Corruption in the Pharmaceutical Industry
An Analysis of Corruption and Pharmaceuticals: Causes and Solutions
Shawn Gardner
12/6/2015
Medicine is crucial for survival. Corruption within the pharmaceutical industry is an issue that can’t go unattended to because it can harm the lives of many patients that need immediate healthcare. To analyze corruption within the pharmaceutical industry I searched google for existing research and data to find out just how big of an issue corruption really was. I found that it was undoubtedly an important issue. I used ideas for solutions that were provided within these articles and also included my own suggestions on how to fix these issues. These solutions could make the entire healthcare system more efficient and increase the quality of life for many.
Introduction
Corruption is a serious issue within the pharmaceutical industry. Greed, counterfeit medicines, and political influences Cicero demonstrated the power and importance of medicine when he said, “In nothing do men more nearly approach the gods than in giving health to men” (quotegarden.com). Without medicine, the world would struggle to thrive or even survive. How can we let such a powerful subject be taken over by corruption and the greed of human beings? The world of medicine is filled with corruption that is often caused by the greed of a few that affect the lives of many. For many people, medicine is the only thing that guards the line between life and death. Those filled with greed recognize the importance of the drugs they are given and often charge high prices, knowing that what they have will still be purchased. Counterfeit medicines may also be made and sold often, having falsified effects which ultimately result in continued suffering for the patient. A connection exists between pharmaceutical companies and political campaigns which lead to the protection of economic profits by congressional laws. In such a vital part of society’s survival, control measures must be emplaced in order to assure the longevity of the human race.
Related Literature
Pharmaceutical industry corruption seems to be an important issue as there is a substantial amount of research conducted on it and its effects. The primary sources used for this analysis came from The Many Faces of Corruption, “Institutional Corruption of Pharmaceuticals and the Myth of Safe and Effective Drugs”, “Pharmaceuticals and corruption: a risk assessment”, and “Institutional Corruption and the Pharmaceutical Policy”. This paper takes some of the data gathered from research and opinions stated within the previously listed sources along with my own opinions on the matter. The texts listed and I also contributed multiple possible solutions for each of the problems listed within this paper and how they could change corruption within the industry.
Analysis
First let’s look at the most obvious cause of corruption in the medical world today; greed. Albania has pharmaceutical suppliers that have private financial interests controlling which drugs actually made it to the market. They pay bribes in order to access otherwise confidential information, and they use direct procurement in order to assure themselves a bid (Cohen, Mrazek, Hawkins, 32). These behaviors are caused by a desire for financial gain rather than a charitable act for the greater good. They drive the prices of pharmaceutical goods through the ceiling, ultimately becoming unattainable by the majority of citizens. Because of the high cost of many drugs and poor quality control measures, people begin to relate high prices with good quality and low prices with bad quality. Although this may not be necessarily true, it has become a common misconception across the globe. A result of this is a disregard for the lower cost generic drugs, and an irrational need for higher costing brand name drugs (Cohen, Mrazek, Hawkins, 32). This ultimately results in higher profits for the higher level executives and their companies.
How can the effects of greed be minimized to prevent corruption? One way to go about this is to minimize the excess profits that pharmaceutical companies make. Let’s assume that companies are making 10% in excess profits. If they are selling $400 million a year in products, that would result in $40 million in excess profits. That seems to be a lot of profits for companies that make products that are aimed towards increasing the quality of living. To solve this, they could place a cap on the amount of excess profits a company can make. If they limited this to an amount that was half the amount of current average excess profits in the industry, in this case 5%, it would limit the attempts at increasing profit margins. If a company did go over their limit, they could donate the extra profits towards providing healthcare for those who can’t afford it or offering their products at a lower price for those who meet certain qualifications. Another possible solution for minimizing the effects of greed would be to provide incentives for companies that help those who cannot afford healthcare. Using this method they could assess patients based on certain criteria and if they meet the requirements, they could receive assistance from the company so they can afford the medicine they need. In return for doing this, companies may be able to receive tax benefits or meritorious awards that would increase the reputation of their company. This could be very rewarding for companies as they would develop a better reputation while at the same time maximizing the hedonic value of their work.
