A few years ago, there was a profound cartoon neatly encapsulating the state of our world. Some children are sitting around a makeshift fire with a person who looks like a corporate executive. The setting in the background is unmistakably post-apocalyptic. The executive is saying: “Yes, the planet got destroyed. But for a beautiful moment in time we created a lot of value for shareholders.”
The initial version of the cartoon, created by Tom Toro, read “money for shareholders” instead of “value for shareholders”. Toro edited it because he considered “value” funnier: “It’s more of a corporatese kind of speak… It sounds like what you would say as part of your deck pitch in a sales meeting or something.”
Victor Roy, a practising physician and sociologist and the author of a new book, ‘Capitalizing a Cure: How Finance Controls the Price and Value of Medicines’, might agree wholeheartedly. I first encountered Roy’s work on drug-pricing in 2021, when he made an engaging presentation at a Harvard Medical School online seminar. His book based on that research was released last month. The publishers have made it available open access – an important and fitting gesture for a work that champions the ideals of affordability and accessibility.
While Toro’s cartoon depicts a dystopian world in which we make earth unlivable but still fondly reminisce the transient “value” for shareholders, Roy’s book describes a dystopian society where we have made life-saving medical care inaccessible and impoverishing, yet are content with the argument that it is still a “good deal”.
‘A great deal’
Sofosbuvir 400 mg tablets made by Gilead. | Photo Credit: Insomniac70/Wikimedia Commons, CC BY-SA 4.0
A 2014 report on the public outrage in the U.S. at the astronomical price of a new drug had a bizarre headline: “Each of these Hepatitis C pills cost $1,000. That’s actually a great deal.” Roy uses the example of this very drug, sofosbuvir, to “get to the bottom of” why prices for new medicines are reaching “unprecedented levels”. He recounts being in a policy meeting in Washington, D.C. in 2015 and hearing a public health official say: “These drugs are of high value… They could cost up to $1.4 million [for the full course of treatment, then priced just below $100,000] and they would still be cost-effective!”
Pharmaceutical companies have traditionally cited research and development expenses and the costs of the “risks” involved in biomedical innovation as the major reasons for high drug prices. But in the past few decades, we have learned that, like many other big-ticket corporations, the pharmaceutical industry has been making dishonest and misleading claims. Many of these claims were dissected at length by Merrill Goozner in ‘The $800 Million Pill’ and Marcia Angell in ‘The Truth About the Drug Companies’ (both 2005).
Roy writes that in the wake of such critiques, the pharmaceutical sector in recent years “has advanced a second rationale: that prices reflect the ‘value’ they bring to health systems and society.” This idea of ‘value’ is that the price of a drug reflects not just the traditional costs of production plus profit margins but also the savings it can bring to society “by averting downstream disease”.
He called this concept of value “alluring”, with its central tenet that healthcare “consumers” are willing to pay more for better health outcomes. This alluringly simple claim, however, crumbles under scrutiny. For starters, while people and systems are generally willing to provide adequate remuneration for better treatment options, they are understandably not willing to accommodate profiteering in the remuneration.
Second: why is it that pharma executives and shareholders – people who play minimal to no role in the often decades-long work and intellectual labour that goes into drug development – pocket the lion’s share of that remuneration? To quote the economist Jeffrey Sachs: “Gilead did not discover or develop these [Hepatitis C] drugs, except for a brief and modest role at the end of the drug-approval process. Gilead bought these drugs from their discoverers and developers in 2011 after a decade-long discovery and development process.”
A ‘natural’ state of affairs
Roy spends a large part of the book explaining and analysing this strange and outrageous state of affairs, where a private company can swoop in and lay ownership claims on a drug (or vaccine) even though it had no role in its development. Gilead could “own” sofosbuvir because it bought the smaller company Pharmasset, which had conducted early research on that compound.
Pharmasset itself “developed from publicly funded research at Emory University,” and continued to receive several grants from the U.S. National Institutes of Health. Its work on sofosbuvir was dependent on earlier research outcomes and insights, most of that again funded by government entities in the U.S. and Europe. Thus, even though the life-saving “value” of sofosbuvir was possible and “co-created” because of multiple entities, primarily the public itself via government funding, Gilead executives and shareholders successfully cornered most of that value.
Gilead spent a total of $0.88 billion on sofosbuvir research (while Pharmasset had spent $0.06 billion), but just in the first two years of launch, “sofosbuvir-based medicines brought Gilead nearly $46 billion in revenue.”
What could be more abominable is that many in the U.S. and around the world – including public health experts, medical practitioners, journalists, and policymakers – have taken this state of affairs to be “natural”. Roy attributes this to the growing influence of the financial sector and its logics over the economy and society, an influence which “has increasingly contorted our economy around share prices, quick returns, and speculative boom-and-bust cycles”.
The maximum price
A pharmacist checks the weight of paracetamol tablets inside a lab of a pharmaceutical company on the outskirts of Ahmedabad, March 4, 2020. | Photo Credit: Reuters/Amit Dave/File Photo
While one might believe that the central objective of a pharmaceutical company is to develop and manufacture drugs, in the strange world of finance, the sole purpose of the company – like that of any other corporation – is to “maximise shareholder value”.
The single-minded pursuit of such value also explains why the so-called ‘Big Pharma’ has displayed little intention of embracing transparency (in not just the pricing domain but also research and marketing) – despite the serious harm its unethical activities have caused, including rising public distrust in biomedical science itself. When all that matters is share prices and quick returns, issues regarding trust, public health, and of course planetary health, cease to have “value”.
This is a deeply broken as well as immoral system, and Roy champions its replacement with a medical research environment wherein research and its risks are publicly funded, and the rewards of this research are also publicly shared, instead of privately owned. This basic idea has been around for quite a while, and Roy elaborates and analyses it in detail in the final chapter.
He ends with a very significant observation. In discussions on pharma prices, Roy writes that we are frequently forced to respond to a question: “What is the maximum price society should be willing to pay to drug companies?”
The fact is that this question is inherently wrong and dishonest because it assumes that high, extractive prices are natural and inevitable. But let us not forget, Roy urges, that prices and their determinations are simply “products of human-made systems” and that these systems “can be changed”.
Kiran Kumbhar is a historian of medicine, and is currently the Dr. Malathy Singh Fellow at the Yale South Asian Studies Council.
