The Crimes of the Pharmaceutical Industry

Richard Horton, the Editor-in-Chief of the Lancet, once observed:

The history of medicine is littered with wonderful early results which over a period of time turn out to be not so wonderful – or in fact even adverse… there are a whole string of recent examples where preliminary data led to a lot of excitement and caused changes in clinical practice and then eventually we realised they had done more harm than good. Why is it we never learn these lessons?

The pharmaceutical industry makes drugs for medical purposes. The industry campaigns hard for stronger patents throughout the world, though many economists are highly critical of patents in medicine. In some cases, patented drugs sell for thousands of times as much as they would cost if there were no patents. The industry illustrates some of the worst aspects of corporate power, corporate crimes, and ‘free lunches’ (or rents) that enrich executives and shareholders.

Social Costs, Private Profits

The early stages of drug research and development are often funded publicly, with universities and governments throughout the world paying much of the costs. Corporations often become involved only after early tests show promise. As one commentator pointed out:

The whole ecosystem in which innovation is housed – patents, copyright, finance, universities, research, knowledge transfer, ownership rules, regulation to ensure common standards – is co-created between the public and the private.

However, the companies that receive the patents keep the profits. Once they have a patent for a drug, companies can charge whatever will maximise their profits. In other words, whatever richer people can afford to pay. In an extreme case, a drug called Cerezyme cost over $200,000 for a year’s treatment, even though almost all of the development had been funded publicly. Healthcare systems in rich countries end up rationing drugs because of their cost.

Under these circumstances, allowing private companies to keep all of the profits from patented drugs, the development of which has been largely publicly funded, makes no sense. It is an example of how the economy is rigged to transfer immense wealth into the hands of executives and shareholders of big companies, whilst causing harm to others.

To make matters worse, it’s estimated that up to a third a of new drugs are no more effective than existing drugs. The Canadian government published a review of the 61 drugs patented in Canada in 2018. It concluded that only one was what is called a breakthrough, and 56 provided little or no improvement compared with existing medicines.

The U.S. National Institute of Health (NIH) carried out a large study published in 2002 to see if existing drugs for high blood pressure worked. Some of the drugs were among the world’s biggest sellers, yet the study found that old-fashioned diuretics worked as well or better than anything else. The diuretics cost $37 per year. The other drugs tested cost $230-$715 dollars per year, yet doctors were mostly prescribing the more expensive drugs.

Huge amounts of money have been spent on diabetes drugs, such as Avandia, that turned out to be ineffective. When they were first introduced, they were initially promoted as life-saving. The flu drug, Tamiflu, had minimal value, but massive stockpiles were purchased against H1N1 influenza in 2009 due to misleading research data and corporate lobbying. The manufacturer, Roche, withheld data to mislead everyone. This should be considered a serious crime, but is not actually illegal.

Fraud and Deception are Widespread

If a drug is really effective, it requires no marketing. Proper scientific studies demonstrate the benefits, and doctors and healthcare networks all over the world will use it. However, because most drugs are not very effective, companies need to spend huge amounts ‘persuading’ doctors to prescribe them. This includes gifts, holidays and other inducements (a euphemism for bribes). Many doctors are happy to go along with this. In some countries there is also a great deal of more general advertising. In total, more is spent on marketing than on research. This marketing is ultimately paid for by the people who buy the drugs, making them much more expensive.

Many new drugs are copycat drugs. In other words, variations of existing drugs. Good examples are Cialis and Levitra, which are variations of Viagra. The companies have an oligopoly, so they can control prices. Huge sums are spent on marketing these copycat drugs, but if they did not exist, nobody would miss them.

All big pharmaceutical companies have been convicted of selling harmful, sometimes fatal drugs. The industry has been fined over $50 billion during the last twenty years. In 2012, the pharmaceutical company Glaxo Smith Kline (GSK) was fined £3 billion in the U.S. for mis-selling drugs; for fraud, bribery and overcharging; for paying lavish inducements to doctors; for covering up negative research evidence; and for making false claims about medicines. GSK has also been fined in India, South Africa and the UK. Although these figures sound large, they are not enough to deter the companies from continuing to commit these crimes. The sales of a single drug can be worth many times these amounts, so as far as the companies are concerned, crime pays. No individual is prosecuted for criminal offences. In 1997 some pharmaceutical companies were fined for operating a global price-fixing cartel. One author has gone so far as to say that the official definition of organised crime closely describes the activities of the drug companies.

