: Private profit before

Dave O’Farrell

Very few people, at least in the west- cessive Irish governments has been to give ern world, will go through life without the multi-national corporations everything some form of pharmaceutical treatment. they ask for and then some more for good The global market in pharmaceuticals was measure, so it is not surprising given the worth in excess of $954 billion in 2011 and sector’s importance to the Irish exports has been predicted to exceed $1.1 trillion and the mantra of ‘export led growth’, that by 20141. With such huge revenues it is pharmaceutical companies in Ireland have inevitable that the pharmaceutical indus- been able to more or less dictate terms to try will exhibit some of the very worst at- the government. tributes of modern capitalism. The fact In order to entice companies to set up that these attributes occur in an industry operations in Ireland the state made ev- that is directly related to peoples’ health ery effort to accommodate them. Ringask- and well-being presents a stark contrast iddy in Cork harbour has been a major between the stated goals of the pharma- hub for the since ceutical companies to develop treatments the early 1980s. To facilitate their de- to improve people’s health and the reality velopment, Cork County Council provided of the capitalist system, which places profit the largest capacity supply of fresh wa- above all other considerations. ter in the country through the creation Ireland is a significant hub for the of the Harbour and City Water Supply multi-national pharmaceutical sector. Of Scheme and the ESB (Electricity Supply Board) supplied the necessary power in- the top 10 global pharmaceutical compa- 3 nies, eight have bases in Ireland includ- frastructure . On top of this licences were ing Pfizer, Eli Lilly, Genzyme, Merck, Elan granted for the direct release of effluent and , and a number of the world’s from the plants into Cork harbour. In fact, top selling prescription are pro- it has been suggested that a major factor duced in Ireland. In all some 120 global for many pharmaceutical companies set- and indigenous pharmaceutical companies ting up in the area was the ‘County Coun- operate in Ireland and the chemical and cil planning department being particularly undemanding of companies where it came pharmaceutical sector accounts for over 50 4 percent of exports from Ireland, with 27 to control’ . percent coming from prescription drugs. All these concessions were piled on top The Irish Times lists 94 pharmaceutical of the key plank in the strategy of Irish companies in its list of the top 1000 busi- governments for attracting foreign direct nesses in Ireland2. The policies of suc- investment, the sacred cow of a 12.5 per- 1http://www.imshealth.com/deployedfiles/ims/Global/Content/Corporate/Press%20Room/ Top-Line%20Market%20Data%20&%20Trends/2011%20Top-line%20Market%20Data/Regional_Pharma_ Market_by_Spending_2011-2016.pdf 2http://www.top1000.ie/industries/pharma 3Chris van Egeraat Spatial Concentration in The Irish Pharmaceutical Industry: The Role of Govern- ment Intervention and Agglomeration Economies http://www.nuim.ie/nirsa/research/documents/ WP%2028%20Chris%20van%20Egeraat.pdf 4Quoted in Chris van Egeraat Spatial Concentration in The Irish Pharmaceutical Industry: The Role of Government Intervention and Agglomeration Economies above.

