Does Pharma Need the Entrepreneur?

Stephen Farghali
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Capitalists don’t discover new medicine; they invest in it. The incentive to do so, as everyone will admit, is to return a profit. Most would also agree that this profit shouldn’t be “too large,” but enough to encourage adequate investment into new treatments. Under this arrangement the system appears to work fine—we get new medicines, even in a timely manner when, as now, they’re urgently needed.

However, the idea that this is a well-functioning system, and indeed the best way of producing medicine, is a myth. The primary argument in its favor is that it’s innovative. But this is less than compelling, considering the same result is seen without private investment (for instance, in Cuba) and since a significant portion of the industry’s success and investment is often found in psychopharmaceuticals that are both mislabeled (sometimes criminally) and fundamentally misunderstood by consumers, such as “antidepressants,” which do not target depression.

The unique contribution of the market to medicine is that we’re regularly lied to and manipulated by an industry that hinders, not helps, the science it funds. Yet the mainstream dialogue between progressives and conservatives raises no genuine alternative to a privatized pharmaceutical industry, as if any enterprise that doesn’t rely on the market is doomed to fail. Science, generally speaking, doesn’t rely on the market, and pharmaceutical research is driven by science. So why aren’t we discussing a genuine alternative to a genuinely flawed model?

Without a profit incentive, we won’t have medical research

To address this myth, we need only ask who it is that’s actually carrying out the research. It is, of course, researchers trained in the necessary sciences. Naturally, there is overlap between the investor and the scientist. Gilead, for instance, was founded by doctors and scientists—but these counterexamples only distract from the question of who is doing what. The fact that some scientists start private research companies doesn’t change the dynamic between science and investment.

For example, if by some strange and fortuitous circumstance, Elon Musk’s bachelor’s degree in physics proves influential in the design of a SpaceX rocket, he’ll have contributed as a scientist. His value as CEO and founder in that capacity might influence political and social matters surrounding the launch of the rocket, but neither of those roles are needed for the actual functioning of the device. The pharmaceutical industry is no different. Drugs require chemistry, not capital.

Insofar as we admit this much, we remove the credit of discovery from investors. But still they stand as moral giants because they know someone must house the researchers, and take on the risk, and that “someone” is the corporation.

No one can deny the financial benefits of the private sector. But does the researcher really care who pays her, so long as the funding is secure and the pay remains persuasive? Of course not—we need only look at publicly-funded discoveries throughout the history of science to debunk this idea. And if increased financial incentive is necessary, it would be nothing to offer monetary rewards for breakthroughs. In a word, we need motivated scientists for science. Everyone else is bureaucracy.

The government can’t afford to pay for this research

Maybe capital isn’t required and researchers don’t care who signs the check, but can we afford to fund it? We can, easily and for less. Taxpayers already fund the bulk of drug discovery, during which a basic understanding of the illness is sought so that we know where to begin to look for treatments. The next steps are preclinical and clinical trials. The pharma industry invests a great deal in these processes and that cost is their justification for prices that are, for most, unobtainable.

In 2018, the global industry expenditure for research and development (R&D) was $179 billion. By 2024, it’s projected to be at $213 billion. This covers everything through all clinical trial stages at which point a drug is eligible for market approval.

To put this into perspective, the United States could have picked up the tab for the world’s entire private R&D investments and it would’ve amounted to less than one-third of the Department of Defense budget. In fact, it would have been considerably less than that, because the number also includes trial costs for “me-too” drugs, which are basically designed to replace an expensive drug that’s about to go off patent and become much less expensive, i.e. less profitable. Without the entrepreneurial incentive to maximize profits, useless drugs would lose their value and there would cease to be an army of salesmen out to trick you into buying them.

The details of the utter wastefulness of these drugs are too many to consider here. But for the sake of a quick idea, it goes as such: a significant amount of money is spent developing a drug that won’t offer any worthwhile improvement to the one it replaces, and could in fact be worse (because FDA doesn’t require the comparison), but will be granted a new patent because a slight adjustment was made to the makeup or function. Massive amounts of money will then be spent persuading doctors to prescribe you the more costly medication, and more will be spent on commercials to make you think it’s the new gold standard.

