Yves here. Go Katie Porter! While you were busy rubbernecking over Robinhood and GameStop, some people were staying focused on issues that matter to Americans.
We have written for many years about other elements of bad faith at Big Pharma, like whining they need more profits to fund drug development, when they spend more on marketing than R&D, and also spend a lot on buybacks. From Axios:
The big picture: When billions of dollars became available to the biggest drug companies, their main priority was to juice earnings, along with the paydays of their executives and investors — not investments in new treatments or relief for patients who can’t afford their drugs.
And on top of that, for decades, the overwhelming majority of FDA “new drug applications” are actually minor reformulations of existing drugs to extend patent life.
By Brett Wilkins, staff writer at CommonDreams. Originally published at CommonDreams
Rep. Katie Porter on Friday published a damning report revealing the devastating effects of Big Pharma mergers and acquisitions on U.S. healthcare, and recommending steps Congress should take to enact “comprehensive, urgent reform” of an integral part of a broken healthcare system.
The report, entitled Killer Profits: How Big Pharma Takeovers Destroy Innovation and Harm Patients, begins by noting that “in just 10 years, the number of large, international pharmaceutical companies decreased six-fold, from 60 to only 10.”
While pharmaceutical executives often attempt to portray such consolidation as a means to increase operational efficiency, the report states that “digging a level deeper ‘exposes a troubling industry-wide trend of billions of dollars of corporate resources going toward acquiring other pharmaceutical corporations with patent-protected blockbuster drugs instead of putting those resources toward’ discovery of new drugs.”
Merger and acquisition (M&A) deals are often executed to “boost stock prices,” to “stop competitors,” and to “acquire an innovative blockbuster drug with an enormous prospective revenue stream.”
“Instead of spending on innovation, Big Pharma is hoarding its money for salaries and dividends,” the report says, “all while swallowing smaller companies, thus making the marketplace far less competitive.”
Today, our office released a bombshell report exposing the devastating effects of Big Pharma’s mergers and acquisitions. Featuring exclusive interviews with former Immunex, and later Amgen employees, our report shows how consolidation curbs innovation at the expense of patients.
— Rep. Katie Porter (@RepKatiePorter) January 29, 2021
Our report is clear: Consolidation destroys scientific cultures that once celebrated creativity and transforms them into places that cater to the whims of shortsighted shareholders.
But our investigation also shows how we can chart a new path forward ⬇️https://t.co/1jxtK9J6rh
— Rep. Katie Porter (@RepKatiePorter) January 29, 2021
The report calls M&As “just the tip of the iceberg of pharmaceutical companies’ anti-competitive, profit-driven behaviors”:
Pharmaceutical companies often claim that lowering the prices of prescription drugs in the United States would devastate innovation. Yet, as prices have skyrocketed over the last few decades, these same companies’ investment in research and development have failed to match this same pace. Instead, they’ve dedicated more and more of their funds to enrich shareholders or to purchase other companies to eliminate competition.
“In 2018, the year that [former President] Donald Trump’s tax giveaway to the wealthy went into effect, 12 of the biggest pharmaceutical companies spent more money on stock buybacks than on research and development,” the report notes.
Some key findings from the report:
- Big pharmaceutical companies are not responsible for most major breakthroughs in new drugs. Rather, innovation is driven in small firms, which are often spun off of taxpayer-funded academic research. These small labs are then purchased by giant firms after they’ve assumed the risk needed to develop a blockbuster drug;
- Instead of producing lifesaving drugs for diseases with few or no cures, large pharmaceutical companies often focus on small, incremental changes to existing drugs in order to kill off generic threats to their government-granted monopoly patents; and
- Mergers in the pharmaceutical industry have had an overall negative effect on innovation, taking what little competition existed in the industry and completely destroying it.
“Competition is central to capitalism,” Porter said in a press release introducing the report. “As our report shows, Big Pharma has little incentive to invest in new, critically needed drugs. Instead, pharmaceutical giants are free to devote their resources to acquiring smaller companies that might otherwise force them to compete.”
