Pushing drugs: Global profits and local markets in the pharmaceutical industry

David Neil, University of Wollongong

Adriana Petryna, Andrew Lakoff and Arthur Kleinman Global Pharmaceuticals: Ethics, Markets, Practices, Durham, Duke University Press, 2006 (312 pp). ISBN 1-3978082233-741-6  (paperback) RRP $54.95.

In 2006 the global pharmaceutical market was worth an estimated US$643 billion (IMS 2007a)—a sum equivalent to 84 per cent of Australia’s GDP for that year. The ten largest pharmaceutical corporations collectively accounted for over US$282 billion (Consumers International 2007). However, the astronomical growth of the market during the 1980s and 90s has slowed dramatically and today big pharma is in big trouble. To a large extent the difficult financial outlook for the big firms is an effect of their dependence on ‘blockbuster’ drugs—usually defined as drugs generating more than $1 billion in annual sales. For instance, the world’s biggest selling drug is Pfizer’s anti-cholesterol treatment Lipitor, which alone generates nearly $13 billion of that company’s revenue and over 40 per cent of its profits (Consumers International 2007). But between 2008 and 2012 patent protection on a number of blockbuster drugs will expire and cheap generics will put an end to the monopoly profits earned by these products. Meanwhile, during the last decade the development of new drugs has slowed markedly and there are few candidate blockbusters in the pipeline. One industry analyst estimates that just between 2010 and 2011, big pharma will lose 28 per cent of current sales (Herper 2007). A recent report by the consultancy group Accenture calculates that up to $1 trillion of ‘enterprise value’ (which measures future profitability) has been wiped out as investors have lost faith in the industry’s future profitability. In response to poor share performance the world’s largest drug firm, Pfizer, announced a restructuring program in January 2007 that cuts 10,000 jobs (one tenth of its global workforce) and closes five research centres and several manufacturing facilities (‘Billion Dollar Pills’ 2007). Industry analysts now identify the most promising growth prospects with emerging markets (or ‘pharmerging markets’ in industry jargon), with China, Brazil, Mexico, South Korea, India, Turkey and Russia identified as the countries with the most sales growth potential in the near future (IMS 2007b).

The real engine of the corporate pharmaceutical industry is not research and innovation, but marketing. Drugs, however, are not like ordinary consumer goods for several reasons, most importantly because drugs are allocated to patients by prescription. Hence the market for a drug depends on the state of medical practice and opinion regarding the appropriate indications for that drug (although in the United States direct to consumer advertising dangerously promotes amateur self-diagnosis). Drugs are also highly regulated and, in principle, drug companies bear the burden of proof regarding the safety and efficacy of their products. Recently a good deal of attention has been focused on the issue of gifts for doctors and whether this has a biasing effect on prescription practices (Brent 2004; Consumers International 2007). (Unsurprisingly, the evidence suggests that it does.) However, dinners for doctors is just one layer in the complex business of drug marketing. Ethical questions about the influence of drug companies arise regarding human research trials, the disclosure of research results, the objectivity of conference and journal papers, and the politics of regulation. Questions about the tension between drug marketing and the public interest take on a new urgency in the context of the impending crisis for big pharma. As a faltering behemoth confronts a sharp erosion of profits, will we see an intensification of the most controversial practices of drug development and promotion?

The global drug industry is extraordinarily complex and Global Pharmaceuticals: Ethics, Markets and Practices, edited by Petryana, Lakoff and Kleinmann, is an illuminating anthology of essays on this topic. This book is a work of medical anthropology that presents a series of ethnographic studies. As the editors put it:

The essays in this volume rethink the big object—big pharma—in terms of located political and ethical problems whose solutions are not predetermined or whose solutions could be different or better … An ethnographic analysis of this sort opens perspectives on the bureaucratic and technological determinants of disease and health, and of the concrete institutional ethics and medical and political practices that are determining life and its managements in the pharmaceutical nexus (p. 22).

