Last night, BBC2 aired The Price of Life, a documentary examining the NHS’s purchase of a new cancer drug. Myeloma is a cancer of the plasma cells. A US company, the Celgene Corporation, holds the patent on lenalidomide (Revlimid in the US.) People survive for an average of just over a year longer than they might have done without it.

In the programme, Adam Wishart follows a number of patients awaiting a decision from NICE, and several other players in the health market: the chair of the NICE committee making the decision, an NHS fund manager, and the head of Celgene.

We’re present at a NICE committee meeting where it’s decided the NHS can’t afford lenalidomide. There’s a specific money limit per year for treatment at certain points in life, based on Qalis - a combination of economic and social value. This leads to a specific cost limit, and this drug is too much. By the end of the programme, this situation has been reversed – back to that in a moment.

Revlimid was developed by Celgene in 2006, costing $100 million for that and two related drugs. Revlamid alone has since been making a billion dollars a year. Wishart manages to get himself invited to a $350 dollar a head gala dinner in honour of Celgene’s founder. You can just make out the name of the body organising the dinner: the Center for Medicine in the Public Interest. The gala included a short film where it becomes clear that CMPI is actually making the case that private and public interest are one and the same (not surprising given they're funded by various large pharmas.) They attack plans for universal healthcare in the US: a woman tries to get her life-saving medicine from the bathroom cabinet – but Uncle Sam (“call me Dr Sam”) won’t let her. They’re too expensive for cheapskate public bodies to fund. The woman responds:

But I thought we had universal healthcare now.
Yeah – government care.
Can I just take my prescription please...?
No – too expensive. But – I got this for ya, you can have those.
This is old.
Ah – but cheaper.
Look, this isn’t even what my doctor prescribed.
Yeah, but I’m writing the prescriptions now.

Wishart talks to Celgene’s founder, Sol Barer (what a name; the last thing he does is bare his soul, I suspect...) and asks about the cost of the drug: "isn’t £50,000 pounds a year in the UK a lot of money?"

When you think in abstract terms. But when you think about a drug that will potentially lengthen the life of somebody who is fatally ill, I would submit to you that’s one of the most important things society can spend its money on. Developing a drug is very, very difficult process – from a scientific perspective, from a regulatory perspective. In fact, I’ve often said it’s an impossible process. So to encourage that, there needs to be incentive to do that. And the incentive is the price. The price isn’t the cost of the pill, it’s all the effort – the intellectual effort, all the risk you take to get the drug at the end. And then, with the profit you make on the drug, that goes in to the next drug.

So you’re not profiteering from it?

Absolutely not. I think we’re very fair, and we’re doing a service to society, a great service to society.

Wishart talks to Merrill Goozner, author of The $800 Million Pill: The Truth Behind the Cost of New Drugs (negative BMJ review there) who makes the obvious point: companies price to what the market will bear.

He takes up one of Goozner’s points: the burden of cost for these drugs is having a big impact on health services around the world. Returning to the UK, we see then secretary of state for health Alan Johnson in Parliament, announcing new flexibility in NICE’s framework for approving drugs that may prolong life in the very last stages of a disease. We also see Myeloma sufferers at a Myeloma UK conference, hearing of the push to get this policy through: of course, they desperately want the drug. NICE then reconsider their decision and, with a casting vote from the chairman, decide to fund it. Unable to directly negotiate with the drug companies, they toy with the idea of rejecting again in the hope of getting a better deal, but in the end accept Celgene’s offer of supplying the drug for free after two years. They note that, following the government’s announcement, they now rate the life of someone with months to live at 1.5 times the value of anybody else.

Sufferers are, of course, over the moon. But the government have provided no more funding for the £45 million a year Celgene will be getting. Wishart hears from an NHS funding manager who will be forced to pay for it out of an unchanged budget:

I felt angry. I have 30 babies a year dying that wouldn’t die in other parts of the country. It felt like a message that said, you shouldn’t bother about that; you just need to make sure that the very small number of people who will benefit from this drug – that’s the area that we want you to focus on.

It’ll cost her three million a year. She recounts how her hand has been forced before by similar approvals:

We’d been through a thought-out process that had included people from our patients' group, local doctors and specialists sitting down and looking at 128 proposals that people wanted to see funded. In the event, we only had enough money for the top 15. Three elements which ended up being funded were the three cancer drugs – because they’d been NICE approved. And they came numbers 125, 126 and 127 on the priority list.

She wants to expand home support and hospice care – 4500 people a year die in her PCT, mostly not in the way they’d want (given that they have no option for avoiding it altogether…) and she believes the cost of the drugs are "preventing them from getting access to the best death they could have."

