Pharmaceutical drug companies in the US are out of control, raising their prices for potentially life saving drugs to astronomical levels, in the process condemning millions of US citizens to suffering and earlier death.
Last week attention focused on the latest scandal by the renegade ‘Big Pharma’ industry, as a company called Turing Pharmaceuticals raised the price on its drug, Daraprim, by 5000%. The medicine is critical to prevent the life-threatening infection, toxoplasmosis, that kills women with pregnancy related infections and others with cancer and AIDs. Daraprim has been around for more than 60 years.
Turing Pharmaceuticals’ new CEO, Martin Skrelli, purchased the company, Impact laboratories that had previously owned the medicine. As part of the acquisition, Impact Labs had to agree to take all its product off the market to prevent the development of generic alternatives, to ensure that Turing would thereafter have a monopoly on the medicine. Once it purchased Impact labs and Daraprim, Turing jacked up the price 5000%, from the former $13.50 per pill to Turing’s new $750 per pill.
Big Pharma’s Political Power; Washington’s Political Indifference
Skrelli and Turing are not just a rogue example of practices in the industry. They represent a trend that has been growing, as the lobbying spending and election campaign contributions by US Big Pharma have also risen to record levels, and as US governments and politicians turn a blind eye to the practices that are condemning millions of US citizens to pain and earlier death.
Since 2008, the 1425 officially recognized ‘Big Pharma’ lobbyists in Washington D.C. have spent close to $2 billion on lobbying activity, making the industry among the largest of lobbying spenders, according to the source, ‘OpenSecrets.Org’. Since 2008, the industry has also contributed more than $150 million to political candidates as well—not counting the further amounts hidden by US Supreme Court decisions since 2010 allowing unlimited corporate campaign spending.
With government and elected politicians sitting on the sidelines, examples of Turing behavior have been proliferating across the industry in the US.
There’s the recent case of Gilead Sciences, a company with a prescription drug that effectively cures victims of the widespread disease, Hepatitis C. Its drug, Solvaldi, costs $1000 per pill. A treatment to cure the disease now costs between $50,000 and $100,000 per year.
Another recent scandal case is Rodelis Corporation, which bought a company and the drug, Cycloserine, one of the few antibiotics able to treat drug-resistant tuberculosis which is becoming a new worldwide epidemic. Once it purchased the company and Cycloserine, Rodelis raised the price by 2000%. A 30 day treatment for tuberculosis used to cost $500. Now it costs $10,800 for just one month. A full treatment costs $500,000. It is interesting to note that outside the US the drug costs $20 per 100 pills.
Other examples of out of control US Big Pharma companies abound, such as Alexion Corporation’s new drug for treating blood disorders which costs $500,000 per patient; Biogen Corporations drug for treating multiple sclerosis costs $55,000 per year; Valeant Corporation’s price gouging of its newly acquired heart disease drugs, and other drugs from companies that treat cancer that have surged in price and today cost typically $80,000 per treatment. The list is long and growing.
Big Pharma Now Morphing Into Big Finance
The problem with Big Pharma price gouging ‘out of control’ is not just that its companies have been allowed to operate as monopolies due to patent protection. Patent protection has been around for decades, well before the industry began its price gouging and profits at the expense of life practices.
A good part of the problem has become the growing ‘financialization’ of the industry by Wall St. and global finance capital in general in recent decades. That takeover has led to new ways to inject price volatility into the prescription drug market in order to manipulate pricing to extract excessive speculative profits.
This has transformed, and continues to transform, the pharmaceuticals industry into what is sometimes called a ‘rentier capitalist’ sector. By ‘rentier’ is meant the ability of the industry, or a company, to gain excess profits share at the expense of consumers and even other companies. Banking and finance, itself a ‘rentier’ industry, is thus successfully transforming ‘Big Pharma’ into its own image as finance increasingly penetrates the industry.
The connections between Wall St. and Big Pharma are strikingly evident, and not untypical, in the case example of Turing Pharmaceuticals.
Turing’s CEO, Martin Skrelli, is a former hedge fund manager who crossed over to the Pharma sector. He started the hedge fund, Elea Capital, back in 2006. Sued for shady practices during the 2008-09 crash, he started another hedge fund, MSMB Capital Management, and made millions by what is called ‘short selling’—i.e. speculating on falling prices of stocks. Targeting drug companies at the time, Skrelli clearly saw a new opportunity to manipulate prices and make millions. He bought a pharma company called, Retrophin, with older but obscure drugs that were priced low. He then jacked up the prices. Retrophin profits were then creatively redirected to his hedge fund. Leaving Retrophin, he then formed Turing Pharmaceuticals in 2014, and immediately began what is becoming increasingly a practice in the Pharma industry by shadow bankers like Skrelli who are taking over more companies—i.e. manipulate the price of what were once low cost ‘orphan’ drugs, like Daraprim, to extract excess rentier profits at the expense of consumer patients in desperate need of life-saving medicines.
The transition from speculating by ‘short selling’ falling prices of pharmaceutical stocks to speculating by ‘price gouging’ with astronomical price hikes is an easy transition for hedge fund and other finance speculators now penetrating the pharmaceutical industry. Their business model is all about manipulating prices to obtain excess profits. Pharma is thus an easy transition.
Wall St. is in effect transforming the industry for purposes of speculative profits in other ways as well. Pharmaceutical companies are now a prime global sector for Wall St. Investment banks mergers and acquisitions activity. Wall St. investment banks make big bucks in managing M&As.
The pharmaceuticals industry is also among the leading practitioners of what is called ‘tax inversion’, as this writer noted in a previous teleSUR piece published August 13, 2014. Tax inversions, simply put, are a way for US corporations to avoid paying US taxes by purchasing a small company offshore, moving its global headquarters operations to the new company and diverting its US profits there, and thereby avoiding paying US taxes on ‘offshore’ profits.
Big Pharma has become increasingly integrated with Wall St. and has been focusing on various forms of Wall St. driven financial speculation. Price gouging of life-saving drugs is but the latest trend.
Profits for the Few vs. Lives of the Many
The effect the price gouging on US health care is already devastating. According to the US Center for Disease Control and Prevention, 12.9% of US adults aged 18 and older, about 32 million, now don’t take medicines prescribed by their doctors because they can no longer afford the price of the drugs. At least 4 million are those in dire need of life-saving TB, hepatitis, heart, and cancer medication.
As more money buys more votes for the few in the US, it does so at the expense of even more lives of the many—especially the poorest and those least able to afford necessary medicine often needed just to survive.
Jack Rasmus is the author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, by Clarity Press, 2015. He blogs at jackrasmus.com.