The Horrifying Hidden Story Behind Drug Company Profits

This is the story of one of the great unspoken scandals of our times. Today, the people across the world who most need life-saving medicine are being prevented from producing it. Here's the latest example: factories across the poor world are desperate to start producing their own cheaper Tamiflu to protect their populations -- but they are being sternly told not to. Why? So rich drug companies can protect their patents -- and profits. There is an alternative to this sick system -- but we are choosing to ignore it.

To understand this tale, we have to start with an apparent mystery. The World Health Organization (WHO) has been correctly warning for months that if swine flu spreads to the poorest parts of the world, it could cull hundreds of thousands of people -- or more. Yet they have also been telling the governments of the poor world not to go ahead and produce as much Tamiflu -- the only drug we have to reduce the symptoms, and potentially save lives -- as they possibly can.

In the answer to this whodunit, there lies a much bigger story about how our world works today.

Our governments have chosen, over decades, to allow a strange system for developing medicines to build up. Most of the work carried out by scientists to bring a drug to your local pharmacist -- and into your lungs, or stomach, or bowels -- is done in government-funded university labs, paid for by your taxes. Drug companies usually come in late in the process of development, and pay for part of the expensive but largely uncreative final stages, like buying some of the chemicals and trials that are needed. In return, they own the exclusive rights to manufacture and profit from the resulting medicine for years. Nobody else can make it.

Although it's not the goal of the individuals working within the system, the outcome is often deadly. The drug companies who owned the patent for AIDS drugs went to court to stop the post-Apartheid government of South Africa from producing generic copies of it -- which are just as effective -- for $100 a year to save their dying citizens. They wanted them to pay the full $10,000 a year to buy the branded version -- or nothing. In the poor world, the patenting system every day puts medicines beyond the reach of sick people.

This is where the solution to the swine flu mystery comes in. Ordinary democratic citizens were so disgusted by the attempt to deprive South Africa of life-saving medicine that public pressure won a small concession in the global trading rules. It was agreed that in an overwhelming public health emergency, poor countries would be allowed to produce generic drugs. They are the exact same product, but without the brand name -- or the fat patent payments to drug companies.

So under the new rules, the countries of the poor world should be entitled to start making as much generic Tamiflu as they want. There are companies across India and China who say they are raring to go. But Roche -- the drug company that owns the patent -- doesn't want the poor world making cheaper copies for themselves. They want people to buy the branded version, from which they receive profits. Although not obliged to, they have licensed a handful of companies in the developing world to make the treatment -- but they have to pay for license, and they can't possibly meet the demand.

And the WHO seems to be backing Roche -- against the rest of us. They are the ones best qualified to judge what constitutes an overwhelming emergency, justifying a breaching of the patent rules. And their message is: Don't use the loophole.

Professor Brook Baker, an expert on drug patenting, says: "Why do they behave like this? Because of direct or indirect pressure from the pharmaceutical companies. It's shocking."

What will be the end-result? James Love, director of Knowledge Ecology International which campaigns against the current patenting system, says: "Poor countries are not as prepared as they could have been. If there's a pandemic, the number of people who die will be much greater than it had to be. Much greater. It's horrible."

The argument in defense of this system offered by Big Pharma is simple, and sounds reasonable at first: we need to charge large sums for "our" drugs so we can develop more life-saving medicines. We want to develop as many treatments as we can, and we can only do that if we have revenue. A lot of the research we back doesn't result in a marketable drug, so it's an expensive process.

But a detailed study by Dr Marcia Angell, the former editor of the prestigious New England Journal of Medicine, says that only 14 percent of their budgets go on developing drugs -- usually at the uncreative final part of the drug-trail. The rest goes on marketing and profits. And even with that puny 14 percent, drug companies squander a fortune developing "me-too" drugs -- medicines that do exactly the same job as a drug that already exists, but has one molecule different, so they can take out a new patent, and receive another avalanche of profits.

As a result, the US Government Accountability Office says that far from being a font of innovation, the drug market has become "stagnant." They spend virtually nothing on the diseases that kill the most human beings, like malaria, because the victims are poor, so there's hardly any profit to be sucked out.

We all suffer as a result of this patent dysfunction. The European Union's competition commissioner, Neelie Kroes, recently concluded that Europeans pay 40 percent more for their medicines than they should because of this "rotten" system -- money that could be saving many lives if it was redirected towards real health care.