32 cent corporation tax rate. This strategy of ment was using this as a means to encour- allowing multi-nationals to keep even more age companies to set up in Ireland, with of their profits has been key to the estab- the added incentive of paying low tax rates lishment of many companies in Ireland, de- on any profits generated. spite the questionable benefits to the state And yet in spite of the benefits ex- given the relatively low levels of employ- tended to the pharmaceutical industry ment and the low tax receipts generated Irish drug prices remain scandalously high. from their profits. Following the acquisi- There appears to be a strong preference tion of Irish pharmaceutical company, Elan among doctors to prescribe more expen- by US company , the Financial Post sive on patent drugs over available cheaper noted that: generics and pharmacists are obliged to dispense the specific brand of medica- Buying the Dublin-based busi- tion prescribed even if a cheaper generic ness allows Perrigo, based is available. However even the price of in Allegan, Michigan, to re- generic versions of off patent drugs in Ire- domicile itself in Ireland, where land are well above average and this is the corporate income-tax rate exacerbated by the use of branded gener- is 12.5%5 ics. The reasons why healthcare pro- fessionals tend to supply patented rather Despite the common narrative often than generic (and branded generic over non heard from government ministers about branded generic) will be addressed later our highly skilled and educated workforce in this article. The pharmaceutical indus- it is this ability to pay little or, as in the try in Ireland offers many excuses for this case of many companies engaged in com- and has published many surveys on pric- plex tax avoidance schemes, virtually no ing in Ireland which seem to contradict tax that encourages companies to base op- the experiences of anyone who has ever erations in Ireland. purchased prescription medication in other Indeed the level of compliance the Irish countries such as France or Spain. On state extends to the pharmaceutical indus- June 19 2013 for example the Irish Phar- try is such that in 2011, in the midst of maceutical Healthcare Association (IPHA) the recession, the Taoiseach Enda Kenny published details of a survey conducted by wrote a foreword for a document for Phar- IMS Healthcare which despite acknowledg- machemical Ireland (the organisation rep- ing the high price of generic medicines in resenting the pharmaceutical sector within Ireland claimed that the price of the employers body IBEC) where he not only boasted of the 12.5 percent corpora- the 200 most frequently pre- tion tax rate but also that ‘an estimated scribed on patent medicines 14% improvement in unit labour costs rel- which amount to over 99% of ative to the euro area is expected by 2012.’6 the on patent segment of the While workers were suffering from declin- market were examined, Irish ing pay and conditions the head of govern- prices were in line with those 5‘Perrigo to buy Irish drug company Elan for $8.6-billion to get low tax base’ Financial Post http://business.financialpost.com/2013/07/29/perrigo-to-buy-irish-drug-company-elan- for-8-6-billion-to-get-low-tax-base/ 6 IRELAND The location of choice for scientific investment Pharmachemical Ireland, http://www.idaireland.com/news-media/publications/library-publications/external- publications/Pharmachemical.pdf

33 in Austria, Belgium, Den- In other words the reason we pay higher mark, Finland, France, Ger- prices for medication is the same reason many, Netherlands, Spain and the pharmaceutical industry has based it- the UK.7 self in Ireland to such an extent, the rela- tionship it has with the Irish state which This assessment of drug pricing in Ire- has demonstrated time and again it’s will- land was almost immediately contradicted ingness to do anything to keep big pharma by an ESRI report published on June 27 happy. 2013 which found that The myriad of abuses perpetrated by the large pharmaceutical companies can, New (i.e. single source in- and indeed have, filled countless pages in patent) and generic pharma- many books and are far to numerous to ceutical prices in Ireland are deal with in any great depth in the space high relative to comparable EU available here. In this article we will limit Member States.8 our scope to outlining some of the major issues relating to the global pharmaceuti- How can we account for the discrep- cal industry at this moment in time. ancy in these studies? IMS Healthcare, who we will meet again later, describe Big Pharma themselves as ‘a leading provider of in- formation, services and technology to the The global pharmaceutical industry is pharmaceutical industry’ whilst the IPHA dominated by a small handful of large com- mainly represents the interests of the man- panies with the top ten, including such ufacturers of in patent drugs and so it giants as Novartis, Pfizer, Merck, Glaxo- is not surprising that their reports reflect SmithKline, Johnson & Johnson and Ab- their position and attempt to downplay the bott, accounting for around 40 percent of high price of prescription drugs in Ireland. the global market and 52 percent of the While industry spin may account for protected or patented section of the mar- the differing survey results it still doesn’t ket. Despite the value of the industry glob- explain why Irish consumers are paying so ally, and the continuing profitability of the much for medication. The ESRI report of- sector, many changes are currently becom- fers a plausible answer locating the prices ing evident in both the structure and fo- in cus of the pharmaceutical companies. In a 2013 white paper on the top ten pharma- the series of negotiated volun- ceutical companies IMS Healthcare identi- tary agreements between the fied 4 key events shaping the global phar- State and pharmaceutical rep- maceutical market10. Examining some of resentative bodies or trade as- these ‘market events’ and looking into how sociations.9 they have come about can serve as an in- 7‘New study shows prices of IPHA medicines in Ireland at European average’ http://www.ipha.ie/ news/latest-news.aspx?article=8bf296e2-5752-4f60-8ff0-204f3f6acd47 8Ireland: Pharmaceutical Prices, Prescribing Practices and Usage of Generics in a Comparative Con- text, ESRI 2013 http://www.esri.ie/UserFiles/publications/RS32.pdf 9ibid 10The changing face of the top 10 pharmaceutical companies, IMS Health 2013 http: //www.imshealth.com/deployedfiles/ims/Global/Asia%20Pacific/Content/Insights/Top10% 20Pharma%20Companies%20WP%20final_for%20clients.pdf