“Lives are on the line; it’s clear the federal government needs to reform how it evaluates healthcare mergers and patent abuses,” Porter added.
To that end, Porter’s report recommends the following actions:
- Removing incentives that prioritize investors and Wall Street over patients;
- Reevaluating the standards used by the Federal Trade Commission (FTC) for healthcare mergers;
- Altering the presumption that most mergers and acquisitions are legal unless contested by an individual or group;
- Lowering the cost of prescription drugs. Congress should pass legislation that reins in skyrocketing costs. This can begin with drug price negotiation legislation, such as the Elijah E. Cummings Lower Drug Costs Now Act, but must extend to include a larger class of drugs and cover all payers and the uninsured; and
- Preventing anti-competitive abuses of the drug patenting system. Congress should pass legislation, such as the such as the Preserve Access to Affordable Generics and Biosimilars Act, the Affordable Prescriptions for Patients Through Promoting Competition Act, and the Stop STALLING Act, to stop abuses of the regulatory process.
“It’s time we reevaluate the standards for approving these mergers,” the report concludes. “It’s time we pass legislation to lower drug prices. And it’s time we rethink the structure of leadership at big pharmaceutical companies. Together, these strategies can help us bring more innovative, and critically needed, cures and treatments to market.”
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Katie Porter is brilliant – the total anti-Trump.
https://www.youtube.com/watch?v=yh4nhkuvuFc
Okay, this I didn’t expect: top recipients of Pharma $ in the senate per Open Secrets: Bernie Sanders, twice the take of his nearest competitors, Warren and McConnell
https://www.opensecrets.org/industries/summary.php?
Everything isn’t about Trump.
In the House maybe it is: Kevin McCarthy for the win
https://www.opensecrets.org/industries/summary.php?ind=H04&cycle=2020&recipdetail=H&mem=Y
I happen to live in Kevin McCarthy’s district. He is awful, particularly when it comes to basic theories of capitalism and basic economics.
Back when the big issue was Internet Freedom and monopoly control I sent him a letter explaining why I disagreed with his position on whatever the “law of the week” was that he was supporting. He replied back to me (with an actual letter, to his credit) explaining to me that Monopolies Are Good Because They Foster Innovation. This from a supposedly intelligent Republican and House Leader.
Oops, correct link fir Senate
https://www.opensecrets.org/industries/summary.php?ind=H04&cycle=2020&recipdetail=S&mem=Y
This looks tragic. I hope there is some explanation. My first guess is that Bernie is being induced to include generous limits for Pharma’s drug prices as he pushes for M4A. The big thing was, formerly, to give the government control of drug pricing. This donation would indicate that Pharma has a more favorable compromise in mind. And, being hopeful here, Pharma will still be taking a big cut in their profitability. They are pre-emptively mitigating their losses. Which are still inevitable because “health care” in America is making us all very sick. And even if and when we get M4A we will all be convalescing for years to come. After fighting for a lifetime for good nationalized healthcare, when it finally comes (and it will) nobody is going to jump up and down and clap for the medical industry. A fight this long and bloody will affect us all for generations to come. I will never trust them.
So – if you dig in to the numbers:
https://www.opensecrets.org/members-of-congress/bernie-sanders/industries?cid=N00000528&cycle=2020&recs=0&type=C
This seems to be mostly individual donations – Bernie tops a lot of sector lists but his PAC money looks to be mostly from unions. Open Secrets rolls up occupation data by donor to the sectors.
From your link:
METHODOLOGY: The numbers on this page are based on contributions from PACs and individuals giving $200 or more.
*******
Also, the list includes as categories separate from Pharma Production several that would seem to account for unions: Teachers Unions, Public Sector Unions, Industrial Unions.
Bernie doesn’t crack the top 25 for Pharma PAC money
https://www.opensecrets.org/industries/pacrecips.php?ind=H04&cycle=2020
Right, that list excludes individual donations while the one above includes them. Individual donations put him over the top, but why are they designated as Pharma Production? It can’t be the Union thing.
