Concerns over the privatisation of health services tend to be focused on the outsourcing of elective clinical care, mental health, diagnostics, support services and data management.
The staggering (and still rising) £19.2 billion annual bill for pharmaceuticals in England (2022/23) is often overlooked, even though it has increasingly been reported as a key factor in the deficits faced by trusts and Integrated Care Systems.
Almost three quarters of this spending (£14bn; 73%) is on branded drugs, which carry the highest mark-up for the drug companies, even though there is a yearly cap on the total sales value of branded medicines.
Now ministers have been criticised by campaigners for a new 5-year deal, signed this month, that the government claims will “save the NHS £14 billion over 5 years,” while in fact the level of annual growth in sales of branded drugs will double from 2% in 2024 to 4% by 2027.
Ministers also boast that the agreement includes a commitment by the pharmaceutical industry to “invest £400 million over 5 years” – just £80m per year – to support work on clinical trials, manufacturing and “innovative health technology assessments.”
In response, Global Justice Now, which has taken the lead in campaigning to rein in the profiteering by Big Pharma, accuses ministers of caving in to the drug companies, with a deal that is far too generous. Tim Bierley, pharmaceuticals campaign manager at Global Justice Now said:
“… this deal effectively doubles the cap on sales growth of branded drugs. It’s hard to see how the NHS won’t be spending far more on drugs than previously, making this deal too generous to big pharma.”
The latest government press release speaks of more than “65 years of working together” with the drug industry to “help manage the affordability of medicines for the NHS.” But in July Bierley and GJN were flagging up the massive profits from the NHS in the last ten years, estimating that £12 billion of excess profits were derived from just 10 drugs – each of which had been developed with support from public funds or charities.
The GJN figures only highlight profits over and above a “reasonable 50% profit margin” above estimated production and distribution costs.
But the average underestimates some much more extreme examples, such as one company (Bristol Myers Squibb) charging a mark-up of 23,000% on a key cancer drug, lenalidomide (Revlimid), despite having contributed extremely little to its development.
Nick Dearden, Director of Global Justice Now, said: “Currently, money we need to keep the NHS going is being poured into pockets of wealthy shareholders of big drug corporations.”
Sonia Adesara, NHS doctor and campaigner, said: “This research shows that the prices pharmaceutical companies charge the NHS have little to do with the cost of producing medicines.
“The markup on these 10 drugs alone is enough money to cover pay restoration for junior doctors. Instead of battling with health workers who are struggling to keep up with the cost of living, the government should be trying to claw back the rip-off prices charged by pharmaceutical companies.”
BMS’s monopoly on production of lenalidomide, and the consequent inflated price, has since been broken with a number of companies offering generic versions at much lower cost: the limited time during which the drug companies have the opportunity to generate these super-profits from their monopoly position on new drugs is another factor forcing the prices ever higher.
In November GJN led a coalition of campaigns and MPs from the SNP, Greens and Labour parties in writing to new Health Secretary Victoria Atkins to warn against capitulation to “pharma lobbying,” noting that the drug companies had been pressing for “new rules which would force the NHS to pay an extra £2.5 billion a year to access medicines”.
The letter, backed by organisations including Keep Our NHS Public, We Own It, the People’s Health Movement, Just Treatment and STOPAIDS, pointed out that far from investing increased revenues in research and development of new drugs, “most pharma companies spend more on share buy backs, or on selling, general and administrative activities, than they do on research and development.” It goes on:
“Even more worryingly, pharmaceutical companies are already drifting away from investing in truly innovative drugs, with over 50% of new drugs that reach the market failing to represent a therapeutic advance for patients.”
When new, useful drugs have been developed recently it has most often been by, or with support from the public sector, although the end product is then sold by the drug corporations at inflated prices: “For example, Abiraterone, a prostate cancer drug, was developed at a largely publicly funded UK research institute, yet the drug was licensed to a company which used its monopoly over the drug to charge such high rates that the NHS was forced to limit access to it.”
An October press release by the Peoples Vaccine campaign underlined the scale of the rip-off by Big Pharma, which grew to monstrous proportions during and since the Covid-19 pandemic. It sums up:
“More than $1 million was paid to shareholders and executives every 5 minutes during COVID-19 pandemic.” In this same period: “The world’s 20 biggest pharmaceutical companies handed nearly as much money to shareholders and executives as they claim to have spent on developing new vaccines and medicines
“… At Novartis and AbbVie, shareholders and executives pocketed over $10 billion more than the companies spent on R&D, while payouts at Johnson & Johnson were $4.6 billion higher than their R&D spending.”
Pharma industry profits more than doubled over the course of the pandemic, “growing from $83.4 billion in 2020 to $188 billion in 2022. Over three years, the companies amassed profits of $455.4 billion, equivalent to nearly $5,000 every second.”