34 structive starting point in analysing how The aggressive marketing strategies the relentless pursuit of profit has shaped of global pharmaceutical companies have the modern pharmaceutical industry, as we long been a source of criticism. Prohibited know it. from direct advertising of drugs to patients The first of these events is described as: in many jurisdictions (the USA being a major exception) companies aggressively Rising healthcare costs lead- market to doctors and other health care ing to inevitable payer pres- professionals, such as pharmacists, in order sure in the pharmaceutical to encourage them to prescribe or recom- market, which coupled with mend their treatments. These marketing the ongoing financial crisis has strategies go beyond simply dispensing lit- tipped the emphasis from slow- erature or branded paraphernalia or even ing pharma spend growth to sales reps visiting doctors. Company ex- actually cutting pharma spend pense accounts are often used to wine and in many mature markets. dine medical professionals or pay for their attendance at various ‘conferences’ as in While most of us are familiar with the one case in Ireland where Novartis, now catastrophic cuts implemented in health the biggest pharmaceutical company glob- spending by governments and the reduced ally, paid for a group psychiatrists to stay spending on health care by ordinary people in the exclusive K Club in Kildare and to suffering the affects of the austerity poli- attend a series of lectures on hyperactivity, cies implemented in response to the global which recommended Ritalin, a drug manu- crisis currently engulfing capitalism, there factured by Novartis, as the preferred drug is in reality far more behind this point to treat the condition11. than simply a reduction in pharmaceuti- cal spending due to recession in much of While these practices represent at- the western world. In order to understand tempts by companies to increase their mar- how the pharmaceutical industry, which as ket share many companies are also keen we have seen is still a highly profitable in- to create new markets. In many cases dustry, views this trend of ‘cutting pharma these new markets are developed in ways spend’ we need to understand how the many people find unsettling. There have pharmaceutical industry has grown over been many incidences of companies pro- the years. While there may be a germ moting the so-called ‘off-label’ prescription of truth to the narrative of the pharma- of various drugs. Prescribing drugs off- ceutical industry that they have developed label refers to the practice of prescribing an ever larger range of ever more effective drugs approved for the treatment of a par- drugs which have greatly improved peoples ticular condition (or a particular condition general health, the modern pharmaceutical in a particular group) for other conditions industry owes its revenue generating po- (or other groups) for which it has not re- sition much more to aggressive marketing ceived approval. In 2012, Glaxo-Smith- and business decisions geared towards in- Kline and Abbott pleaded guilty in the US creased profit. to promoting the off-label use of a number 11P. O’Grady Why is the Irish health service in crisis? Dublin Bookmarks 2005 12USDOJ: ‘GlaxoSmithKline to Plead Guilty and Pay $3 Billion to Resolve Fraud Allegations and Failure to Report Safety Data’ http://www.justice.gov/opa/pr/2012/July/12-civ-842.html 13USDOJ: ‘Abbott Labs to Pay $1.5 Billion to Resolve Criminal & Civil Investigations of Off-label Promotion of Depakote’ http://www.justice.gov/opa/pr/2012/May/12-civ-585.html