The essays in this volume can seem disconnected from each other, concerned with a diverse range of questions. Taken together, however, they show how drug markets depend not just on disease demographics, but on local institutions, cultural and medical norms, and the political and institutional context. They also illustrate how multinational drug corporations have adapted to national conditions, the variety of business strategies deployed in different national contexts, and how ethical standards are often hostage to local fortune.

The collection is somewhat uneven in quality and some inconsistencies of tone and terminology present challenges to the reader. Given the diversity of this collection readers will inevitably find some papers of more interest than others. For me, three stood out.

Today big pharma is in big trouble.

Adriana Petryana’s contribution to the book, ‘Globalising Human Subjects Research’ , takes on the subject of clinical trials in developing countries and in places where healthcare infrastructure is collapsing. In recent decades, demand for evaluations of the safety and efficacy of drugs in human subjects has grown rapidly and the organisation of these procedures has changed significantly. Developments include the emergence of contract research organisations to which drug companies outsource clinical trials, difficulties in meeting the associated demand for clinical trial subjects, and increasing dependence on the developing world as the source of those trial subjects.

Petryana looks at the debate around the Helsinki Declaration which aims at universal minimum ethical standards for medical research on human subjects. A central issue in this debate is the standard of healthcare that should be provided to trial participants in developing countries. Should it be measured against Western standards or local standards? Is it acceptable to use placebo controls when a standard treatment exists, but the trial participants would not normally have access to that treatment? Are trials conducted more cheaply than would be allowed in Western countries simply exploiting of the poor; or are they beneficial because they provide some healthcare to people who would otherwise receive none? There is a considerable bioethics literature around these questions. Petryana, however, foregrounds the way that economic imperatives and business practices affect local standards for clinical trials:

Today CROs [contract research organisations] are highly competitive transnational businesses that run clinical trials for pharmaceutical, biotechnology and medical device industries. They offer expertise in submission of clinical trial data to regulatory bodies and in conducting market analyses of existing and prospective drugs. Their main source of revenue comes from conducting clinical trials in an efficient and cost effective manner … and they are paid to know the constraints and opportunities afforded by country and regional regulations related to drug testing. CROs are rapidly expanding into the Third World and the former Second World of Eastern Europe, statistically and innovatively carving out new populations for larger and more complicated trials to assess the drug safety and efficacy demanded by US regulators and consumers (pp. 38–39).

‘Treatment naïve’ subjects—that is, trial subjects who have not used other drugs—are considered incredibly valuable, because the absence of other medications in the patient’s body eliminate the chance of drug interactions that might confuse the trial results. With fewer variables to affect the results trials on the treatment naïve have an increased likelihood of showing drug effectiveness. Thus those who lack access to healthcare become, for that very reason, a more valuable research resource. This reveals the disingenuousness of some of the arguments as to why such trials are not exploitative.

What standard of care should be provided to drug trial participants in developing countries?

David Healy’s essay, ‘The New Medical Oikumene’ examines … ‘the role of the pharmaceutical industry in structuring expert and popular understandings of mental illness over the last two decades, specifically focusing on North America and Great Britain’ (p. 61). Healy presents a fascinating discussion of how a newly defined class of anxiety related disorders were made medically respectable and how these novel conditions created new markets for existing drugs. For example:

In the early 1990s, Roche had hoped to market moclobemide, a monoamine oxidase (MAO) inhibitor, for the treatment of another of this new cluster of disorders—social phobia. In preparation for the launch of moclobemide, Roche commissioned an educational booklet produced, apparently disinterestedly, by a working party of the World Psychiatric Association, aimed at helping clinicians recognise the features of social phobia. One hundred thousand copies of this were prepared for distribution to clinicians. Moclobemide was eventually licensed in only a small number of markets for social phobia, but the methods of marketing it, which involved selling social phobia, have been documented in some detail (Moynihan 2002) and were subsequently pursued on a much wider scale by SmithKline, the marketers of paroxetine (Paxil) when it was licensed for social phobia (pp. 63–64).

