Like The Hub?
Join our community.
Join
This April 6, 2016, file photo shows the Pfizer logo appearing on a screen above its trading post on the floor of the New York Stock Exchange. Richard Drew/AP Photo.

Harry Rakowski: Big Pharma: Pandemic heroes or profiteering villains?

Commentary

The rapid creation of effective vaccines that mitigate the effects of COVID-19 has been a triumph for drug companies. Vaccine development would not have been possible without the infrastructure, production capacity, and distribution channels that are an integral part of Big Pharma (the name for large publicly traded drug companies). Should we view their pandemic actions as heroic or simply another example of aggressive profiteering?

Why are Big Pharma companies mistrusted?

Pharmaceutical companies are generally mistrusted as having predatory profit, rather than patient-centered, motives. They rank just above the tobacco and oil and gas industries in their low levels of public trust. This reputation stems from their high profit margins, massive product liability payouts to harmed patients, and regulatory penalties for fraud and misrepresentation of drug benefits. Large fines have been paid by most Big Pharma companies to settle claims of criminal acts, deceptive marketing, illegal promotion of off-label unapproved uses, kickbacks to prescribers, and failure to report safety data. As an example, in 2012 Glaxo Smith Kline paid $956.8 million as a criminal fine, $43.1 million in forfeiture, and $2 billion to resolve civil liabilities under the U.S. False Claims Act. Total penalties paid by American Big Pharma companies since 2000 exceed $83 billion. 

The most egregious recent settlement was by Purdue Pharma for $8.3 billion. This was due to its major role in fuelling the opioid epidemic by its prolonged, deceptive, and unsafe promotion of OxyContin, thus fostering addiction and overdose deaths. 

For many companies pushing the ethical boundary, egregious conduct and misrepresentation is simply the cost of doing business with fines covered by their enormous profits, which are estimated to exceed $600 billion worldwide in 2021. 

Drug promotion and direct to consumer advertising

Direct to consumer (DTC) marketing of prescription drugs play a growing role in product promotion. The U.S. is one of the few countries that allow it. Canada does not; however, we are exposed to it because of ads on American TV stations that are freely seen in Canada. Most television shows now have multiple drug promotion commercials suggesting you talk to your physician about the use of their new and expensive anticoagulant, arthritis drug, psoriasis treatment, irritable bowel syndrome treatment, memory enhancer, or targeted chemotherapy. 

The U.S. Government Accountability Office (GAO) recently reviewed the nature of DTC advertising and its effects on Medicare beneficiary drug spending. In the three-year span between 2016 and 2018, DTC industry advertising spending was over $18 billion, with Medicare pharmaceutical drug spending $560 billion. Half the advertising spending was for three classes of drugs for chronic diseases, namely arthritis, diabetes, and depression. The advertised drugs represented only about 8 percent of drugs used, but 57 percent of Medicare drug costs. Advertising is geared to more recently released high-cost drugs in an attempt to convince patients to request that their physician preferentially prescribe them. 

While DTC advertising has some benefits in informing patients about new and beneficial therapies, it is also associated with the potential for overuse of more expensive drugs and rejection of less expensive yet often sufficient therapy. Advertisers, when directly describing an approved drug benefit, must also describe its many potential side effects. When hearing that you may be seriously harmed by the drug, the commercial usually focuses on happy people doing fun things that distracts you from the negative worrisome message. Indeed studies suggest that the listing of the many side effects may even be falsely reassuring since there is an expectation, not always correct, that your prescribing physician is fully aware of these concerns and will diligently avoid giving you the drug if you are at risk. Drug cost is never discussed no matter how expensive it is.  

Why are drug costs so high?

The traditional answer is that few compounds ever make it to the marketplace, research and development and clinical trial costs are high, and the profit motive fosters invention. However many drugs produced are simply very similar to existing drugs that have little added benefit, with large sums of money spent on promotion and marketing—spending that doesn’t advance science or patient benefit. 

Another reason for growing costs is that small companies with a potentially useful drug may receive investments from hedge funds with the greedy expectation of enormous profits. The goal is to sell the company to a Big Pharma group that wants to buy a potentially important new drug that likely will be successful soon, rather than laboriously having to develop their own pipeline. The very high cost of sale to a Big Pharma company ensures a very high multiple of return on investment, which necessitates a very high drug cost price to the consumer. 

