Nowhere is private industry's promotion of self-interest more evident than in the pharmaceutical industry. Companies offer strong incentives to anyone with any influence, especially doctors who are persuaded to prescribe their products and to act as cheerleaders for them.[133] This is what Dr Marcia Angell[134] said:
No one knows the total amount provided by drug companies to physicians, but I estimate from the annual reports of the top 9 U.S.-based drug companies that it comes to tens of billions of dollars a year in North America alone. By such means, the pharmaceutical industry has gained enormous control over how doctors evaluate and use its own products. Its extensive ties to physicians, particularly senior faculty at prestigious medical schools, affect the results of research, the way medicine is practiced, and even the definition of what constitutes a disease.[135]
Also quoted by Fiona Godlee[136] in the British Medical Journal:
The power of drug companies to buy influence over every key group in health care-doctors, charities, patient groups, journalists, politicians has clearly shocked a UK parliamentary committee. It should shock us all. Can we console ourselves that companies' lavish spending on research and marketing, which far outstrips spending on independent research and drug information, leads to truly innovative treatments? No, says the committee's report. Can we rely on regulatory bodies to keep the industry in check? No, again.[137]
They regularly manipulate, distort and misrepresent research findings to support sales, and hide results that could harm profits[138], sometimes with catastrophic results.[139] Ben Goldacre and Malcolm Kendrick have done extensive work in revealing the many deliberate and underhand tricks that drug companies use to promote their products and hide true data from doctors, the NHS and the public (Goldacre 2012 Chapter 1 and Kendrick 2014 Chapter 7. See also Akerlof & Shiller 2015 Chapter 6).
In addition they devote much of their research and development (R&D) effort to producing variants of existing drugs rather than producing new ones. That is much easier and more profitable. If they can present trial results to give the impression of increased effectiveness or reduced side effects for some groups of people then they can claim a new patent and enjoy a new period of protection for what is in reality only a slightly modified version of an earlier drug. These products are what Marcia Angell calls 'me-too' drugs (Angell 2005 p21).
Where sales potential for new products is limited - for example new ranges of antibiotics effective against traditional antibiotic resistant bacteria which would be used very sparingly - then their profitability is limited and they are reluctant to fund the necessary research.[140] Instead the state must provide the funding. In fact most of the really innovative new drugs come from publicly funded laboratories (Mazzucato 2014 p72). Most people think that the vast pharmaceutical profits are used for R&D, but most of those profits are used to buy back their own shares so as to boost the share price and benefit management and shareholders (Mazzucato 2014 p32).
There have been very many occasions when pharmaceutical companies have been fined for illegal activities. A table published by Business Ethics May 5 2016[141] shows US fines over the last ten years, where a total of $30 billion was paid in settlement of crimes committed by pharmaceutical companies in 374 separate cases. This catalogue of repeat offending shows clearly that the industry regards such fines as mere business costs, vastly outweighed by the profits available by conducting their business in ways that harm people. So called punishments of this sort are in no way deterrents, quite the opposite in fact, they encourage and reward social harm.
Levying such 'punishments' also makes the state complicit in the crimes as it in effect receives a fee for each crime detected. In effect the state and the pharmaceutical companies share the proceeds while members of society pay the cost in terms of serious side effects and death.
It also shows how ridiculous it is to punish a company. A company is not a person, it feels no shame or humiliation, and a fined company allows real criminal employees to hide from view.
It's as if the government announced that in future burglary would no longer be punished by custodial sentences no matter how many offences had been committed, it would be punished by a fine of a proportion of the proceeds of the crime that was detected. Furthermore a new corporate entity would be created called 'Burglary', and the fine levied on that rather than on the burglar in question so there would be no stain on their character - though the burglar would have to pay the fine. Would that be an effective deterrent do you think? It would probably be as effective as pharmaceutical company punishments.
If there is one principle that should attach to a punishment it is that it should be sufficient to make the perpetrator sincerely regret ever having committed the crime. Punishments should only ever be meted out to people responsible for crimes, and should hurt. Punishing a company hurts no-one and allows real criminals to escape punishment.
