by Serban V.C. Enache
Donald Trump never misses an opportunity to prove his loyalty and commitment to the vested interests [the forces of usury, rent-seeking, and war profiteering]. In the recent past, Trump sold war-gear to Saudi Arabia, and plans to double down this year too. He implemented corporate tax cuts, which pushed stock-buybacks to record highs, not investment. This time, his American Patients First plan, designed to reduce the price of pharmaceuticals, promote biosimilars, redirect rebates from insurers to consumers, and requiring drug ads to reveal the price has been dropped from the Executive’s agenda.
Modern medicine’s been a boon to mankind. Diseases like chicken pox, diphtheria, measles, malaria, HIV, and polio – all but eradicated in the past century by pharmaceuticals. So what went wrong? The USA’s drug industry is the product of the country’s culture. As the cultural outlook changed, so did the industry. Consumers are addicted to quick fixes, and Big Pharma is addicted to major quick profits.
In the past, drug companies were often led by medical scientists. Expected profit margins were around 10 percent, with a singular brand new drug rolled out each year. But then the culture shifted. Businessmen took the place of scientists, and marketing and advertising took the place of actual medical research. Profit became one-dimensional, seen only as money costs vs. money gains. The most important ratio of all, human costs vs. human gains was ignored or, in some cases, intentionally trampled. More to the point, Big Pharma’s products bear heinous negative externalities. An externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit. For examples of negative externalities, think coal, secondhand smoking, opioids etc.
I’ll cite two examples to show just how powerful and callous Big Pharma was decades ago, and why it’s only gotten stronger and worse today. The case of Pfizer, in 2009, comes to mind. The company paid $2.3 billion, the largest health care fraud settlement in the Justice Department’s history. That sounds punitive, but not when you factor in a company profit of over $8 billion for that same year. It’s a slap on the wrist, one that comes with no jail time. Bayer in the early 1980s is another example. When Bayer’s Cutter Laboratories realized some of their blood products were contaminated with HIV, the money investment was considered too great to destroy the inventory. Cutter misrepresented the results of its own research and sold the inventory to overseas markets in Asia and Latin America. Consequently, hemophiliacs who infused the HIV-contaminated Factor VIII and IX tested positive for HIV and developed AIDS.
Unfortunately, the FDA didn’t have an explicit policy regarding direct-to-consumer-advertising (DTCA), because in 1969 there had been no mass media advertisements for prescription drugs. They supported the concept of DTCA, confident the existing regulations for promotion to physicians would prevent any misleading ads aimed at consumers. In 1983, the FDA began to voice serious concerns. Commissioner Arthur Hull Hayes asked the pharmaceutical industry to stop advertising drugs to the public. The fears were many: patients will pressure physicians to prescribe unnecessary drugs; ads will confuse patients by leading them to believe some minor difference in products represents a major therapeutic advantage; DTCA will increase the price of drugs – encourage the use of brand name products over cheaper, equivalent generic drugs, and exacerbate the problem of an already narcotized population.
Nowadays, to get a drug approved by the FDA, a company has to submit just two tests, showing that the product works better than a placebo. The legislation is so lax that the government allows drug companies to submit whatever tests they want. For example, a company may commission 20 clinical trials for its drug. Eighteen may prove the drug is harmful or inefficient, but as long as two positive studies are produced, the drug gets FDA approval. The real business magic of the industry no longer lies with the pursuit of science, but in hiding the bad studies.
Research in the effectiveness of drugs is left to the corporate sector. The federal government doesn’t fund this activity, despite it falling under the public purpose and general welfare. Going back to the shrewd practice of hiding bad data, how many negative studies are published in scientific journals? Publication bias doesn’t contain itself solely to the realm of usual politics [democrat vs republican].
What are the results of the so-called war on drugs? A system based on greed, corruption, and addiction. A propitious environment for legal drug pushers. A frightening incarceration rate, the highest of any country in the world. Huge numbers of addicts and addiction-related illnesses. A culture obsessed with quick and temporary fixes, in which normality is deemed insufficient. And a booming drug industry with vast leverage over the political process.
