It’s not that McArdle can’t read…it’s that she can’t (won’t) think: part two.
So: on to the bill of particulars on McArdle’s recent attempt to claim the intellectual high ground in her ongoing attempt to convince us that we live in the best of all possible drug markets. [Part one is here]
I’m not going to fisk the entire piece in question. Instead, I’m going to focus on one passage in which she invokes the research community to defend her assertion that artificially high US drug prices for big pharma are essential to the future of drug innovation. You can read in the way she treats this literature that she either doesn’t or willfully won’t engage her subject up to the level that would allow her to make believable arguments.
She introduces her bravura display of rigor this way:
…we could go to the academic literature. Not the literature from advocacy groups which too often fills the pages of political magazines on the left and right, but something from someplace like Rand. And fortuitously, Rand happens to have published a paper on this very topic!
McArdle goes on to quote at length a passage about what would happen to longevity if the US imposed price controls on pharmaceuticals to bring US costs down to those paid by Europeans (about 20% less than current prices, according to the paper).
McArdle then seeks to emphasize the urgency, even the moral quality of her concern for maintaining the status quo in pricing by citing this conclusion from the Rand group:
…. the introduction of price controls would reduce life expectancy by two-tenths of a year for Americans ages 55-59 alive in 2010 and by one-tenth for Europeans ages 55-59 alive in the same year. In percentage terms, these correspond to 0.8 percent and 0.7 percent declines from the status quo.
And, just to finish laying the groundwork, she adds one more cite from the professional literature to affirm the authority of the quite striking claim above:
If you’re wondering how much levels of spending matter, you could go to Acemoglu and Linn, who estimate that a 1% increase in market size (aka revenue) for pharmaceuticals results in a 3-4% increase in the number of drugs being approved.
Sounds pretty devastating, right?
Well, yes…and that ought to be the clue. In science, and in common experience too, of course, the rule of thumb is that the more striking the claim the greater the appropriate level of skepticism. So before you endorse or adopt such positions, you need to test the inference.
There are a number of ways to do so, of course. Step one is to consider the source.
Did McArdle? Not really. A first reality check comes from an inquiry into the background of the Rand study.
Go to what the Rand paper actually says: It analyzes two cases: either reduce payments to drug companies, or increase subsidies to consumers to get an effect on consumer pocketbooks (absent the tax consquences of the latter policy) that would be the same. Reducing drug expenditures though it saves consumers money but, according to this analysis, costs them life expectancy. Subsidies leave consumer finances unchanged, but do not impose the cost in months of life lost. As the value of life in the model exceeds that of the saving on drug costs, the conclusion is obvious: No attempt to reduce drug company receipts should be made, with policy makers concerned about the effects of the cost of health care instead told to focus on further subsidizing the purchase of drugs.
That is: pay the man, or we will kill grandpa before his time.*
But then, if you go on to read to the end of the study, you find something interesting. The study was not a piece of social science research undertaken by a body of disinterested researchers. Rather, you are reminded that Rand is a private, nonprofit research shop, available to perform academic-level, but not academic-housed studies for those willing to pay. The lead funder for this study?
Which, if you’re interested, is, by a wide margin, the largest pharmaceutical company in the world.
McArdle does not point this out. I’m not sure if she noticed it in her first reading of the piece. She does respond in the comment thread to a reader who pointed this out, writing”If you can find articles on the subject that are not funded by an institution with a clear dog in this fight, please send them. Rand is a widely respected institution.”
This is…how to put it…seriously weak sauce.
Juxtapose it with her snark about “the literature from advocacy groups which too often fills the pages of political magazines on the left and right.”
In other words, she’s relying on the argument from authority, again: Rand is respectable…a member of the village. The fact that it is an intellectual gun-for-hire does not seem to matter to her, and of course her defense — that everybody does it — is wrong, a false statement.
You don’t have to go far to find the confounding counter-example. The other paper she cites, (on which more later), was written by two economists both then at MIT. The work, published in the Quarterly Journal of Economics, lists its outside funders: first the National Science Foundation, and then the Russell Sage Foundation, a one hundred year old philanthropic institution with a focus on “the improvement of social and living conditions in the United States.”
Now of course, the fact that Rand was hired by the world’s largest drug company, and then produced a paper which argued that the pharmaceutical industry’s revenue should under no circumstances be cut unless you are willing to accept death and lamentations, is not in itself prima facie evidence that this paper is a put-up job, astroturf research with Rand serving as the cut-out for big Pharma.
But it does, or it should, compel you to interrogate the paper with great care.
And for that: look to part three of this series.
*Or perhaps, if you follow the learned doctor M. Python, pay the man and we’ll kill grandpa before his time…;)