Like I said, I was surprised…
Its because as a presidential candidate that didn’t take significant pac money he took an order of magnitude more money from the grunts that work in every industry.
Switch it to 2018 when Bernie was running for reelection in the senate and he got a whopping $16k.
Adding, 10 Dems are on that list of top 25 PAC $, which was the point I was making.
And to debug: I am the last person to suggest anything nefarious about Bernie. My intent was to point out its not all about Trump.
Sanders is also at the top of many many other sectors, too. This is a result of his having run for president, not some nefarious collusion with pharma. I’m not putting a link here because all one has to do to refute the idea that he is especially receiving donations from pharma is to use the same link given, but just poke around in any other sector at the same site. I did this for several other sectors and Sanders is at the top of all the sectors I picked. He may not be top in all sectors available at the site, but he was in the few I picked, nearly at random. He was much further ahead of the other senators in each of the other categories I chose than he was in the one linked to.
The moral? One statistic, isolated from all the rest of relevant statistics, can be highly misleading. It’s called ‘cherry-picking.’
“There are lies, damn lies, and statistics “ – Mark Twain
Biden got the most from Pharma by far.
Sadly, she made the mistake of extending her reach into other areas, which led to her getting stripped from the one assignment where she had significant power.
Again, eclownomists are wrong.
Outsized profits has failed to draw competition to itself. Instead, outsized profits is used to kill competition. Another advantage for the bigs is using the carryforward losses of the soon to be devoured innovator to offset the big’s profits, reducing taxes owed.
Sweet deal for those at the top. Taxpayer funded research -> innovative money losing company taking a risk -> devour the innovative company and use the generated losses by it to reduce your own taxes and kill the competition. Circle complete.
How is that circle to be broken when the bigs own congress?
I think this is a wider problem that just the drug industry.
I was invited to a silicon valley party once at the partner of a big law firm. It was kind of a celebratory party for all the companies that had liquidity events that year.
I went around asking what their companies did. What struck me was how trivial most of the products these companies were making. Really most were minor upgrades to existing products.
It turns out that the healthcare industry would rather buy a minor update that do it themselves, because if they did it themselves it would be a cost. By buying the product it doesn’t show up as cost (at least in the short run).
This makes everything less efficient. A small company starting from scratch takes much time and money to make this minor update. Once the acquisition occurs, the big healthcare company now has 2 products, which are similar, but made by different producers, with total different BOMs.
I covered the health infotech VC startup space (mostly Silicon Valley) for a number of recent years. I was working in Health IT at the time (electronic medrecs, etc).
Then I watched “Silicon Valley HBO” at the urging of my kids.
I couldn’t do it with a straight face after that.
The content of this report of Big Pharma corruption should certainly be a national scandal, resulting in a generation of reform. But the corrupt mass media, corrupt legislature, corrupt executive, and corrupt judiciary will do nothing at all. They are the core problem.
The US needs constitutional amendments to restrict funding of mass media, political parties, and elections to limited individual donations, with very severe penalties for violations. Congress and the judiciary and most agencies must be purged and restaffed under strict controls, and monitored for life for corrupt influence. All branches and mass media corporations must be structured with multiple redundant cross-checking decision committees, with rotating memberships. Otherwise they sell out.
Hear, hear . . . but getting such legislation past the money already swamping the system will take some kind of miracle.
“The content of this report of Big Pharma corruption should certainly be a national scandal,….”
You are absolutely right, and it is something that all Americans should know about, so I searched the major news outlets in this country to see who is carrying this story and guess what? NOT ONE! Vox is the closest to MSM coverage that I could find.
They are all carrying the Robinhood story though.
Who pays at Pfizer calls the tune?
