hit if trees and plants continue to be destroyed at the current rate. The World Health Organisation estimates that 5.3 billion people – 80 per cent of the global population – rely on traditional plant-based medicine as their primary form of healthcare, and in many cases collection and sales of these plants provide their only form of livelihood.

Leaving aside the poor country aspect of the problem, for a moment, as well as the agency problem. Can Economics fix this? Of course – Economics can fix anything!

The Solutions

What would Economics do? The same thing it does with every negative externality: tax the participants of the market causing the harm.

We can take the Pigovian method: tax the drugs that deplete the resource necessary for the drugs, thereby (a) lowering their use (potentially their overuse) and (b) forcing more efficient/sustainable extraction or (c) forcing faster research into synthesised chemical compounds.

We can also take the Coasean approach, which is to tax the use of these drugs for the specific purpose of funding research into solutions to the problem – slightly different to the Pigovian method (for which the motive only has to be lowering consumption).

Alternatively, we can (and should) examine the cross-subsidisation. Given that the depletion of natural resources is a holistic one, much of what we do contributes to the problem. There is a strong case to be made for international regulation of some kind – since the countries where these plants are to be found have little in the way of oversight of their own. Our own governments could add pharmaceuticals to the idea of ‘food security’, and start domestic growth of these plants, so that any given country with the initiative and subsidies (using those taxes, for example) could secure its own supply of the same (or other potential) treatments for future generations.

The difference is as the title of the post suggest: who pays for tomorrow’s drugs? Today’s drug-users, or Today’s everybody (the idea being that (a) we all contribute to the problem, and/or (b) we, or our children, are all potentially Tomorrow’s drug-needers: we all have an investment in insuring ourselves against the catastrophe of no drugs).

Here’s another idea: we’re familiar enough, by now, with the idea of carbon-offsets. We (households or firms) purchase, say, land, somewhere – and that land has trees that off-set our carbon emissions. The Economics behind this (and the surety that the plan will work) is still yet to proved conclusively, as has the science that suggests any such behaviour will save us.

So: why not a market for Pharmaceutical-Resource-Depletion off-sets? Your firm pays some money, and X amount of acres of Hou Po are preserved in China – or planted in South Dakota.

It’s an idea.

The Caveats

Now, to the other issues: that poorer countries are affected first. This is always a problem. We are under no obligation to care, until the extent of the depletion affects us directly (or sufficiently, indirectly). This means it is very hard to affect change. We can be taxed into acting as though we care (when really we are just responding, tropishly, to a price signal) but we will not appreciate that tax at all – and likely punish the poor bastard who tries it. So how to find the incentives that enduce Pharma-plant Conservatism in people/firms is one of, if not the, Economic Problem. It’s the sort of thing with which the Environmental Defense Fund (for example) deals.

Second problem: agency bias. Who are Botanic Gardens Conservation International? According to the Telegraph:

The BGCI has drawn on the work of some of the world’s leading botanists, conservationists, healthcare professionals and traditional healers to identify which medicinal plant species are most at risk and what steps are needed to save them.

Plant conservation is their bag. Meaning that they have a vested interest in us believing, also, in plant conservation. Whether they intend to or not, (and whether they have or not) their bias existed before they ever began researching or writing the report. I’m not suggesting that the report is a lie; I’m not suggesting that we believe nothing until Merck or Pfizer themselves confess to the problem. I’m just saying that we need to attach that piece of information to the information BGCI is giving us – more information equals more and more rational decision-making, after all.

Bush outlines $140bn stimulus package

He didn’t really. He did, apparently, make this statement:

The administration said his plan would create or safeguard half a million jobs at risk from the economic downturn.

Which is an interesting warning: like anything else they’ve attemtped, the government is outling irrefutable, untestable criteria for success. This is the counter-factual problem: we’ll never see what will happen without this stimulus package, so the government is always free to claim that it would have been 500,000 lost-jobs worse, without it.

Just like the last stimulus package which, by all appearances, did practically bugger all except leave the Fed stranded with macroeconomic management for 5 years.

Mind you, he also said that a fiscal stimulus would “provide a shot in the arm to keep a fundamentally strong economy healthy” – so he’s either lying, outright, while assuming that you’re a Goddamn idiot, or he’s crazy. Or he’s been hanging out with Paulson way too much in his intellectually incurious, non-querying way. Which will come to the same thing.

I am pleased by the apparent attempts to consult the people to write and pass the laws (my word, must that have been an interesting experience for them all) – Fiscal policy is usually hindered in timely effectiveness by its own baggage, getting passed as a piece of legislation (Congress does not, no, actually grow up and act like adults when properly important Bills are floating around).

This is good:

Democrats are also pushing for an increase in transfer payments to the poor through food stamps and/or unemployment benefits – which clashes with Mr Bush’s assertion that tax relief should be “broad-based”.

(a) no, it doesn’t – any more than a business tax cut does; (b) Poorer people have the greatest Marginal Propensity to Consume. You want to boost GDP, you give the money to the people that will spend it. That means middle-income and down, first.

Less pleased with this one:

Some Republicans in Congress remain sceptical about the case for a stimulus package, and would rather stick to pressing for the Bush taxs to be made permanent.

Those people are just idiot ideologues, who – I wish with all my heart – were never even within sight of Government. Those tax cuts are (a) crap at boosting economic activity (but great at rewarding non-labour income, which only wealthier people have in significant amounts), and (b) not due to expire until 2010 – meaning that making them permanent does even more fuck-all for the macroeconomy in this recession than it did in the previous one in which they began.

The distinction between the myriad of conservatism (Christian, Fiscal and ‘political’, for a start, but Environmental – i.e. Sierra Club types, also) can wait for another day. But the myth of GOP Fiscal responsibility (or nous of any kind at all) must surely be dead by now.