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From The Socialist newspaper, 14 June 2007

The pharmaceutical industry

Prescription for profit

IN 2005, the health service spent 11 billion on medicines. Most of these drugs were sold to the NHS by the few huge multinationals who dominate the pharmaceutical industry. Alison Hill looks at the implications of these big companies' relentless search for profits and puts forward a socialist alternative for the development and production of medicines.

THE PUBLIC image of drugs companies isn't great. Most people feel at least uneasy, if not angry, that these big firms are making tidy profits out of illness. The profits are tidy indeed. These companies operate margins of about 25%, whilst those producing other goods have to put up with around 15%.

The pie that the pharmaceutical companies slice up between them is huge. The world's retail drug market is worth $550 billion and Pfizer, the biggest drug company, holds about 10% of it. Global drug sales have almost doubled since 1997 and are estimated to rise to around $700 billion by 2008.

So these companies exert a big influence on how much the NHS costs to run and even on what sort of treatment patients can expect to receive.

NICE little earner for drug companies

IN ENGLAND and Wales the National Institute for Clinical Excellence (NICE) was set up to assess objectively what the drug companies claim for their products. It is supposed to issue national guidance to cut across the "postcode rationing" of drugs.

But far from being the public body which forces the drug companies to produce safe medicines and provide good value for money, NICE has become one of the ways the drug companies influence the NHS in their favour.

What tends to happen is that health authorities fund everything that NICE judges to be cost-effective. Nice is therefore very subject to lobbying by specialists and their supporters in the pharmaceutical industry. If you get a favourable NICE decision, your product is very likely to be used by every health authority in England and Wales.

It's not surprising therefore that at least one commentator has described NICE as the pharmaceutical industry's "golden goose". The pharmaceutical industry is even represented on NICE's governing body!

Health authorities' budgets are limited, so if funding is given to marginally cost-effective drugs, other treatments like hip replacements and cataract surgery can be starved of funds.

This might actually exacerbate the regional variations in health treatment - as different authorities decide to make the cuts in different fields.

And NICE has proved to be a boon to articulate patients from the professional classes, as they insist that the NICE guidelines are slavishly followed in their cases.

So NICE can actually contribute to inequality of health care between regions and between classes.

The dangerous side effects of marketisation and advertising

THE WAY that the health service has been reorganised has also opened the door wide for the drug companies to come in and make big profits. The Tories introduced the market into the NHS but New Labour has enthusiastically continued down this track.

For example GPs' contracts include payments for performance, such as the number of patients whose blood pressure is kept within defined limits.

This means it's likely that people with slightly high blood pressure will be treated with drugs, when perhaps lifestyle changes should be considered first. And the drug companies have responded to this by aggressively marketing their products to GPs.

But the costs of advertising and marketing are actually contributing to a fall in the drug companies' share prices. In fact consultants Accenture estimated earlier this year that about $1 trillion in future profitability has been wiped out because investors have lost faith in the growth prospects of drug companies.


In the USA, the world's largest drug market, drugs companies can advertise their pills on television. They spent $4.5 billion on consumer drug advertising last year. And those billions contributed nothing to the development of new potentially life-saving drugs.

Viren Mehta, an industry expert exposes what is happening when he says: "If the drugs industry is so proud of being innovation-driven, why is it spending twice as much on overhead and marketing as on research and development?"

The answer is that the drugs companies are locked into a marketing and sales 'arms race' with each other which is cutting into their profitability, diverting money away from research and development and causing a certain amount of public backlash.

In January this year Pfizer announced it was cutting 10,000 jobs worldwide - about a tenth of its workforce. A fifth of its sales force in Europe and America is to go and research and manufacturing sites are to close.

The chief reason for this downturn in share prices and consequent cuts is the drop in sales of one drug. Lipitor, the anti-cholesterol drug accounts for over 40% of Pfizer's profits.

Sales are dropping, however, and the patent runs out in four years. After that, anyone can produce cheaper generic versions of the drug. Pfizer had a replacement drug under development but they dropped it in December 2006 amid safety concerns.

Bringing a drug to the market is not cheap - Regina Herzlinger of the Harvard Business School speculated recently that the billion-dollar new drug cannot be far off.

But these huge costs expose the madness of the capitalist market as a whole and the drugs industry in particular. If the industry was nationalised, under democratic workers' control and management, spending on marketing and advertising would obviously stop. And the research expertise which has been built up through years of cut-throat competition, could be pooled.

Teams of scientists could co-operate and share research results, rather than duplicating work and hiding information because of 'commercial confidentiality'. And the driving force would no longer be to produce a profitable medicine. It would only be to produce medicines that people need and the effectiveness of non drug-based treatments could be assessed properly.

Much original research already takes place in universities anyway. This should be massively expanded and available for the benefit of humankind as a whole, not hived off by the company able to give the biggest research grants.

When drug companies turn nasty

THE COSTS of developing and marketing a new drug are so high that drug companies vigorously defend their "trade secrets" and their profits. This has meant patients involved in clinical trials not being told of the risks involved in taking the trialled drugs.

In one notorious case in Canada in 1996, Dr Nancy Olivieri found risks associated with taking a drug, involving patients with thalassemia, a potentially fatal blood disorder. She was studying a drug in trials sponsored by Apotex.

As soon as she told patients of this risk, Apotex stopped the trials and threatened her with legal action. At the time the Canadian government was forcing big cuts in public spending so many provincial governments were making cuts to universities and hospitals.

They began looking for corporate sponsors to fill in the gaps.

When Nancy Olivieri made her findings public, her university was in the middle of negotiating a big donation from Apotex - $20 million for the university and $10 million for affiliated hospitals - the largest donation ever received by the university.

The perils of being tied to such donations were horribly revealed when the hospital and university responded to her findings, not by instigating a full study and suspending the use of the drug but by removing her from her position as director of the research unit.

After a long campaign she was reinstated and one of her chief detractors was disciplined. But she came close to having her licence to practice revoked, which would have ended her career.

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In The Socialist 14 June 2007:

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