The pharmaceutical industry is owed a substantial debt of gratitude by everyone around the world. Its products have cured deadly diseases or improved the quality of life for billions. But this gratefulness has always needed to be qualified. Drug companies are not charities. They have to make a profit both for their shareholders and to invest in research for new effective medicines.
A standard industry argument is that it can cost at least $1 billion merely to develop a single drug. There is first the expense of research. Different compounds must be put together and tested. Along the way, many hundreds, sometimes thousands of potential drugs fail to work as hoped and the research is abandoned after a huge investment of scientists’ time and effort, to say nothing of the capital commitment. Then once a promising compound is discovered and extensively tested it must undergo fresh testing in order to obtain the regulatory approval by governments around the world. Though regulators take into account the findings of respected peers, the fact remains that this lengthy and costly process has to be pursued by the pharma companies in dozens of different jurisdictions.
Drug company bosses then insist they have to charge prices that will recoup their heavy investment in a product. They claim that patent protection, by which they have exclusive rights to their intellectual property for a certain number of years before “generic” copies can be produced by rival concerns, is essential. But this protection, particularly in the United States, is a moveable feast thanks to expensive lobbying on Capitol Hill by which extensions and exemptions are negotiated, often in return for generous campaign contributions by the pharma company concerned. Thus for instance a single syringe of insulin can still cost $100 in America when the same drug is available for less than $10 elsewhere in the world. Moreover, Big Pharma is not always actually plowing back its huge profits into research. Instead drug companies are acquiring small start-ups with promising discoveries, many in the new and exciting field known as “large-molecule biological medications”. Most notoriously, the price of EpiPen, a unique treatment used against anaphylactic shock, was increased 500 percent when the manufacturer was taken over.
Some 40 US state governments are currently suing 20 international drug companies, including Israel’s Teva Pharmaceutical, for fixing the prices of more than 100 generic products, in some cases driving up the cost of medicines by an astonishing one thousand percent. Profits are essential to free markets. But there are free markets and then there are phony markets. Forcing health systems and the patients they care for to pay through the nose for essential medicines that cannot be obtained elsewhere more cheaply is both utterly immoral and entirely unacceptable. One proposal is that regulatory approval should be extended to fix the price that a company can charge. This would be based on a close examination of the investment made in the development, production and expected future marketing of that medicine.
If the industry protests that this goes against free market theory, they should be reminded that they are being awarded a monopoly, although it is time-limited. They have a social duty to behave responsibly on pricing and to sacrifice some of their currently monstrous profits. It is high time that Big Pharma was called out.
