How the pharmaceutical drug economy became a racket controlled by Wall Street

Alexander Ziachik writes:

Donald Trump’s plan to lower prescription drug prices, announced May 11 in the Rose Garden, is a wonky departure for the president. In his approach to other signature campaign pledges, Trump has selected blunt-force tools: concrete walls, trade wars, ICE raids. His turn to pharmaceuticals finds him wading into the outer weeds of the 340B Discount program. These reforms crack the door on an overdue debate, but they are so incremental that nobody could confuse them with the populist assault on the industry promised by Trump the candidate, who once said big pharma was “getting away with murder.”

With his May 11 plan, Trump is, in effect, leaving the current pharmaceutical system in place. Increasingly, its most powerful shareholders are the activist managers of the hedge funds and private equity groups that own major stakes in America’s drug companies. They hire doctors to scour the federal research landscape for promising inventions, invest in the companies that own the monopoly licenses to those inventions, squeeze every drop of profit out of them, and repeat. If they get a little carried away and a “price gouging” scandal erupts amid howls of public pain and outrage, they put a CEO on Capitol Hill to endure a day of public villainy and explain that high drug prices are the sometimes-unfortunate cost of innovation. As Martin Shkreli told critics in 2015 of his decision to raise the price of a lifesaving drug by 5,000 percent, “this is a capitalist society, a capitalist system and capitalist rules.” That narrative, that America’s drug economy represents a complicated but beneficent market system at work, is so ingrained it is usually stated as fact, even in the media. As a Vox reporter noted in a piece covering the May announcement of Trump’s plan, “Medicine is a business. That’s capitalism. And we have seen remarkable advances in science under the system we have.”

This is a convenient story for the pharmaceutical giants, who can claim that any assault on their profit margins is an assault on the free market system itself, the source, in their minds, of all innovation. But this story is largely false. It owes much to the rise of neoliberal ideas in the 1970s and to decades of concerted industry propaganda in the years since.

In truth, the pharmaceutical industry in the United States is largely socialized, especially upstream in the drug development process, when basic research cuts the first pathways to medical breakthroughs. Of the 210 medicines approved for market by the FDA between 2010 and 2016, every one originated in research conducted in government laboratories or in university labs funded in large part by the National Institutes of Health. Since 1938, the government has spent more than $1 trillion on biomedical research, and at least since the 1980s, a growing proportion of the primary beneficiaries have been industry executives and major shareholders. Between 2006 and 2015, these two groups received 99 percent of the profits, totaling more than $500 billion, generated by 18 of the largest drug companies. This is not a “business” functioning in some imaginary free market. It’s a system built by and for Wall Street, resting on a foundation of $33 billion in annual taxpayer-funded research. [Continue reading…]

Print Friendly, PDF & Email