Taking on big pharma

At the heart of a debate about healthcare is how best to ensure that everybody, regardless of wealth or status, has access to drugs if they need them. This inevitably brings drug companies into conflict with government. 

If, for example, you are unfortunate enough to contract hepatitis C you can expect to be treated by the NHS and to receive the drugs you require on the basis of your need. You do not need, as is the case in the USA for example, medical health insurance. Maintaining the principle that the NHS should be free at the point of use is likely to be a key theme, especially for the Labour Party, in the forthcoming General Election.

When we are ill and require drugs we tend to take it for granted that these should be provided for us regardless of our ability to pay. But, this assumption depends on pharmaceutical companies providing the drugs at a price the NHS can afford. Given that ‘big pharma’, as these companies are known, are private companies their priority is as much, some would argue more, about securing large dividends for their shareholders, than ensuring sick people get treatments to alleviate, or cure, their conditions. Put bluntly, big pharma doesn’t care about individual suffering, it cares about making money.

As private companies, there is nothing to prevent drug companies setting whatever price they think is appropriate. Bear in mind, that many of these drugs are monopolies. The company producing them own the patents that prevent other companies, or countries, from producing them. 

This produces the situation where very often people who need drugs cannot have them because they (or the NHS in the UK) cannot afford them. In other words, they are distributed on ability to pay rather than need. Nothing socialist or democratic, but the logic of a capitalist economy where nothing is valued unless a monetary value can be placed on it.

In his speech to the Labour Party Conference, just a couple of weeks ago, Jeremy Corbyn referenced nine-year old Luis Walker, a cystic fibrosis sufferer who was being denied access to the drug orkambi because the NHS would not pay the £104,000 per patient per year cost.

“Luis, and tens of thousands of others suffering from illnesses like cystic fibrosis, hepatitis C, and breast cancer, are being denied life-saving medicines by a system that puts profits for shareholders before people’s lives.” Corbyn told the conference.

The NHS in England has since joined with those in Scotland and Wales to offer orkambi, but this was after a long set of discussions with NHS chiefs and health ministers. What we are not told is how much it’s manufacturers Vertex are being paid, though somewhat less than the original price of £104,000.

You might think that £104,000 for a daily injection that could provide someone with relief from a condition that literally prevents them from breathing is rather a lot. But, drug prices are not dictated by compassion but by the cold logic of market forces. It is a question of supply and demand, nothing more.

The deal for this vital drug took 4 years to negotiate, during which time multinational Vertex refused to submit any of its other drugs to NICE for approval. The deal is probably worth around £100 million per year but was was wrapped up in commercial sensitivity clauses preventing any scrutiny of what the Tories offered Vertex in return for their agreement.

This story has the veneer of a happy ending. Cystic fibrosis sufferers in the UK will now have access to orkambi, but it shows how big pharma can hold national governments to ransom. These companies are huge conglomerates. Somewhat unsurprisingly given the cost of that one drug, Vertex Pharmaceuticals has a revenue of $304 billion a year. It’s profits are expected to rise by 20% next year.

Vertex is not alone. Johnson & Johnson, the largest of the big pharma’s had income of $306 billion last year with profits rising by 42% in the last quarter. “Small-timer” Pfizer only had an income of $14 billion last year, and only posted a “measly” 30% quarterly profit. Now, of course, some people will say that it is a good thing they make so much profit because that means they pay lots of tax which can support good things like the NHS. Cash which the NHS can then use to buy drugs and boost their profits even further.

With these billions of pounds sloshing around we might think Her Majesty’s Revenue and Customs would need a special room just to store their taxes in. But, it turns out that most big pharma companies are no keener on income tax than the misnamed Taxpayers Alliance. 

In September 2018 Oxfam issued a report that showed that 4 large companies – Pfizer, Merck, Johnson & Johnson and Abbott dodge $3.7 billion of taxes annually. All the companies denied it of course. But the Oxfam report showed that profit margins of the companies based on their own published finances were on average 5% in developing countries, 7% in advanced countries and 31% in tax havens.

I should point out here that most of them are doing nothing illegal. However, rather than pay taxes in the countries where they are based, they move their profits around to ensure that a large proportion of their profits are tax free. That’s money that could potentially be spent on the NHS or education or social care that is instead being kept in offshore banks in places like Bermuda, the Cayman Islands or Panama where corporation tax does not exist.

So, we have a situation where national governments are held to ransom by massive multinational corporations who, through the perfectly legal ruse of patent ownership, develop drugs over which they have an absolute monopoly. These drugs, which to be fair, the companies research and develop, are then offered at prices which are dictated by what the market will pay rather than any sense of providing a service to people who need it.

These companies, in common with other large corporations, then use tax havens to avoid paying tax on their profits taking billions out of governmental coffers that could fund, for example, the NHS. It is this reliance on private profit as the driver of drug development that brings big pharma into direct conflict with an ideal like the NHS which has a stated aim of providing healthcare free for those who need it.

The Labour Party, alone amongst UK political parties, has a plan to confront the problem caused by exorbitant pricing of specialised drugs. This includes:

·      Actively using voluntary and compulsory licenses to secure affordable generic versions of patented medicines where the patented product cannot be accessed;

·      Increasing the transparency of medicine prices, the true cost of research and development and pharmaceutical company finances so that the NHS can have informed discussions on drug pricing.

The NHS is the jewel in the crown of the UK, but we tend to think of it in terms of new hospitals, more doctors and nurses and better access. All those things are important, but if we cannot afford the drugs people need then there is no point in building new hospitals or employing more nurses. That is what makes Labour’s plans so radical.

To take on big pharma will be one hell of a fight. It’s not just the companies with their sophisticated tax avoidance schemes, or their use of patents to prevent drugs being affordable, nothing sums up global capitalism better than the existence of the stock market. 

This is a market that actually produces nothing tangible but is dominated by the wealthy being able to accumulate ever more wealth. They “gamble” (or invest) in companies being successful. In the case of pharmaceutical companies who prevent any competition to their drugs through the use of patents it is hardly a gamble at all. It is the William Hill’s of the establishment, where your access to drugs may be dependent on somebody else’s ability to gamble on what is a fixed race.

We will hear a lot about the NHS in the next six weeks and in particular about how much parties will be spending in the future. Whilst you can take most claims of extra cash with a large pinch of salt, even if they are true, there is no point in ploughing millions into the NHS if all that happens is it ends in the hands of the shareholders of huge global companies who are happy to avoid their fair share of tax. Only Labour has committed to transforming this and whilst it may not be the most talked about policy in the manifesto it is absolutely vital to the likes of Luis Walker who are deprived of drugs that could alter their lives for the better.