Why would we keep this system, if it is so bad? The drug companies have spent more than $3 billion on lobbyists and political "contributions" over the past decade in the US alone. They have paid politicians to make the system work in their interests. If you doubt how deeply this influence goes, listen to a Republican congressman, Walter Burton, who admitted of the last big health care legislation passed in the US in 2003: "The pharmaceutical lobbyists wrote the bill."

There is a far better way to develop medicines, if only we will take it. It was first proposed by Joseph Stiglitz, the recent Nobel Prize winner for economics. He says: "Research needs money, but the current system results in limited funds being spent in the wrong way."

Stiglitz's plan is simple. The governments of the Western world should establish a multi-billion dollar prize fund that will give payments to scientists who develop cures or vaccines for diseases. The highest prizes would go to cures for diseases that kill millions of people, like malaria. Once the pay-out is made, the rights to use the treatment will be in the public domain. Anybody anywhere in the world could manufacture the drug and use it to save lives.

The financial incentive in this system for scientists remains exactly the same -- but all humanity reaps the benefits, not a tiny private monopoly and those lucky few who can afford to pay their bloated prices. The irrationalities of the current system -- spending a fortune on me-too drugs, and preventing sick people from making the medicines that would save them -- would end.

It isn't cheap -- it would cost 0.6 percent of GDP -- but in the medium-term, it would save us all a fortune, because our health care systems would no longer have to pay huge premiums to drug companies. Meanwhile, the cost of medicine would come crashing down for the poor -- and tens of millions would be able to afford it for the first time.

Yet moves to change the current system are blocked by the drug companies and their armies of lobbyists. That's why the way we regulate the production of medicines across the world is still designed to serve the interests of the shareholders of the drug companies -- not the health of humanity.

The idea of ring-fencing life-saving medical knowledge so a few people can profit from it is one of the great grotesqueries of our age. We have to tear down this sick system -- so the sick can live. Only then we can globalize the spirit of Jonas Salk, the great scientist who invented the polio vaccine, but refused to patent it, saying simply: "It would be like patenting the sun."

Johann Hari is a writer for the Independent. To read more of his articles, click here . You can email him at johann -at- johannhari.com

To read Johann's article about how swine flu was caused by our hunger for cheap meat, click here.

Comments

[CroatianCritter]

You mentioned it in your article and I can't help but reinforce this point!

"Most of the work carried out by scientists to bring a drug to your local pharmacist -- and into your lungs, or stomach, or bowels -- is done in government-funded university labs, paid for by your taxes. Drug companies usually come in late in the process of development, and pay for part of the expensive but largely uncreative final stages, like buying some of the chemicals and trials that are needed. In return, they own the exclusive rights to manufacture and profit from the resulting medicine for years. Nobody else can make it."

This is the absolute definition of the corporatism system that we currently live under. Profits are more important than human lives and our government funds the research while private individuals profit from it! One thing I want to ask my liberal friends is this, "When you created these governmental systems, did you ever THINK that the system (EVEN CREATED WITH GOOD INTENTIONS) can become corrupted? That is why this health care issue is so dangerous. No amount of good intentions maybe able to create an uncorrupted health care plan. We need to keep this in mind when we think about the government that we currently have.

[darker]

Well, sure!
"Health care" and "health insurance" is ABOUT the HEALTH of THE BOTTOM LINE
of those PROFITEERING CORPORATIONS!

Did you actually believe it was all about YOUR health? ?
Hahahahaaaaaaaaaaa! Not in a bizillion years.

Profiteering = #1 American "value".

[offred]

"Most of the work carried out by scientists to bring a drug to your local pharmacist -- and into your lungs, or stomach, or bowels -- is done in government-funded university labs, paid for by your taxes."

How about a regulation that if any drug that has been researched at any point with taxpayer funds, pharmaceutical companies can hold the right to manufacture and profit from the drug for five years maximum?

[oldschoololdsoul]

Nice article. But you may have missed the forest for the trees. There's often doubt on whether any drug approved by corrupt powers that be is even safe in the first place. Just watch hairbrained multi deadly side effect drug ads on the idiot box to decide the answer.

[OCanadian]

The good news is that this whole sordid issue is being brought to light. I know too many pharmacists (and owners), doctors, and pharmaceutical reps who have been flown to the most luxurious spots in the world, thanks to the drug companies, sometimes several times a year, and that's only one perk of pushing pills. And more than anything, we're depressed. What show is this???