Wishart does an excellent job of clearly showing the brutal choices that must be made with a limited budget, and the NICE committee head is very stark about the job that needs doing. But it’s Sol Barer I want to go back to: the incentive is the price. Without investment, the drugs won’t get made; without a return the investment won’t come; without intellectual property protection, the returns won’t come.

But this isn’t ipods, it’s life and death. We are forced to make these choices. So if there’s a better way of organising things, don’t we have a duty to find them out? Conversely, if better ways might exist, isn’t it wrong to claim the price system as the only way?

I’m not about to say "this is too important to be left to the market" – that gets us nowhere closer to understanding the problem. Innovation and discovery will bring us new medical breakthroughs, and markets of various hues are clearly good at doing this (as long as someone is willing to pay. Malaria sufferers, this isn’t you.) Markets are one form of social technology, proven to be effective at many things. If the current shareholder-return model works best, OK. But does it?

How do we answer this question? I’ll start off by asking, where exactly is the incentive in the production of these drugs now? Is it limited to those wanting a return? Not entirely – clearly, many people high in the company will get a large chunk of their remuneration, maybe most, from share options: they’re 'incentivised' to get these drugs produced. Presumably at least some of them do actually have a scientific background.

But is this the best model? There’s the New Labour answer, adopted on day one in 1997: "it's the only game in town." (My Google efforts have failed to find the source of this quote, though I did incidentally confirm its ubiquity in discussions about private finance of public goods.) This phrase is a slightly more avuncular version of "there is no alternative." It can have two different meanings: its not possible in this or any other world; or, it can't be done politically. The latter is down to the political landscape of the day and may change (though recent events don't bode well...) For the former, there's Hayek: governments will try, governments will fail; we're dealing in facts of nature, not of politics. Look, here's our “Uncle Sam takes your medicine away” video for illustration.

The NuLab approach perfectly illustrates that no-one appears to have actually thought about the problem. Someone said "we need innovation, and we only get that through incentives – like the private sector, they know about that, don't they?" NuLab hitched private companies onto state goals by the only means available – very large amounts of money. Somehow – and I'm extremely unclear on how this was ever supposed to succeed – that vital incentive process was to work its magic in the bidding process. Oh, and some tacked on contractual obligations, ushering in a whole new career-path of “contract manager”, charged with ongoing policing. Quite an achievement then – taking all the worst aspects of both public and private. (This is my utterly unacademic impression, underpinned by no research whatsoever and some undergrad work from 1999 – so, maybe I'll offer it as a hypothesis. Nice getout.)

There are many other responses from all around the political compass, but in-keeping with the spirit of the Buckminsterism - 'you never change things by fighting the existing reality; to change something, build a new model that makes the existing model obsolete' – the most relevant answer for me is open source production, for the simple fact that it has already succeeded. Other projects and concepts may have succeeded if political circumstances had been different – we'll never know the outcome of Chile's experiment with cybernetics, for example. But open source has the power of demonstration. Software is the usual exemplar: Apache (Benkler uses this to point out: how could a bunch of people just wanting a better server manage to beat the market share of listed companies actively competing and fighting strategically?) Firefox, Zotero, Wikipedia etc. And once you're looking for it, open source social technology turns up elsewhere too: it made potatoes and corn (though South American farmers over several thousand years had something to do with it too.) One day I'll get my model of this finished.

As regards informatics, there's a proper noisy smorgasbord of Things Have Changed Forever, with very different political conclusions. Wikinomics, for example, while full of interesting in-the-wild examples of these changes (including a pharma company), is written in a style consistent with winning business-book prizes, and loves to wax Shumpetarian: "a power shift is underway, and a tough new business rule is emerging: harness the new collaboration or perish." They examine many examples of companies making strategic decisions to farm out aspects of their knowledge work – while carefully keeping a solid grip on the money-making handle. Benkler (TED video above), coming from a very different viewpoint, nicely traces the outlines future informatics battles. Outcomes will be – are – a rhizome of economic interests. And while Wikinomics pushes for businesses to see the light, I doubt many of them have missed the point. As Morgan said a long while back:

The designers and users of [informatics] systems have been acutely aware of the power in information, decentralising certain activities while centralising ongoing surveillance over their performance.

It has always been thus with the implementation of any technology in the labour market and workplace: new technology allows novel blends of control and freedom.

But, for me, all of the political arguments leave my inspiration from open source undiminished. It works, it's distributed, it's alive in the world, and it demonstrates a fact that can't be undemonstrated: the orthodox understanding of incentives – regurgitated by Sol Barer - is wrong. Without copyright protection, so the story goes, you'd be able to hear the high-pitched squeek as all the incentive rushes out, leaving you with a flabby soviet monstrosity.

