Originally published in The Breach, on August 19th, 2022.
It is a peculiar time, to put it mildly, to be arguing for higher drug prices in Canada. Inflation is surging in every part of the country, confronting poor and working-class people with excruciatingly difficult choices. As wages and benefits erode, a growing share of Canadians are forced to ask themselves: do I pay the rent, buy groceries or fill my prescriptions?
But in anticipation of pharmacare legislation, Big Pharma’s defenders are bravely leaning into this difficult task. In the upside-down world of pharma industry propagandists, “economic fairness” is about getting Canadians to pay three and a half times more than they currently pay for prescription drugs.
Shrill denunciations of Canada’s modest attempts to control drug prices are common fare for the industry’s hired guns. Brett Skinner and Nigel Lawson of the Big Pharma-linked Canada Health Policy Institute have portrayed the Trudeau government’s half-hearted efforts to bring drug prices in line with European levels as “extreme” regulation that “reflects Soviet-style thinking on price controls.”
In another piece criticizing Canada’s “unhealthy obsession” with lower drug prices, Lawson (with a co-author from an industry-funded patient group) accused “out of control” federal regulators of waging “an anti-industry, anti-patient witch-hunt.”
Reading the Financial Post opinion pages, one might expect to see pharmaceutical executives marched off to the gulag any day now. In fact, relations between Justin Trudeau’s Liberal government and the industry have never been warmer.
The government agency tasked with regulating pharmaceutical prices, the Patented Medicines Price Review Board (PMPRB), has done a poor job keeping a lid on drug price inflation. Canada’s drug prices might be lower than the U.S., but they are much higher than all other wealthy countries. A 2015 10-country study found that on average, Canadians paid 60 per cent to 105 per cent more for prescription drugs than other countries, all of which had universal public drug insurance.
Costs have been soaring, with severe consequences for low-income people’s access to medications. Nearly a quarter of Canadians (23 per cent) tried to make a prescription last longer by splitting doses or not filling a prescription in the past year because of cost, according to a 2020 Angus Reid poll.
Undeterred, Richard C. Owens has taken up the noble cause of explaining to Canadians why they should feel sorry for these massive corporations in a recent Financial Post opinion piece. Times are tough for Big Pharma, Owens tells us, due to “confiscatory” price controls which mean companies can barely afford to do any research into new drugs anymore. Pharmaceutical companies are “victims” of a regulatory regime that amounts to government-backed gangsterism.
Rather than move in the direction of greater affordability by adopting European-style policies of universal pharmacare, Owens would have Canadians suffer the same fate as Americans (“the only honest payers”) in the name of defending pharmaceutical profits. Incredibly, Owens claims that patients would be “the greatest beneficiaries” of letting prices rise to American levels—though it is hard to see how lower-income Canadians could possibly benefit from drugs they can’t afford.
Owens, an intellectual property lawyer and academic affiliated with the Macdonald-Laurier Institute, fails to mention that Americans have the highest rates of medication rationing in the advanced capitalist world, because of the inflated costs of drugs. High prescription drug prices in the U.S. are costing working-class people their savings, their health, and even their lives. It’s no wonder that politicians on both sides of the aisle are calling for action to reduce drug prices for Americans.
Big Pharma as amoral drug dealers
Perhaps aware of just how bitter the pill he’s asking Canadians to swallow is, Owens turns to pop culture to make his position more relatable. By “stealing” from pharmaceutical companies via price regulation, Owens says Canada is behaving like Omar Little, the iconic gangster from the TV police drama The Wire. While the intent of this analogy is clearly to frame Big Pharma as the “victim” of what Owens regards as regulatory gangsterism, anyone familiar with the show will come away with a rather different impression.
Played by the late Michael K. Williams, Omar is a Robin Hood-like figure who fearlessly prowls post-industrial Baltimore’s streets, making his living sticking up drug dealers. Yet the openly gay, lone-wolf gunman also abides by a strict moral code, leaving other residents of the public housing projects alone and demonstrating an unwavering devotion to his loved ones. Thanks to Williams’s portrayal of this unique character, Omar Little has remained a recognizable name more than a dozen years after The Wire’s last episode aired.
The upshot of casting Canada in the role of Omar is that pharmaceutical corporations take the place of the show’s ruthless drug kingpins. Omar’s “victims” on The Wire, after all, are drug dealers. Owens tries to walk back the obvious implication of his analogy by insisting that these companies’ “only sins are to be large, successful and unpopular.”
But comparing Big Pharma to The Wire‘s drug dealers is unfair—to the drug dealers. The body count of fictional Baltimore drug kingpin Marlo’s gang pales in comparison to that of the real-life Sackler family, whose aggressive marketing of the highly-addictive OxyContin sparked off the deadly opioid crisis in North America. By the most conservative estimates, tens of thousands have died from overdosing on synthetic opioids.
And The Wire antagonist Stringer Bell’s business acumen is no match for the ruthless profit-maximizing of Pfizer CEO Albert Bourla, who ensured his companies’ COVID-19 vaccines were sold almost exclusively to high-income countries as the pandemic raged worldwide. With $22-billion in profits, Pfizer had “a better year than any other drugmaker in 2021.” More than half of those profits came from its mRNA vaccine, produced in partnership with BioNTech.
If vaccine doses had been distributed a bit more fairly—so that every country could have reached 40 per cent vaccination rates by the end of 2021—we could have prevented at least 600,000 deaths, according to one recent study. Lifting intellectual property rules at the WTO and allowing companies to produce generic versions of COVID-19 vaccines could have saved countless more.
While Owens is right that Big Pharma is almost universally disliked, The Wire’s Omar, on the other hand, is adored by fans and critics alike. It is thus a strange brush with which to tar the Canadian government, and a role which the Trudeau government is hardly qualified to play.
