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From The Socialist newspaper, 20 April 2006

The scandal of drug companies and the NHS

Super-profits from illness

THE SERIOUS Fraud Office has just launched criminal proceedings against five drug companies, over the alleged price-fixing of drugs supplied to the NHS.
Meanwhile several women have launched campaigns in recent months because of the refusal of their primary care trusts to fund Herceptin for breast cancer.
Claire Job, a nurse and a member of Swansea Socialist Party looks into the multi-million pound pharmaceutical industry.

HERCEPTIN IS expensive, it costs 21,800 per patient per year. But the mainstream media don't question why it is so expensive. The pharmaceutical companies say that research and development costs a lot but what is the truth?

The pharmaceutical multinationals have great power and influence and make great profits. The top ten drug companies - "Big Pharma" - are American, British, Swiss and French. In 2002 the combined profits of Big Pharma in the Fortune 500 list were more than the profits of the other 490 businesses put together.

In 2002 the worldwide sale of prescription drugs cost $400 billion. A large proportion of these sales were in the USA. Without a national health service and where many low-paid jobs come without medical insurance, many workers in America have to trade off taking medicines against paying for heating and food.

The frailest and most vulnerable people string out prescriptions, taking less than is prescribed. Or worse, people risk sharing prescription medicines. Perversely, those without health insurance pay more for medicines because they miss out on discounts negotiated by the insurance companies.

Why is this industry so profitable?

Heavily prescribed drugs are routinely jacked up in price. People are taking a lot more medicines and these are more likely to be expensive new drugs instead of the older cheaper ones that do the same thing.

But the research and development part of the drug companies' budgets is small compared to marketing and certainly much smaller than the profits they make. The prices of these medicines have little relationship to the costs of making the drugs and could be enormously cut without coming close to threatening research and development.

Anyway, public money plays a significant role in the development of new medicines. Most of the research and development is done in academic institutions. About a third of medicines marketed by Big Pharma are licensed from academic institutions.

The industry is not particularly innovative either, most drugs are variations of the same medicine produced in competition with existing drugs that do the same thing. This duplication is enormously wasteful and outrageous, given the rarer illnesses that need drug research but don't get it because they will not be profitable.

The patents of medicines are the life blood of this industry. These give the drug companies exclusive rights to the profits from sales. When the rights to the medicine expire a generic drug (copy) can enter the market at a significantly cheaper price.

Big Pharma therefore employ armies of lawyers to ensure they maintain the patent for as long as possible. In 1980 a patent length was eight years. In 2000 this had grown to 14 years.


A drug company that has exclusivity to a very widely sold medicine - they call this a blockbuster - has secured its place amongst the top pharmaceutical companies. With this comes enormous power, influencing governments on a global scale.

Big Pharma will do almost anything to protect exclusive marketing rights, including condemning people in the developing world to a premature death from AIDS. 95% of people with the HIV virus live in the developing world - that's 32 million people.

Antivirals dramatically reduce mortality from AIDS in wealthy countries and have gone some way in transforming the fatal AIDS virus into a chronic condition that people can live with. Big Pharma have made billions from the sales of antiretroviral drugs. But their cost puts them out of the reach of the vast majority in the developing world. This is about profit and power not health!

The biggest item on a drug company's budget is "marketing". This can be two and a half times that spent on research and development. This covers education, advertising and promotion. This means influencing those that write the prescription or influencing those who influence the prescription-writer.

Doctors and nurses are given free gifts of everything from pens, computer accessories and paper weights to sponsorship to attend world conferences and study days that are not funded by the strapped-for-cash NHS. A recent study showed even those doctors who said they were not influenced by the drug companies' marketing did in fact alter their prescription habits. If marketing didn't work and increase profits they wouldn't invest so much in it.

The quest for profit pushes every other consideration aside, including public safety. Medicines have been withdrawn due to health risks. One of Big Pharma's members has recently had to pay hundreds of millions of dollars in compensation. They produced a medicine taken by 20 million people worldwide (including by my own father) that has been linked to what is estimated to be around 28,000 heart attacks or deaths since 1999.

Their response should be to invest more in research, development and safety. But the fear is they will respond by being even less innovative in developing new medicines.

So what is the answer to this global industry that puts profit before health and safety, that does not respond to public health need and who condemns the poor to premature death?

The nationalisation of the drug companies under democratic workers' control, would provide the NHS and public health with the funding required to dramatically improve the health of the world, re-investing in the research and development of medicines produced for health need not profit.

Ill-health is strongly associated with poverty, the environment and lack of education. All past capitalist governments have been useless in running society and health care.

No matter who is in power, the gap between the health of the wealthy and the health of the poor is growing. That is why we need the socialist transformation of society so we can tackle the causes of ill-health. Everyone should have an equal opportunity to live life to the full, to be productive and to be cared for.

Conspiracy to defraud

FIVE DRUG companies and nine individuals, senior employees of those companies, are being charged as part of the investigation into price-fixing. This is one of the biggest investigations the Serious Fraud Office has ever brought to trial.

In a separate but related civil action already in the High Court, it has been estimated that the NHS has lost 150 million through this alleged price fixing.

The five companies in the dock are being charged with conspiracy to defraud in relation to the supply of the blood-thinner warfarin and some penicillin-based antibiotics. The five companies are Kent Pharmaceuticals, Norton Healthcare, Generics (UK), Ranbaxy (UK) and the Goldshield Group.

The investigation started in 1999 when the price of some generic drugs shot up by 40%. Some even went up by 300% over 18 months. The NHS spends nearly 2 billion a year on these generic (off-patent) drugs.

The break-up and privatisation of the health service has meant the big drug companies are in a strong position when individual hospitals and primary care trusts are doing the buying. There is no standard price list for drugs and no central purchaser. And the drug companies have been making the most of this.

Some of the companies have already paid millions to settle civil actions against them, without admitting liability.

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In The Socialist 20 April 2006:

Socialist Party NHS campaign

NHS in crisis: Join the fightback now

New Labour feel the heat on hospital cuts

Super-profits from illness

Housing crisis

Fight to save our council housing!

Socialist Party election campaign

A socialist alternative to privatisation

We need a fighting alternative

Workplace news and analysis

Socialists call for "robust" action to oppose Peugeot job losses

Keep up the pressure on bosses and union leaders

New strikes against DWP job cuts

Kick big business out of education!

Stewards prepare to fight for jobs

International socialist news and analysis

Nepal: General strike movement against regime

Successful CWI public meeting in Caracas

Walmart: the High Cost of Low Price


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