I am concerned about a recent example in my field where a company with a useful new drug was bought for $13 billion, a highly excessive price. Because they produce an “orphan drug” that is a drug with low use, they are able to charge an exorbitant amount of money since the market is relatively small. The cost will likely be $50,000 per year for life rather than a more reasonable $5,000 had the selling price for the developing company not been unreasonably inflated. As well, while investigators who manage clinical trials need to disclose grants and other funding that may create a conflict of interest, the amount and value of stocks or options allocated to the researchers are often not clearly or fully disclosed. 

Canadian trends

While the highest drug costs are in the U.S. the impact of rising costs for existing and new drugs is a growing problem worldwide. The Canadian Institute for Health Information estimated that in 2021 Canadian health care cost $308 billion, or about $8,000 per capita.“Total health spending in Canada is expected to reach $308 billion in 2021, or $8,019 per Canadian. It is anticipated that health spending will represent 12.7% of Canada’s gross domestic product (GDP).”https://www.cihi.ca/en/health-spending#:~:text=Total%20health%20spending%20in%20Canada,report%20National%20Health%20Expenditure%20Trends. Drug costs made up about 13.9 percent of the total cost and more so since it didn’t include drug costs by hospitals. The public share of spending is just under 75 percent, with the balance split by out-of-pocket and insurance expenditure. 

Increased drug cost pressure also comes from the unreasonable and extreme price rise of some inexpensive drugs purchased by companies with plans for predatory price increases. An example is the 500 percent price increase by Mylan in the U.S. for EpiPens used to treat acute life-threatening allergic reactions.Mylan CEO defends EpiPen price hike to U.S. lawmakers https://www.ctvnews.ca/health/mylan-ceo-defends-epipen-price-hike-to-u-s-lawmakers-1.3083173#:~:text=The%20list%20price%20of%20EpiPens,Mylan%20in%20growing%20public%20outcry. Another driver of cost is the large number of biological drugs used for multiple conditions. While they are important and expensive to produce, they are heavily marketed and sold at very high cost and large profit margins.     

Are drug companies profiteering from COVID-19 therapies? 

Pfizer, one of the world’s largest Big Pharma companies had annual revenues of about $44 billion prior to COVID-19 vaccine sales. Julia Kollewe reported in the Guardian recently that their sales were boosted by $37 billion to $81.3 billion for 2021, due to the roughly three billion vaccine doses produced.Pfizer accused of Covid profiteering as first-quarter sales hit $26bn https://www.theguardian.com/business/2022/may/03/pfizer-covid-sales-pricing-vaccine-paxlovid-pill

Their likeable CEO Albert Bourla wrote about the challenges of getting the vaccine produced and approved in record time in his book Moonshot.The Story Behind Pfizer’s Covid-19 Vaccine – CEO Bourla’s ‘Moonshot’ https://www.forbes.com/sites/johnlamattina/2022/03/17/the-story-behind-pfizers-covid-19-vaccine–ceo-bourlas-moonshot/?sh=3a6acbb820e5 Very few companies had this capability. Another more effective vaccine is in the works that will provide more comprehensive protection. Their antiviral drug Paxlovid is expected to save many lives this year and beyond in higher-risk infected individuals. The drug is also expected to generate an additional $22 billion in sales, pushing annual revenues over $100 billion, an astonishing amount. Sales of vaccines to poorer countries were generally priced close to the production cost of $3-10 per shot and at about $25-30 for richer countries. Not a large individual cost to save millions of lives but at an incredible profit. Is this reaping the benefits of a remarkable moonshot in a free market or profiteering? It seemingly is both. 

Moderna a much smaller company is also having a similar banner year. They just reported that vaccine sales in the first three months of 2022 alone brought in $5.9 billion in revenue and a quarterly profit of $3.7 billion. 

Can Big Pharma do better?