This brings us to the larger point. Namely, the entrepreneurs in this industry are the middleman. In return for their investment they set the terms for life and death. Not only do they decide what diseases should take priority (for instance, see the neglect toward antibiotics that could end with COVID-19 feeling nice by comparison), they’re known to manipulate data to push through useless or harmful drugs, they waste time and precious resources (participants for studies) with unnecessary trials for drugs of no social benefit, they hire psychologists to craft manipulative marketing campaigns, they bribe our doctors, and at the end of the day, they pay themselves quite handsomely for it all. El Chapo picked the wrong product.

Perhaps this seems like an overly cynical, unfair treatment of the industry. Consider then how more than 40 companies, including some of the world’s largest and most powerful, coordinated their efforts to prevent South Africa from battling its AIDS epidemic in the late 1990s. For years the industry lobbied governments, including the Clinton administration, to impose sanctions and and cut off foreign aid to the country. Why? Because the only way Nelson Mandela and his government, still recovering from apartheid, could combat the world’s worst instance of the AIDS pandemic was to manufacture HIV medication under a generic label, thereby violating patents. And so, while 22 million people in South Africa alone were infected with HIV, with 60,000 children expected to be born HIV-positive every year, the pharmaceutical entrepreneurs banded together to stop this illegal battle against HIV. Only under capitalism can it be illegal to fight AIDS.

Have they repented? In 2012, GlaxoSmithKline paid $3 billion for criminal misbranding of their drugs, where among other things, they published false information in medical journals to promote pediatric use of their “antidepressant,” Paxil—despite there being no FDA approval to do so, no evidence of its effectiveness, and an increased risk of suicide among children who take it—and then bribed doctors to promote it. Likewise, they used “sales representatives, sham advisory boards, and supposedly independent Continuing Medical Education (CME) programs” to promote the use of Wellbutrin for ADHD, sexual dysfunction, weight loss, substance addictions, and other off-label uses while it was approved only for Major Depressive Disorder.

Prior to this, the largest settlement in US history for health care fraud was $2.3 billion, against Pfizer in 2009, for similar actions, including illegal promotion of the antipsychotic medication, Geodon. In 2013, Johnson & Johnson paid $2.2 billion in settlements for false claims and physician kickbacks. In 2012, Abbott Laboratories paid $1.5 billion. In 2009, Eli Lilly paid $1.4 billion. In 2012 Amgen paid $762 million. In 2010 GlaxoSmithKline paid $750 million (bravo for perseverance). In 2010 AstraZeneca paid $520 million…the list goes on and on.

But they didn’t really pay that—you did. The legal costs of bribing your doctor, lying to you, and of their liability in needless addictions and deaths—these costs are passed on to you. And if that makes the treatment your life depends on too much for you to afford? That’s too bad. Maybe you’ll find charity somewhere. Or they’ll have cheap options to make your death more comfortable.

Regardless of whether one believes the free market to be the source of all human freedom, or a monstrosity to be abolished, there is no rationale for using it to produce medicine. The system doesn’t reward “responsible profit”; it rewards maximal profits. As we’ve seen, the counteracting incentives—positive public image, ethical satisfaction, and so on—aren’t strong enough to prevent them from the behaviors that have led to perpetual settlements and to horrid crimes against humanity, such as that which played out in South Africa. Yes, in the end their attack against the country was abandoned, but how much damage was done in the process? Wouldn’t we rather have people in charge who don’t struggle to pick the humane option, who won’t make access to medicine more difficult than it really needs to be?

If the government were in charge, innovation and efficiency would collapse under a stagnant and bloated bureaucracy

The market incentive has produced some abysmal outcomes in medical treatment—compromised research, wasted resources, price-gouging, criminal practice, general unaffordability, and extraordinary salaries to those responsible for such failures. It sounds remarkably similar to the indictments that are brought against the government when it takes control of a sector, as through nationalization. In spite of this, and in spite of the fact that the entrepreneur makes no contribution to drug development that justifies these failures, many still reject a nationalized alternative, simply because they equate nationalization with failure.

