Nationalize the Pharmaceutical Industry Now

The status quo will kill us.

Hadas Thier

A sign is posted in front of the Gilead Sciences headquarters on April 29, 2020 in Foster City, California. (Photo by Justin Sullivan/Getty Images)

As the coro­n­avirus pan­dem­ic ripped through the globe ear­li­er this year, it seemed for a moment that the scale of the calami­ty and the depth of des­per­a­tion for a cure might force gov­ern­ments and indus­try to pri­or­i­tize our health above profiteering.

Many other countries have practices in place that help to keep prices of medicines down.

What­ev­er nation­al­ist blus­ter and threats came out of Wash­ing­ton or Bei­jing, sci­en­tif­ic col­lab­o­ra­tion across bor­ders moved for­ward with great speed and scale. The New York Times report­ed in April, Nev­er before, researchers say, have so many experts in so many coun­tries focused simul­ta­ne­ous­ly on a sin­gle top­ic and with such urgency.” The pos­i­tive results of this ramped up research are begin­ning to trick­le in.

Even the noto­ri­ous­ly cor­rupt phar­ma­ceu­ti­cal indus­try had to pause for a breath. In March, Gilead Sci­ences had obtained the Food and Drug Administration’s orphan” sta­tus clas­si­fi­ca­tion for remde­sivir, a drug which has the poten­tial to treat Covid-19. Orphan sta­tus is usu­al­ly reserved for med­i­cines intend­ed for rare dis­eases, and comes with great finan­cial wind­falls for phar­ma­ceu­ti­cal com­pa­nies. But pub­lic pres­sure soon forced Gilead to relin­quish its right to the spe­cial status.

Fast for­ward a few months, and very lit­tle pre­tense of fair­ness remains. Despite ben­e­fit­ing from tens of mil­lions of dol­lars in tax­pay­er-sup­port­ed research, and despite an esti­mat­ed cost of less than $10 to pro­duce, Gilead Sci­ences has priced remde­sivir treat­ment at over $3,000 per per­son. Regard­less of the orphan” sta­tus clas­si­fi­ca­tion, run-of-the-mill patent laws will be effec­tive enough in pre­vent­ing the ade­quate dis­tri­b­u­tion of cheap­er, gener­ic ver­sions of the drug.

Gilead has already signed con­fi­den­tial licens­ing deals with phar­ma­ceu­ti­cal man­u­fac­tur­ers in Egypt, India and Pak­istan, which will lim­it the coun­tries in which gener­ic ver­sions can be dis­trib­uted, and like­ly the quan­ti­ty and time­line in which they will be pro­duced. Com­pa­nies will set their own prices, but roy­al­ties to Gilead will be added once anoth­er Covid-19 treat­ment or vac­cine is approved, or the World Health Orga­ni­za­tion declares an end to the pub­lic health emergency.

To make mat­ters many orders of mag­ni­tude worse, the Trump admin­is­tra­tion is answer­ing the shame­ful record of death rates in the Unit­ed States with Amer­i­ca-First rhetoric, and has bought up almost the entire­ty of treat­ment cours­es that Gilead will pro­duce for the next three months. Vital treat­ment is not only a means of cor­po­rate prof­i­teer­ing for the phar­ma­ceu­ti­cal com­pa­nies, but also a tool for glob­al domination.

Espe­cial­ly in a pan­dem­ic, the log­ic of mar­ket-dri­ven health care leads to price goug­ing and bid­ding wars, rather than glob­al coop­er­a­tion and guar­an­teed med­i­cine. Though cross-bor­der sci­en­tif­ic col­lab­o­ra­tion is thank­ful­ly still ongo­ing, Big Phar­ma is primed to make a killing at home and abroad, in the midst of a dev­as­tat­ing pandemic.

