Big Pharma: Private Profit Before Public Health
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Big Pharma: Private profit before public health 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 pharmaceutical industry 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 Allergan, and a number of the world's from the plants into Cork harbour. In fact, top selling prescription medicines 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 pollution 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 Perrigo, 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