[1will]

It costs "Big Pharma" about 3/4 of a billion dollars to bring a successful drug to the marketplace. For every Tamiflu and Vioxx there are countless failures. I really doubt your sources and their numbers. While I am no fan of the drug companies I realize there is a reason why almost 3/4 of the successful new drugs come out of the US instead of Keyna, Russia, Venezuela or Cuba. The government does a lousy job at creating anything other than waste.
Drug companies create new meds for one reason....­proffits. It would be nice if their sole motivation was welfare but it's money. Until a communist society starts passing us in medicine creation it seems our flawed system is still the best.
Take the money out of medicine and you might as well get used to a lack of improvement in medicines. Break the drug companies patents and you take away any incentive they have to spend billions on new drugs.
The system sucks but until you show me another country that creates more successful drugs than the US I'll continue to believe that even a lousy system is better than the next runner up.

[harrync]

I mostly agree, but would add that a lot of big pharmas applied research is based on government sponsored basic research that even big pharma can't afford to do.

[noralou]

For years I have been telling people that the big pharmaceutical companies spend more on advertising and marketing then they do on research. I also mention that a large amount of the research these companies use is funded by our tax dollars. I have been told that I am a liar or that I am mistaken. It is nice to see, in black and white, corroboration of my statements.

[FogBelter]

... and from the same 1961 Eisenhower speech that brought us the warning about the Military-Industrial Complex we have this:

"Akin to, and largely responsible for the sweeping changes in our industrial-military posture, has been the technological revolution during recent decades.

In this revolution, research has become central; it also becomes more formalized, complex, and costly. A steadily increasing share is conducted for, by, or at the direction of, the Federal government.

Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. For every old blackboard there are now hundreds of new electronic computers.

The prospect of domination of the nation's scholars by Federal employment, project allocations, and the power of money is ever present

and is gravely to be regarded. Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific­technologi­cal elite.

It is the task of statesmanship to mold, to balance, and to integrate these and other forces, new and old, within the principles of our democratic system -- ever aiming toward the supreme goals of our free society."

[biotechwoman]

Unfortunately the journalist who wrote this article knows nothing about the topic. As clinical research becomes more complex (particularly with indications like oncology with many secondary effects) the length of time to get a drug approved has lengthened considerably. This eats away at the patent life. If it takes 12+ years to get a drug to market...d­o the math.

Anyone who is stupid enough to believe that the pharmaceutical industry is a non profit, philanthropic bunch must be hallucinating. The question has nothing to do with patents, or profit. It has to do with government setting sound policies. Europeans pay less for drugs than Americans because the EU governments intervene. But because Americans are so anti-socialist, they get what they deserve.

[darker]

Yes, Americans are brainwashed by rich corporations' lobbying and media campaigns to be
anti "socialist" so they can be SCREWED BY CORPORATE PROFITEERING over and over again.
Stupid is, as stupid does!

[medicare4all]

I blame the WTO, GATT, "free trade", which really is for the rich corporations to rewrite the rules so as to become monopolies, and charge whatever they want for however long they want. Tamiflu is rumored to have been invented by a company in which Donald Rumsfeld had a stake. Voila, pandemic, manufactured or not, and HUGE profits!

[biotechwoman]

As a public health expert with 20 years of experience in drug development and clinical research, I loathe the fact that an ignoramus like this has written about this complex topic. First to say that drug companies come in during the "uncreative late phase" is completely ridiculous. This author needs to spend time learning more about clinical trial design challenges (among other things). Additionally, he completely ignores the culpability governments and individuals in society have for this problem. Drug companies are a FOR PROFIT BUSINESS. The sooner people recognize this, the sooner we can develop more sound health care policies. Individuals in the west are fat, lazy creatures who want the next statin to solve their obesity or viagra to solve the fact that they are horrible in bed. Drug companies deliver on this promise. If the developed world truly was interested in saving poor countries neglected diseases would be eradicated. It is only because rich Westerners now are being exposed to the effects of healthcare globalisation that they suddenly care. And what about all the shareholders of these drug companies? They sure enjoy the profits.

[inc3000]

So what is your title? Are you a researcher?
As for your, "Drug companies are a FOR PROFIT BUSINESS. The sooner people recognize this, the sooner we can develop more sound health care policies."

I am pretty pretty sure most of us know this is a business and especially when you pay 100 dollars per medicine, trust me, we know this is all for profit.

