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Pharmaceutical Industry
Practicing the most stark acts of corporate inhumanity
Pharmaceutical Giants
‘There were times not long ago that drug companies were merely the size of nations. Now, after a frenzied two-year period of pharmaceutical mega-mergers, they are behemoths, which outweigh entire continents. The combined worth of the world’s top five drug companies is twice the combined GNP of all sub-Saharan Africa and their influence on the rules of world trade is many times stronger because they can bring their wealth to bear directly on the levers of western power.’ (Guardian, 26/06/2001)
The pharmaceutical industry is one of the most profitable industries in both the US and Great Britain. Gross Profit margins of some of the leading pharmaceutical companies in recent years has been around 70 to 80 percent [1].
The global drugs market is controlled by corporate behemoths such as Pfizer, Bristol-Myers Squibb, Bayer, Merck & Co, Pharmacia, Novartis, Johnson&Johnson, Abbott Laboratories, American Home Products, Eli Lilly, Schering-Plough, GlaxoSmithKline and Allergan. Their market domination enables them to dictate drug prices . In past years, pharmaceutical prices have risen faster than the rate of inflation. The fact that there is very little price elasticity (the elasticity of demand tells us how much the quantity demanded changes when the price changes) associated with price increases is a major factor contributing to the high profitability of the pharmaceutical industry. A patient will not change the demand for a product with a small change in price when there are no close or available substitutes.
Actual manufacturing costs of medicines are relatively low [2].
The big pharmaceutical companies’ profits can be even higher due to limited competition in the pharmaceutical industry caused by strict patent laws [when a company owns a patent for a key drug, profits can mount up since the company faces no competition] and high barriers for small firms [new competitors] to enter the industry. In addition, through a recent and ongoing wave of mergers and acquisitions the big companies intensify the process of consolidation [limiting competition in the so-called free market even further]. Also, more frequently strategic alliances (less costly than mergers and acquisitions) are being formed with small biotech companies in order to reap the (new) economic benefits biotechnology offers. The drug giants cannot keep track of all new developments themselves, but want to keep their pipelines full [3].
According to industry apologists, high profits in the pharmaceutical industry are justified due to the unusual nature of the industry: research and development costs for new drugs require huge investments and involve relatively great risks as to whether the investment will pay off.
However, claim that prices are kept artificially high even after the initial investment has been recovered.
In addition, money is spent on
‘bribing’ journalists and ‘independent’ researchers. The industry’s most closely guarded secrets, according to Gaia foundation, are their pricing policy and what they are spending on lobbying [5]. PhRMA (Pharmaceutical Research and Manufacturers of America), an US-based organisation that represents all the big drug companies, has one of the biggest lobbying budgets in Washington.
Also,
much of the research which end up providing the drug giants’ profits was carried out with public money at universities and in public laboratories. The top ten drug companies in the US are reported to spend on average 20% of their revenues on R&D, of which 40% is paid by the governmental National Institute of Health (Forbes, 27/11/2000). In addition, the Guardian reports that drug companies try to make their R&D budgets look bigger by means of creative accounting. ‘With a little creative accounting, all manners of expenditures have been logged under the R&D title, partly in the pursuit of tax rebates.’ (The Guardian Unlimited, 13/02/2001) [6]
According to Dr Judith Jones, Director of the Division of Drug Experience at the FDA, if the data obtained by a clinician proves unsatisfactory towards the drug being investigated, it is quite
in order for the company to continue trials elsewhere until satisfactory results and testimonials are achieved. Unfavourable results are very rarely published and clinicians are pressured into keeping quiet about such data.
It is very easy for the drug company to arrange appropriate clinical trials by approaching a sympathetic clinician to produce the desired results that would assist the intended application of the drug. The incentive for clinical investigators to fabricate data is enormous. As much as $1000 per subject is paid by American companies, which enables some doctors to earn up to $1 million a year from drug research, and investigating clinicians know all too well that if they don't produce the desired data, the loss of future work is inevitable [9].
Thirteen of the world's leading medical journals have recently (September 2001) mounted an outspoken attack on the rich and powerful drug companies, accusing them of
distorting the results of scientific research for the sake of profits. The Lancet, the New England Journal of Medicine, the Journal of the American Medical Association and other major journals accused the drug giants of using their money - or the threat of its removal - to tie up academic researchers with legal contracts so that they are unable to report freely and fairly on the results of drug trials [10].
The drug giants are kicking the poor, especially those in poor countries, in several different ways: by
refusing to develop drugs needed in the Third World (e.g. drugs combating malaria, tuberculosis, sleeping illness and other tropical diseases) because there is no profit in it; by refusing to allow the manufacture and import of cheap generic drugs (South Africa, India, Brazil, Thailand and Egypt are good cases in point), using the poor as guinea pigs for untried and untested drugs (this is happening on a dangerously large and ever increasing scale), by engaging in biopiracy in the South (transnational corporations "pirating" genetic resources from the developing South) [11].
