9781118041581

The FDA, AZT,

and AIDS

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CHAPTER 11

Regulation,

Public Goods, and

Benefit-Cost Analysis

How many people does it take to screw in a light bulb?

Economist: None, the market will do it.

Consumer Advocate: None, the regulators will do it.

DENNISCARLTON ANDJEFFREYPERLOFF

Azidothymidine, or AZT, retards multiplication of the AIDS virus in cells. Scientists

discovered AZT in 1964, and Burroughs Wellcome Co. acquired the patent a decade

later. When the AIDS epidemic struck, Wellcome sent the drug to the National Insti-

tutes of Health for tests and human trials.

Rapid FDA approval in March 1987 was hailed as a success story by the medical

community and AIDS activists. Average lead time for the approval of a new drug (pre-

clinical and clinical trials, and FDA approval) is seven to nine years. The FDA approval

phase itself averages over two years. The FDA approved AZT in a record four months.

However, soon after AZT’s introduction, critics attacked Wellcome for the “excessive’’

price it set for the drug. At a price to distributors of $1.50 per capsule, the cost of treat-

ment for patients with advanced cases of AIDS, ranged between $5,000 and $8,000 per

year. This made AZT one of the highest-priced drugs ever sold.

In its defense, Wellcome justified the high price as a way of recovering the

enormous costs of developing AZT. Although the company refused to divulge AZT’s

R&D costs, the cost of developing a major new drug (R&D, testing, and FDA

approval) typically averaged some $200 million. However, critics contended that

the government’s sponsorship of the drug’s testing significantly reduced the com-

pany’s costs. In 1989, federal lawmakers and a host of interest groups sought an

investigation of Wellcome’s pricing policies and called for the government to

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