The lesson for pharma in Amazon HQ debacle

IN SUMMARY: Amazon’s decision to pull out of New York is a lesson for EVERY corporation. The retail giant’s expansion in New York encountered opposition in no small part because of growing frustration with corporate America and their huge tax breaks. With the media consistently highlighting “pharma greed” people, and politicians, are going to point fingers at big pharma.

According to Bill DeBlasio, the Mayor of New York “the lesson here, when it comes to Amazon, is that corporations can’t ignore rising anger over economic inequality anymore. We see that anger roiling Silicon Valley, in the rocks hurled at buses carrying tech workers from San Francisco and Oakland to office parks in the suburbs. We see it in the protests that erupted at Davos last month over the growing monopoly of corporate power.

People in this country are divided and angry. Big pharma is an easy target and frankly has done a lot to be at the center of that anger. From raising prices to using the tax cuts to buy back stock pharma can be their own worst enemy.

We keep reading stories about how diabetics are rationing insulin which could lead to a life or death choice but what we don’t read about too often is how today’s life savings drugs are allowing people with chronic conditions to live longer with a better quality of life. Is there room for improvement? Of course.

Senator Sanders keeps using the system of medicine in the UK as an example of what could be but we just learned tens of thousands of cancer patients were left waiting months to start treatment last year, despite being urgently referred by their GP, NHS data reveals. Analysis of the 2018 figures by Macmillan Cancer Support shows that 31,000 people waited more than two months to start treatment after being referred by their GP.

In the US 85% of patients have health insurance through their employer but they are paying more both out of their paychecks and with higher deductibles. Then we read stories about the record profits of pharma and insurance companies. Healthcare spending on average totaled $5,641 for individuals with an employer-sponsored health plan in 2017, according to a new study from the Health Care Cost Institute.

Workers who get health care coverage through their jobs are bearing the brunt of rising health care costs. And that’s mainly because health care prices keep going up, not because we’re using more health care services. Then we read that the 5 largest conglomerates combining health insurance and pharmacy benefits are on track this year to be bigger than the 5 preeminent tech companies.  The big picture: Anthem, Cigna, CVS Health, Humana and UnitedHealth Group cumulatively expect to collect almost $787 billion in 2019, compared with $783 billion of projected revenue for Facebook, Amazon, Apple, Netflix, and Google.

When a company like Amazon, who made $11 billion in profits, is reported to pay no federal income tax while getting a $3 billion tax break from the city of New York you can bet people are angry. When a pharma company buys a potential cure for Hep-C from someone who was supposedly working FOR the government and charges over $1000 per pill people are going to get angry.

When Americans will be paying higher prices for the next five years because AbbVie is proud of extending its Humira monopoly in the U.S. something is dreadfully wrong. According to a transcript of congressional testimony, Joanna Hiatt Kim, the vice president of payment policy at the American Hospital Association, said “[Humira manufacturer] AbbVie’s almost 10% price hike to Humira is expected to increase healthcare costs in this nation by a billion dollars in 2018 alone.” One billion dollars in healthcare costs in the U.S., from a price increase on one drug. The price rose by 100 percent overall between 2012 and 2018.

Pharma CEO’s seem to be oblivious to anger within the public. PhRMA tries to point the finger at PBM’s and insurers but the public knows full well that they are the lobbying arm for big pharma.

I have tried to point out that even if all prescription drugs were free our healthcare costs would still be rising because we, Americans, are unhealthy. Diabetes, caused by obesity is out of control, 40% of all cancers are preventable and millennials are on track to become the most obese generation in history. But, we like to appoint blame because it’s easier to point the finger instead of looking in the mirror.

American’s are tired of corporate greed. The tax cut clearly shows that profits are more important than anything else. Pharma needs to take notice.

2 thoughts on “The lesson for pharma in Amazon HQ debacle

  1. I’m surprised this “lesson for pharma” was published after what New York Mayor Bill DeBlasio said about the Amazon move on television on Sunday.
    He clearly disagreed with Amazon’s pull out, and put responsibility for that action on the shoulders of the decision makers at Amazon. He also detailed the benefits the deal would have produced for the City and for the local inhabitants.
    Coupling this with the fact that the locals (Hispanics and Blacks) are overwhelmingly in favor of the move, and that the House Representative for the area…who has been lauding the critics of the deal…has demonstrated limited knowledge of economics, and (apparently) no clue that offering a tax relief benefit as part of a deal does not mean that the taxes not paid are not real hands-on dollars that should be made available for other uses. If pharma were to adhere to being responsive to criticism, they would have done so with respect to the irrational pricing actions that continue to sully their already poor image.
    The only lesson I can see for pharma in this issue is to not pull out of an agreed upon deal just because a few locals make a lot of noise.

  2. Bob: the lesson I discussed was that people are angry at most corporations. However with $11 billion in sales and no federal income tax people were even more upset that they were getting $3 billion in tax breaks. No matter what Pharma does or says it’s not going to be enough to counter this anger.

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