Far from stealing from the rich to give to the poor, Canada has been quite solicitous of the interests of Big Pharma, especially since the start of the pandemic. Under intense lobbying from the industry, Trudeau has axed reforms that would have brought prices in Canada more in line with other European countries—a gift of billions to Big Pharma—and has repeatedly delayed implementing pharmacare. At the WTO, Canada quietly sided with rich countries to block efforts to suspend patents on vaccines and other publicly-funded COVID-19 tools.
Dying for a profit
Beyond this dubious analogy, Owens’s argument hinges on the idea that pharmaceutical firms are being reduced to penury by price-controlling, freeloading governments like Canada. He alleges that pharmaceuticals’ profitability is “much lower than in businesses like automobiles, information technology and financial services.” But even a cursory glance at business news coverage of the industry shows that the financial health of Big Pharma is exceptionally good. Since the pandemic, it’s never been better.
Major corporations have prospered across the board in the pandemic, with profit margins currently running at 13 per cent for Standard & Poor’s index of the 500 largest corporations. This level of profitability is so abnormally high that analysts consider it “wildly unrealistic” to expect it to continue. But for Big Pharma, these kinds of margins have been the pre-pandemic norm.
In a study of corporate profitability from 2000 to 2018, pharmaceutical giants like Pfizer and Johnson & Johnson were found to have “significantly higher annual profit margins than S&P 500 companies” across a range of measures. The most conservative estimates of profit margins for pharma were 13.8 per cent versus 7.7 per cent for non-pharmaceutical companies, though other estimates pegged pharma’s profit margins as high as 28 per cent. Only the largest Big Tech corporations, such as Apple, Google and Microsoft, came close to Big Pharma’s profitability.
Since the pandemic hit, pharma profits are higher than ever. A FiercePharma ranking of the top 10 most profitable pharmaceutical corporations in 2021 shows that pharmaceutical companies had profit margins in the 20 to 27 per cent range, well above the average level of S&P 500 corporations. The most eye-popping returns were for pharmaceutical companies that produced vaccines and antiviral treatments, the industry publication pointed out: “Several companies enjoyed a big windfall from selling COVID-19 products.”
The public pays for development, Big Pharma takes the profit
For Owens, Big Pharma’s profits are the just rewards for “the enormous complexity and high risks” shouldered by private investors. Canadians must start paying more for our drugs or else pharmaceutical investment and innovation will enter a “death spiral,” Owens warns. Left out of Owens’s story is the fact that a huge proportion of R&D costs, and nearly all of the basic scientific research that underlies it, comes from public sources.
The mRNA COVID-19 vaccines are a case in point. Moderna received $2.5-billion from the U.S. government early on in the pandemic, which covered 100 per cent of the funding R&D required to accelerate the development of its vaccine. The story is largely the same for BioNTech, which received $800-million in subsidies. These same companies are now racking up astronomical profits. BioNTech and Moderna posted the highest net profit margins among the 10 companies profiled by FiercePharma, 54 and 66 per cent, respectively.
Overall, public funding accounted for 98.12 per cent of the total investment that went into COVID-19 vaccines up to March 2021, according to Forbes Magazine. Through publicly-funded research and taxpayer investment in clinical trials, vaccine manufacturing, and large-scale procurement, governments generously “cushioned the pharmaceutical industry from much of the risks associated with vaccine development.”
Such one-sided “public-private partnerships” are typical of pharmaceutical drug development. As health researchers Matthew Herder and Srinivas Murthy point out, “almost every drug and vaccine that has meaningfully improved public health in the last 50 years originally emerged from university and government labs,” they recently argued in The Hill Times.
“But the public sector’s contributions, in terms of financing, risk, and scientific labour, are never reflected in the resulting treatment’s price.”
The outsized role of public sector money and public institutions in de-risking the drug development that Big Pharma profits from raises an obvious question: why shouldn’t the public have more say over pricing, production and technology sharing? Apologists like Owens have no answer to this question.
Our pharmacare or theirs?
The hysterics of Owens and other pharma industry-aligned commentators may seem hard to square with timid efforts at reforms pushed—and ultimately abandoned—by the Trudeau government. After seven years in power, Trudeau’s 2015 pledge to plug some of the gaping holes in the PMPRB’s regulations has been gutted by a combination of legal contestation, lobbying pressure and political cowardice. The victories for Big Pharma can seem inevitable. But the pharmaceutical industry, as journalist Alexander Zaitchik explains, “lives in a state of permanent emergency,” in which “no victory is ever secure, no policy seedling too small not to be treated as a full-blown existential threat.”
The next policy seedling to be trampled upon is pharmacare. The Liberal-NDP supply-and-confidence agreement has put Trudeau’s shelved pharmacare plans back on the political agenda, but it is far from a done deal. As debates around the shape of pharmacare to come heat up, the question is whether it will be our pharmacare, or Big Pharma’s.
We can expect to see much more scare-mongering from Big Pharma’s defenders. In the coming months and years, they will try to frighten us into thinking that any limits imposed on their price-gouging will bring the sky down on our heads.
Owens’s arguments—and his self-defeating Wire analogy—are bizarre to the point of hilarity, but they should serve to remind us Big Pharma does not win by arguments alone. No matter how ideologically bankrupt, Big Pharma’s lobbyists and lawyers will still be there, working the back rooms to undermine any aspects of the pharmacare programme that could impinge on their towering profits.
Working class people have successfully organized against private medicine before—that’s why we have Medicare. A pharmacare program that centres the needs of the people, rather than the demands of Big Pharma, is eminently winnable. But right now, we’re playing on Big Pharma’s turf, and the way their defenders, like Owens, are framing the battle should remind us how hard we need to fight back.