The ‘small government’ movement was always a total ruse. It wasn’t even libertarian. It was just ‘give me monopolies and tax cuts’ populism for the One Percent. Meanwhile the plebes continue to believe in ‘trickle down,’ prosperity for themselves. A friend of mine found this quote. I think it is pertinent: “The Baltimore Evening Sun on July 26, 1920: ““As democracy is perfected, the office (of the President) represents, more and more closely, the inner soul of the people. We move toward a lofty ideal. On some great and glorious day, the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.” The only thing H.L. Mencken didn’t consider when he wrote the sentiment was how many of a like mind and character would be swept into office by the wake.” This is not a criticism of the new President, Joe Biden. He appears sane and maybe even quite progressive. A true populist, not the fake one we just collectively fired.
The “small gov movement” that spawned such practices was a economic Qanon of its day with congressional hearings and investigations.
https://www.nsfwcorp.com/dispatch/milton-friedman/
Can you imagine something like “clean coal’s” logic forming the basis for an entire country’s economic system and mentality? That’s what we have and that’s the mess Porter and her office so expertly sorts through.
As her report centers on capitalism needing competition, it is abundantly clear we do not have capitalism in this country. It is merely an economy wide oligopoly with socialized income distribution for the top 1% and their companies. No wonder the money flows towards marketing and PR by pharma companies, often in the form of scooping up the work done by the little guys to prevent people from realizing this is not a functioning economy for them. Currently, this is the “pfizer vaccine” that they cam into a the last minute to drop a bunch of resources ad cash into so it looks like they saved the day and BioNTech is a sidekick. It’s only a matter of time before healthcare and pharma companies are given the “heroes” and untouchable treatment in the media.
He appears sane and maybe even quite progressive. A true populist, not the fake one we just collectively fired.
When does your comedy central show air? That can’t be the only good joke you know…
You can leave your dusty bottles on the shelf / An’ you can keep your words of wisdom to y’self….
Codeine – The Dead South (cover)
It’s time to roll back the legislation that allowed Big Pharma to openly advertise in media – decades ago it was illegal for drug companies to advertise, instead relying on detailers to visit doctor’s offices with their latest concoctions.
The true reality is to ban stock repurchases 100%.
Last time I checked, US was one of only two countries in the world allowing D-t-C (direct-to-consumer) advertising by pharmaceutical firms. That law was passed under Clinton. Watch any cable news network, and try to count all the pharma commercials.
It’s a system.
I mean, Canada technically disallows DTC advertising, but their system of having “separate” issue ads and no-content drug name advertising allows them to skirt the law—- nobody is left very confused after watching a drug commercial that doesn’t mention the drug name, followed by an almost identical ad mentioning the name but with no content.
And, if I’m not mistaken, a lot of straightforward American drug ads leak through uninhibited via cable television. I’m pretty sure our regulator doesn’t sim-sub every advertisement into compliance.
I’m not defending DtC advertising. It’s nefarious. (At best it disturbs the doctor patient therapeutic relationship).
But we (Canada) have price controls.
And speaking as a pharmacist I don’t see many patients clamoring for brand name drugs they’ve seen on TV. (OTC drugs are a different story). Honestly the bigger problem is some ignorant doctor prescribing the newest drug they’ve heard of without realizing it’s 20x the cost of the standard of care (and debatably no better). They are intentionally kept ignorant so I can’t really blame them either.
So as bad as advertising is, I haven’t seen/heard enough to make me think it’s the worst problem.
I speak partially from ignorance as I haven’t intentionally watched broadcast or cable television for like 15 years. But damn do I remember the Cialis and Prilosec and “The purple pill called Nexium” commercials from my 90s Canadian youth. I also overhear the ads my mother sees on CNN— but she trusts her doctor over the people on the TV and I have to say most of my patients are the same.
Yet the drug companies spend a fortune on advertising so it must work.
Direct-to-consumer advertising of prescription drugs — along with other healthcare products and services whose appropriateness require a licensed professional’s judgment — is actually the biggest obstacle to effective healthcare reform in the United States. That’s because Big Pharma’s huge advertising outlays have effectively bought “the news.”
