WHY TREATING ADDICTS IS TOUGH PLAY FOR DRUG FIRMS

Larry Bloch is one of those rare folks with degrees in both medicine and
business from Harvard. Recently, his biotech company created an enzyme that
breaks down cocaine molecules and is highly effective in rats given a
cocaine overdose.

Dr. Bloch (M.D.) is thrilled. Mr. Bloch (M.B.A.) isn't so impressed.
"There's a very large business risk" to developing cocaine treatments, he
says. The company where he serves as chief financial officer, Applied
Molecular Evolution Inc. of San Diego, hopes the government will pay for
the next stage of research because it isn't sure its investors want to put
their own money on the line.

Dr. Bloch's experience is all too common. Scientists are discovering more
medications that seem to help addicts, and given the huge social costs of
addiction one would expect those medications to be rushed onto the market.
Instead, they limp through development, hobbled by a shortage of funds and
lack of interest from big pharmaceuticals companies.

Why? In a word, economics. If a drug company finds a cure for cancer,
insurers and the government will include it among their covered treatments
and pay almost whatever price the company wants. The cure's discoverer also
will reap a bonanza of good publicity. So drug companies spend billions of
dollars of their own money each year studying cancer.

For addiction, the calculations are different. Few companies want to be
tarred by association with junkies, and the size of the market is
uncertain. While some insurers are covering a new medication called
buprenorphine for heroin and painkiller abusers, coverage of methadone, an
older treatment, is less common. As a result, even addicts lucky enough to
have insurance can pay several thousand dollars a year out of pocket for
methadone, says Chris Kelly, the head of a methadone-users group in
Washington. Of course, many addicts are uninsured.

Besides, a drug company can't send a bill to the largest group that
benefits from addiction treatment: nonaddicts. Everyone wants lower crime
and a more efficient work force, but it is hard to imagine drug-company
executives going door-to-door collecting fees from homeowners who weren't
robbed because their neighborhood had fewer addicts. "If General Electric
absorbed the costs [of addiction] you can be sure there'd be a market," Dr.
Bloch says.

To economists, such "market failures" are a familiar problem. The classic
case is pollution: Individually no one has an incentive to pay for a filter
that cuts car pollution, but collectively society is better off if everyone
drives low-polluting cars. The solution is laws on auto emissions. It's
effectively a tax, since antiemission equipment costs money, but cleaner
air is worth it.

Yet federal and local governments hesitate to use their power of taxation
to pay for the development of antiaddiction drugs . True, a variety of
government programs use tax money in drug-abuse research and treatment. The
National Institute on Drug Abuse, whose main job is funding research, has
an annual budget of $960 million. Many states cover methadone treatments
for indigent addicts under Medicaid. But these sums are dwarfed by the
costs of addiction, which are estimated as high as several hundred billion
dollars a year.

Skeptics point out that addiction treatment isn't as certain to work as a
pollution filter. Medications under development typically help only some
addicts or address only part of the recovery process.

Most scientists, however, see addiction as a brain disease that, in
principle, can be addressed with drugs just as well as mental illnesses
like schizophrenia. They accept that subduing addiction will require a
collection of partially effective weapons rather than a single magic bullet.

One such weapon is lofexidine, which Britannia Pharmaceuticals Ltd. has
sold in Britain since 1992 for addiction to opiates such as heroin. It
isn't a cure, but British doctors believe it helps relieve withdrawal
symptoms and put addicts on the road to recovery. The U.S. government paid
for a clinical trial of lofexidine, and the results were so good that last
year the trial was stopped early.

Now, Britannia Managing Director Max Noble is looking for an American
partner to help foot the bill for a large-scale U.S. clinical trial and, if
successful, a marketing campaign here. Midlevel executives at one big U.S.
pharmaceuticals company were intrigued, but higher-ups nixed the deal early
this year.

Meanwhile, U.S. addicts wait. "You've got to get society to make a
decision: Is drug addiction something to be scolded or something to be
faced up to?" says Mr. Noble, who has shifted his search to smaller companies.

Eventually, Mr. Noble's drug will probably make it to the market here, and
Dr. Bloch's company will scrape up the funds to test whether its cocaine
antibody works as well in humans as it does in rats. But it will likely
take longer than it would if Americans were more committed to the idea that
medicines can help drug abusers.