Quick rejections on labels alone are not based on thinking; they’re based on reflex. When your knee is tapped with a mallet, the nerve signal doesn’t bother travelling to your brain to retrieve a decision to kick out your leg. It makes a shorter loop, entirely without thought, and completes the reaction. Likewise, the word “nationalization” is so settled in our minds that it seems to elicit the same effect, as if the auditory nerve connects directly to the jaw to kick out “Venezuela.” But is nationalization such a decided failure as to warrant no further thought, no reflection of the context involved?

Considering the USSR beat the United States into space and developed themselves into a world superpower in very short order after dealing with civil and international wars—it would be a tough sell to say they failed scientifically. Or perhaps it’s the specific aspect of central planning that worries people. However, that doesn’t apply to pharmaceutical development, nor would it make any sense to try it. We already know what nationalized pharmaceuticals would look like. Generally speaking, it would look much like it does today, only cheaper and with fewer middlemen. When Venezuela, North Korea, and the USSR are used as general examples of why a specific endeavor like nationalized medicine wouldn’t work, they’re meant to evoke terrible suffering and shut down the conversation. They aren’t honest or intelligent counterarguments because it makes no sense to equate an entire country to a given hardship, or to assume that all policies are related to that hardship.

Fortunately, there are clear and positive examples to look at that are specific to the question at hand. Cuba’s pharmaceutical industry has for decades excelled as sophisticated, innovative, and prevention-focused. It’s also entirely state-owned and had to be rebuilt following the internal conflict of their revolution 60 years ago. Not only has their nationalized system produced an outstanding industry that’s consistently won international praise for its output and innovation, they’ve done so while restricted by decades of embargo placed on them by the United States (which has been condemned every year for decades by virtually every country on earth).

For those who mistrust any success attributed to the Cuban government (even if that success includes the pioneering of cancer vaccines and an international reputation of supplying doctors to countries in need), the issue returns to the same points that have already been addressed above. Government bureaucracy is irrelevant in this case. Nationalization doesn’t equal central planning. It’s merely a relatively small expansion of the same method that’s already producing most of our science.

The challenge of improving this system is not much of a challenge at all. We simply need to ask what kind of system we want, and make that happen. In the case of medical research, we don’t need radical transformations. We only need to feed what works and cut what doesn’t. Well-funded labs, funded for the public good, work extraordinarily well. Labs funded for private profit are sometimes great for science, and are always good for profit, no matter the social cost.

When asked, “who owns this [polio vaccine] patent?,” Jonas Salk replied “Well, the people I would say. There is no patent. Could you patent the sun?” The executives we trust to run our research would, we have to imagine, say yes, if they could. They’ve been at work to patent DNA for years.

To ask, as Albert Einstein did in 1949, “Why Socialism?,” we might, if we answer without reflex, be tempted to respond as he did, that “the economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil.”

***

Mad in America hosts blogs by a diverse group of writers. These posts are designed to serve as a public forum for a discussion—broadly speaking—of psychiatry and its treatments. The opinions expressed are the writers’ own.

17 COMMENTS

  1. I wrote this comment for another essay just now, but it fits better here.

    I lived in a group home that the makers of Abilify offered “free” work out equipment to if each resident kept a detailed food log for them. It was around the time they were sued for downplaying the weight gain side effect. I refused, so the company refused back. Who got paid in the settlement for Abilify anyway? It certainly wasn’t any of us group home fatties from the last ditch patient blaming research I refused to do. And I got double guilted for depriving a whole group home of a new treadmill which we probably wouldn’t have been allowed to use anyway because “Liability” and “Safety”    

  2. In our current system the corporation expecting to make billions is the one who determines the safety and effectiveness of their drug. They design, create perform and analysis the “clinical trials”. They hide negative clinical trials and only publish positive ones. One “antidepressant” was approved because there were two positive trials for it. Later it was found out there was 5 negative trials that were hidden.
    Clinical trials need to be designed, performed, etc by a neutral third party. All the data needs to be public record.
    The Soviet Union was horrible but having state granted monopolies determine the safety and effectiveness of medical products they make trillions of dollars from is a step closer to how the Soviet Union operated.