Another cause of corruption in the pharmaceutical industry is the amount of drugs that contribute very little therapeutic quality to the user, according to Light, Lexchin, and Darrow. Most advertisements of new medicines seem to make clear and concise claims although most of these claims are “not supported by the FDA” or “depends on the user”. Snake oil is a nickname given to these drugs that make false claims. Snake oil is defined as “fraudulent health products or unproven medicine but has come to refer to any product with questionable or unverifiable quality or benefit” (Snake oil, Wikipedia.com). One example of snake oil is Dr. Morse’s Indian Root Pills that were popular in the late 18 and early 1900s. These pills claimed to “cleanse the blood” which was supposedly the cause of all diseases in the world (Dr. Morse’s Indian Root Pills, Wikipedia.com). Although many of these radical claims have been eliminated in today’s world, there are still many instances where falsified or exaggerated claims occur. Figure 1 shows a study that was conducted in France on the therapeutic value of new drugs in 2011. As can be seen, 21.7% of drugs introduced to the market had minimal added value and 54.7% of drugs had no added value. Only 6.4% of drugs introduced to the market actually had some added therapeutic value. (Light, Lexchin, Darrow, 592)
Many firms are incentivized to develop “me-too” drugs. “Me-too” drugs are minor variations of existing drugs that are marketed as having exaggerated benefits while not illuminating their full risks (Rodwin, 545). The issue with this is that all of these products are being marketed as having solid impacts on a person’s health and well-being, while they really aren’t adding any significant value to what has previously been on the market. In turn, these products are being purchased by consumers at a higher rate because of their popular brand name or their newness, rather than the amount that they contribute to their health (Rodwin, 545). This can be problematic because people are not actually getting the added benefit that they believe they are receiving. This also is similar to the previous cause of corruption because companies know they can sell these products at a higher price without having to spend much more on their production. Their profits will undoubtedly increase and cause a much higher profit margin for the companies and their executives.
Another approach that companies take to making their products seem better than they really are is allowing them to test their own products. When they are allowed to do this, they will often times plan the trials to minimize the negative side effects and maximize the health benefits. They will set up the trials to be almost unable to detect the negatives and detect almost every possible positive effect (Light, Lexchin, Darrow, 594). They can then publish these results for the public to see, ultimately resulting in skewed results. When consumers or doctors try to find research on the products to see the quality of what they are getting, they see these biased results. This ultimately results in consumers having a false sense of hope, as they believe the drugs will do a lot more for them than they actually will.
How can the introduction of these products be controlled? One possible solution is increased financial consequences and the possibility for more serious criminal punishment (Rodwin, 545). Repercussive actions such as these would divert companies from advertising these exaggerated benefits because they would want to protect their reputation as a trustworthy pharmaceutical supplier. Another solution could be imposing taxes to help prevent inappropriate promotion and other corporate activities that need to be limited (Rodwin, 545). Losing profits is the last thing a company wants to do. If taxes are imposed on these companies, they will be very likely not to engage in the behaviors that bring about these taxes. A third possible solution is to price the drugs differently than how they are currently done. There are two possible ways of doing this. One is pricing drugs based on the effects that they provide towards health. Another pricing method is reference-point pricing. Reference point pricing is basing the price of a new drug off of the price of a similar existing drug (Rodwin, 545). Using these new pricing methods will allow these new products to be reasonably priced by their benefits, rather than the exaggerated hype that the companies try to bring about for the products. Instead of being priced highly due to the “newness” or “advanced health benefits” that are claimed by the company, they would be priced based off of what they provide for the consumer. Using this method, consumers will get exactly what they are paying for, rather than the disappointment of buying high priced fallacy products.
Another apparent cause of corruption is the link between current political policy and the pharmaceutical industry’s involvement with campaigns and lobbying (Rodwin, 545). Could it be possible that Congress regulates drug prices in order to improve the overall health of the public? Why instead do they emplace laws that strive to protect the profits brought about by the pharmaceutical industry? (Rodwin, 545) There has to be a connection between the profits of pharmaceutical companies and their involvement with political campaigns. Paul Jorgensen makes the assumption that the industry “selectively provides information to legislators, subsidizing their work, and targeting campaign contributions to influential legislators and allies” (Rodwin, 545). This is very problematic as it takes away the public’s ability to influence pharmaceutical policy and places it in the hands of industry controlled Congressmen.
How can the influence of politics be removed from the pharmaceutical industry? This is a difficult question to answer as it is difficult to maintain disconnect between politicians and these companies. One way to handle this issue could be to pass a law that prevents companies within the pharmaceutical industry from being able to contribute to political campaigns. It would be hard to make a law like this become a reality because it would have to go through those very people who are benefitting from the contributions of those companies. If a law like this was enacted then it would eliminate the possibilities of political lawmakers to pass laws that protect the profits of pharmaceutical companies. It may also cause politicians to enact laws that control how much pricing power the companies have, resulting in more affordable healthcare solutions for consumers. Another possible solution might be to enact laws the limit the excess profits that companies make and allow them to still fund political campaigns. This would mean that there is still a strict limit on the amount of profits a company can make but they can still help politicians in their campaigns. In doing this, it could eliminate all incentives for a company to fund the political campaigns.
Conclusion
Corruption within the pharmaceutical industry is a very serious issue, but there are possible ways to protect against it. Whether it is greed, counterfeit products, or political influences, all of the causes of corruption can be mitigated to provide a better quality of life for those seeking medical care. Laws can be passed, quality control can be done, and incentives can be provided to help eliminate the temptations of questionable actions that lead to corruption. Although most of the solutions seem to be based upon the implementation of new guidelines, there is still one method that is very simple and doesn’t need paperwork to implement. This method would be for individuals in the pharmaceutical industry to realize that healthcare is about preserving the wellbeing of those who need help rather than pursuing their personal financial interests.
References
Cohen, Jillian Clare. "Pharmaceuticals and Corruption: A Risk Assessment." (n.d.): 77-85.Worldbank.org. Web. 6 Dec. 2015.