Pharmaceutical companies no longer have much to do with what they were fifty or even twenty years ago. Increasingly large and increasingly financialized, they have become machines for siphoning billions of euros or dollars to redistribute them to shareholders, especially the big funds on Wall Street.
In 1955, Jonas Salk, father of the first polio vaccine, who was asked on television who held the patent on this discovery, had this famous response that there was no patent, who could patent the sun? Sixty years later, in 2015, Martin Shkreli, a young New York businessman who came from finance, caused a scandal by multiplying the price of the Daraprim. He had just bought the exclusive rights to this drug classified as essential by the World Health Organization, used to treat malaria or AIDS. As he explained, that was a capitalist society, a capitalist system, capitalist rules.
The pharmaceutical industry has changed dramatically in sixty years. Drug manufacturers are now among the largest multinationals in the world, alongside oil and auto companies. They are also the most lucrative for the financial markets. And it is probably not over. Medicines are put on the market at ever more expensive prices. In 2015, Sovaldi, a hepatitis C treatment from the Gilead laboratory, was sold in France for 41000 EUR for three months of treatment. It is thus the first drug to have in fact been reserved by the health authorities for only a portion of potential patients because of its price. Now, the prices of certain drugs presented as innovative reach half a million euros. At the same time, plans to cut jobs follow one another. Also, Sanofi was in its third social plan since 2009. The fourth has just been announced.
It is often difficult to trace the evolution of large industrial companies over the long term. Aligned with the rhythm of the financial markets, multinationals generally only look back a year or two. The successions of mergers, resales of subsidiaries or name changes mean that the traces are quickly erased when we seek to go further back in time. The leaders themselves often seek to erase the memory of companies doomed to constantly restructure in order to comply with the rules of competitiveness.
By relying on the data collected My Canadian Pharmacy, we nevertheless managed to follow the evolution of eleven most important pharmaceutical laboratories in the world (Johnson & Johnson, Sanofi, Bristol Myers Squibb, AstraZeneca, Eli Lilly, Merck, Roche, Novartis, Abbott, Pfizer, and GlaxoSmithKline) between 1999 and 2020.
Between 1999 and 2020, the turnover of these eleven laboratories doubled, reaching a record sum of 405 billion USD. At the same time, the value of their assets has multiplied by 4,2 to reach 908 billion USD. Since 1990, the cumulative turnover of laboratories has increased by more than seven, their profits by five, their dividends by more than twelve.
Are the Labs Still Concerned with Their Social Utility?
When it comes to drugs, our entire health and social security system is based on an implicit assumption: pharmaceutical companies are private companies that seek to earn money, but are also at the service of patients and public health. They reap profits – today staggering – but at the same time bring to society new treatments that improve general well-being. The patent on medicines is the very symbol of this ‘give and take’ exchange: manufacturers have a monopoly on the marketing of a new treatment for a fixed period – generally 20 years – because they have taken charge of its development, provided that after these twenty years the treatment can be freely produced and sold by others, for example in the form of a generic.
Pharmaceutical companies, which have become multinationals, no longer play the game according to the same rules as they did thirty years ago. It is the same social contract which would justify that the drug companies are supported in multiple ways by public funds: from the funding of basic research to the tens of billions of reimbursement of health insurance, via a generous policy for setting the price of treatments. But does this hypothesis still correspond to reality? In fact, pharmaceutical companies, which have become multinationals, no longer play the game according to the same rules. Their business decisions are now dictated by the financial markets much more than any public health consideration. Patents, once a convenient tool to encourage the availability of drugs, have turned into speculation and blackmail of governments.
Public Guarantee, Private Profits
Twelve years ago, the global financial crisis demonstrated how banks take advantage of an implicit public guarantee from governments, since they also manage the money of savers and ordinary citizens. Assured that the States will never allow them to sink completely and that if necessary they will be bailed out, as in 2008, by billions of public money, they did not hesitate to engage in increasingly speculative activities that were very profitable for traders, knowing that the real risks in the end would remain limited. The pharmaceutical sector also has its own form of public guarantee: health insurance systems, and government support for research. It is largely thanks to this public guarantee that they have become what they are today: hyper-financialized monsters, who put themselves at the service of shareholders rather than patients.
