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.

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