The industry has a long history of exaggerating the benefits of its drugs, understating the downsides and hiding negative results. A recent study showed that in the real world, medicines tend to be four times more harmful than the manufacturers claim. Adverse effects hospitalise a quarter of a million people in the U.K. and 2 million in the U.S. each year. There were 55,000 deaths from the pain-relief drug Vioxx, but the data were withheld by the manufacturer, Merck. Large numbers of heart attacks, strokes and deaths were caused by the diabetes drug, Avandia. One expert commentator stated that:

Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become commonplace, companies will continue defrauding the Government and putting patients’ lives in danger.

Numerous studies have found that when corporations foot the bill, research is more likely to come up with results that support new drugs. In other words, there is now overwhelming evidence that drug companies manipulate the research. Companies test their own medicines, so testing is cleverly designed to emphasise benefits and understate harms. Negative trials have not always been published. They can get away with this because of inadequate regulation.

The pharmaceutical industry spends more than any other industry on lobbying the U.S. Government, spending $280 million in 2018. The purpose of this is to keep regulation of the industry favourable to its interests. The U.S. regulator is called the Food and Drug Administration (FDA). It is underfunded, has shown little interest in safety and has no ongoing, long-term safety analysis. It also has serious conflicts of interest, with many staff connected to the industry. The former FDA chief went to work for the drug company, Pfizer. Many former members of the U.S. Congress have taken jobs as lobbyists for the pharmaceutical industry.

Astonishingly, the regulatory situation in Britain is even worse. The U.K. regulator (MHRA) has not successfully prosecuted a single firm, and the fines total just £73,300. The regulator boasted in 2012 of having given 467 warnings and 151 cautions, but these have no effect. Laws and regulations are not enforced, and conflicts of interest exist throughout the whole drug approval system.

All of these factors have been at work during Covid. There is increasing concern that the World Health Organisation (WHO) has been captured by pharmaceutical interests. There is also evidence that university research has been manipulated by funders. The profit motive in the hands of companies with immense power seems to corrupt everything it touches. The injections that are labelled ‘vaccines’ are described by governments and manufacturers as ‘safe and effective’, yet the evidence shows that the claimed effectiveness has been hugely exaggerated, the short term harms have been greater than claimed and the long term harms remain unknown. Governments have paid huge amounts to private companies, such as Pfizer, for these experimental drugs, giving shareholders and executives a free lunch beyond their wildest dreams. They have indemnified the companies against liability for any harms from the drugs, diminishing their incentive to ensure they are safe.

Within the pharmaceutical system, the focus on corporate profit, rather than medical need, tends to push in the wrong direction, creating perverse incentives. In other words, profit-seeking companies will always try to claim that their medicines are more effective and less harmful than is actually the case, and they can earn more profits by committing bribery and fraud. The pharmaceutical industry is a glaring example of an industry that is ‘not fit for purpose’. It fails the populations of both rich and poor countries.

Possible Solutions?

I should stress that in discussing solutions I have no strong ideological bias towards markets or state. All successful economies have been combinations of the two. The main goal with the pharmaceutical system should be to eliminate financial motives to manipulate drug trials and minimise the expenditure on marketing. This might require an organisation that is not profit-orientated being responsible for the large-scale testing of possible medicines. This would have to be much more transparent than existing research carried out by private companies. Pharmaceuticals might be one area where the elimination of patents would benefit society, so there would be no overpriced medicines or windfall profits. (I’ll write an article about more general problems with patents in the future.) All successful drugs, developed mainly via public means, would be available to every country to make as cheaply as possible. Private companies could still participate in other aspects of the process, such as early research or manufacturing drugs.

There have been debates for generations about whether the system should be partly nationalised and these have resurfaced recently. Proponents suggest that this could provide the same medicines for a fraction of the cost. There would be no financial incentive to commit fraud or bribery, no copycat drugs, no expensive marketing, no lobbying, no legal battles over patents and no depriving poor countries of medicines. But would there be perverse political and bureaucratic incentives in their place, to appear successful and hide failure? Would public bodies do a better job of developing the drugs we need?

If you have any thoughts on the best way to reform the pharmaceutical industry, let us know.

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