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Now
The US Pharmaceutical industry has been
making headlines since the Democrats won back both houses of
Congress in the November 7 election. Big Pharma, which has closer
ties with Republicans, is now scrambling to reorganize its massive
lobbying enterprise to maintain its immense influence in Washington
so it can protect its legislatively-engineered superprofits.
The lobbying power of Pharmaceutical
Researchers and Manufacturers of America (PhRMA), the main industry
association, is awesome. A recent Reuters article noted estimates
that for every member of Congress there are three drug industry
lobbyists in Washington.[1]
The New York Times recently
reported that the industry's lobbying efforts in Washington amount
to some $100 million per year.[2]
According to the Center for
Public Integrity, of the nearly $150 million spent on direct
campaign contributions over the last four election cycles, sixty-five
percent went to Republicans.[3] Although the industry has thus
given over $50 million to Democrats in the last decade, this
has been insufficient to assure the fealty shown by Republicans.
Many Democrats remain committed
to allowing cheaper imports from Canada and to allowing the government
to negotiate lower drug prices for Medicare recipients, a practice
outlawed in the 2003 Medicare law.
The superprofits and excessive
power of Big Pharma in Washington are so extreme as to compel
many Democrats to take principled positions against the industry.
Typically, however, such positions are taken not against the
system but only in relation to particular individuals and companies
(e.g., Ken Lay and Enron). In the present case, somewhat unusual,
outrage is directed against an entire industry (other than need
for a little tweaking here and there, the larger capitalist economy
works just fine).
But the Big Pharma case is
not of a different kind. Rather, it is a matter of degree
in this case an extreme example of nothing other than capitalists
being successful at being capitalists and, as such, of the economy
functioning according to its systemic tendencies in the absence
of countervailing power (e.g., powerful unions or a strong political
party that actually represents the interests of workers).
From the great classical political
economists, beginning with Adam Smith who famously theorized
the invisible hand of the market, to their intellectual and political
successors, neoclassical economists such as the late Milton Friedman
and neoliberals such as the banal Thomas Friedman, defenders
of the faith have emphasized the benefits of competitive markets
and minimized or dismissed the significance and extent of monopolistic
markets.
Academically, teaching in economics
generally fails to note the basic fact that the "profit
maximizing" goal of capitalist businesses means that nearly
all such organizations aspire to become giant corporate monopolies
(think GM, GE, Wal-Mart, Microsoft, etc.) and, as such, a strong
tendency toward monopoly is intrinsic to capitalism. (Technically,
mainstream economists refer to the situation in question, where
a small group of powerful firms dominates a market, as oligopoly.)
And politically, the plain,
undeniable fact that large sectors of the economy are dominated
by a small group of massive corporate conglomerates is simply
ignored by mainstream economists and neoliberal journalists shilling
for the captains of industry and the governmental apparatuses
whether under Republican or Democratic control that
champion and watch out for the business class as a whole.
These issues, minimized or
ignored by mainstream economics are, of course, central to the
Marxist analysis of capitalism. In particular, Karl Marx made
two related arguments about the nature of capitalism that provide
a better understanding of the current problems with the pharmaceutical
industry than market-centered theories.
First, a defining characteristic
of capitalism is that capitalists do not produce for use-value
that is, make things in order to satisfy needs as such
but for exchange-value that is, to satisfy markets
where they can make the most profit. Of course, whatever is produced
for exchange-value must also have use-value or else nobody would
buy the product. The subtle yet profound point is that, because
the first and foremost goal of capitalist firms is to make profit,
capitalists generally do not have any stake in the markets they
serve nor any particular interest in the well-being of their
customers.
An example of the perverse
effects of the drive for exchange-value in the pharmaceutical
industry is that these companies typically do not invest much
in finding vaccines or cures, but instead focus on treatments
for diseases where there are large existing or potential markets
and, ideally, for incurable chronic diseases so that consumers
must take drugs for life. Pharmaceutical companies sell drugs
to make money, not to help people. Witness their intense lobbying
to keep cheap imports out of the hands of the US market and cheap
generics out of Africa.