‘About 14 million people die each year from infectious diseases, many of which are preventable or treatable, This health crisis is caused by several inter-linked factors -poverty, and lack of access to health services, water and sanitation being some of them. However, a vital factor in the promotion of public health - and very often a matter of life and death - is the supply of effective and affordable medicines and people’s access to such medicines and treatments.’[12]
‘Of the 1,223 new chemical entities developed in the 21-year period between 1975-1996, only 11 were for the treatment of tropical diseases. The last major new tuberculosis drug was developed 30 years ago, but tuberculosis remains a major cause of death in many developing countries. There is concern that R&D in the
pharmaceutical sector is concentrated on products intended for the lucrative developed-country markets, given the increased investments for R&D on drugs for impotence, obesity and baldness, instead of R&D on new and more effective drugs for life-threatening or poverty-related ‘Third World diseases’, including malaria and tuberculosis.’[14]
"I had not been exploring Big Pharma for more than a couple of days before I was hearing of the frantic
recruitment of third world ‘volunteers’ as cheap guinea pigs. Their role, though they may not ever know this, is to test drugs, not yet approved for testing in the US, which they themselves will never be able to afford even if the tests turn out reasonably safe" --John le Carre
Every year infectious diseases kill two million people in the Third World; over half are children under the age of five, the vast majority too poor to afford proper healthcare. Countless millions more suffer debilitating illnesses, and two billion people lack access to basic health care. The availability of cheap drugs and better healthcare systems would help to reduce these figures. To keep the drug giants happy, and
using the threat of trade sanctions,
WTO rules (TRIPs) are preventing the availability of cheap generic drugs. GATS (WTO rules governing rules on trade in services) will force healthcare systems into the private sector [16].
Since its inception, TRIPs (
allowing the patenting of life forms, undermining poor countries’ rights to their natural resources and traditional knowledge, selling out the environment by undermining the Biosafety Protocol, preventing poor countries from developing their own pharmaceutical industry, and from importing cheap drugs to fight public health disasters, etc.) has been highly controversial. The US, the big pharmaceutical companies, the WTO and World Intellectual Property Organisation (WIPO) aggressively pressured poor countries to ensure their compliance with TRIPs.
In the face of so many people suffering and dying preventable deaths, it is very cynical to note that it’s all about money. As Pfizer CEO McKinnell puts it: "No one believes the provision of cut-price or even free Aids drugs in Africa will seriously dent drug company profits. But surrendering intellectual property in one part of the world would undermine the system of commercial incentives vital for the development of tomorrows medicines." [18] However, as has been notified earlier,
this reasoning is based on loose ground, and obviously highly immoral from a human perspective.
The fact is that the Doha Declaration only confirmed the existing agreement which already says that
WTO rules on patents do not prevent member states from providing more affordable generic medicines for their peoples. Nothing new here. The only so-called gain is that the WTO members adopted a strong political statement confirming this.
In March 2001,
39 of the world's largest drugs companies took action against South Africa to stop the use of generic drugs. At issue was South Africa's right to import and manufacture cheap generic drugs. The drug companies were asking the Pretoria High Court to invalidate a South Africa law (Medicines and Related Substances Control Amendment Act) that permits the import and manufacture of cheap generic drugs. The case was expected to last one week. On the second day the case was postponed for six weeks. During the period the case was scheduled to be heard, i.e. one week, drugs companies would have sold $2.2 billion of drugs, making a profit of $560 million. By the end of the week 5,000 sick South Africans would have died. 5,000 sick South Africans would have paid the price of
corporate greed [21].
Following the adjournment of the South African drugs case several corporations announced discounts on their drugs, but this has been dismissed for what it is, empty gestures delivered under pressure. The world’s drugs companies occasionally provide cheap drugs to the Third World. These are drugs long superceded,
drugs it is cheaper to dump on the Third World than to store or dispose of [22]. Donations and projects offered by drug companies are meaningless and can only be considered PR stunts, as long as the drug giants keep overpricing drugs (e.g. via patent law enforcement) beyond the reach of millions of poor people and keep ignoring poor people’s needs.
‘WTO trade rules (TRIPs) obviously clash with International Humanitarian Law.’
The pharmaceutical industry is not generally affected by economic conditions. ‘Rather, the industry has a tendency to be impacted by regulatory bodies and laws.’[26] Therefore, the pharmaceutical industry goes out of its way to influence politicians and policymakers. In the US, health care reforms are currently cited by the industry as the most important factor determining its future. The nation's multibillion-dollar
pharmaceutical industry appears comfortably situated with new President Bush.
Dr. E.M. Kolassa, an associate professor of pharmacy at the University of Mississippi and an industry consultant, said
drug firms are more comfortable with a Bush administration than they would have been with Gore, who accused them of, among other things, price fixing. Drug prices, increasing at a rate that outstrips inflation, emerged as a major issue during the presidential campaign because many senior citizens have trouble paying for their medicine. Gore scored political points by criticising industry profits and the high price of drugs. After heavily financing his election campaign, the concerns of the nation's big drug companies appear to be somewhat alleviated.
Bush has surrounded himself with advisers with ties to the pharmaceutical industry [27].
The pharmaceutical industry enjoys more privileges/freedom in the US (than in the EU). There are more price regulations (e.g., some medicines must be supplied at a fixed price) and the approval process for new medicines to enter the market is longer in the EU. As a result, the period in which corporations can pick the fruits of their patent rights is shortened. In addition, advertising codes are stricter in the EU, preventing corporations from aggressively promoting their products directly to consumers (DTC). All these issues impinge on the profitability of the drug giants which therefore threaten to move all or part of their business to the US. The European Commission (as well as the UK government) is actively working to prevent this by relaxing regulation.
With business-friends Bush and Blair in power, the outlook for the industry is promising.