  3. So refreshing, what a great article – ain’t no context wide enough for understanding and addressing the issue of psychiatry.

    The fact that this piece begs even more questioning of the industry is a sign, to me, that it’s necessary content to consider. So many things come to mind: Can the US government, with its own brand of evil, ever “turn” on the industry by absorbing its job? Is the very science of the current R&D model worth salvaging? If not, what would make it so? Can pharmacy, as an industry, be displaced in the (much) longer run by something fantastically more preventative, something that American taxpayers would sign up to fund?

    At least you’ve shed good light on this issue: is there any way to separate the side effects of the current pharmaceitical industry from the “economic anarchy” of our American brand of capitalism? It looks like there isn’t. I’m not one to trust anything nationalized by this particular nation, but maybe the current system has already realized my worst fears about government authority in the medical arena.

    A really succinct & well-researched piece that warrants more discussion and exploration, thank you for writing this

  4. I am amazed every day that at this point, we can’t cure migraines.
    Or cancer.
    Yet psychiatry comes up with new “illnesses” every day, through their scientific application.
    Amazing field really, if medicine could only come close to the success of psychiatry. Instead medicine, the field that deals with real illness, or tried to, has co-opted psychiatry.

    I do not excuse the real “doctors” for being bribed, and knowingly prescribing dangerous drugs, but doing so, was easier than to say “I don’t know”, “we don’t know”.
    It seems so much simpler to say the truth, than to try and maintain the imaginary thing they elevated themselves to.

    There are those who want to truly help, in an honest manner, but are overruled.
    But that is a choice in the end.

    Even long before Covid, they were all in it together, and it has become an evil presence. The unused and useless used “meds”, chemicals, washed down the throats of innocent and the sewers of our city.

    Something is brewing. It cannot be sustained. And always they look to the “people” to solve their messes.

  5. Thank you for this Stephen. I agree with your thoughts about for profit Pharma and other market driven medical research. I worry that our systems are very corrupted by the influence of money and other systems of power, and no longer are what they claim to be.

    My personal story is one of many millions of examples of the harm perpetuated by the misrepresentations and blatant lies of Big Pharma.

    I was prescribed a medication for prolonged and serious morning sickness during my first pregnancy. The drug I used, (only half the dose prescribed, but for 5 months) was Phenergan. My child, now a young adult was born with developmental delays and labeled on the “spectrum.” I have come to strongly suspect that much of what gets called autism is probably a form of neurological damage – and that the rising levels of this damage (also known as the incidence of “autism”) are most likely related to the fact that people, including pregnant women and their children are not protected from the harms caused by for profit Pharma.

    I find your ending quote powerful,

    “To ask, as Albert Einstein did in 1949, ‘Why Socialism?,’ we might, if we answer without reflex, be tempted to respond as he did, that ‘the economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil.'”

    Your work is much appreciated.

  6. Imagine coming up with a medical device that would save a lot of lives (the innovator).

    You find yourself food poisoned to the point where you end up in the E.D. and your ‘mental illness’ will require you to be treated (failing this drop the target with a benzo ‘spike’ (I mean a ‘covert administration’ of a stupefying drug that can be prescribed later once we have kidnapped the target) and plant items for a police referral and have police deliver them for you. Careful though we wouldn’t want the public realise were doing arbitrary detentions, yet). You spend four weeks in the locked ward being injected with chemicals that make your skin feel like it’s on fire, and the story is this is your forseeable future. But, a strange thing happens.

    You tell the staff about your invention and miraculously your mental illness begins to ease. Somethings changing, there doesn’t seem to be a need for the large amounts of drugs anymore, and your skin feels …..dare you say it? Normal.

    You are realeased from the locked ward though can be returned at the whim of a doctor who simply need call police and your being treated within the hour.

    Sadly you find that someone has taken out a patent on your medical device and your dreams of profiting from your invention has disappeared while you were being treated for your medical issues (that it might be best you remain silent about given the stigma associated with mental illness). Some entrepenuer doctor has beaten you to it.

