Big Pharma

What we think of as medicine is a fairly new development. Doctors used to be able to set broken bones, sew up cuts, lop off limbs, and give you an emetic. This changed in the later 19th Century, thanks to the addition of chemistry to medicine. Anesthesia and disinfectants made invasive surgery possible. No screaming, no gangrene. Then insulin (1921) and penicillin (1928) were discovered. Direct chemical treatment of disorders became possible. After the Second World War scientific research was applied in a systematic way to expanding knowledge of biology and techniques for producing drugs improved. The results of this combination appeared in a flood of new drugs and the growth of huge pharmaceutical companies. The new products included oral contraceptives, blood-pressure medicines, and psychiatric drugs. Cancer drugs began to come on-line in the 1970s. More recently, there have been drugs to treat cholesterol, acid-reflux, and asthma, as well as Viagra–and anti-depressants for when that doesn’t work. Then there is the terrible plague of male pattern baldness.

There have been several important developments in my life-time.

First, rules for medical trials became more elaborate and restrictive. Between 1957 and 1961 doctors prescribed a new tranquilizer to pregnant women to counter morning-sickness. Unfortunately, thalidomide caused terrible birth defects. In 1962 Congress amended the law governing the Food and Drug Administration to require that new pharmaceuticals prove not only safety, but also “efficacy”: the ability to produce a specific desired effect (and not some other effect or no effect) before a drug could be released. In 1964 the World Medical Association established rules requiring testing before the release of any new drug.   Again, pharmaceutical companies were required to prove “efficacy.” These reforms greatly extended the time and cost invested before drugs were released. In recent years, medical crises—like heart-disease and AIDS—has created a countervailing pressure for accelerated testing and approval.

Second, the pharmaceutical business became highly concentrated and vertically integrated. These are business terms, but it is a business. You should learn what they mean—although I didn’t when I was your age.) As pharmaceutical research sought treatments for complicated illnesses, research and development became more expensive. As research and development became more expensive, companies faced a greater risk that they would not be able to cover their costs before any patent ran out. Therefore, during the 1970s many countries passed laws strengthening and extending the time limit that the patents issued to pharmaceutical companies. These were intended to prevent generic producers from just figuring out the chemical basis of a drug, then producing it without having to bear the high costs of research. During the 1980s a wave of “buy-outs” of small bio-tech firms by big pharmaceutical companies took place. Today most pharmaceutical research, production, and sales are concentrated in fewer than twenty large companies. These companies are based in the United States, Britain, France, Germany, and Switzerland, although they operate internationally. This is called “concentration.” Each of these companies researches, develops, manufactures, and markets the product. This is called “vertical integration.” Critics refer to this complex as “Big Pharma.”

Most prescription drug use took place in a few rich countries (US, EU, Japan). Don’t get sick somewhere else. (My son’s room-mate got bit by a rabid dog while in Bolivia one summer. He had to fly home to get the injections to save his life. What if he had been Bolivian?) However, China, Russia, and South Korea expanded sales by 81 percent in 2006. Pharmaceuticals are already the most profitable business in America. Now a big money harvest looms in the developing world.

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