Big pharma prioritizes profit over health – jacks up prices

Who is Big Pharma? What does it do, and why is it so powerful?

The term refers to the biggest pharmaceutical companies — the likes of Pfizer, Johnson & Johnson, Moderna, AstraZeneca, GSK — but it also implies a common way of operating, based on the monopolies these corporations enjoy, and the way they produce and market drugs.

Particularly in the United States, these companies have an extremely bad reputation, for very good reason. These are corporations we rely on to provide lifesaving medicines, but they are absolutely addicted to sky-high profits. If the purpose of this industry is to make medicines, to keep us healthy, and to eradicate disease from the world, then it’s completely dysfunctional. If its purpose is to behave as a cash machine for superrich investors, then it’s working extremely effectively.

Can you give us a brief history of Big Pharma, especially its reinvention in the early 1990s? How did these companies become the industry titans we know now?

Many of these companies emerged in the late nineteenth century and consolidated after World War II. The opioid crisis is an example of the way pharmaceutical companies behaved for much of the twentieth century: they invented drugs, then they squeezed as much profit as they could from those drugs by selling them in highly inappropriate ways. The result in that case was that three hundred thousand people in the United States alone died of overdoses.

But in the 1990s, another — also very harmful — model for how Big Pharma could function emerged. Like a lot of companies at the time, pharmaceutical companies realized that it wasn’t the stuff they produced that was creating the most value. They realized they owned something intangible: not research, not staff, not factories, but intellectual property, such as copyright and patents. Patents have given companies a complete monopoly for at least twenty years — and often much longer — on the drugs they produced.

In realizing this, pharmaceutical companies began to rethink and restructure what they did. Rather than prioritizing long-term investment in research and development, they focused on protecting their intellectual property. The pharmaceutical industry gutted research and development of new drugs. They got rid of all of many parts of that process that they could contract out or buy from others. What they were left with were drug monopolies and that really changed how they behaved.

Today, by and large, the pharmaceutical industry does little to research and develop drugs. They buy up other companies that have done that research, often with huge amounts of taxpayer funding. As a consequence, if you are a company that profits primarily from intellectual property, what’s important to you is not doctors and medical researchers but lobbyists and lawyers, because they are the people who are going to extend and deepen your patents.

You have no interest in medicines that would treat diseases primarily suffered by poor people in poor countries; you have no interest in dealing with pathogens that could cause the next pandemic, because in all likelihood, a pandemic won’t be caused by that specific pathogen. They have very little interest in curing disease, because their ultimate blockbuster is lifelong treatment for chronic disease — that’s where enormous amounts of their time and energy are spent.

Martin Shkreli is a great example of what’s happened to the industry. He realized there was effectively a monopoly on an antiparasitic treatment particularly needed by people with HIV, so he bought the drug and then he jacked up the price by 5,000 percent overnight. Later, when he was asked if he had any regrets, he replied, “I regret not raising the price further.”

Shkreli went on to make some really interesting comments that I find very applicable to the industry today: “I am not expected to give my shareholders a decent return but to maximize their return.” He also said, “I don’t do anything that the rest of the pharmaceutical industry doesn’t do.” He’s right. He’s extreme, but not unusual, and he does it without the sanctimonious words that you get from many pharmaceutical executives.