35 of their drug products and were fined $3 highly successful in creating their own billion and $1.5 billion respectively.1213 markets in particular in the developed In addition to these attempts to world. The market creation strategies used broaden the potential consumer base for by these companies generally follow a pat- their products pharmaceutical companies tern of increased medicalisation of human may also attempt to devise new markets behaviour. This process is often backed by by creating a perceived need for new med- supposed independent scientific research ications. In an article in the Wall Street identifying a problem to which pharmaceu- Journal, Erik Simanis, a researcher at the tical companies can then market a treat- Center for Sustainable Global Enterprise ment. This phenomenon is prevalent in at Cornell University’s Johnson School of the treatment of psychiatric disorders and Management, writing on problems faced is often referred to as ‘a pill for every ill’, by companies looking for a consumer base but it extends well beyond psychiatric di- in developing countries puts forward the agnoses. A particularly striking example argument that: of this approach occurred in 1999 with the publication in the Journal of the American Companies must create mar- Medical Association of an article entitled kets - new lifestyles - among ‘Sexual Dysfunction in the United States, poor consumers. They must Prevalence and Predictors’16. In this arti- make the idea of paying money cle it was claimed that 43 percent of Ameri- for the products seem natu- can women experienced female sexual dys- ral, and they must induce con- function. This highly questionable diag- sumers to fit those goods into noses was immediately the subject of in- 14 their long-held routines. tense scrutiny and the following edition of the Journal of the American Medical As- He goes on to describe a failed venture sociation carried a correction noting that by Proctor & Gamble to sell a water pu- some of the authors had financial ties to rification treatment and notes that in ac- Pfizer, the manufacturer of the male im- knowledging the failure of the venture: potency treatment Viagra, who were at The company agrees that the the time working on developing a drug real hurdle to cross when in- known as UK-414-495, which was designed troducing a new product, in to treat female sexual dysfunction. any market, is helping the con- Another frequently cited example of sumer understand the benefit this type of market creation is the preva- of doing something in a differ- lence of treatments for high cholesterol. ent way.15 Despite criticism of the evidence for a link between high cholesterol levels and heart While Proctor and Gamble may have disease pharmaceutical companies success- failed in this particular venture, over- fully promoted the idea that high choles- all the pharmaceutical industry has been terol was linked to heart disease, culminat- 14E. Simanis ‘At the Base of the Pyramid’ Wall Street Journal June 15 2012 avail- able at http://online.wsj.com/article/SB10001424052970203946904574301802684947732.html# articleTabs%3Darticle 15Ibid. 16Laumann EO, Paik A, Rosen RC. ‘Sexual Dysfunction in the United States: Prevalence and Pre- dictors’. JAMA. 1999;281(6):537-544. doi:10.1001/jama.281.6.537. http://jama.jamanetwork.com/ article.aspx?articleid=188762

36 ing in the rewriting of the US National In- cedures required to bring a drug to mar- stitute of Health guidelines on what consti- ket these clinical trials are often open to tutes high cholesterol in 2004. The guide- varying levels of abuse both in the design lines were written by a group of 9 experts 8 of the trials themselves and in the presen- of which had links to large pharmaceutical tation and analysis of the trial data after companies. The result of this rewrite was the fact. The ways in which pharmaceu- that the market for drugs aimed at those tical companies manipulate these trials is with high cholesterol rose from 13 million a major subject of a recent book by Ben in 1990 to 40 million in 2004.17 Indeed the Goldacre, Bad Pharma18. In this book he Pfizer manufactured drug Lipitor, which is describes many of the ‘wily tricks, close used to treat high cholesterol, is still the calls, and elegant mischief at the margins most successful drug in history and was of acceptability’ that characterise these tri- until very recently the world’s top selling als. Some of the common abuses he lists prescription drug. include the use of unrepresentative patient groups, comparing new drugs with older These cases serve to highlight the in- treatments either known not to be effec- fluence exerted by drug companies in both tive or known to be effective in different academia and government. Through fund- dosages or treatment regimes and stopping ing of research large corporations can in- trials early. He also provides accounts of fluence what research is carried out and re- the various analytical tricks used to con- searchers may be unable to publish results ceal negative outcomes such as publishing critical of the products manufactured by results for a subgroup of the trial, which these corporations for fear of loosing their may suggest a more positive outcome than funding source and damaging their chances the overall results or publishing results as of gaining future funding from other cor- relative rather than absolute risk reduc- porations. On a governmental level, the tions to make a treatment seem more ef- pharmaceutical companies as giant cor- fective19. Goldacre points to the system- porations with massive financial resources atic publishing where negative results have the ability to effectively lobby for par- remain unpublished and to the fact that ticular health policies. while ultimately regulators may see all, or This influence, which the pharmaceuti- at least the majority, of the trial data no cal companies can bring to bear, is perhaps one else outside of the company will, unless best illustrated in the process of running they decide to publish their results. There clinical trials for new pharmaceutical prod- is also the problem of so-called seed tri- ucts. Before they can market drugs for als where the real purpose is not to gather use on the general public pharmaceutical useful information on the drug being tested companies must show in clinical trials that but to encourage doctors to prescribe it. they are effective in treating the conditions they are designed to treat and also quan- When IMS Health talks about a trend tify any adverse effects from the drug. De- towards ‘cutting pharma spend in many spite the supposedly rigorous testing pro- mature markets’ what they and the phar- 17Quoted in K. Allen The Corporate Takeover of Ireland Irish Academic Press Dublin 2007 18B. Goldacre : How drug companies mislead doctors and harm patients. Fourth Estate, 2012 (UK) 19For example if a particular condition will effect 4 people in a sample of 1000 but only 2 will be effected if a particular drug is taken then the reduction is 50 percent while the absolute risk reduction in the sample group is only 0.2 percent.