Gilead’s price goug­ing track record is well-known. Gilead priced Soval­di, which can cure Hepati­tis C, at $84,000 for a 12-week treat­ment. The drug,” explained Ter­ry Allen, was near­ly mar­ket-ready in Novem­ber 2011 when Gilead paid $11 bil­lion cash to acquire Phar­mas­sett, which had fore­cast a $36,000 price tag for the 12-week course. In Decem­ber 2013, Soval­di hit the mar­ket at well over twice that price.” Mean­while Gilead’s oth­er main cash cow is HIV med­ica­tions. Tru­va­da, which helps pre­vent trans­mis­sion, costs near­ly $2,000 a month despite a $6 cost of production.

What on earth could jus­ti­fy these gaps?

When the Insti­tute for Clin­i­cal and Eco­nom­ic Review (ICER) released its analy­ses of pric­ing for remde­sivir, it dis­tin­guished between cost recov­ery” (under $10 per treat­ment) and cost-effec­tive­ness,” which weighs the cost of a drug against the costs saved to the health care sys­tem, will­ing­ness” (read: abil­i­ty) of con­sumers to pay, and a quan­ti­fied val­ue placed on our lives. In this case, ICER deter­mined the cost-effec­tive” price or remde­sivir could be as high as $4500.

In essence, cost-effec­tive” pric­ing is meant to reward com­pa­nies rel­a­tive to the costs soci­ety would bear if we didn’t have the ben­e­fit of the drugs. What would be the cost of sev­er­al more days on a hos­pi­tal ven­ti­la­tor, or X num­ber of years lost in a life? Just as patent laws osten­si­bly encour­age inno­va­tion (but in fact achieve the oppo­site), cost-effec­tive pric­ing, too, is meant to incen­tivize the devel­op­ment of pharmaceuticals.

Cost-effec­tive” pric­ing is gen­er­al­ly assumed to be a fair­er alter­na­tive to the oth­er­wise Wild West approach in which drug mak­ers set pric­etags with­out any frame­work apart from charg­ing the high­est amount they can get away with. But, in fact, even ICER’s watch­dog sta­tus in the indus­try has qui­et­ly shift­ed to what phar­ma com­pa­nies con­sid­er the least bad option” for cost debates.

Remde­sivir, like many drugs, was the result of a pub­lic-pri­vate col­lab­o­ra­tion, which took place over the course of many years among gov­ern­men­tal orga­ni­za­tions and employ­ees, uni­ver­si­ties, and sci­en­tists across the world. Over $70 mil­lion of tax­pay­er fund­ing con­tributed to its devel­op­ment. The unspo­ken but under­stood agree­ment with­in the phar­ma­ceu­ti­cal indus­try is pub­licly fund­ed inno­va­tion, pri­vate own­er­ship of the product.

The unfor­tu­nate real­i­ty is that there is noth­ing extra­or­di­nary about Gilead’s greed. While Big Phar­ma uses monop­oly posi­tions to prof­it off of sky­rock­et­ing drug costs, Small Phar­ma,” includ­ing many com­pa­nies charged with pro­duc­ing cheap­er gener­ic drugs, has also cre­at­ed monop­oly con­di­tions through acqui­si­tions and patent manip­u­la­tions. Com­pa­nies find a drug for which there is lit­tle mar­ket com­pe­ti­tion, buy out the firm that pro­duces it, and imme­di­ate­ly raise the prices. In this way, small­er com­pa­nies can mim­ic monop­o­lis­tic strate­gies by cor­ner­ing mar­kets for par­tic­u­lar drugs.

Mar­tin Shkreli’s Tur­ing Phar­ma­ceu­ti­cals made those strate­gies infa­mous a few years ago when it acquired and then jacked up by 5,000% the price of Dara­prim. As Busi­ness Insid­er point­ed out, For drugs like Dara­prim, for which only about 8,000 pre­scrip­tions are filled a year, it sim­ply isn’t worth it for oth­er com­pa­nies to try to come up with gener­ic alter­na­tives. This allows for a price monop­oly in which the drug man­u­fac­tur­er can set vir­tu­al­ly any price it wants.”