The top 20 pharmaceutical companies had an overall profit margin of 19% during the COVID-19 pandemic, even higher than “the notoriously high profit margins of the oil and gas sector, which averaged 17% in 2022. COVID-19 vaccine makers had some of the highest profit margins, with 54% for BioNTech, 51% for Moderna, and 28% for Pfizer.”
But as the World Health Organisation continues its efforts to establish a “pandemic treaty” that would prevent the worst inequalities and the huge delays in access to vaccines in the poorest and developing countries during the Covid pandemic, Big Pharma continues to fight tenaciously in defence of the restrictive agreements that protect their so-called “intellectual property (IP) rights” and patents that have become the mainstay of their sky-high profits.
However the myth that patent protection and the right to exploit “intellectual property” (even when it has been derived as a result of public rather than private sector investment) are somehow vital to new research and treatments has been thoroughly refuted, not least in a lengthy article last year in Nature magazine entitled ‘What the Covid-19 pandemic revealed about intellectual property’.
This article by Richard Gold shows how work on the various components of the Covid vaccines “dates back decades,” with early work on mRNA vaccine technology almost entirely publicly funded, as were “some of the critical elements of the Pfizer–BioNTech and Moderna vaccines, such as the lipid nanoparticle container”.
And while Pfizer, Moderna and other companies filed patents over their vaccines and antivirals, “these provided a relatively minor incentive given other, more powerful, incentives. These incentives included both upfront grants to the companies and procurement contracts.” The grants ran from €100 million to US$1.7 billion, but Gold argues:
“The real pull for development came, however, from the mammoth procurement contracts issued by governments, entered well before any patents were issued.”
Gold sums up: “Ultimately, it was not IP that played a significant role in vaccine development but rather government and philanthropic direct funding and, more significantly, procurement contracts. Patents appear to take on a more significant role once the first vaccines and antivirals have made it to market.”
Moderna has pledged to not enforce its patents related to its COVID vaccine in, or for sale in, low- and lower-middle-income countries. But that does not mean that poorer countries are free to produce their own supplies of Moderna vaccine:
“Instead, Moderna relies on its secret know-how, refusing to share knowledge on how to construct an mRNA vaccine, even with the World Health Organization’s South African hub, delaying development of an mRNA vaccine by the hub.”
For people wanting to understand more of this and the crazed neoliberal logic that has turned drug companies from the pioneers of life-saving new medicines into vastly wealthy monopolies extracting the maximum possible return while investing as little as possible in research and development, a relatively new book, Pharmanomics, published by Verso, has the answers.
Engagingly written by Nick Dearden, Director of Global Justice Now, it is packed with shocking details, statistics and glimpses into the perverted world of the drug companies. He highlights “bad apple” pharma corporations such as Pfizer (which tried to charge the US $200 for a vaccine course costing $13) and are by no means “one off” exceptions:
“Rather the rules and incentives by which Big Pharma operates have created a deeply dysfunctional industry, which in turn prolonged the pandemic, and ensure that the way the world has dealt with Covid-19 has entrenched global inequality, possibly for a generation.” (ppix-xi).
Moderna’s Covid-19 vaccine was “developed entirely with public funds” – yet the company privatised that knowledge, making its CEO Stephane Bancel a Covid billionaire.
Dearden tells the story of Martin Shkreli, the hedge fund boss who set up a pharmaceutical company because it could make more profits than hedge funds. He bought a medicine useful for AIDS patients and pregnant women – and jacked the price up by 5,000 percent.
Despite the efforts by bigger Pharma corporations to distance themselves from Shkreli, Dearden argues what he did was not so abnormal: the difference was that he did not hide behind “a wall of public relations.” (ppxii-xiii)
Pharmanomics quotes Diarmid McDonald of Just Treatment who argues “Nothing Shkreli did was that unusual. … He did it in a more extreme manner and he wasn’t pious about his behaviour. But really he just got too greedy and he did it with a grin on his face.” (p12)
Big Pharma mobilised huge resources on lobbying and PR to ensure it is seen and portrayed differently. “The pharmaceutical and health industries together spent $352 million lobbying US Congress in 2021, the pharmaceutical industry donating to two-thirds of congressional representatives in 2020.” (p13)
All of this is most extreme in the US, where back in 2012 Big Pharma spent $24 billion marketing to doctors, but Pharmanomics shows there is also extensive lobbying in Europe, supplemented by a ‘revolving door’ between industry and government. (p14)
Dearden traces rip off pricing and above average profits by big pharma corporations way back to 1959 and 1960. (p17)
In Britain a 1967 report by Lord Sainsbury recommended tough measures to combat inflated pricing of drugs and proposed a package of measures to force the industry to be fully transparent on its costs, end the sale of medicines by brand name, and set up a committee to oversee the sector. But the Labour government of the day lacked the courage to push through the whole package and watered down the controls. (p23)
In 1973 the Monopolies Commission found hugely inflated prices being paid by the NHS for Valium, giving Swiss manufacturer Roche a 60% profit on sales and a 70% return on capital: the Commission ordered a cut in the price paid. (p24)
But while British, European and even US governments have at least some ways to try to contain the runaway costs of medicines, the poorest developing countries seldom have any bargaining power, and since the early 1980s there has been a growing fight by NGOs and campaigners to expose the mounting inequalities in access to medicines that can prolong and improve the quality of life.