"Cost is an incentive mechanism" is, in and of itself, not wrong of course – the error comes in claiming it's all there is. Open source shows there are others, and they're very powerful. Benkler notes that because open source is computer-based, it has been very easy to see and measure – so I'd argue its no less important to realise that complex adaptive networks of artisanal producers were improving productivity thousands of years ago.

Given that, it begs the question: how do social technologies work to solve problems, and which ones might do vital jobs – like drug research – more efficiently, at lower cost, with the widest social benefit? I find Sol Barer's social conscience somewhat unconvincing in this respect. My off-the-cuff thoughts about capital market-funded drug companies: front-line scientists are whipped from higher up. That's their incentive. So, a similar structure to getting slaves to pull your statue into place. Or perhaps, to the extent that most scientists are like most software producers (and there's a big venn diagram intersection there, labelled 'geek') their primary motivation is not money: they don't need whipping because they love what they do, and genuinely want to help find new drugs. If this is the group producing most of the value, it looks like there's a strong chance investment-led research is not the only way to get them to produce. Indeed, isn't there a chance they'll innovate more if they think it won't benefit fund managers more than patients? I don't know – which is the point. We need to get past blithe Sol Barerisms and actually look at the problem. "Human resources management" is usually the area that deals with this, though, so perhaps we need new ways to analyse the problem.

Two immediate problems: first, this is exactly the path that wikinomics thinking espouses – I mentioned a drug company; they farm out their data in an attempt to harness global analysis of it, but don't share their own analysis. Anyone discovering something is drawn back to the company. They will keep the drug IP. This is sort of the informatics equivalent of free range vs industrial pig farming. My enthusiasm for the demonstration effect of open source is all very well but, actually, can a global intellectual property regime manage to capture the knowledge production of informatics? Perhaps. Open source is not Obi Wan Kenobi.

Second is more academic: once we're outside of the price system, things get very messy. Price makes the social sciences very happy – well, economics anyway – by allowing an ostensibly scientific analysis of human behaviour. It hasn't done a bad job. But the state of affairs for most other social technologies is considerably more tangled. This doesn't make the social technologies themselves any less robust – any more than the complexity of gene interaction in a plant makes it more likely to keel over. It's just harder to analyse. Indeed, Hayek might argue that the apparent simplicity of the price system's signal medium – just a number – is a dangerous misdirection from the human cognition it reflects.

Ultimately there are cost limits to everything: limits of energy, limits of resources. Any drug production method will cost. Many of the procedures for deciding how to ration over a whole system will always need to be made. I just can't see – from a logical point of view, as well as a moral one – how it makes any sense to have so much of the value in the system going to a few. Please, argue that it's not politically feasible to change that – fair enough. We can find ways to make it more-so, over time, if we're so politically inclined. But it's not the only game in town, not by a long way. Going back to Sol Barer again:

When you think about a drug that will potentially lengthen the life of somebody who is fatally ill, I would submit to you that's one of the most important things society can spend its money on.

Absolutely. The BBC programme brilliantly showed how there's only a finite amount of things the NHS can pay for. Health services spend some of their money on returns for shareholders and fund managers. You can only justify doing that if it really is the only social technology that works.

This also ties to my last post: what incentives do we want to educate ourselves to respond to? There's a fair bit of flexibility. In the case of NHS drug purchase, NICE look nasty and the Myeloma campaign group (made up of absolutely harrowing personal stories, as it is) appears to have right on their side. But NICE must attempt to serve the interests of all patients; if they don't, they're just another organisation to lobby. As the fund manager pointed out, if they approve everything, what's the point of them? Which is to say: NICE is an example of an institution that – in the abstract – we might all agree we needed. It is designed specifically to be above and beyond incentive structures or lobbying. I'm guessing plenty of people will see their expensive drug decisions and immediately assume they're in the drug company's pockets: I don't agree, though they can't avoid political pressure from government. If we believe we need this sort of institution, its independence needs much stronger protection. It shouldn't be vulnerable – via either political influence or through which patient's lobby group is the best funded (and who's interests might it be in for certain groups to be well-funded?) We already have a structure designed this way, globally - the WTO: a 'mast that politicians can tie themselves to to avoid the siren-like calls of lobby groups.' So – again – the principle appears acceptable in practice. The question is, are we applying it in the best way we can?

Curiously, the Adam Smith Institute may have hit upon a solution: they claim the price system is a more pure form of democracy than democracy itself – every pound is a vote in a perfectly responsive system. Maybe so. If that's the case, though, and we want a just democracy, we'll need the pecuniary equivalent of one person one vote. Now, what would that look like...?