By Jessica Barford· On March 30, 2017
For centuries, medicine and forms of herbs and minerals have been used to alleviate pain, uplift attitudes, and heal wounds. At the end of 2015, it was estimated that 70% of Americans were using prescription drugs1. Overall, society has benefited significantly from medicine. Drug researchers have found cures for serious illnesses and made it possible for people to live with severe diseases and enjoy a better quality of life.
As heroic as pharmaceutical companies may appear for making drugs accessible to the general public, over the past few years they have been criticized for creating severe addictions, overdoses and inciting over-prescription of medications.
Pharma Company Background
The Pharmaceutical Industry is one of the fastest growing industries around. In 1999, Pfizer bought Warner-Lambert for $128 billion, making it the biggest M&A deal in history. Over the last 17 years, nine of the largest Pharma mergers in history have taken place, accounting for roughly $690 billion in deals5. Remarkably, while the big 5 Pharma companies only hold 4% of the companies listed on the Fortune 500, their market cap of $1.06 trillion makes it appear as if they account for a much higher percentage6.
Pharmaceutical companies’ profits directly correlate with the overall health and well-being of the population. While pharma companies are manufacturing products to cure illnesses, a paradox is created where their demand is dependent on individuals falling ill. Most drugs that people consume have side effects of some sort, whether immediately apparent or not. As a result, consumers are typically forced to buy additional drugs in order to combat these side effects. This cycle has turned many into drug dependent users. More than three quarters of US citizens over the age of fifty take prescribed medication. The U.S. has the highest rate of drug abuse in the world. They account for 5% of the world’s population but consume 80% of the world’s supply of painkillers1.
One of the larger problems pharma companies are facing today is that many regulated prescription drugs are appearing on the black market. This includes Ritalin, a drug normally used to help with ADHD but is often abused as a study aid on many university campuses. Moreover, pharmaceutical companies have also been donating large amounts of money to universities that subsidize student tuitions, learning materials, buildings, and research departments. As a result of these donations, they have become powerful stakeholders in academia and can exert significant influence over curricula, faculty appointments, and research funding.
Big Pharma influence is so potent that many members of the medical community have begun publicly acknowledging the strains it has placed on physicians’ abilities to practice their profession. In particular, there has been a growing movement of physicians sending letters to the oval office asking that laws be put in place to control how much pharmaceutical companies can pay doctors to prescribe their products. Still, many proponents of pharmaceutical research have argued that without Big Pharma’s subsidization of cutting edge research facilities, the world would lack many of the medical advances that we rely upon today.
Back in 2013, Turing Pharmaceuticals CEO, Martin Shkreli, bought the patent for a drug used to combat HIV/AIDS. When he purchased the drug, he raised the cost from $13.50 per pill to $750 without facing any regulatory barriers. Publicly, however, Shkreli’s price gauging tactics generated significant light, despite the fact that his actions are quite common within the industry.
While incidents like the one with Turing Pharmaceuticals paint a bleak picture of the drug industry, it is unreasonable to argue that pharmaceutical companies should pursue research without the protection of their intellectual property. Patents are crucial to the regulation of the industry. When a company initially starts researching a drug, it must invest years of labour and enormous amounts of money upfront to ensure the drug is safe and effective. Thus, when a patent is filed, it is protecting the process and standard to which the drug is made, and forces generic companies to eventually do the same without allowing them to cut costs in ways that violate the spirit of what was originally developed and deemed safe by the FDA.
This patenting process not only ensures strict drug regulation, but allows the company to make a profit off of margins which help them subsidize their costs at the initial stage of research and development. Still, over the past 10 years, the cost of bringing a drug to market has doubled to an average of $2.5 billion per drug, highlighting the complexity of this issue. It is true that much of the higher costs are due to the increased complexity of trials, as well as new focus on chronic diseases that require longer research and development periods. Yet, undoubtedly, there remains an unhealthy pricing power within the pharmaceutical industry that warrants some form of government intervention.
Overall, major changes need to take place in the pharmaceutical industry. Lack of fair pricing, transparency of corporate bribery activities, and ethical wrong-doings are all reasons consumers are skeptical of pharmaceutical companies. To combat this problem, it is imperative that regulators and companies work together to alter the mindset towards drug consumption and begin to consider how drug reliance is going to affect the population in the long run.
It is a fact that we have a much better quality of life with drugs. We are dependent on them to extend life expectancy and save our loved ones from medical conditions that would otherwise kill them. But more balance is needed and responsibility ultimately lies in the hands of those with power. We should push for regulatory change that reduces the exclusive eligibility period of a patent. At the moment, the average patent on a drug lasts around 20 years, after which generic drug companies can apply to produce drugs related to the patent. This lengthy period of time is leading people, like the Turing Pharmaceuticals’ CEO, to extract huge amounts of rent instead of inspiring innovation in the drug development field. Shortening, but not abolishing, the patent period is a good first step towards improving regulation. Increasing the amount of funding allocated to research subsidies for these companies is a great way of compromising on the cost. Secondly, action should be taken against sales reps who offer indirect monetary compensation to doctors in exchange for them prescribing their product more often. This will decrease the amount of over prescription in the industry. Finally, Pharma CEOs should be given smaller compensation packages. In 2015, the two highest ranking executives at Amgen had a combined compensation package of $22 million. To consumers, a lot of this is money that could be reinvested in drug trials. However, it is up to the public to push for action on all of these suggestions, and for those in power to hear them and react to it.