While Valeant may hold the title in many people’s minds as Canada’s worst drug company, they are no means alone or a complete outlier. The Valeant story is perhaps the most apparent, “expose of the new tradecraft of the pharmaceutical industry, which increasingly relies on technically legal but ethically dubious business practices to squeeze out profits at the expense of patients, insurers, and the American [or Canadian] economy.” There are other firms that have followed the ‘Valeant way’ to some extent with a, “dependence on pricey acquired drugs, M&A, or stingy R&D spending. Mallinckrodt spent 6.9 percent of its net sales on R&D last quarter, Endo was at 4 percent, Horizon around 5.5 percent…”
Earlier this week Forbes ran an article titled, “The Other Canadian Drug Company That Has Pushed Up Drug Prices,” looking at Concordia Healthcare (based in Oakville, Ontario just outside of Toronto). Examples such as Donnatal, a decades-old drug used to treat irritable bowel syndrome, which Concordia purchased and immediately doubled the price of (it now sells for about $782 USD and in total the price of Donnatal has increased by 800% since 2010). They have also taken part in an acquisition spree that’s seen it spend almost $5 billion on transactions since 2013. The financial post notes, “Its growth-by-acquisition strategy has drawn comparisons with that of its larger peer Valeant Pharmaceuticals International Inc.” The company has, “scooped up assets from privately-held Covis Pharma Holdings SARL for $1.2 billion in March of last year, and followed up with an even bigger $1.9 billion deal in September in which it acquired Amdipharm Mercury Ltd. The latter acquisition boosted Concordia’s portfolio of drugs from 20 to 200.”
And like Valeant, Concordia Health relies on offshore tax havens. With buyout talks swirling, it is worth pointing out that Concordia Pharmaceuticals, a subsidiary of Concordia Health, is organized in Luxemburg and operated through Barbados. This subsidiary is the real, “owner of all the revenue generating legacy products and IP, is based in Barbados – considered one of the friendliest corporate tax jurisdictions in the world. So a U.S. company merging with Concordia could see its corporate tax rate drop by well over 10% based on the lower tax rates in Barbados and/or Canada.” If you read yesterday’s blog, this story might sound familiar. Yet, Concordia CEO Mark Thompson has tried to distance himself from the pharma-bros stating, “We have a very different business model than both Valeant and Turing. We have a model that doesn’t rely on taking geometric price increases. We also have a model that buys products. We’re not like Valeant that buys companies and tries to find synergies and strips them down.” The company doth protest too much, methinks.
But, as Doctors Without Borders (MSF) has noted, that while big pharma has, “cast this practice as fringe behaviour, claiming that investors and venture capitalists were ‘masquerading as pharmaceutical companies’ but did not represent drug company practices. Yet ‘traditional’ pharmaceutical players routinely follow the same strategies. The price of Novartis’s Gleevec (imatinib) for leukaemia has risen three-fold in the past decade; Biogen raised the price of a treatment for multiple sclerosis an average of 16% a year in the ten years since 2005, with 21 separate price hikes. On 1 January 2016, Pfizer arbitrarily raised the price on over 100 drugs in the US. Price hikes are a strategy that allows companies to maintain revenues even in the absence of successful innovative products.“
In the US, it has been reported that the top 10 best-selling drugs went up by at least 50% over the past 5 years. Companies like Johnson & Johnson have jacked up list prices on its anti-inflammatory med Remicade by 63% over that period, while Amgen’s list price on Enbrel more than doubled, and AbbVie’s anti-inflammatory Humira went up by 126%. As FiercePharma points out, “the roundup of list price increases shows, once again, that the high-profile, egregious hikes from Turing Pharmaceuticals and Valeant Pharmaceuticals are just part of the pricing story–and quantifies how a range of Big Pharma companies use increases to fuel sales even if prescription volumes decline.”
Valeant (and the other Big Pharma companies) embody vulgar capitalism and champion the neoliberal ethos. They don’t invest in R&D or building new fixed assets, but instead rely on M&A, price gouging and speculation to constantly expand their market and products. Investors, governments, and institutions champion this quest for profits and corporate greed. We allow ‘market forces’ to largely decide how accessible medicine should be, what is clinical trials are undertaken, and where to set the price of medications that captive consumers (ill people) require; these are the everyday business practices of capitalism, red in tooth and claw.
It is precisely for the reasons stated above that you can not talk about Big Pharma or health without understanding the political economy behind it. What Valeant and other companies are doing is largely legal, and rewarded, in our market society. As Karl Polanyi writes, “To allow the market mechanism to be the sole director of the fate of human beings and their natural environment . . . would result in the demolition of society,“ and “[The] laissez-faire economy was the product of deliberate state action.” While ‘the market’ is personified and deified in our modern language, it is not a natural system for organizing societies, governance, and laws; this ‘Great Transformation’ is a relatively new ordering principle for society. But, this system (which is often referred to as neoliberalism) needs even more government management, laws and social control to be maintained (the state is not a night watchman).
The problems we face with price gouging, lack of accessibility to medication, and so on, are political problems that stem directly from how we organize the markets and make our social institutions subservient to pariahs. Knowledge, intellectual property, and patents regarding medication/health have been further entrenched as commodities which can be speculated on under the neoliberal rules and laws which governments enforce. Public goods and social necessities are what Polanyi calls ‘fictitious commodities’ and when they are, “ treated as if they are commodities produced for sale on the market, rather than protected rights, our social world is endangered and major crises will ensue.”
The crash in Valeant share prices will likely happen again and again. The crash highlights the inherent crisis of capital as these, “speculative orgies periodically become a quagmire of destruction for capital itself.” Now that the speculative fever in M&A pharma companies has died down (for the moment) and ‘Say’s law’ is once again debunked, reactionary apologists continue to try and claim the situation was just a coupe ‘bad apples’. But, the internal contradictions of capitalism are the internal contradictions big pharma as a whole. The crisis is inherent in the process of commodity production, the circulation of speculative capital, and the affects -when it comes to Big Pharma- are always predatory and pernicious on humanity. To put it another way, be it through our institutions, governments, laws or financial rules, we reward the quest for profit and personal greed. Our current system does not necessarily promote socially necessary or socially valuable investments to sustain growth and provide quality medicine. As such, “Any slow-down or blockage in capital flow will produce a crisis. If our blood flow stops then we die. If capital flow stops then the body politic of capitalist society dies.” Further, our system never inherently solves this crisis, it just shift it around. As an economist very much in vogue these days has highlighted, “the poverty and restricted consumption of the masses,” is the, “the ultimate reason for all real crises.”
If we want to solve the current problems stemming from Big Pharma, we need to change the nature of the debate and understand the political economy behind it.” For example, while economists like Joseph Stiglitz or Paul Krugman bemoan many neoliberal economic policies, their answers involve fiddling with the system instead of changing its architecture. Interventions and regulations may be improvements but they still based in and, “accept the fundamental neoclassical economic precepts at the heart of neoliberal policy.” What is needed is a discussion not only grounded in political economy and class, but the rights of humanity when it comes to our health. This must be the starting point.