37 maceutical companies they work for are re- has vigorously defended patent rights over ally concerned with is not that they may be their products including some well publi- forced to take a hit in their profits due to cised cases, such as a group of 39 compa- reduced consumption, indeed it is a near nies taking the South African government certainty in life that medical treatments to court in an attempt to block them im- and prescription drugs will always be in porting and producing cheap versions of demand, but that they may not be able to patented drugs to treat AIDS23 and Novar- continue to develop new markets for their tis taking the Indian government to court products in the manner in which they have over their refusal to grant a patent on one in the past. This reduced willingness to of their cancer drugs24. spend ever increasing amounts on drugs for an ever increasing array of diagnoses, coupled with some of the other ‘market events’ we will discuss shortly, has worried the industry, because they may not be able to continue to increase their profits at the same rate and so will not be able to pro- vide their investors and shareholders with an ever increasing return. The next ‘market event’ raised by IMS Health deals with the so-called ‘patent cliff’, which will affect many current block- 20 buster drugs: Such is the drive for profit for the phar- Significant number of small maceutical companies that when one of molecule genericisation events their key drugs is approaching it’s patent in the primary care market, expiration they will often produce a new leading to the demise of many version of the drug with a slightly mod- blockbusters: 12 out of the ified formula and use all of the market- world’s leading 20 blockbuster ing strategies discussed earlier to ensure it products are small molecules is prescribed over the older parent drug, which either have or will lose which can be produced generically. The their protection by 2016....21 proliferation of this type of drug, often called ‘me too’ drugs, is a constant source These ‘small molecule22 genericisation of criticism of the pharmaceutical indus- events’ refer to the expiration of patents try and the patent system they operate un- on many of the top selling prescription der. While supporters of the patent system drugs after which other manufacturers will claim it supports innovation as the process be able to produce generic versions of the of bringing a new drug to market is so high product. The pharmaceutical industry and the successful drug must also pay for 20Blockbuster drugs are those drugs that make large profits for the producing company. Within the industry a drug is regarded as a blockbuster if it makes more than $1 billion. 21The changing face of the top 10 pharmaceutical companies, IMS Health 2013 22In pharmaceutical terms a small molecule drug is a drug made from a molecule with low molecular weight as opposed to other treatments such as vaccines or proteins which are usually much larger and derived from biologial processes as opposed to being chemically synthesised. 23http://news.bbc.co.uk/2/hi/africa/1285097.stm 24http://www.doctorswithoutborders.org/publications/article.cfm?id=5769