The for-profit health sector is one of US media’s biggest advertisers. According to a January 2016 New York Times article by Elisabeth Rosenthal (now with the Kaiser Family Foundation), the sector was spending $14 billion a year on DTC advertising, with $4.5 billion of that from Big Pharma alone. According to an advertising industry study, in 2005, when Medicare for All was beginning to loom as a threat, total pharma DTCA spending reached $5.5 billion. Of that $1 billion each went to ABC, CBS, and NBC, a half billion to Fox, and the rest to miscellaneous and print. To put that in perspective, in 2005, NBC Universal’s gross revenue from all operations — TV, radio, movies, and entertainment parks — was $17 billion, and its net income was $17 million. Even allowing for creative Hollywood accounting, $1 billion in revenue from a single class of advertisers dramatically trumped any theoretical commitment to objectivity and balance anyone working for an NBC news operation might have espoused. Sad to say, the three cardinal rules of commercial media are:
(1) Always know which side your bread is buttered on.
(2) He who pays the piper calls the tune.
(3) Don’t bite the hand that feeds.
This is obvious to anyone old enough to remember the difference between American healthcare-news coverage around the time of Hillary Clinton’s reform effort in the early 90s and the coverage around the time of Obama’s effort, ca. 2008–2010.
In 1990, Walter Cronkite hosted a primetime CBS special (Borderline Medicine) comparing the Canadian and US healthcare systems. He all but explicitly concluded that the Canadian system was better than the American one. (I still remember him saying of the American healthcare system that “it isn’t healthy, it doesn’t care, and it isn’t a system.) During Hillary’s effort, it was hard to turn on the news without seeing tables comparing the price of leading prescription drugs in the US and abroad, or interviews of American seniors forced to choose between prescription meds, food, and utilities, or footage of bus convoys of Americans traveling Mexico or Canada for affordable prescription drugs. At this time, I should point out, Big Pharma was spending under $300 million a year, in the aggregate, on prescription-drug DTCA.
Fast-forward to the Obama effort, when Big Pharma was spending around $5 billion a year on DTCA. We saw no drug price comparisons, no elderly people unable to afford their prescriptions, and no mention of American medical tourists. We did get a decent share of cherrypicked horror stories from countries with universal healthcare, like unusually long wait times for elective surgeries in Canada’s poorest provinces, or terminally ill British octogenarians being denied an exorbitantly expensive medication on the basis of expected Quality-Adjusted Life Years. (We didn’t get coverage of the innovative piggyback heart transplant that saved the life of a Welsh teenager at the NHS’s Great Ormond Street Hospital in London, and that no private American insurance plan would have covered.) On PBS, we got TR Reid’s Sick Around the World, which was decent as far it went, but PBS Frontline watered down the followup Sick Around America so much that Reid dissociated himself from the project entirely. (PBS and NPR are not terribly different from commercial operations in the sense that they keep a weather eye to donors and underwriters, both current and potential. That’s why PBS/Frontline killed the Koch Family exposé Citizen Koch.) Finally, Jill Stein and Margaret Flowers of the Green Party were invited on Bill Moyers’ show a couple of times to talk up Medicare for All, and you could see Michael Moore’s Sicko for the price of a movie ticket. (I’m pretty sure it still hasn’t been broadcast.)
Why is mainstream news so important — still, in the social-media era? Well, because there’s little original reporting in social media, and mainstream “news” can still drive what happens there. And that’s relevant to healthcare reform for two reasons:
(1) Politicians’ political careers and, increasingly, their golden-parachute deferred payoffs in the private sector, depend on how they are portrayed in mainstream news, directly and as echoed in social media. A politician who supports Medicare for All risks finding himself being attacked as a terrorist-loving sexist pig.
