Wednesday, February 15, 2006

Mercenary Thinking in the Boardroom -- and in the Jury Box?

"Doctors are excited about the prospect of Avastin, a drug already widely used for colon cancer, as a crucial new treatment for breast and lung cancer, too. But doctors are cringing at the price the maker, Genentech, plans to charge for it: about $100,000 a year." Alex Berenson, A Cancer Drug Shows Promise, at a Price That Many Can't Pay, NYTimes Online (Feb. 15, 2006).

An executive at Genentech explained the high price of the drug this way:

Dr. Susan Desmond-Hellmann, the president of product development of Genentech, which is based in South San Francisco, Calif., said that Genentech had set Avastin's price based on "the value of innovation, and the value of new therapies."
Id.

Perhaps when product liability claims against Genentech end up in the courtroom, jurors will take Genentech's calculus into account when they compute the damages that Genentech must pay? Will the jurors' motto be: Live by the value of your drugs -- and die by the lack of value of your (defective) drugs?

P.S. It is evident why I could never bring myself to join the Federalist Society or turn myself into a law and economics law teacher. I will say in advance: I take little solace in the thought that the marketplace may or will eventually generate products that compete with Avastin and lower its price.

N.B. The same newspaper article also states:

With Avastin's expanded use, analysts expect the drug's sales to soar to $7 billion in the United States alone by 2009, compared with $1.1 billion last year. Over the same period, Genentech's overall profits are forecast to triple, to $4 billion in 2009, as sales, $6.6 billion last year, climb to $18 billion.
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