While excessive regulation comes at a cost to innovation and discovery, there seems to be little hope that self-regulation and reigning in the drive for excessive profits will come from within. Governments need to place a profit cap on new drugs that puts limits on profiteering. Companies should also not be allowed to buy up inexpensive but highly useful drugs in order to raise prices by a large multiple of cost. Research funding from government agencies should be seen as a co-investment with an equity stake that will allow for a fair profit and affordable pricing. Direct to consumer advertising needs more FDA oversight in the U.S. and such commercials should be blocked from Canada where DTC advertising is illegal. 

Research bias can be further reduced by not allowing scientists (and family members) carrying out clinical trials to own stock or hold an equity position in sponsoring companies. Journals need to more rigorously enquire about and enforce conflicts of interest. 

Finally, companies that make such huge profits need to find their moral compass. They need to act ethically, carry out and report studies honestly, and financially support those in need with donations of both funds and products. 

C.S. Lewis said that “Integrity is doing the right thing even when no one is watching”. For Big Pharma to act with greater integrity they also need to know the world is watching. 

Jamil Jivani: The conservative case for regulating big tech

Commentary

The following is an edited version of the opening remarks delivered by Jamil Jivani, president of the Canada Strong and Free Network, in his debate with Reason Magazine’s Robby Soave on the question of regulating big tech. The debate took place in Ottawa on Friday, May 6 at the 14th Canada Strong and Free Networking conference.

I’m going to probably surprise some people by starting my pro-regulation argument by quoting a libertarian think tank. The eighth edition of the Cato Institute’s handbook for policymakers explains why we should believe in the principle of limited government. Cato states, “Advocates of limited government are not anti‐​government, per se, as some people charge. Rather, they are hostile to concentrations of coercive power and to the arbitrary use of power against right.”“Limited government is one of the greatest accomplishments of humanity. It is imperfectly enjoyed by only a portion of the human race; and where it is enjoyed, its tenure is ever precarious. The experience of the past century has made clear the insecurity of constitutional government and the need for courage in achieving it and vigilance in maintaining it. Advocates of limited government are not anti‐​government, per se, as some people charge. Rather, they are hostile to concentrations of coercive power and to the arbitrary use of power against right. With a deep appreciation for the lessons of history and the dangers of unconstrained government, they advocate for constitutionally limited government, with the delegated authority and means to protect our rights, but not so powerful as to destroy or negate them.” https://www.cato.org/cato-handbook-policymakers/cato-handbook-policy-makers-8th-edition-2017/limited-government-rule-law

My support for regulating big tech is based on these very same concerns with concentrations of power. It would be a mistake to think that conservatives should only be concerned with power in government hands. We ought to be consistent in our desire to see appropriate checks and balances, wherever power might concentrate. 

There are many ways we could go about documenting big tech’s unprecedented power. For example, in Canada, the duopoly of Facebook (now known as Meta) and Google receive 80 percent of digital advertising revenues.“Google and Facebook continue to dominate the $8.8 billion internet advertising market in Canada. In 2019, for example, their combined share of the online advertising market climbed to 80%, a significant increase from 72% in 2016.” https://nmc-mic.ca/2021/03/30/google-and-facebook-control-the-internet-advertising-market-in-canada/ This is objective domination of information networks. Or, how about Google accounting for 90 percent of search results in the United States? 

Some of you might say Google’s dominance is purely the result of consumer choices and not a justification for government action. To that, I’d refer to a point made by Matt Stoller at the American Economic Liberties Project: if Google’s dominance is purely the result of consumer choice, why do they engage in anti-competition practices? The U.S. Department of Justice has sued Google over the company’s exclusivity agreements that forbid the preinstallation of competing search services, including long-term agreements with Apple that require Google to be the default search engine on the Safari web browser. Where is the consumer choice in that?

