Monday, January 10, 2005


Have You Heard of the Purple Pill?

It should be obvious to anyone who reads my meanderings that I don't find the ideas of the far right very convincing. But the one I find the most asinine, to the extent that it qualifies as a pet peeve, is the notion that "the market is a perfect engine."

You've heard the idea a hundred times, probably. Producers (the "supply side") compete to provide products that fulfill needs, and then "the demand side" collectively indicates which products it likes best, by buying them. The Neoconservative mantra is that government must leave this ideal process alone, because only in its pure form can it work properly.

This is so stupid I just can't believe anyone believes it, although I know a lot of people do. There are many, many problems with the concept, perhaps the most obvious being that it assumes that buyers are informed and always act in their own best interests by choosing the products which are right for them. This ultimate act of the consumer plunking down his or her bucks for something is almost sacrosanct among Neocon philosophizers. Unfortunately, there's an enormous industry--one of the world's largest--that completely puts the lie to this entire notion. The advertising industry, of course.

If you watch the evening news or major sporting events, you've probably seen, many times over, ads for "The Purple Pill," an anti-heartburn nostrum called Nexium. In the ads, a serious and authoritative-looking gray-haired guy strolls around a giant purple Nexium capsule extolling its virtues as the very best solution for the problem it's expected to fix. It's part of an enormous advertising campaign from the drug's maker, AstraZeneca.

The ads aren't really lies. Nexium works wonderfully well. What the ads don't tell you but what you might want to know about, however, is a little about the history of Nexium. Years ago, drug-maker AstraZeneca came up with a heartburn medication called Prilosec. It worked very well, especially for people who didn't respond well to lesser medications. It became a huge seller, people paid dearly for it, and it earned the drug company $26 billion over its proprietary lifetime. (As my brother likes to say, "that's 'illion' with a 'b'.")

Then the patent for Prilosec expired in 2001. That's just how it's supposed to work, of course: the company gets a period of time to capitalize on its successful products, but then the rules say enough's enough, other companies are allowed to market copycat products, and consumers get to stop paying the premium prices they had to pay during the period of (government-enforced!) monopoly. But AstraZeneca was loathe to lose its cash cow. So the company put on its thinking cap, changed the molecule slightly, and came up with a nearly identical medicine that could legally be patented anew: Nexium, the name presumably a play on the word "next."

The "clinical studies" touted on TV that "prove" that Nexium is better give it a tiny edge over its predecessor in one aspect of its performance--an edge which is barely more than the statistical margin of error. Prilosec and Nexium are functionally identical products. The big difference--and there is indeed a big difference--is that Prilosec is now available without prescription as "Prilosec O.T.C." (O.T.C. stands for "over the counter") for one-fifth the cost of Nexium. That's right, Nexium costs five times as much as Prilosec O.T.C., while offering virtually nothing that Prilosec doesn't. And lest you argue that the drug company has a "right" to profit from its invention, remember that it had already earned twenty-six billion dollars for Prilosec. That's a lot of money for anybody, with the possible exception of Donald Rumsfeld.

Of course, then the company had another problem: why would anyone buy Nexium when generic Prilosec was just as good and much cheaper?

Enter advertising.

The sole purpose of that half-billion-dollar advertising campaign--all those television commercials and magazine ads--is, of course, to influence people to buy Nexium, even though it's clearly not their best choice. So where's that perfect engine the Neocons are always gassing on about? According to free market theory, Nexium should drop like a lead boulder, because everybody would buy the same medicine for a fraction of the cost. But of course they don't, because they've been force-fed misleading information. Yes indeedy, an advertising campaign that spends half of a billion dollars in a single year actually does work: Nexium ("from the makers of Prilosec!") sells like gangbusters.

The idea of the free market originally came from classical liberalism. But what people conveniently forget is that an essential aspect of the idea of the free market was Christian morality. Balanced against the freedom to act without constraining regulations was the expectation that the participants would be good.

Somehow, I think that part gets short shrift these days.

(Incidentally, the story of Nexium and Prilosec was first broken by the bleeding-heart liberal Wall Street Journal.)

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