One of the more disturbing practices Healy discusses is the ghost-writing of papers for ‘opinion leaders’—influential researchers— that are published in the researcher’s name. For instance, invited speakers to a company sponsored symposium might be offered ghost-written drafts of articles they can edit which will then be published in the symposia proceedings. Most major pharmaceutical companies outsource their medical writing to specialist medical writing agencies. Healy describes the work of one such agency in coordinating articles for Pfizer in its antidepressant Zoloft. He shows that a number of these agency-written articles were placed in the most influential journals in the field. Importantly the commissioned articles report more favourable trial results for the drug than other studies and downplay or omit data about serious side-effects (like suicide attempts in some children on the drug). Healy illustrates some of the ways in which drug companies can influence even the peer-reviewed scientific literature on which medical opinion and regulatory judgments are based.

In ‘Treating AIDS: Dilemmas of unequal access in Uganda’, Whyte and colleagues examine the social relations brought into focus by the stark choices that health workers and AIDS affected families face in that country. For instance they describe the ‘blanket sign’ used by staff in one hospital to decide which patients to inform about anti-retroviral drugs and where they can be purchased. They don’t dispense ARVs on the ward because ‘they do not want the spectacle of the lucky ones going to the dispensing window of long life while others look on hopelessly’ (p. 248). In poorly equipped clinics patients must bring their own bedding—and their quality of their blankets and clothes is a test of financial means. Information about drugs is withheld from poor patients because it is considered cruel to tell them about drugs they can’t possibly afford. Families face impossible speculations and calculations:

People speculate about whether taking a child out of school would enable them to buy drugs and improve enough to keep a job so they could continue giving some support at least. They worry about using all of their resources to buy drugs, not being able to continue after they run out of money, and then dying. Leaving the children with nothing. The price of social relations and life chances is brought sharply to consciousness in such situations (p. 250).

To read this chapter against David Healy’s highlights the absurd inequities of global healthcare. While drug companies expend huge sums finding dubious new diseases for the wealthy, in order to sell more product, what is probably the worst plague in human history ravages entire countries virtually unchecked because a $40 per month treatment regimen is beyond the reach of most victims.

Drug companies can even influence the peer-reviewed scientific literature.

A more optimistic story about AIDS appears in Joao Biehl’s investigation of the reasons behind the relative success of Brazil’s AIDS prevention program. Other chapters continue the analysis of the spread of drugs—and diagnoses— in psychiatric practice. Kalman Applbaum explores how selective serotonin re-uptake inhibitors (SSRIs) were launched in Japan—a country where the high social value placed on stoicism presented a challenge to the supposedly universal clinical indicators for depressive conditions. Andrew Lakoff documents the rise in anti-depressant sales in Argentina during that country’s financial crisis of 2001. In her chapter, Anne Lovell examines the use of Buprenorphine as a treatment for heroin addiction in France. In this case informal practices developed around a stigmatised condition, where doctors regularly prescribed Buprenorphine to addicts in spite of a lack of government support for this approach. In their chapter, Veena Das and Ranendra Das study self-medication practices in poor areas of Delhi and the various factors influencing how drugs are acquired and used in these neighbourhoods.

Global Pharmaceuticals does not include a chapter on Australia and this may lessen the book’s interest for Australian readers. With regard to pharmaceutical markets, Australia is relatively unique because of the Pharmaceutical Benefits Scheme. The PBS provides Australian patients with necessary drugs for a relatively low standardised co-payment for all PBS listed medicines—both generic and patented medicines. The PBS reimburses drug companies, via pharmacists, for the ‘health innovation’ value of listed medications, on the basis of pharmacoeconomic analysis of scientific evidence by the Pharmaceutical Benefits Advisory Committee. In order for a drug to get PBS listing for a given condition, the PBAC must determine that the drug has either better efficacy or safety than the most cost effective off-patent comparator for the same condition. The PBAC, which effectively has a monopoly purchasing power, then further negotiate the submission price of the drug to help manage healthcare costs. Drugs in the same therapeutic class, which have similar safety and efficacy, are subsidised at the level of the lowest cost drug in that class. This is called reference pricing and, in essence, it means that we don’t pay more for a drug if a cheaper alternative is just as good.

