Richard Epstein: Perverse Incentives and Medicines

Very interesting podcast interview (courtesy of Glenn Reynolds and Helen Smith at Instapundit) with Richard Epstein, a law professor at the University of Chicago, and the author of “Overdose: How Excessive Government Regulation Stifles Pharmaceutical Innovation.” Epstein hits on a favorite theme of ours, that regulatory regimes create all sorts of perverse incentives.

[If] you impose regulatory impediments, the hidden but very real cost of that is a delay in introduction. Delays in introduction matter in this business, and the less good treatment that you get, and the more money that you have to pay for it, the greater the suffering that you will see and the shorter the life expectancy and the higher rates of morbidity. And so, what one has to do is to rethink the question as to whether or not various rules which are designed to protect people against themselves, and various rules that are designed to protect other kinds of interests, like low prices and so forth, in the long run are going to serve the goals they have.

Along with the regulatory environment, Epstein talks about the effects of the legal and political climate on the pharmaceutical industry, which he views as often attacked by very simplistic accusations of malfeasance, when the reality is much more complex. And talk about the most perverse of incentives: It’s terrible if we kill you, but if we let you die, that’s all right.

Epstein addresses lots of topics — barriers to entry, biases of the media, the need for patient activism. A clear presentation of the value of competition in the marketplace.

Instapundit is often a good place to turn for this brand of argument; Reynold’s wife, Dr. Helen Smith, lives a healthy life thanks in part to Tikosyn, a drug used to treat heart arhythmia. The U.S. system of patents, intellectual property rights and health care have encouraged innovation in prescription drugs; heavier regulation — and litigation — will certainly discourage the R&D that leads to breakthroughs and new medicines.

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