    Who said psychiatry wasn’t good for the community? What’s good for our politicians is obviously good for the community right?

    It’s amazing the things people will reveal when you take them close to the edge. Ask the ‘plumbers’ at Guantanamo Bay. Most doctors don’t have the stomach for it, hence the need for the co-opt Sam.

  7. What do you do when you have a physically taxing “PHYSICAL” illness and the doctors ask if you’re depressed and “suggest” “anti-depressants” for you to “cope” with the physical illness?

    Where they hound you, to remind you (as if you’re an idiot) that “anxiety and depression are “common” in illness, and that “IT” creates this “loop”.

    No, I’m an idiot, I never knew that physical illness could cause people to be “unhappy”. That pain etc could make you look drawn.

    How you try to explain the obvious, how exhaustion looks, how suffering looks. How hard you try not to cry or blow up at the continual lies and false paradigms.

    Best to create shame in the victim of this aggressive false crap, shame that you’re not taking their poison on top of being ill.

    I still remember how my dad was forced to swallow effin “anti-depressants” as he lay dying, when in fact he had NEVER taken one in his life.
    And how I told the nurses that he is dying and how they looked at me angry, asking me, “who says so, did your dad say so”?
    He died less than 24 hours later.

    From what I have witnessed, ALL doctors have become shrinks and there is absolutely NO distinction anymore.

    My last visit was met with “if you’re going to be angry, I can’t ‘help’ you”.

    I don’t need childish threats. Welcome to Canada, where good healthcare is free.

    • Yeah, apparently you’re supposed to be HAPPY that you’re physically ill or that your life may be in danger. God help us we should find it discouraging or overwhleming to have an actual phsyical disease process going on! Apparently we’re supposed to face pain and death cheerfully (but not TOO cheerfully – that would be manic!)

    • ‘Where life is beautiful all the time and I’ll be HAPPY to see those nice young men in their clean white coats…’

      I was jealous the first time I heard of a release from psych because insurance ran out. I wish we had that same problem here in the north. No drug coverage limit at all for haldol and clozapine and the newest model of antidepressants that gets you put on the neuron seizers in the first place come as free samples so were good. Set for life.

      • I was interested to read last night that the UK government was upset about teenagers being subjected to ECTs.

        In my State their are huge profits for doctors using it (see the letter attached to article by Niall McLaren on this site regarding the rort), and the Mental Health Act was ‘clarified’ to ensure that teenagers (at 14) could consent to the ‘treatment’, and that doctors couldn’t be held to account for any damage caused. Might explain why this “safe and highly effective treatment” has increased by 194%. The only barrier being that you need to ‘hijack’ the victims in the first instance which isn’t so difficult with the power imbalance.

        Personally I think that the direction my government has gone on this and other measures to ensure the public are not made aware of how much AHDH ‘medication’ is being prescribed is the direct result of corrupting of our political representatives. Once in the pockets of the medical mafia they do as they’re told, or their personal medical records (you did what Minister?) are released to the hounds.

        Oh and did I mention the State has done aware with any and all legal protections from the medical fraternity by alllowing a Clinical Director to distribute fraudulent documents to legal representatives asking questions about ‘treatments’ and negative outcomes? FACT. I have the documented proof. And consider seriously the consequences of such a situation. Cover ups are much cheaper than having doctors held to account. (unfortunately such corruption is the reason we have a Federal body called AHPRA that is as effective as a chicken acting as a guard dog. Money to create the appearance of accountability. Their negligence worse than that of the criminals operating in our hospitals with impunity.)

    • Society puts a lot of pressure on people to take psychotropic drugs. People are still forced to take these drugs. Those that can’t be force fed the drugs are shamed and stigmatized to take them. The psychiatrists explanation for why people don’t want to take these drugs is that they are to mentally ill and defective to understand. It’s at the level where in order for society to label you as a good parent you need to get your kid addicted to meth.
      I totally get why some people who don’t take these meds pretend they are taking them. If everyone thinks you already take them they won’t pressure you to start taking them.