1992 is a testament to Big Pharma’s powers of persuasion. That year Congress passed the Drug User Fee Act, which allows Pharma companies to pay a fast-track fee to the FDA of up to $350,000 per drug in order to speed up the approval process. This is called “pay to win.” It’s not democratic, and has nothing to do with efficient or fair market practices. It’s political rent-seeking.
The legal drug pushers aren’t only at the top, waiting for the end of fiscal years to tally up net profits. Crooked physicians are in on it too. They handle patients directly and keep them coming by prescribing street-legal dope when it’s not really needed, except they don’t call it heroin or meth, but Codeine and Adderall. Take drug A to manage condition 1. Then take drug B to manage condition 2, induced by drug A. Then take drug C to manage drug B. In the words of former Pharma rep. Gwen Olsen, “The pharmaceutical industry is no longer in the business of health and healing, it’s in the business of disease management and symptoms maintenance.”
But this perverse, systemic cancer has a name, it’s called Shareholder Capitalism! The philosophy is completely narrow-minded: maximize shareholder value, everything else be damned. One solution to the Shareholder Capitalist cancer is Stakeholder Capitalism – which means that the shareholder MUST have a stake in the company and the community or communities that company serves. Some call it ‘cooperative capitalism,’ others call it socialism, in the 19th century during the actual progressive economics era, they called it cooperative individualism – the Christian Socialists being the most notable group of proponents back then.
So when you hear the filthy rich and their market analyst mouth pieces and politicians, whether they pretend to be God-fearing people or not, excusing their huge markups [often on products that cost peanuts to manufacture] and their huge profit margins on ‘the rules of the market,’ claiming that ‘we live in a capitalism system, and that’s the way it is,’ they are LYING to you!
The whole concept behind capitalism, indeed its very purpose, is to offer the best price for consumers – in the logic that a cartel or a monopoly will always offer a higher price compared to a free market, in which multiple producers compete for market share. They claim they’re working fully under capitalist rules, yet in foreign markets [where state regulations meant to protect consumers and patients exist] drug prices are dramatically lower than in the USA. There isn’t free market capitalism in the US, there’s rentier market capitalism, and it means a neo-feudal society.
By scrapping the American Patients First plan, Trump has proven once again that he’s a Wall-Street stooge! Those who blame “socialism” for what’s essentially feudal economic policy and who demand full deregulation and defunding of State institutions suffer from mental illness, are incurable, and are part of the problem.
In the late 1800s, Henry George wrote, “The patent […] prohibits any one from doing a similar thing, and involves, usually for a specified time, an interference with the equal liberty on which the right of ownership rests. […] The patent is in defiance of this natural right. It prohibits others from doing what has been already attempted. […] Discovery can give no right of ownership, for whatever is discovered must have been already here to be discovered. If a man make a wheelbarrow, or a book, or a picture, he has a moral right to that particular wheelbarrow, or book, or picture, but no right to ask that others be prevented from making similar things. Such a prohibition, though given for the purpose of stimulating discovery and invention, really in the long run operates as a check upon them [a drag on discovery and invention].”
How prescient George was. A working paper written in 2012, from the St Louis FED, authored by Michele Boldrin and David Levine, professors at Washington University in St Louis, concludes that any patent system, no matter how well conceived, inevitably devolves into a quagmire.
A closer look at the historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side-effects, strong patent systems retard innovation with many negative side-effects. Both theoretically and empirically, the political economy of government operated patent systems indicates that weak legislation will generally evolve into a strong protection and that the political demand for stronger patent protection comes from old and stagnant industries and firms, not from new and innovative ones. Hence the best solution is to abolish patents entirely through strong constitutional measures and to find other legislative instruments, less open to lobbying and rent-seeking, to foster innovation whenever there is clear evidence that laissez-faire under-supplies it.
If Trump really wanted to drain the swamp, his economic and foreign policies would look dramatically different. Instead, he just wants to change the Democrat swamp with a Republican swamp. Ironically, both [corrupt] parties profit from Trump’s economic agenda. If you hate the rich, smug liberal elites, remember that under Trump’s term, their bank accounts swelled and swelled big.