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Time for a war on the real drug dealers: Big Pharma

John Bell

September 13, 2016

For many, awareness of the unbridled greed of the pharmaceutical industry began a year ago with their introduction to Martin Shkreli, the self-described “finance bro.” He’s the former hedge fund operator who created a new drug company (Turing Pharmaceuticals), purchased the patent on a drug essential to cancer and AIDS patients, and jacked the price up from $13.50 to $750 per pill (a 5,000 per cent increase).

The Rat Jumps Out of the Bag

Turing wasn’t Shkreli’s first drug business. Before it he started Retrophin. Like Turing, Retrophin specialized in buying rights to obscure, specialized drugs and raising the price exponentially. For instance, Thiola, a drug treating a rare and deadly kidney disease, was purchased and jacked up 2,000 per cent. The Retrophin board of directors eventually forced Shkreli out, not because they had any ethical qualms about usurious practices, but because he was accused of insider trading and fraud. No matter, on to Turing and starting the game all over again.

When Shkreli’s profiteering made news he was named “the most hated man in America” and other less complimentary things. He reacted with a combination of amusement and confusion. In an interview with Vanity Fair, Shkreli compared himself to the “robber barons”, the handful of dynastic capitalists who became super-rich in the late 19th and early 20th centuries. He said: “The attempt to public shame is interesting. Because everything we’ve done is legal. Rockefeller made no attempt to apologize as long as what he was doing was legal.”

He was right. The practice wasn’t illegal and he wasn’t the only one doing it. Why did Shkreli become so notorious? No doubt it was largely due to his smug, smirking response. But it was the beginning of the presidential election campaign, and Bernie Sanders used Shkreli as an example of the ruthlessness and greed of the 1%. Hillary Clinton jumped on the bandwagon, denouncing the price gouging. Even Donald Trump denounced his personality—although not his practices.“My parents were immigrants and janitors,” Shkreli told Vanity Fair. Trump “inherited wealth! Fuck him. And I thought we could be friends.”

Fearing that Shkreli”s notoriety would lead to calls to regulate the drug industry or to impose price controls, his pharmaceutical peers denounced him. But the rat was out of the bag, and more people began to take a hard look at drug corporations’ practices.

“What About the Children!”

Fast forward a year, to the EpiPen scandal. US drug dealers Mylan thought the time was right for a big jump in the price of EpiPens, the lifesaving portable drug that stops severe allergic reactions in adults and children. In fact Mylan had been slowly inflating the price for years. With more and more children developing potentially deadly reactions to foods like peanuts and soy, EpiPen sales are widespread and some sufferers carry several.

In the US they used to cost almost $100 for a 2-pack, bad enough. But over a decade, Mylan decided to raise the price 450 per cent, to over $600 (US). It is estimated the cost to make the medicine is about $1 per dose, and that of the injector is $5.

Mylan’s CEO, Heather Bresch, went the hand wringing route. Bresch told an CNBC interview she was no Shkreli: “Look, as I’ve said before—there is not a single person on the planet that is more upset about what’s going on than I am. But at the end of the day, we have to face the facts. And the fact to the matter is that we can’t put a price on anyone’s life even if we wanted to. And if we could, that price would literally be astronomical. So, when it’s all said and done, the price didn’t go up because we wanted it to; we didn’t do it to increase our profits. Who do you think we are, oil barons? We’re in the business of saving lives, not milking our customers for unnecessary profits, we’re not like that.”

The American Medical Association said that is exactly what Mylan is like, that there has been no change or improvement to the EplPen since 2009, and the massive increase was a cash grab.

Bresch, who obviously does not drive a Kia, used an analogy to make her case: “Try to think of it in terms of owning something extremely valuable, like say, an expensive exotic car. Now, if something were to go wrong with that car, you’d want to fix it. And because you value your car immensely, you’d need to change the part that’s gone wrong with an equally well built and, consequently, costly component. So, if an engine or suspension part gets broken on your exotic car, you don’t just go out and buy a replacement part that’s cheap because it was manufactured in China. No, you either import it from the manufacturer directly or buy it in the good, old United States.”

She went on to imply that parents complaining about the high prices might not love their progeny sufficiently: “Surely you don’t want to send your child off to school with a Chinese-made EpiPen and hope for the best. Because if, God forbid, your kid actually needs to use it, who knows if it will get the job done, if it’s good enough or not. On the other hand, when you buy an expensive drug, you know it’s going to work because no one in their right mind would set a price that high and still sell you something that doesn’t work.”

And we all know the expensive things always work perfectly. Like all those Mercedes-Benz autos that had to be recalled back in May. But I digress. Ms. Bresch has one more pearl of wisdom: “And even though my company was founded with the purpose of helping people, at the end of the day, we’re still a business and we need to stay one if we intend to keep on helping.”

Let me sum up: Mylan is in the business of helping people, not making profits, and the way to help people is to make the drug equivalent of a Lamborghini part because your children are Lamborghinis which are too expensive to break down, and if they do will require genuine Lamborghini parts made in the good old USA and anyway we need to make more profit or we can’t go on offering you Lamborghinis.