38 all the other drugs which failed to make investment. The drop in the numbers of it, opponents can point to the huge profits blockbuster drugs coming to market, only generated by patented drugs while under four drugs launched since 2009 have bro- patent as well as the lack of development ken $1 billion in sales, is simply another of truly new treatments in favour of a se- reflection of this quest as few major con- ries of ‘me too’ drugs, which generally have ditions are viewed as having the potential little or no increased therapeutic efficiency to provide the necessary return on the in- in treating conditions. vestment required for research and devel- The final two ‘market events’ directly opment to bring the treatments to market. follow from the first two and represent the Indeed IMS Health takes the view that the industries attempt to maintain its profits. only remaining fast growing area of pri- They are: mary care, outside of vaccines, is Diabetes treatment. The rise of specialty care .... In the introduction to Bad Pharma which combined with the pre- summarises the way he be- vious trend, means the compa- lieves the pharmaceutical industry affects nies thriving in this new en- the healthcare we all rely on while allud- vironment are more dependent ing to the root cause of these practises, the on specialty care than primary pursuit of profit. care.25

and Drugs are tested by the peo- ple who manufacture them, A flattening off in the true in poorly designed trials, on number of blockbusters with hopelessly small numbers of fewer launches achieving block- weird, unrepresentative pa- buster status.26 tients, and analysed using tech- niques which are flawed by The focus on speciality care over pri- design, in such a way that mary care basically represents a shift away they exaggerate the benefits from treating conditions, which affect large of treatments. Unsurprisingly, numbers, to a focus on more rare condi- these trials tend to produce re- tions with smaller markets. This shift is sults that favour the manufac- not occurring because there is any short- turer. When trials throw up age of conditions affecting large swathes results that companies don’t of people across the globe, but because like, they are perfectly enti- the drug companies don’t see a profit in tled to hide them from doc- treating many of these conditions, par- tors and patients, so we only ticularly those which affect people in de- ever see a distorted picture of veloping countries or what M´edecinsSans any drug’s true effects. Reg- Fronti`eres call ‘neglected diseases’ such as ulators see most of the trial tropical diseases and tuberculosis. This data, but only from early on profit driven shift in focus is not something in a drug’s life, and even then new to the industry simply a continuation they don’t give this data to of the goal of maximising the returns on an doctors or patients, or even 25The changing face of the top 10 pharmaceutical companies 26ibid.

39 to other parts of government. lems persist, but worse than This distorted evidence is then ever, because now people can communicated and applied in pretend that everything is fine a distorted fashion. In their after all.27 forty years of practice after leaving , doctors Goldacre describes the system by which hear about what works through new drugs are brought to market extremely ad hoc oral traditions, from well and correctly identifies a profit mo- sales reps, colleagues or jour- tive for the attendant abuses and the lack nals. But those colleagues can of profit as the reason why pharmaceu- be in the pay of drug compa- tical companies are not focused on de- nies - often undisclosed - and veloping new solutions for many existing the journals are too. So are health problems. However, a full analy- the patient groups. And fi- sis of the problems must go further than nally, academic papers, which this. In order to understand the workings everyone thinks of as objec- of the pharmaceutical industry we need a tive, are often covertly planned much deeper understanding of the inter- and written by people who nal forces in capitalism which force com- work directly for the compa- panies to look at the relatively short term nies, without disclosure. Some- goal of realising a profit and generating a times whole academic journals return for investors. This short-term out- are even owned outright by one look, which sees more spent on aggressive drugs company. Aside from all marketing strategies than on research into this, for several of the most im- new and innovative treatments, drastically portant and enduring problems limits our ability to provide the global pop- in , we have no idea ulation with the necessary treatments to what the best treatment is, be- enable them to live full lives. Ultimately cause it’s not in anyone’s finan- these issues must be addressed as part cial interest to conduct any tri- of a wider systematic change that moves als at all. These are ongoing away from a capitalist ‘for profit’ system problems, and although people to a system dictated by peoples’ needs. A have claimed to fix many of change that can provide a pharmaceutical them, for the most part they industry that doesn’t place private profit have failed; so all these prob- before public health.

27B. Goldacre Bad Pharma: How drug companies mislead doctors and harm patients. Fourth Estate, 2012 (UK)

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