“Instead of spending on innovation, Big Pharma is hoarding its money for salaries and dividends,” the report says, “all while swallowing smaller companies, thus making the marketplace far less competitive.”
(Flanoz/Wikimedia Commons)
Rep. Katie Porter (D-CA) on Friday published a damning report revealing the devastating effects of Big Pharma mergers and acquisitions on U.S. healthcare, and recommending steps Congress should take to enact “comprehensive, urgent reform” of an integral part of a broken healthcare system.
The report, entitled “Killer Profits: How Big Pharma Takeovers Destroy Innovation and Harm Patients,” begins by noting that “in just 10 years, the number of large, international pharmaceutical companies decreased six-fold, from 60 to only 10.”
While pharmaceutical executives often attempt to portray such consolidation as a means to increase operational efficiency, the report states that “digging a level deeper ‘exposes a troubling industry-wide trend of billions of dollars of corporate resources going toward acquiring other pharmaceutical corporations with patent-protected blockbuster drugs instead of putting those resources toward’ discovery of new drugs.”
Merger and acquisition (M&A) deals are often executed to “boost stock prices,” to “stop competitors,” and to “acquire an innovative blockbuster drug with an enormous prospective revenue stream.”
“Instead of spending on innovation, Big Pharma is hoarding its money for salaries and dividends,” the report says, “all while swallowing smaller companies, thus making the marketplace far less competitive.”
For years, Big Pharma has gobbled up small biotech firms that might otherwise force them to compete. As soon as these companies are acquired, innovation stops. The culture of creativity is killed. The small firm’s vision is lost, and the big firm’s profits become priority.
— Rep. Katie Porter (@RepKatiePorter) January 29, 2021
The report calls M&As “just the tip of the iceberg of pharmaceutical companies’ anti-competitive, profit-driven behaviors”:
Pharmaceutical companies often claim that lowering the prices of prescription drugs in the United States would devastate innovation. Yet, as prices have skyrocketed over the last few decades, these same companies’ investment in research and development have failed to match this same pace. Instead, they’ve dedicated more and more of their funds to enrich shareholders or to purchase other companies to eliminate competition.
“In 2018, the year that [former President] Donald Trump’s tax giveaway to the wealthy went into effect, 12 of the biggest pharmaceutical companies spent more money on stock buybacks than on research and development,” the report notes.
Some key findings from the report:
- Big pharmaceutical companies are not responsible for most major breakthroughs in new drugs. Rather, innovation is driven in small firms, which are often spun off of taxpayer-funded academic research. These small labs are then purchased by giant firms after they’ve assumed the risk needed to develop a blockbuster drug;
- Instead of producing lifesaving drugs for diseases with few or no cures, large pharmaceutical companies often focus on small, incremental changes to existing drugs in order to kill off generic threats to their government-granted monopoly patents; and
- Mergers in the pharmaceutical industry have had an overall negative effect on innovation, taking what little competition existed in the industry and completely destroying it.
“Competition is central to capitalism,” Porter said in a press release introducing the report. “As our report shows, Big Pharma has little incentive to invest in new, critically needed drugs. Instead, pharmaceutical giants are free to devote their resources to acquiring smaller companies that might otherwise force them to compete.”
“Lives are on the line; it’s clear the federal government needs to reform how it evaluates healthcare mergers and patent abuses,” Porter added.
To that end, Porter’s report recommends the following actions:
- Removing incentives that prioritize investors and Wall Street over patients;
- Reevaluating the standards used by the Federal Trade Commission (FTC) for healthcare mergers;
- Altering the presumption that most mergers and acquisitions are legal unless contested by an individual or group;
- Lowering the cost of prescription drugs. Congress should pass legislation that reins in skyrocketing costs. This can begin with drug price negotiation legislation, such as the Elijah E. Cummings Lower Drug Costs Now Act, but must extend to include a larger class of drugs and cover all payers and the uninsured; and
- Preventing anti-competitive abuses of the drug patenting system. Congress should pass legislation, such as the such as the Preserve Access to Affordable Generics and Biosimilars Act, the Affordable Prescriptions for Patients Through Promoting Competition Act, and the Stop STALLING Act, to stop abuses of the regulatory process.
“It’s time we reevaluate the standards for approving these mergers,” the report concludes. “It’s time we pass legislation to lower drug prices. And it’s time we rethink the structure of leadership at big pharmaceutical companies. Together, these strategies can help us bring more innovative, and critically needed, cures and treatments to market.”
The whole health care system, top to bottom, must be nationalized. Profit and health care do not, in fact cannot mix. Anything less than this will not solve our skyrocketing health care costs, lack of innovation and inequity.
The logic of markets depends on all participants being small in relation to the whole – an insight that goes right back to Adam Smith. Consequently, essentially ALL mergers and acquisition are against the public interest. Concentrating power is almost always bad, and concentrating ownership can only increase society-destroying inequality.
Business mergers and acquisitions should be forbidden short of court-declared bankruptcy. Leaving those decisions up to a corruptible, political system is a recipe for failure, as we’ve seen.
Beyond that, preferably companies would not be allowed to grow beyond a certain size. One way to achieve that would be a sharply graduated corporate income tax, levied on the income they declare to their ownership. It would be prohibitive past a certain point, forcing companies to grow by selling pieces.
This addresses Rep. Porter’s findings, but not the fundamental immorality of profit-driven healthcare or making healthcare dependent on payment. For that, we need universal, single-payer healthcare, as well as breaking up the plutocratic oligopolies.
This is a good article, but to think that capitalism can be moved to abandon the profit motive is incredibly naive. All pharmaceutical development must be done for the benefit of the people, not for profit.
And yet Katie Porter did not withhold her vote for Nancy Pelosi to be speaker of the House unless she brought Medicare for all
to the floor of the House for a vote. Seems to me that if you want to stick it to big Pharma, Medicare for all would be the way to do it; reigning in costs and providing healthcare for all during a deadly pandemic.
So while this report is nice, real legislative action could have been taken to transform people’s lives – but Katie Porter was no where to be found.
Killer Kapitalism…never interested in average man/woman on the street – only looking after their own financial well-being.
Concentration of personal wealth. Too big.
Media conglomerates. Too big.
Drug Conglomerates. Too big.
Financial Conglomerates. too big.
Spending to elect and influence elected officials Too big
Serious reform to reduce the concentration of power. Too small or non-existent.
If a Democrat proposing reform is supposed to suggest it is the party of reform. Puhlease!
“Competition is central to capitalism.” Oh my God. Wrong. Capitalism extracts profits in any way possible; the whole nonsense about “Competition” only applies to the lowest levels of capitalist enterprise. That Porter actually believes this is staggering, disturbing. As Noam Chomsky once put it, if some well-meaning board member went into the board room and declared that, “we need more competition,” she’d immediately be removed by security and thrown out into the street.
Porter is a Representative of one of the capitalist Parties that answer to the very people who see to it that the system runs as it does. Much of the Left swoon over her, but they’re dreaming if they think anything change. Remember Liz Warren’s brag: “I’m a capitalist to my bones.” You are NOT going to get any kind of real change out of these people. Porter will get up in front of the Congress and pound the podium and wag her finger, and the Capitalists will understand that that’s just another cost of doing Business.
Correct. Thanks for posting.