How Big Pharma Pursues 'Killer Profits' at Americans' Expense
February 1, 2021
"Instead of spending on innovation, Big Pharma is hoarding its money for
salaries and dividends," the report says, "all while swallowing smaller
companies, thus making the marketplace far less competitive."
(Flanoz/Wikimedia Commons)
By Brett Wilkins
Common Dreams
Rep. Katie Porter (D-CA) on Friday published a damning report revealing the
devastating effects of Big Pharma mergers and acquisitions on U.S.
healthcare, and recommending steps Congress should take to enact
"comprehensive, urgent reform" of an integral part of a broken healthcare
system.
The report, entitled "Killer Profits: How Big Pharma Takeovers Destroy
Innovation and Harm Patients," begins by noting that "in just 10 years, the
number of large, international pharmaceutical companies decreased six-fold,
from 60 to only 10."
While pharmaceutical executives often attempt to portray such consolidation
as a means to increase operational efficiency, the report states that
"digging a level deeper 'exposes a troubling industry-wide trend of billions
of dollars of corporate resources going toward acquiring other
pharmaceutical corporations with patent-protected blockbuster drugs instead
of putting those resources toward' discovery of new drugs."
Merger and acquisition (M&A) deals are often executed to "boost stock
prices," to "stop competitors," and to "acquire an innovative blockbuster
drug with an enormous prospective revenue stream."
"Instead of spending on innovation, Big Pharma is hoarding its money for
salaries and dividends," the report says, "all while swallowing smaller
companies, thus making the marketplace far less competitive."
The report calls M&As "just the tip of the iceberg of pharmaceutical
companies' anti-competitive, profit-driven behaviors":
Pharmaceutical companies often claim that lowering the prices of
prescription drugs in the United States would devastate innovation. Yet, as
prices have skyrocketed over the last few decades, these same companies'
investment in research and development have failed to match this same pace.
Instead, they've dedicated more and more of their funds to enrich
shareholders or to purchase other companies to eliminate competition.
"In 2018, the year that [former President] Donald Trump's tax giveaway to
the wealthy went into effect, 12 of the biggest pharmaceutical companies
spent more money on stock buybacks than on research and development," the
report notes.
Some key findings from the report:
Big pharmaceutical companies are not responsible for most major
breakthroughs in new drugs. Rather, innovation is driven in small firms,
which are often spun off of taxpayer-funded academic research. These small
labs are then purchased by giant firms after they've assumed the risk needed
to develop a blockbuster drug;
Instead of producing lifesaving drugs for diseases with few or no cures,
large pharmaceutical companies often focus on small, incremental changes to
existing drugs in order to kill off generic threats to their
government-granted monopoly patents; and
Mergers in the pharmaceutical industry have had an overall negative effect
on innovation, taking what little competition existed in the industry and
completely destroying it.
"Competition is central to capitalism," Porter said in a press release
introducing the report. "As our report shows, Big Pharma has little
incentive to invest in new, critically needed drugs. Instead, pharmaceutical
giants are free to devote their resources to acquiring smaller companies
that might otherwise force them to compete."
"Lives are on the line; it's clear the federal government needs to reform
how it evaluates healthcare mergers and patent abuses," Porter added.
To that end, Porter's report recommends the following actions:
Removing incentives that prioritize investors and Wall Street over patients;
Reevaluating the standards used by the Federal Trade Commission (FTC) for
healthcare mergers;
Altering the presumption that most mergers and acquisitions are legal unless
contested by an individual or group;
Lowering the cost of prescription drugs. Congress should pass legislation
that reins in skyrocketing costs. This can begin with drug price negotiation
legislation, such as the Elijah E. Cummings Lower Drug Costs Now Act, but
must extend to include a larger class of drugs and cover all payers and the
uninsured; and
Preventing anti-competitive abuses of the drug patenting system. Congress
should pass legislation, such as the such as the Preserve Access to
Affordable Generics and Biosimilars Act, the Affordable Prescriptions for
Patients Through Promoting Competition Act, and the Stop STALLING Act, to
stop abuses of the regulatory process.
"It's time we reevaluate the standards for approving these mergers," the
report concludes. "It's time we pass legislation to lower drug prices. And
it's time we rethink the structure of leadership at big pharmaceutical
companies. Together, these strategies can help us bring more innovative, and
critically needed, cures and treatments to market."