In August 2007 the previous Federal Government passed into law amendments to the National Health Act 1953, which undermine the reference pricing system. The legislation creates two pricing reference categories, known as ‘formularies’. The F1 formulary will contain single brand drugs considered ‘not clinically interchangeable on an individual patient basis’. The F2 category will contain mainly older drugs for which there is at least one alternative drug considered clinically interchangeable. Effectively, drugs under patent will mostly fall into F1 and generics will fall mostly into F2. Under the proposed rules drugs in F1 will not be compared with those in F2 for pricing purposes, even if an F2 drug is equivalent or better for the same clinical indication (Searle et al. 2007).

In Australia, we don’t pay more for a drug if a cheaper alternative is just as good.

Faunce has argued that this and other changes to the fundamentals of the PBS system were pushed by pharmaceutical companies via mechanisms established by the Australia-United States Free Trade Agreement (AUSFTA) (Faunce 2007). Whether or not this specific accusation is true, it is evident that the de-linking of patent drug pricing from equally effective generic comparators will benefit the owners of those patents at the expense of Australian taxpayers. It is interesting how little attention this issue received in the mainstream media, relative to the public interest at stake.

Although I cannot argue for it here, I believe that distributive justice requires that we subsidise drugs such that people can reasonably afford what they happen to need when they are sick. However, the total cost of the PBS has been rising sharply in recent years. The imminent expiry of many drug patents presents an opportunity to reduce the cost of drugs in our healthcare system without reducing access—but if we are to maximise the potential benefits, the basic principles of the PBS must be preserved and a single formulary for reference pricing should be restored.

Perhaps the interest of Global Pharmaceuticals for the Australian context is that it illustrates why it is important that standing between drug companies and patients we have not just unbiased doctors, but that the we also need independent experts, with access to all of the clinical evidence, to assess the relative effectiveness of new drugs and what it is really worth paying for them.


‘Billion dollar pills’ 2007, The Economist, January 27, vol. 382, no. 8513, p. 72 [Online], Available: http://www.economist.com/business/displaystory.cfm?story_id=8585891 [2007, Dec 3].

Breen, K. 2004, ‘The medical profession and the pharmaceutical industry: When will we open our eyes’, Medical Journal of Australia, vol. 180, no. 8, pp: 409–410.

Consumers International 2007, Drugs, doctors and dinners: How drug companies influence health in the developing world [Online], Available: http://marketingoverdose.org/documents/ci_pharma_2007.pdf [2007, Dec 3].

Faunce, T. 2007, ‘Reference pricing for pharmaceuticals: is the Australia United States Free Trade Agreement affecting Australia’s Pharmaceutical Benefits Scheme?, Medical Journal of Australia, vol. 187, no. 4, pp. 240–242.

Herper, M. 2007, ‘Big Pharma’s Black Hole’, Forbes.com, 22 January [Online] Available: http://www.forbes.com/2007/01/19/pfizer-pharma-cuts-fda-biz-cz_mh_0122pfizer.html [2007, Dec 3].

IMS 2007a, ‘IMS Health reports global pharmaceutical market grew 7.0 percent in 2006, to $643 billion’ [Online], Available: http://www.imshealth.com/ims/portal/front/articleC/0,2777,6599_3665_80560241,00.html [2007, Dec 5].

IMS 2007b, ‘IMS Health Predicts 5 to 6 Percent Growth for Global Pharmaceutical Market in 2008, According to Annual Forecast’ [Online], Available: http://www.imshealth.com/ims/portal/front/articleC/0,2777,6599_3665_82713022,00.html [2007, Dec 3].

Searles, A., Jeffereys, S., Doran, E., & Henry, A. 2007, ‘Reference pricing, generic drugs and proposed changes to the Pharmaceutical Benefits Scheme’, Medical Journal of Australia, vol. 187, no. 4, pp. 236–239.

David Neil is a lecturer in the philosophy program at the University of Wollongong. His research interests are in the area of applied ethics, particularly medical ethics.