According to Alex Hittle, an
analyst for AG Edwards, "We sometimes joke that when you're
doing a clinical trial, there are two possible disasters. The
first disaster is if you kill people. The second disaster is
if you cure them. The truly good drugs are the ones you can use
chronically for a long, long time."[4]
Where pharmaceutical companies
do focus on cures, it is often for invented diseases of rich
Westerners, such as pre-hypertension, compulsive shopping and
gambling addiction, while crippling diseases such as malaria,
tuberculosis and sleeping sickness remain unprofitable and hence
with few or no effective treatments or research dedicated to
finding cures.[5]
Sleeping sickness, for example,
which is at epidemic levels in Africa, only has two treatments
its late stage. One, melarsoprol, which corrodes human
veins and must be delivered in glass syringes, fails for a third
of patients and kills one in ten. The more effective treatment
is eflornithine, which was discontinued as a treatment for sleeping
sickness by Aventis because it was unprofitable. Yet the company
continued to manufacture it as an ingredient in Vaniqa, a cosmetic
drug that removes facial hair. Only after the independent medical
aid agency Médecins Sans Frontières threatened
to sue was a deal worked out to continue producing eflornithine
as a treatment for sleeping sickness.[6]
A second core argument that
Marx made is that capital will become increasingly concentrated
and centralized. The argument about concentration refers to the
increasing accumulation of wealth and means of production into
fewer hands, while the argument about centralization is about
growing mergers, acquisitions and monopolistic firms.[7] These
predictions have been generally correct, as evidenced by oligopolistic
markets from cereals to computers and the giant corporate conglomerates
that today dominate that US economy across industries, as well
as the waves of mergers and acquisitions that have been a common
characteristic of the US economy since the Great Merger Movement
from 1895-1905.
Such concentrated economic
power translates directly into political power.
And so we see the enormous
influence of the pharmaceutical industry allowing it, for instance,
to more-or-less write the 2003 Medicare law to its benefit and
to the detriment of tens of millions of elderly Americans.
More generally, Big Pharma
spends more money on marketing, suppressing competition, and
shaping laws, trade agreements, the regulatory regime and the
scientific review process than it does researching and developing
drugs. Pfizer, for instance, spent over $11 billion on marketing
in 2001, over twice what it spent on R&D.[8]
According to PhRMA, 39% of
industry staff are in marketing while only 22% are in research
and development; since 1995 the marketing staff has increased
by 59% while the R&D staff has decreased by two percent.[9]
And the industry's claims that
the extensive monopoly patent protection it receives in the US
are necessary for innovation do not hold much water. In the first
case, as discussed above, the industry has been characterized
by lack of innovation in terms of curing deadly diseases, with
most of its innovation being in inventing and marketing new
less serious but more profitable "diseases."
Perhaps more importantly, although
precise statistics are not available, much of the basic research
takes place in universities or foundations and is not funded
by the industry.
Without having to spend all
the money on marketing, lobbying and suppressing competition,
independent scientists in universities and foundations could,
with public funding, conduct R&D at fraction of the cost.
A direct implication of Marx's
arguments about the drive for exchange value and the tendency
toward monopoly are that in seeking profit, capitalist organizations
do not necessarily maximize efficiency or innovation. While competition
does generate innovation, a primary goal of monopoly-seeking
pharmaceutical companies is the elimination of competition.
And although it is clearly
true that capitalism is a dynamic economic system that does radically
increase efficiency, productivity and innovation, it remains
equally true that under capitalism efficiency is a means and
not an end.
As we have seen, industry spending
on marketing far outstrips that on R&D. A primary goal of
pharmaceutical industry marketing, and management more generally,
is to find so-called blockbusters that have potential sales of
over a billion dollars. Profit in the pharmaceutical industry
often comes not from innovative products but from innovative
marketing in ways that are often pure waste from the point
of view of consumers.