(2) Voters get most of what they think they know about healthcare from mainstream news, again both directly and as echoed in social media. They think Medicare for All will cost a fortune and cause their taxes to go up, when in fact, if we’re as stingy as Switzerland or France (which are not stingy), we stand to save $1 trillion a year. American voters also don’t know that Americans already bear close to the highest healthcare-tax burden in the world, without getting guaranteed healthcare in return. And in an electoral democracy as in data-processing, garbage (disinformation) in, garbage (votes against one’s own interests) out. As HL Mencken put it, “Democracy is the theory that the common people know what they want and deserve to get it, good and hard.” Propaganda and disinformation from a fatally conflicted and corrupt news media is the reason it has taken so long for the American common people to begin understanding what they should want.
And that’s why prescription-drug DTCA is actually the biggest problem advocates of universal, egalitarian, cost-effective healthcare face in the United States.
I think the biggest problem for M4A, besides those of a bought and paid for congress and an unfriendly corporate media is the lack of a marketing strategy for M4A that defeats the economic arguments and misinformation against it. Remember talking to an in-law last year who said that he read somewhere that his taxes would go up to 60% if M4A were passed. A communication strategy that tells working and middle class people that they won’t taxed to death for M4A will help make the argument to main street americans. A mainstream media talking point strategy would help too, to combat the disingenuous arguments anchors make to progressives when talking up M4A that the rabble laps up.
Citizen Koch is on Tubi – free w/ commercials and Amazon Prime w/ a subscription.
Tell me about it.
We spend nearly 18% of GDP on “healthcare” and get close to the worst average outcomes in the OECD (Mexico and Turkey do worse). The second most medically expensive tier of countries spend from around 10% to around 12% of GDP on healthcare and they all get better average outcomes than we do (Switzerland and Japan typically coming in at best in the world). The only country I’m aware of that has a close to “pure” national single-payer insurance system — in effect, a 25-year-long real-world trial of “Medicare for All” — is Taiwan. They only spend 6% of GDP, and their national health metrics have reportedly improved dramatically since they switched from an American-style system to National Health Insurance in 1995. (I haven’t seen direct country-to-country comparisons that include Taiwan.) Granted, Taiwan produces even fewer physicians per capita than the US, and the system takes an even harder line on cost-effectiveness than Britain’s NHS, but still, running a highly adequate universal healthcare system that covers medical, hospital, pharma, dental, vision, hearing, and even Chinese traditional medicine for 6% of GDP is a testament to how efficient national single-payer can be.
In short, potential savings from Medicare for All are massive, and it’s beyond me why organizations like Physicians for a National Health Program and politicians like Bernie Sanders aren’t driving that point home at every opportunity. Unless, that is, their support for Medicare for All is just for show — a hypothesis I increasingly subscribe to.
I can’t immediately cite you the source, and I don’t think the source itself provided a citation, but the list of countries allowing prescription-drug DTCA I remember from my days as a more hopeful Medicare-for-All advocate/activist was:
• Bangladesh
• South Korea
• New Zealand
• United States
Exactly. Practically NO other country allows direct advertising to the public. The USA is exceptional!
Also, buying the companies’ own stock benefits only the stockholders and CEOs and WAS illegal, as it should still be, in earlier decades. Banning the practice would help all the rest of us.
Biden got the most from Pharma by far.
What is capitalism anyway?
In the beginning there was a world of small state, unregulated capitalism and the classical economists could observe it directly.
Adam Smith on Profit:
“But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin.”
Exactly the opposite of today’s thinking, what does he mean?
When rates of profit are high, capitalism is cannibalising itself by:
1) Not engaging in long term investment for the future
2) Paying insufficient wages to maintain demand for its products and services
Today’s problems with growth and demand.
Amazon didn’t suck its profits out as dividends and look how big it’s grown (not so good on the wages).
Adam Smith again:
“The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens.”
Patents allow companies to become monopoly suppliers, and engage in some good old 18th century price gouging.
This does maximise profit as Adam Smith observed.
Big pharma plays the game set out by today’s rules.
what is it they teach idiots in the MBA finance 101 curriculum by rote? oh yeah M&A it’s all about accreting “synergy”….–what a crock! It’s mostly about market power and price jacking.