Profiteering in Big Pharma

Scenario: “Pharmacy X” invents a new AIDS drug and makes it through FDA trials. When it hits the market, they jack up the sale price by 100% to maximize profits. Though this may seem unethical, it is a pattern that is becoming all too common in the United States.

Profiteering in Big Pharma

In 1914, Jonas Salk invented the cure for polio which, nearly overnight, cured the United States of a disease that was crippling its populace. This formula was developed and produced entirely free from any patents or restrictions, and, more importantly, was openly considered by Dr. Salk to be his charitable contribution to the world (Khan J.D.). Now, I’m not suggesting that, in this day and age of overt capitalism, we could all expect the same altruistic outcome from his discovery, but I do think it is an example of something our Pharmaceutical/Healthcare/Capital Investment industries should take into consideration as they move forward. We are, in fact, in the center of medical innovation, but in comparison to most other advanced countries in the world, the United States falls way behind when it comes to the patient’s cost of critical prescription drugs. Our splintered healthcare insurance system is partly to blame for the soaring prices of these medications because of a lack of negotiating power, but other causes include monopolistic patents, a strong reliance on prescription drugs, and profit driven investors focused solely on the bottom line (Nelson). Because we have let our Pharmaceutical Industry become so rooted in capitalist philosophy, there is so much profit to be made that money is now the driving force behind medical innovation rather than human benevolence. While there are possible solutions to remedy this medical malfunction, in this atmosphere, it is not surprising that “Pharmacy X” has jacked up the price of their new AIDS drug; however, in comparison to other, nastier Pharma companies, they are still investing in medicine that has the potential to help the less fortunate.

            This exercise represents an outcome that many drug companies come to once they make it past FDA trials, and onto the prescription pad, which is that they raise the price in order to make as much money as they can from their new discovery. In our example, “Pharmacy X” hiked their price by 100%. At first, this seems like it might make sense. The company worked long and hard to get through the years of rigorous testing that the FDA made them comply with, and, once they did, they earned the right to make their money. But, when you include a patent that lasts 20 years, (which is from the date of the invention, and that comes before the trials, so, once companies start selling their products, the patent could be only a few years from expiring) there is no competition to drive the price down which allows the owners of the patent to set whatever arbitrary price they want (Nelson). They can also keep production low which drops the variable costs, increases employee specialization, and maximizes profit (Mankiw). In today’s market, these Pharmaceutical companies rely on investments from large entities, including the Federal Government (hello taxpayers) and, more importantly, profit driven forces like hedge funds and financial groups (Nelson). These institutions operate solely on the bottom line, and, when they are investing in medical research, they want to create drugs that they will be able to cash in on. For example, 18% of all American adults suffer from depression or anxiety (Gibson), so these financial backers are far more likely to put their money into research for a new anti-depression drug rather than a drug that fights malaria, or some other disease that kills third world populations, because those people don’t have any money.

            Pharma CEO’s attempt to explain why drug price inflation is necessary to spur advancements, but the Government provides incentives for new medical research, as well, that do not fatten the wallets of these corporate bigwigs. Essentially, the market today is driven by investors looking to make the highest profit, and, to lure one of them to, say, a specific cancer drug that treats a rare form of the disease with a low number of patients, the company would have to charge an astronomical price to account for the low demand (Nelson). Now, this is especially troubling to those people with that cancer because they will probably die without medical intervention, but, from a business perspective, the answer is clear and highly expensive. On the other hand, the government and global health networks provide subsidies for these drugs to those who cannot afford them. They also fund an incredible amount of medical research which is, shockingly, not driven by profit, but by the betterment and needs of society (Nelson).

            It’s unfortunate that we have allowed capitalism to infiltrate our Pharmaceutical industry to the point where a select few can get stupid rich off the misery and will to live of the infirm in our country and on our planet. Medicine should not be considered a luxury nor a commodity, but rather an intrinsic property of life for all humanity. It’s true that if a person in Africa is dying from AIDS, and they have never heard of AIDS medication in the US or at all, they won’t miss it. But, if you’re a doctor in San Francisco or somewhere, and you invent a medication that could save a person’s life from AIDS, you know that someone in Africa most definitely needs it. (I hope that) People don’t become doctors to make money off the sick, but to heal them. So, what can we do to prevent this system from falling off the wheels all together? First of all, if our healthcare industry can’t negotiate prices, the Government has to step in and institute price controls, or at least set a percentage cap to drug price markups or even corporate salaries. Second, we must reform our business schools so that we educate our future leaders into benevolent creatures (Khan) rather than money grubbing, opportunists. Thirdly, we have to combat disease and illness in other ways than medication such as education, sanitation upgrades, and investment in the poorest communities. There must be a division between making money and providing essentials for everyone, and, for right now, I think corporate America should be excommunicated from medical and pharmacological investment.

Gibson, C. Robert. US Uncut. “This Chart Reveals the Inhumanity of U.S. Drug Prices Compared to Other Countries.” 9/22/15. Web. 2/16/17.

Khan, Wasima. AAAS. “Profits, Medicine, and the Human Right to Health in the Pharmaceutical Industry: Educating (Future) Business Leaders.” 9/16/15. Web. 2/16/17.

Mankiw, N. Gregory. Principles of Microeconomics. “The Costs of Production.” 2015. P272. 2/16/17.

Nelson, Roxanne. Medscape. “Why are Drug Costs So High in the United States?” 11/19/14. Web. 2/16/17.