Second, the author is not talking about the process of drug development. He is talking about the way drug companies care more about $$ than saving lives anywhere regardless. His point is to create a better and more fair system for everyone to use.

[steppenwolfsayshi]

I don't think people understand what I'm talking about. Think about how much money is spent on curing cancer. Cancer is a major killer of people over the age of 65.
But what is the number one disabiling condition of people in their 20s and 30s? It's depression. Treatments for that are really ineffective and theres hardly any research. Another big one they could cure is drug addiction. Think about how much more productive society would be if there was a cure for those two things and there could be, but the Pharma companies have no financial incentive to do that work.

[darker]

Cancer is a PROFIT MAKING DISEASE. If gotten rid of, neither Big Pharma corporations nor
researchers would be cashing in any longer.
A "cancer cure" = END OF PROFITEERING.
That "cure" will never happen!

[DuganS1]

Is the author really saying that patents shouldn't matter in the drug industry? Really? He he not realize that if there were not patents, there would be far far fewer drugs and way way less innovation?

[inc3000]

Did you read the entire article? He also talked about a system proposed by someone else who knows how health care works. I suggest you re-read this article.

[steppenwolfsayshi]

Forget Big Pharma not making drugs for worlds poor, they don't make drugs for America's middle-class-the people least likely to have health insurance to buy it.
They make drugs for the poor on Medicaid and the elderly on Medicare. If you have an illness that strikes mostly young, middle-income people-the most productive people in the economy!-there is far less likely to be a treatment. That's an inefficent way to ration care.

[DuganS1]

Pharmaceutical companies make a huge amount of drugs, including cheap generic drugs, for the American public. You can buy a huge amount of drugs for $4 or less at Walmart, CVS, or most any other pharmacy. Is it the fault of pharmaceutical companies that some people aren't covered by insurance by their employers and that those folks don't want to pay out of pocket for some medications?

[steppenwolfsayshi]

You can't buy what doesn't exist.

[steppenwolfsayshi]

I didn't say it was their fault.

I said the distortions in the market caused by Medicare and Medicaid have led Pharma companies to have no financial incentive to create drugs for the waste majority of the American public. That's important, because it needs to be addressed as part of healthcare reform.

Drugs development that carries little financial incentive should be completed by the government and the patents held by the government or universities, rather than keeping the framework we use now.

[medicare4all]

Then there are the ubiquitous "ask your doctor" adverts on TV aimed mostly at the Medicare (older) population. Why should anyone "ask" their doctor for something they know nothing about? And then there are the invented new "syndromes" -- restless leg, anyone?

i have great admiration for Louis Pasteur and utter contempt for "Big Pharma" which is forcing some people to choose between paying for their medication or their food!

[Shortyfuse]

HEY OBAMA AND ERIC HOLDER. ARE THERE STILL PRICE FIXING LAWS OR DID THE LOBBYIST ABOLISH THAT ALSO. IF NOT USE THEM.
Did I hear right. Did Obama just appoint Anne Northrup the EX Kentucky neo con congresswoman to the Consumer Product Safety Commission? What a slap in the face the the hard working Democrats of Kentucky that worked so hard to oust her. Thanks for nothing Obama.

[inc3000]

I don't understand your point because it is pretty broad and unclear. Also, Obama just began his term....an­d he is kicking butt unlike newquewlar bush boy.

I take it you are republican? hmm

[johnsopinion]

What has always fascinated me about this situation is where thinking
usually stops--at Cost. It permeates most economical minds-the two
choices--decrease costs or increase income. Cost is usually considered
as the humongous beast that must be tamed.

"It isn't cheap -- it would cost 0.6 percent of GDP -- but in the medium-term,
it would save us all a fortune, because our health care systems would no
longer have to pay huge premiums to drug companies. Meanwhile, the cost
of medicine would come crashing down for the poor -- and tens of millions
would be able to afford it for the first time."

With the money saved in premiums and medicines, what do you suppose
all of these people are going to do with that extra money?
Hoard it? Can dormant money make you well?

No. They'll spend, spend, spend for things they've done without for
so long! And that translates into more State and Federal tax revenue,
more income for retailers, more income in goods manufactured (and
that includes medicines), increases in stock investments, etc.
What you lack in profit per item is more than made up for in quantity
sold at a reasonable price.

?!?!?!?!?!?