What about Generic Drugs Suppliers?
Signed in 1984, the Hatch-Waxman Act 30 years later brought its results. Doctors annually prescribe about 4 billion prescriptions in the United States, of which 84% are prescriptions for generics. Thus, patients and the state save billions of dollars. The more drugs lose patent protection, the more generics appear on the market. When copies of the best-selling drugs began to appear, the market was captured by a wave of mergers and acquisitions. One of the first companies to buy young competitors was Actavis (formerly Watson), which acquired several generic manufacturers. Generic companies themselves are joining forces to enter new markets and squeeze manufacturers of original drugs there. Many renowned pharmacies cooperate with generic suppliers to provide their customers with the widest choice of medicines at reasonable prices.
Many generic companies work with local pharmaceutical companies to assist in manufacturing, marketing and distribution. However, in some countries, collaboration with local companies is mandatory. However, generic manufacturers are interested not only in emerging markets. Demand for analogues of original drugs is growing. Annual savings may amount to 2 billion USD if doctors prescribe analogues of expensive drugs to patients.
Demand for generic medicines is growing worldwide, and pharmaceutical companies are recognizing their significant potential. In the near future, the global market for generics is projected to grow by 8,9% per year up to 2021. The European Pharmaceutical Review has prepared a ranking of the largest generic manufacturers according to their income received in 2019.
- Teva Pharmaceutical Industries
Based in Jerusalem, Teva is a leading global manufacturer of generics. The company was founded in 1901 and was first a small wholesale seller of imported drugs. In the 1980s Teva entered the global market, including the US market. Currently, the company has 44 thousand employees. As the president and chief executive officer of Teva, Kare Schulz, noted the implementation of the plan for restructuring the business began, but this did not prevent to achieve all the tasks set for the company.
- Mylan NV
This pharmaceutical company operates in more than 160 countries, and about 37 thousand people work in Mylan. The company’s portfolio includes more than 8000 products and 15 research centers. The company was founded in 1961 in West Virginia, and is currently registered in the Netherlands. Under the Mylan brand, not only generics are sold, but also branded ones, as well as biosimilar drugs. Most of the company’s products are sold and manufactured in the United States. Thanks to the takeover of a number of small players, Mylan has become one of the leading generic drug providers in the world.
- Sandoz
Sandoz is a Novartis generic and biosimilar product division. The company, headquartered in Munich, merged in 1996 with Ciba-Geigy, thus forming the Novartis group. Sandoz is one of the leading suppliers of bio-analogs and generic antibiotics in the world. In January 2019, the company announced the receipt of the Top Global Employer certificate.
- Sun Pharmaceuticals
Headquartered in Mumbai, Sun Pharmaceuticals offers over 3000 products. In addition to being one of the leading manufacturers of generics, it also produces a number of active pharmaceutical substances. Sun Pharmaceuticals was founded in 1983, until 1996, it sold its products only in India, but in 1996 entered the global market. The company has formed a portfolio of 11 specialized drugs, five of which are already on the market. Sun Pharmaceuticals expects generics to be a key success factor in the new fiscal year.
- Lupin Pharmaceuticals
Lupin Pharmaceuticals is based in Mumbai and is a subsidiary of Lupin Limited and one of the five largest pharmaceutical companies in the country, making it a key player in the industry. The company was founded in 1968, despite the fact that its main focus is on generics, it also produces original medicines and active pharmaceutical substances. The research program of the company covers the entire pharmaceutical product chain, the research and development department of Lupin Pharmaceuticals has 1,400 employees. According to various estimates, the company’s products are sold in 70 countries, currently Lupin Pharmaceuticals is trying to enter the US market.