However it is often difficult to identify responsible individuals when actions can be attributed to systems that are in place within a company, especially when those systems have existed for a long time. Every company should have a director whose responsibilities include company systems, tasked with ensuring that all such systems are fully compliant with the law. If they aren't then that director must answer for it.
I said earlier that it was not my intention to blame individuals for the situation we find ourselves in (see Introduction), but that comment excludes those who engage in criminal activities - I do think they are to blame for what they have done. However at the same time we should recognise that the current system, where the overriding aim and purpose of private companies is to make money, rewards the unscrupulous, and the only deterrents for the unscrupulous against criminality are the likelihood of being caught and the punishment they receive if they are. Conscience and self-control only serve to limit the rewards that are available. What is really to blame is the system that allows the unscrupulous so much scope.
The only thing that can be said in their defence is that pharmaceuticals, like other companies, operate in fiercely competitive markets and have to employ any and all means to remain competitive. It's the freedom conflict again where the rules are set by the most unscrupulous and must be followed by everyone else.
Marcia Angell summarises the problems in her book (Angell 2005 p239):
i. Drug companies produce too many me-too drugs and too few innovative ones.
ii. The Food and Drug Administration (FDA) is too much in the thrall of the industry it regulates.
iii. Drug companies have too much control over clinical research on their own products.
iv. Patents and other exclusive marketing rights are undesirably long and too elastic.
v. Drug companies have too much influence over medical education about their own products.
vi. Important information about research and development, marketing, and pricing is kept secret.
vii. Prices are too high and too variable.
Joseph Stiglitz weighs in too on the subject of lobbying (Stiglitz 2006 p191):
Pharmaceutical companies spent $759 million to influence 1,400 congressional bills between 1998 and 2004; the pharmaceutical industry ranks top in terms of lobbying money and the number of lobbyists employed (3,000). Their success reflects their investment: as we saw in chapter 4, the U.S. government has made their interests paramount in international trade negotiations, and under the new Medicare drug benefit the government is proscribed from bargaining for lower prices - a provision worth billions of dollars just by itself.
After all that it will hardly come as a surprise that pharmaceutical companies are heavily involved in tax avoidance. Richard Brooks expresses it this way:
Few companies have thicker files on the shelves of the world's tax offices than Britain's dominant drug companies, GlaxoSmithKline and AstraZeneca. For decades tax inspectors have struggled to work out where the companies really make their profits on blockbusters that might be developed, manufactured and sold in separate countries, and for which the all-important patents might be owned somewhere else still. (Brooks 2013 p131)
The case for state control of the pharmaceutical industry is overwhelming. R&D effort can then be properly applied in proportion to social benefit rather than monetary value; research findings can be analysed objectively and made public to allow greater scrutiny; vast sums can be saved in advertising and marketing; and doctors and nurses can be given accurate information.[142] The problems involved in nationalising one or more multinational companies will be severe, but if society demands it then it will be done. Society can't continue to allow itself to be held to ransom by private interests.
We need to recognise that it is society that pays whether drugs are produced privately or publicly. The difference is that when produced privately society also pays for the incentives, exorbitant management salaries, shareholder dividends and all the advertising and marketing. Even worse, it is deceived about benefits and risks, and therefore pays for drugs that it not only doesn't need but also sometimes cause significant harm.
In state control much more research effort can be devoted to factors that improve overall health and wellbeing, including diagnostics, surgical treatments, preventative medicine and lifestyle changes, which are currently neglected by the private sector because they don't yield much in terms of profit even though they have the potential to yield a great deal in terms of social health (Mazzucato 2014 p10).
The behaviour of these companies shows that whenever there's a choice between making profits or avoiding harm to people and society, profits win every time. It's the same for all businesses, that's why we need strong regulation whenever there's a risk to society or to individuals, but for the pharmaceutical industry the potential damage is so great that it should not be allowed to remain in private hands.