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Big Pharma’s Distressing Covid Profits
‘Doing well by doing good. In fact, doing obscenely well’
The race by Big Pharma for a vaccine to combat the Covid-19 coronavirus, a breathtaking scientific achievement, is also nothing more than the latest demonstration of the absolute moral bankruptcy of the western pharmaceutical industry. As many as 70 poor countries are likely to be left out in the short term, according to Jomo K. Sundaram, a Malaysian economist, and his associate, economist Anis Chowdhury. As many as 1.7 billion people are certain to go without a vaccine for an extended period.
Big Pharma is hiding behind the international patent regime. If the mainstays of the industry had agreed to combine their efforts to create a vaccine to take care of billions of people, getting relief to the third world could have been far more effective. But despite the fact government investment is largely driving development, the pharmaceutical companies will keep their patents and their profits, which are far larger than conventional industry as a whole, according to a cross-sectional study by the Journal of the American Medical Association of 35 large pharma companies compared with 357 nonpharmaceutical companies.
As Jomo points out, the Trump administration provided US$10.5 billion to vaccine development companies. Moderna’s vaccine emerged from a partnership with the National Institute of Health (NIH). Research at the National Institutes of Health, the US Defense Department and federally funded university laboratories have been crucial for rapid US vaccine development. Pfizer has received a US$455 million German government grant and nearly US$6 billion in US and EU purchase commitments. AstraZeneca received more than £84 million (US$111 million) from the UK government, and more than US$2 billion from the US and EU for research and via purchase orders.
So Moderna and Pfizer have already been paid for their work on the vaccines, as Dean Baker of the Washington DC-based Center for Economic and Policy Research has pointed out. “In the case of Moderna, the US government paid the full cost of the research and clinical trials for the economy. If the vaccine turned out to be ineffective, the US taxpayer would have been out the money, Moderna had been paid for its work. In the case of Pfizer, the company has large advance purchase agreements with the US and many other countries, which far more than cover its plausible research costs and allow for a generous profit. The German government also contributed several hundred million dollars to manufacturing facilities. Of course, both vaccines rely heavily on taxpayer-funded research through the National Institutes of Health. So, their reliance on government support is extensive.”
According to a variety of sources, Big Pharma is thus going to be doing well by doing good, in fact doing obscenely well. According to a New York Times article by Stephen Buranyi, a lecturer at the European Business School, bulk pricing negotiated by the US government for both Modern and Pfizer-BioNTech vaccines amounts to a range of US$15.25 to UD$19/50 per dose. That could yield a 60 percent to 80 percent profit for Pfizer. The deal negotiated by Oxford with AstraZeneca could yield a profit of up to 20 percent, Buranyi writes.
“With control over the production of these vaccines,” according to Buranyi, “these companies will largely provide them on their own schedule, using their own factories or licensed producers — while other facilities around the world sit idle. Governments will almost certainly order more of the approved vaccines in the weeks and months to come, but the production capacity for each company is limited.
He suggests that “Companies should not only pledge to waive their patents but to also share all their technical knowledge so that other manufacturers can help produce the much-needed vaccines.”
Donald Trump, whatever his indelibly besmirched presidency, has at least campaigned for lower drug prices. In July, he signed executive orders requiring government health plans to pass on negotiated discounts directly consumers, allowed individuals to import lower-cost drugs from abroad, ordered certain healthcare providers to sell insulin and injectable epinephrine at greatly reduced prices to patients without health insurance and ordered the government-paid health plan Medicare to purchase drugs at prices matching low prices paid by other governments.
Trump signed executive orders because none of these proposals was likely to make it through the US Congress, where the industry has spent US$4.7 billion between 1999 and 2018 -- US$233 million a year on the federal government alone – to maintain its clout. According to a study by JAMA Internal Medicine, the industry spent about US$414 million on contributions to presidential and congressional electoral candidates, national party committees, and outside spending groups; and $877 million on contributions to state candidates and committees.
As a result of this massive purchase of elected officials at every level of government, drug prices have simply become unhooked from the reality of cost of production. Consider this April 21, 2018 Asia Sentinel story by correspondent Neeta Lal: A drug to control Hepatitis C that the American pharmaceutical giant Gilead Sciences Ltd sells for US$1,000 a dose in the US can be had for US$14 a pill in India. And it is exactly the same drug, both manufactured by Gilead to the same specifications. Gilead made the deal to sell the pills at cheaper prices overseas while charging as much as US$80,000 for a 12-week regimen in the US, according to a Hyderabad-based drug reform concern. In India, the same drug regimen costs US$1,200 for 12 weeks of treatment.
Nor is Gilead alone. In 2014, India’s Patent Office a first-ever compulsory license to a generic drug manufacturer, effectively ending the German pharmaceutical company Bayer’s monopoly on the drug sorafenib tosylate, used to treat kidney and liver cancer. Competition from the generic version brought the price down dramatically, from more than US$5,500 per month to close to $175 per month – a price reduction of nearly 97 percent. India’s Patent Office charged that not only had Bayer failed to price the drug at a level that made it accessible and affordable, it also was unable to ensure that the medicine was available in sufficient and sustainable quantities within India. While India has been accused of breaking patents – which they call by the euphemism ‘reverse engineering,” the Indian pharma industry is one of the few brakes put on the global industry’s rapaciousness.
As Jomo pointed out, the leaders of India, France, Germany, Norway and the European Commission have called for the coronavirus vaccine to be “produced by the world, for the whole world” as a “global public good of the 21st century.” The United Nations Secretary-General also insisted on access to all when available. The WHA unanimously agreed that vaccines, treatments and tests are global public goods, but was vague on the implications. Obviously, the industry ignored the request.
The Federation of Pharmaceutical Manufacturers and Associations insists that waiving patent protections “would jeopardize future medical innovation, making us more vulnerable to other diseases.” But as the US National Center for Biomedical Information points out, “Historically, the largest government investments in basic drug discovery research have been made by the National Institutes of Health. The Defense Advanced Research Projects Agency (DARPA) has also contributed to the discovery stage by taking on some relatively high-risk biologic projects. Moreover, in part as a result of the public’s impatience with the slow pace of the discovery process, state governments are increasingly taking the initiative in this area.”
Some 44 percent of all US research is funded by the federal government, admittedly down from as much as 70 percent before successive conservative governments started to wring out budgets. Late-stage pharmaceutical development is funded primarily by pharmaceutical companies or venture capitalists with some collaborative support from government sources, such as the National Institutes of Health.
So in effect, the continued claim of Big Pharma that funding research is risky business is largely nonsense. “The funding gap that often occurs in this period has been referred to as the ‘valley of death’” according to ScienceDirect. “The risks are great and may be considered as not worth taking for products designed to treat rare and neglected diseases, which may ultimately yield a very limited return on investment. To help fill this funding gap, US-based foundations have increased their investments in discovery and development for new drugs specific to their diseases of interest.”
What the drug companies are good at spending their money on – U$30 billion in 2016 – is marketing. Researchers at Dartmouth College found in 2018 that the vast majority of spending by pharmaceutical companies was on marketing prescription drugs. On US television, that usually features an upbeat advertising segment of attractive people getting markedly better after sniffing the latest pharmaceutical glue, followed by an equally long segment listing the dangerous side effects – overshadowed by tranquil photo footage of birds in the sky, mountainous vistas and attractive people doing attractive things so that the warnings of danger are never heard.