Notwithstanding his vigorous, even colorful, writing style, University of Chicago law professor Richard Epstein is a lawyer's lawyer. So it's entirely characteristic that he begin his analysis of the pharmaceutical industry and its discontents with a brief summary of ancient Roman property law. Happily, he moves quickly to the timelier topic of intellectual property, especially patents, the essential ingredient for a productive pharmaceutical industry.

Resident Scholar John E. Calfee

Derived partly from his own research and analysis, "Overdose" summarizes an immense literature while digging into such knotty issues as the prospect of an "anticommons" in which too much patent protection in the pharmaceutical industry could stifle R&D instead of propelling it forward.

The chapter on proposed government buyouts of pharmaceutical patents in order to sell pills at rock-bottom prices is a tour de force in subtle economic reasoning. Epstein doesn't think government bureaucrats will ever be able to predict which drugs will turn out to be essential innovations and which will quickly fade away when competitors unexpectedly come up with better products.

Epstein hits just about every issue in today's intense debate over the pharmaceutical industry: patent rights, prices and price controls, drug importation at bargain-level foreign prices, R&D incentives and the role of government, FDA regulation (including drug-safety oversight), drug marketing and its many critics and tort liability.

Many of his arguments arise directly from the huge wedge between manufacturing costs and the prices paid for drugs. The wedge is inevitable, and has to be defended, because drugs enter the market only after years of research, testing and rigorous FDA deliberations, often after numerous expensive failures. Unless manufacturers know they can charge prices far above manufacturing costs, they won't make the mammoth investments necessary to create the rare success amid all those failures.

Epstein is especially trenchant in his subtle analysis of drug marketing, arguably the most popular target of industry critics. In the tricky economics of pharmaceuticals, Epstein sees marketing as an enormously beneficial cure rather than a problem, at least as long as deception is held in check. Vigorous marketing is what ensures that drugs will actually reach the patients who need them, and it cuts the average cost of drugs by allowing R&D costs to be spread over a larger base of users.

Finally, the author arrives at tort liability--one of his specialties--as applied to pharmaceuticals. And Epstein's conclusion is simple: With all its problems, the FDA is vastly superior to the liability system as a way to regulate drugs and allocate risks.

His case study is the ongoing litigation over Vioxx. The plaintiffs want Merck to pay compensation and punitive damages for heart attacks even though it is impossible to know which heart attacks were actually caused by Vioxx. Epstein argues that Merck acted responsibly in developing and marketing this drug, which saves lives by preventing bleeding ulcers but unexpectedly revealed a tendency to cause more heart attacks than at least some of the older drugs it replaced.

If Epstein's pessimistic view of litigation holds up, Vioxx litigation will escalate with a vengeance, pharmaceutical research will be worse off, and so will patients and consumers. Let us hope this cogent book can help stem the tide.

John E. Calfee is a resident scholar at AEI.