I actually think I prefer Shkreli. At least he was honest.

But wait, the Mylan saga isn’t over yet. Ms. Bresch is the daughter of former West Virginia Governor and current Democratic Senator Joe Mancini III. It seems that Mylan has donated over $130,000 to Mancini’s various campaign coffers, beginning exactly when it began raising the price of EpiPens. In 2012 Mancini led Senate opposition to a bill that would have allowed the import of cheaper generic drugs, including EpiPens, from Canada (which we can assume, to Ms. Bresch, is very much like China).

Between 1998 and 2014 Big Pharma spent $2.9 billion lobbying US lawmakers—more than any other industry. In 2013/14 alone it handed out at least $15 million in direct campaign contributions. Mylan has spent millions creating an institutional demand for EpiPens; airlines are legally required to carry them, and schools, camps, zoos, etc. stockpile them. Perhaps you think that selling a shit-ton more EpiPens would mean the price would come down. Don’t make me laugh: that’s the perfect time to raise the price. EpiPens now account for 40 per cent of Mylan’s profits. And that deadly allergy epidemic? The American Academy of Asthma, Allergies and Immunology estimated 225 people die from anaphylaxis each year, many of them because their made-in-the-good-old-USA EpiPens fail or are misused. As a result of all the bad press and outrage, Mylan announced it would market a “generic” version for a mere $300 per dose. Such generosity.

Sugar Shock Sticker Shock

In the 1920s University of Toronto chemist Frederick Banting was able to build on decades of research into diabetes and developed insulin to control the condition. For his efforts he won a Nobel Prize; he donated his prize money to further research and sold the patent for insulin for 50 cents.

Insulin was derived from the pancreas of live animals. For years drug companies made insulin a bit purer and a bit safer, but there were no real changes until the 1970s. Then gene researchers found they could produce insulin by adding the gene that naturally produces insulin in humans into recombinant DNA. The process was more expensive. In many countries (including Canada) the old, cheaper, animal-derived insulin remained in production to provide a generic version to keep costs down. This was the result of activists and consumer advocates, not necessarily any sense of social responsibility on the part of drug companies.

This didn’t happen in the US. The corporation making Humulin, the new version, spent millions on marketing and won a virtual monopoly. As it did, prices started to rise. Today an American diabetic will have to shell out $400 per month. A doctor based at Baltimore’s Johns Hopkins University couldn’t understand why so many of his patients had so much difficulty managing their blood sugar, until he started asking the right questions. It turned out that many simply could not afford to take their medicine regularly.

Drug corporations like Eli Lilly respond that they counter higher costs with rebates and assistance plans. The problem is that companies and pharmacies keep that information under their hat. David Kliff actually writes a blog called Diabetic Investor, aimed not at investors who happen to be diabetic, but people looking to make money off the condition. When public anger about high prices rose, he wrote: “I don’t think you can draw a straight line from the rising cost of insulin to outcomes. Very few patients pay out of pocket for cost of insulin. So I don’t think prices truly impact the patient pocket book. There’s only a small percentage who don’t have insurance or enough insurance.” Maybe Mr. Kliff should get out more often. Millions of Americans have no health plans or benefits, and that number is only going to rise as the pernicious “gig economy” spreads.

Its Not Us, Its Them – Oh Wait, Its Us Too

All these examples of drug industry greed are from the US, but the practices they expose are global. If there is a difference between the US and Canada, it is just one of degree. In August of 2015 the Canadian price of cycloserine, a drug treating a deadly and rare form of tuberculosis, went up by 2,000 per cent. Daraprim, used to treat auto-immune deficiencies (particularly HIV/AIDs) went up 5,000 per cent. Both increases resulted from the rights to existing drugs being sold to new corporations, which arbitrarily jacked up the price tag, just as Martin Shkreli had done. Neither drug is made in Canada, or are generally approved for sale. But they may be imported for specific patients with dire illnesses whose lives may be saved or prolonged by the drugs. Patients using cycloserine or daraprim could pay up or die, thanks to a corporate-friendly loophole.

That covers the cost of drugs coming into Canada; what about drugs going out? A Council of Canadians report argues a good case that the mother of all greedy drug companies is Canada’s own Valeant Pharmaceuticals. Among other acquisitions, Valeant bought the rights to seconal. The drug has been around since the 1930s and is often used in physician-assisted suicide. Obviously Valeant saw death as a growth industry. As soon as it bought seconal it doubled the already too high price. Valeant doesn’t do much research or development; an RBC investment analyst described their research program as “lean”. The “mean” was probably implied. It pioneered the path the other drug companies follow—growing profits through mergers and acquisitions, rebranding old drugs, spending a fortune on PR and advertising, and jacking the price as high as possible. And if you want to read about how this visionary Canadian business used tax havens around the world to avoid taxation, go to the damning CoC report.