These moves have been defend­ed on the basis that super-prof­its are nec­es­sary to fund fur­ther research and devel­op­ment. But phar­ma­ceu­ti­cal com­pa­nies typ­i­cal­ly spend, at most, 15% to 20% of their rev­enues on research and devel­op­ment. And those com­pa­nies that have most aggres­sive­ly pur­sued the acqui­si­tion and price-hike mod­el tend to spend much less. 

Many oth­er coun­tries have prac­tices in place that help to keep prices of med­i­cines down. The Unit­ed Kingdom’s Nation­al Health Ser­vice, for instance, nego­ti­ates nation­wide drug prices. By nego­ti­at­ing on behalf of the entire coun­try, it exerts bulk buy­ing pow­er.” Amer­i­can insur­ance plans and hos­pi­tals are oblig­ed to pay what­ev­er prices are set in an unreg­u­lat­ed mar­ket. Even Medicare is leg­isla­tive­ly barred from nego­ti­at­ing drug prices. Instead, we pay what­ev­er the drug com­pa­nies ask for, and pray that the invis­i­ble hand” of the mar­ket leads to more com­pet­i­tive prices. 

But com­pe­ti­tion leads to its oppo­site in the form of monop­o­lies. Cor­po­ra­tions gain in size, or cor­ner a mar­ket, pre­cise­ly so that they don’t have to com­pete to make the best or most afford­able prod­uct. Patent laws fur­ther entrench monop­oly con­di­tions, and hold us hostage to the unlike­ly good will of Gilead and oth­er companies.

In the con­text of monop­oly posi­tions, the free mar­ket” does not pro­duce price com­pe­ti­tions in which mul­ti­ple firms vying for con­sumers low­er their prices. Instead phar­ma­ceu­ti­cal com­pa­nies set what­ev­er price tag they think they can get away with, and jus­ti­fy it as fair under the cov­er of con­vo­lut­ed eco­nom­ic met­rics and cost-effec­tive­ness.”

Imag­ine if we applied this frame­work to the Fire Depart­ment. Instead of pro­vid­ing a free, pub­lic good to save lives, local fire depart­ments would cal­cu­late cost-effec­tive” prices for their ser­vices based on the aver­age amount of val­ue stored in hous­es, the belong­ings, and the price of the lives that would be saved in each house. Such a frame­work would seem bar­bar­ic and absurd. But the life­sav­ing stakes of drug devel­op­ment and dis­tri­b­u­tion are just as critical.

To effec­tive­ly bat­tle Covid-19 we’ll need inter­na­tion­al col­lab­o­ra­tion on research, edu­ca­tion and fund­ing, and to wide­ly and freely dis­trib­ute treat­ments and vac­cines. The virus knows no bor­ders, and nei­ther can its cure. Now that vac­cine tri­als are begin­ning to go live — and show­ing some promis­ing signs—we need to pre­pare for pric­ing dri­ven by share­hold­ers, com­pe­ti­tion among com­pa­nies, and gov­ern­ments stock­pil­ing inventory.

There should be a sim­ple solu­tion to the dis­as­ter unfold­ing. Pub­lic fund­ing should trans­late into pub­lic use. Ask­ing what’s the incen­tive?” for phar­ma­ceu­ti­cals to do the research is the wrong ques­tion. Prof­it as a motive cre­ates obvi­ous con­flicts of inter­est. Instead, we should nation­al­ize the indus­try and release sci­en­tif­ic knowl­edge to the pub­lic domain. Our lives are lit­er­al­ly on the line.

Hadas Thi­er is an activist and social­ist in New York, the author of A Peo­ple’s Guide to Cap­i­tal­ism: An Intro­duc­tion to Marx­ist Eco­nom­ics, and a reg­u­lar con­trib­u­tor to Jacobin Mag­a­zine. She tweets at @HadasThier.

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