  8. The pharmaceutical industry is doomed to decline (links below). Like gold mining it is becoming increasingly harder to find new drug targets. More scientist, more time, more money, and more expensive equipment is required to find new drugs then ever before. A point will come when the cost of producing a drug will exceed what anyone is able or willing to buy for. Can you afford to pay a Million for your new diabetes medication? If not then no one will make it. Simple as that.

    Nationalization of the pharmaceutical industry is not the answer. Nationalization will simply encourage more wasteful spending in research . According to some studies, academia is already undergoing a “Reproducibility crisis” where an estimated 80% of physiology papers and 60% of bio-medical research papers can NOT be repeated. This is horrible new. If research is further nationalized then more of this bad science will clog the scientific community making it harder for future scientist to sift through the data in order to find new drugs .

    Today we have a situation were too many PHD scientists are flooded the system due to the bloated educational system. As a result a hyper competitive and cut-throat environment has evolved were many scientist have two options : either to publish or parish, and many publish knowing full well that their data is fraud. Instead of nationalization what we need in science is a flushing out of bad science and instilling of tougher scientific regulations. This mean massive layoff and reeducation.

    Unfortunately this will never happen in America because we are heading into socialism . I suspect nationalization of every industry on the back of the taxpayers. Taxes will pay for products no one wants or uses . As for scientific research, taxes will continue to be wasted on creating research papers that cant even be repeated! not to mention used!

    Further reading below:

    https://www.sciencedirect.com/science/article/pii/S2452302X17302231

    https://blogs.sciencemag.org/pipeline/archives/2017/11/28/a-grim-future-here-are-the-numbers

    https://endpts.com/pharmas-broken-business-model-an-industry-on-the-brink-of-terminal-decline/

    https://www.forbes.com/sites/stanfleming/2018/09/06/why-experts-cant-fix-pharmas-innovation-crisis-part-1-and-what-to-do-about-it-part-2/#3c049b6316fe

  9. You make some excellent points. But I’m suspicious of your characterization of Cuba. Yes, it provides doctors to other countries. But these physicians have been described as slave laborers with the Cuban government keeping a huge percentage of their salary. The Cuban medical system gives far better care to the elites than the common citizen (see the NYT article https://www.nytimes.com/2020/05/23/opinion/sunday/how-cubans-lost-faith-in-revolution.html). Bribes to doctors are common. Some pharmaceutical successes do not make Cuba a giant in the field of medicine. I’m opposed to the U.S. embargo, but even without it an authoritarian system like that in Cuba is not going to succeed overall for the ordinary person.

  10. I think it’s risky to place too much emphasis on the name of the “system.”
    People can make almost any system work for them if they want it enough. And criminals can make almost any system work against the general public.
    Unfortunately, we live in a time that tends to favor the criminal in certain situations. There have been many such times.
    The only answer I see is to make people in general, if not the leaders in particular, less inclined to turn criminal.
    Like in this pandemic: Your best defense is to have a strong immune system.
    Well, how do you build an “immune system” against criminality? That’s the challenge, but I think it’s the best approach if we really want to see more good results and less destructive “solutions.”
    I personally would like to see any industry that can be tempted to produce the situation that its products “solve” be made not-for-profit and so have to be supported by donations. But this is not the total answer. Look at all the “charitable” foundations that invest in big business and donate money in ways that serve their own purposes.
    Many hospitals are not-for-profit, but that doesn’t prevent them from using the same dangerous psychiatric procedures that other “health care” providers use.
    Factually, we live in what amounts to quite a deep hole. It will take a lot of work to climb out of it.

    • We could start with not having doctors who are spending $40, 000 a night on cocaine and hookers operating on people.

      https://www.abc.net.au/4corners/the-hand-that-holds-the-scalpel/5696444

      But how do we hold these people to account? I’ve found the ‘systems’ and laws to be well written, it’s the ‘good faith’ nature of the implementation of them that seems the point of failure. The Royal Commission into Institutional Responses to Child Sexual Abuse has shown us how these ‘systems’ fail. Will we fail to learn from that? More than likely, too much money changing hands.

      It won’t be the sychophants and enablers who are remembered. Though I guess in a world that appears doomed who cares, grab everything you can and live for now.

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