It remains true that, with some exceptions, Canadian drug prices are lower than in the US. However per capita drug spending in Canada is higher than every other member state in the OECD except the US. Provincial price caps (in some but not all provinces) and federal regulation provide some protection. So has the existence of lower-cost generic drug manufacturers. But these defences aren’t what they used to be, largely thanks to free trade laws. At the same time as they were bringing in NAFTA, Brian Mulroney’s Tory government passed two laws, first weakening (Bill C-22) and then killing (Bill C-91) protections for generic manufacturers. Today most of them are owned by the big multi-national drug makers.

It is estimated that the Canadian drug industry spends $2.4 billion annually on advertising, mostly aimed at doctors. If you watch television in the US, you are inundated with ads for all kinds of prescription drugs. Until recently these were absent from Canadian airwaves. But now ads naming prescription drugs, but not saying what they treat, are popping up, taking advantage of another loophole. The industry calls these “drug awareness messages”. Totally a public service announcement: ask your doctor.

Doctor Profit and Privatization in Canada

Ask, especially if your doctor is Dr. Brian Day. He is the front-man for a right-wing BC Supreme Court challenge to declare the Canada Health Act—the cornerstone of our public health system—a violation of his right to make profit.

Day already co-owns a group of private clinics in Vancouver, the result of stealthy erosion of our Medicare over decades. But he is not allowed to charge more for services than they cost in the public system. This, he declares, violates his right to charge as much as the traffic will bear. This is the man who has compared himself to Mohammed Ali, and tries to claim the mantle of the civil rights movement. He told a CBC interviewer that constraints on his greed are “exactly like laws that existed that outlawed homosexuality, outlawed same sex marriage, outlawed safe injection sites, outlawed assisted suicide.”

Day actually believes this drivel. He is an Ayn Rand true believer with long connection to groups and individuals dedicated to ending public health care and all forms of public service, like the Fraser Institute and the Koch brothers in the US. He recently told the National Post: "We in Canada will give the same level of services to a wealthy person as to person who isn't wealthy, and that doesn't make sense." Day thinks the very thing that most Canadians identify as their source of national pride, their public healthcare, is “ridiculous.”

What does this have to do with drug company greed, except to suggest that Martin Shkreli might find the friend he is looking for in Dr. Day?

The one resounding argument the forces on the right make in calling for privatization is that our public system costs too much. We’ve heard it so many times, unchallenged, that even some supporters of public healthcare concede the point. What actually does cost too much is pharmaceutical spending. After the cost of hospitals themselves, the next highest cost factor in our public system is drugs—higher  per capita than even the US. Next time you hear about nurses laid off in your city because of lack of funds, remember the billions of tax dollars going to Big Pharma each and every year.

Capitalism Kills

In the US, between 2000 and 2007, 667 new drugs were approved for sale by the government. Of these, only 11 per cent were actually new drugs, or demonstrable improvements on old ones. Fully three quarters of “new” drugs are copies of old one with new names. Their appearance is an opportunity for aggressive and often manipulative advertising campaigns aimed at doctors and—increasingly—directly at patients.

Some doctors are simply confused; others are corrupted by perks and payoffs. The result is the same—they prescribe the newer one; the one touted as improved even if it isn’t; the one with a higher price tag. 

Sometimes the corporations get caught stepping over the line from unethical to illegal. In 2012, drug giant GlaxoSmithKlein was fined $3 billion by the US government for promoting its drugs as treatment for conditions they were not meant to address, and not approved by the FDA. If you think a $3 Billion fine is punitive, consider this, GSK sales for just the first quarter of 2016 amounted to over $9 billion. They paid their fine without batting an eye and didn’t even bother to issue an apology.

Worldwide, pharmaceutical companies do over $1 trillion in sales per year. They are in the business of making profits. They certainly are not in the business of helping and healing—that they make commodities that may help and heal is entirely coincidental. Some doctors denounce these practices, some collude with them; most are unwitting conduits between corporations and patients.

It is worth reiterating something Mylan’s Heather Bresch told CNBC, quoted earlier: “And the fact to the matter is that we can’t put a price on anyone’s life even if we wanted to. And if we could, that price would literally be astronomical.” Let’s put aside the fact that the pharmaceutical industry does put a price on the lives of millions of people, like the diabetic who skips a treatment because they can’t afford it. What is most stunning is how the last sentence epitomizes the inhuman mindset of capitalism. Human suffering and need is only an opportunity to make an “astronomical” profit.

What can we do to stop the literally murderous profiteering?

First we need to demand a public inquiry into drug corporation practices. The time is right to expose the systemic nature of the problem. We can demand a regulatory process that is fully transparent and democratically accountable. And we can demand a universal pharma-care plan to cover the full cost of needed medications. Canada is the only nation with a public health care system that does not include pharma-care. This needs to be part of defending public healthcare from privatization, the de-listing of services, and deregulation.

These are important reforms we can push for now, opening battles in our war against the drug dealers. But to really win the war we need to remember that the enemy isn’t “bad” individuals like Shkreli, or “bad” corporations like Valeant—the enemy is capitalism, the system that thrives by putting a price on our lives.

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