Are we too critical of pharma?

IN SUMMARY: I have been critical of big pharma because they keep their loyalty to Wall Street instead of patients. When the really good people within the industry learn to take risks and be heard the industry might change.

Throughout my career, I have heard, firsthand, from people whose love have changed for the better because of prescription drugs. There is no doubt in my mind that a lot of people are leading the lives they chose because prescription drugs help them manage their chronic health problems.

I also work with, and personally, know, a lot of very hard working people within the pharma industry who try every day to put patients first by developing cutting edge initiatives to educate and inform health seekers and help them make better treatment decisions. However, their voices are being silenced by an industry that is addicted to higher profits and growth.

First let’s look at some facts:

1ne: The United States currently spends more than $420 million per hour on healthcare, a number that is increasing by the minute and is expected to top $12 trillion in 2040, according to HealthCostCrisis.org

2wo: Four pharma companies—Johnson & Johnson, Merck, Pfizer and Abbott Laboratories—reaped a combined $7 billion in savings from two provisions in the tax bill, according to a recent Oxfam report (PDF), and they plowed that money into stock buybacks and dividends.

3hree: 62 health care CEOs made a combined $1.1 billion in 2018 when calculating the actual value of cashed-out stock.

4our: Even with major R&D spending, pharmaceutical companies remain highly profitable. They have the tenth highest average after-tax profit levels of more than 100 different industries. And according to figures from Axios, while drug companies bring in 23% of health care’s U.S. revenue, they make 63% of the total profits.

5ive: Brand name drug makers have hiked the prices of their products at 10 times the rate of inflation over the last five years. 

6ix: Last year, US giant Pfizer, the world’s largest drug company by pharmaceutical revenue, made an eye-watering 42% profit margin. As one industry veteran understandably says: “I wouldn’t be able to justify [those kinds of margins].”

7even:  Research shows that for 2008 through 2017, 17 pharmaceutical companies in the S. & P. 500 distributed just over 100 percent of their combined profits to shareholders, $300 billion as buybacks and $290 billion as dividends. These distributions were 12 percent greater than what these companies spent on research and development.

8ight: As drug giant Pfizer Inc. hiked the price of dozens of drugs in 2017, it also jacked up the compensation of CEO Ian Read by 61 percent, putting his total compensation at $27.9 million, according to financial filings reported by Bloomberg.

9ine: Paying for failed R&D. Pharmaceutical companies often claim that the research costs of unsuccessful drugs also have to be taken into account. After all, 90 percent of all drugs that enter human testing fail. But most of these failures occur early and at relatively low costs. About 40 percent of drugs fail in preliminary Phase I studies, which assess a drug’s safety in humans and typically cost just $25 million a drug. Of the drugs that clear this first phase of testing, about 70 percent fail during Phase II studies, which assess whether a drug does what it is supposed to do. The research costs of these studies are still relatively low compared with overall R&D costs—on average, under $60 million a study.

The media has done a great job of calling out people who can’t afford medications, but we hardly see a story about people who are living better, healthier, lives because of prescription drugs. But today headlines garner attention because people don’t have the time to study the issues.

I know, from personal experience, that the industry has changed. Before there was a real interest in helping people. Today, it’s more about ROI. It’s not going to change until a forward-thinking CEO has the courage to admit that “we are part of the problem”.

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