A 2020 report by the U.S. House Judiciary Committee showed that these monopolistic practices are not unique to Google or Facebook. The report documents in detail the various ways that other big tech companies, including Apple and Amazon, also make use of the data they collect from users and customers to gain an unfair advantage in the marketplace.“A Democratic congressional staff report recommends changes to antitrust laws and enforcement that could result in major changes for Big Tech companies, such as spinning off or separating parts of their businesses or making it harder to buy smaller companies. After a 16-month investigation into competitive practices at Apple, Amazon, Facebook and Google, the House Judiciary subcommittee on antitrust found that the four businesses enjoy monopoly power that needs to be reined in by Congress and enforcers.” https://www.cnbc.com/2020/10/06/house-democrats-say-facebook-amazon-alphabet-apple-enjoy-monopoly-power.html

But we don’t have to just look at statistics or research reports. We can also look at practical examples. On March 3, 2022, my fellow debater at last week’s Canada Strong & Free Network conference, Robby Soave, took to Twitter to complain about YouTube suspending the channel his show appears on. The suspension was due to an unfair allegation that the show spread election misinformation. Mr. Soave was understandably frustrated, and sounded the alarm that YouTube was “imperiling journalism.” 

Imperiling journalism—that’s quite the serious charge.

Later on, in Reason Magazine, Mr. Soave would explain that he wasn’t calling for government intervention in his situation because YouTube is a private company. But, in my view, Mr. Soave’s concern shows that YouTube is much more than just another private company. 

Would you describe your local shawarma restaurant or auto manufacturing plant as having the power to imperil journalism? No, you wouldn’t. You also wouldn’t describe other video streaming services like Rumble or Vimeo as imperiling journalism because they have such a small fraction of the market share. Youtube, owned by Google, uniquely has the power to imperil a key pillar of democracy.

Big tech firms belong to a separate category of private companies, and that separate category ought to have specific regulations. This might be difficult for defenders of big tech to accept, but I would encourage you to consider what some big tech founders have to say on the matter. They, too, agree with me that big tech corporations are different from typical businesses.

In 2017, The Guardian quoted Mark Zuckerberg as saying: “In a lot of ways Facebook is more like a government than a traditional company. We have this large community of people, and more than other technology companies we’re really setting policies.”

Imagine that. Facebook’s founder says the company is more like a government than a business. Might that change how you think about regulating Meta today?

Just a couple of weeks ago, after Elon Musk purchased Twitter, former Twitter CEO Jack Dorsey shared this reflection on the company he founded: “In principle, I don’t believe anyone should own or run Twitter. It wants to be a public good at a protocol level, not a company.” 

Dorsey’s view mirrors that of U.S. Supreme Court Justice Clarence Thomas, who has argued that social media companies ought to be regulated as common carriers.“His key point is that First Amendment review by the courts might very well uphold a state or federal statute that treated social media platforms as common carriers or places of public accommodation and restricted their ability to remove content on their systems based on political point of view. He did this in the form of a non-binding concurring opinion in the Supreme Court decision dismissing as moot a lawsuit against former president Donald Trump over his blocking of some Twitter followers.” https://www.brookings.edu/blog/techtank/2021/04/09/justice-thomas-sends-a-message-on-social-media-regulation/

With the limited amount of time remaining in this opening statement, I’d like to make clear that I do not support regulation in the style of Prime Minister Justin Trudeau or President Joe Biden, who want to censor what people can say on big tech platforms. Trudeau’s proposed Digital Safety Officer and Biden’s Disinformation Governance Board are focused on pressuring big tech to control the political views we share with one another.

Conservative proposals for regulating big tech ought to carve out distinct conservative solutions that stand in contrast to the censorious approach taken by Trudeau and Biden. Here are three examples of what conservative solutions can look like:

First, in May of last year, Florida Governor Ron DeSantis signed a bill that would prevent big tech firms from removing political candidates from their platforms in the lead up to an election. That bill was successfully challenged in court, but I believe it’s worth pursuing the objective of protecting elections from the influence of big tech firms.

Second, U.S. Senator Josh Hawley’s Trust-Busting for the Twenty-First Century Act proposes the banning of all mergers and acquisitions by companies with a market capitalization exceeding $100 billion. The Act would also designate “dominant digital firms” exercising dominant market power and prohibits these firms from buying out potential competitors.

Third, House Judiciary Committee Republicans have laid out an antitrust framework that would give individuals the ability to challenge big tech in court over censorship and also require big tech firms to disclose why they remove posts online.

No proposal is perfect, but this is a strong foundation for moving beyond the simplistic big tech versus big government dynamic and addressing today’s realities on the ground.