Much of the investment of pharmaceutical
companies in research goes not toward finding new drugs for diseases
without cures that is, generating new and sorely-needed
use-values but into producing "copycat" drugs:
slightly different versions of existing blockbuster drugs that
are functionally similar but different enough to bypass an existing
patent. Indeed, a study by the National Institute for Health
Care Management found in 2002 that two-thirds of the new drugs
approved by the FDA between 1989 and 2000 were identical to drugs
already on the market or modified versions of existing drugs,
with only about 15% judged to be significant improvements over
existing medicines.[10]
Typically pharmaceutical industry
marketing does not provide consumers with any new or useful information
about products. Enormous amounts of money are spent to influence
medical experts with gifts and "consulting fees."
What is covert but routine
in the US is explicit in countries without regulations: Western
pharmaceutical companies commonly exchange refrigerators, TVs
and money for prescriptions in countries like India and Turkey.[11]
Financial industry ties to
the scientific establishment are so prevalent that in 2002 the
New England Journal of Medicine eliminated their policy
barring those with financial ties to companies whose medicines
are being studied from authoring reviews of medical studies.[12]
Enough independent experts could no longer be found to write
the reviews.
The contemptible extent of
Big Pharma's influence in the scientific process is summarized
neatly by Drummond Rennie, a deputy editor of the Journal
of the American Medical Association:
I'm the advertising guy for
the drug. I tell a journal I will give them $100,000 to have
a special issue on that drug. Plus I'll give the journal so much
per reprint and I'll order a lot of reprints. I'll select the
editor and all the authors. I phone everyone who has written
good things about that drug. I say, "I'll fly you and your
wife first class to New Orleans for a symposium. I'll put your
paper in the special issue of the journal and you'll have an
extra publication for your CV." Then I'll put a reprint
of that symposium on some doctor's desk and say, "Look at
this marvellous drug."[13]
Big Pharma employs a lot of
rhetoric about innovation and the provision of new medicines
and useful products for consumers. But these companies are ordinary
capitalists trying their best to capture the market and make
profit; they are extraordinary only in their success, in large
part due to the monopoly patent protection they enjoy. And they
chose profit over the public good or need as a rule.
Matt Vidal is pursuing his doctorate at the University
of Wisconsin in Madison. He
can be reached at: mvidal@ssc.wisc.edu
1. Susan Heavey, "Drug
industry braces for Democrat-led Congress," Reuters November
24, 2006.
2. Rober Pear, "Drug Industry
Is on Defensive As Power Shifts," New York Times
November 24, 2006.
3. Victoria Kreha, "Checkbook
Politics," Center for Public Integrity, July 7, 2005.
4. Alan Cassels, "Peddling
Paranoia," New Internationalist 362, November 2003.
5. Cassels, "Peddling
Paranoia."
6. Spring Gombe, "Epidemic,
what Epidemic?" New Internationalist 362, November 2003.
7. Karl Marx, Capital Vol.
1, esp. Chapter 25, "The General Law of Capitalist Accumulation,"
1867.
8. "Big Pharma The
Facts," New Internationalist, November 2003.
9. Cassels, "Peddling
Paranoia."
10. Russell Mokhiber and Robert
Weissman, "Stripping Away Big Pharma's Figleaf,"CommonDreams.org,
Thursday, June 13, 2002; "New US study underscores lack
of industry innovation," HAI-Lights, October 2002.
11. Tamar Wilner, "Freemarket
freebies," New Internationalist 362, November 2003.
12. Nathan Newman, "Big
Pharma, Bad Science," The Nation, July 25, 2002.
13. Sheldon Rampton and John
Stauber, Trust us we're experts!(Tarcher/Putnam 2001),
quoted in Dinyar Godrej, "The Great Health Grab," New
Internationalist 362, November 2003.
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