Pharmanomics (p31) notes the landmark publication in 1982 of Bitter Pills by Dianna Melrose. Backed by Oxfam, the book exposed the impact of the post-war pharmaceutical industry on the Global South. This was the first of a continuing series of publications by Oxfam and similar bodies challenging the failure of the pharma corporations to make necessary drugs available at affordable cost – and even the shameless use of populations in developing countries to test new medicines that neither they nor their governments could afford to buy.
With such low levels of national and personal income, there was no incentive for a cash-focused pharmaceutical industry to devote any resources to the health needs of the large majority of the world’s population living in the poorest countries, Estimates suggested just 1% of total research and development expenditure of around $5 billion in 1980 was on diseases that specifically affected the poorer world. (p33)
Big Pharma even exploited tax loopholes to send tons of useless or expired drugs beyond their sell-by date, with instructions in languages unfamiliar to the poorest countries, “including appetite stimulants dumped in the middle of a famine in Sudan and silicone breast implants donated to Malawi’s health service.” (p35)
Dearden moves on to look at the impact on Big Pharma of financialisation (“subjecting ever more parts of our economy and wider society to financial motivations, and treating everything we value as if it were a gigantic financial market” p44).
It is this pressure that has led to pharmaceutical corporations (including both UK-based Big Pharma giants GlaxoSmithKline and AstraZeneca) paying out more to shareholders than they actually make in profits, as well as Abbvie, Gilead and Pfizer.(p47) Too often these payments have been funded by borrowing, resulting in companies carrying ever-larger burdens of debt – leaving “the largest pharmaceutical companies increasingly holding more financial reserves than physical means of production for drug manufacturing.” (p49)
Financialisation has also driven the growth in intangible assets, especially intellectual property, which in turn are assigned a cash value which far outstrips the physical assets (factories, laboratories, workforce, etc.) The fight now is not so much to be first to discover a drug, but to find new ways to patent drugs in such a way as to extend their monopoly on them.
But even when it is not spending money to increase its flow of money and line the pockets of shareholders, too little of the money spent on research is aimed at discovering new chemicals that can cure or treat disease. Much of the effort is on tweaking existing drugs to enable new or extended patents to be taken out. Only 2-3% of “new” drugs represent genuine breakthroughs. One German study found 57% of new medicines offered “no added therapeutic value.” (p59)
The book goes on to examine Big Pharma’s role during the Covid pandemic (Chapters 3 and 4); the rise of neoliberalism and the creation and empowerment of the World Trade Organisation as the body enforcing intellectual property rights through the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and the resistance to it (Chapter 5); and the extension of financialisation into the hospital sector, and the sidelining of the WHO by wealthy donors and foundations – and some alternative models that show another way is possible (Chapter 6).
It is in these glimpses of alternatives, and especially the final two chapters of the book (A new hope and Reaching for the Moon) that the real strength of Pharmanomics comes through, in the positive affirmation of the vital role campaigners, campaigning, and progressive political movements in challenging, exposing and weakening the apparently impregnable power of the wealthiest minority.
It’s important to expose and to demonstrate the scale of the greed, corruption and exploitation represented by Big Pharma: but it’s more important to give people appalled by the facts the confidence and the spark of anger that can mobilise political action, reach out as widely as possible and build powerful movements to change things for the better.
Simple exposure of the problem without this dynamic edge can just lead to despair, demotivate and demoralise. But as we fight to resist further private sector incursions that seek to carve out more profitable slices of the NHS, it’s useful for campaigners to be reminded of this very large and growing area of malevolent private profiteering.
While many of the biggest players are powerful, litigious global conglomerates, and therefore not easy to “nationalise,” the next Labour government will need to be persuaded that it is possible and necessary to take action to contain and regulate Big Pharma’s activities – along the lines suggested by Dearden’s book. Only that way can we stem the haemorrhage of NHS funds into corporate coffers, and ensure that new medicines developed with public funds are shared with the world and not hived off by private monopolies.
* Pharmanomics by Nick Dearden is published by Verso, cover price £18.99
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