Big Pharma: Everyone’s Favourite Market Failure

Adbusters’s website has put up a new article by Dee Hon on the subject of the pharmaceutical industry, which gives a nice clear outline of the case against ‘Big Pharma’. Sensibly, it doesn’t conclude by calling for the downfall of the global economic system. Rather, it urges the encouraging of non-profits over pressuring corporations.


In recent years, pharmaceutical companies have offered discounts on vital medicines to middle-income countries, while charging the poorest countries only production costs. The profits on such medicines primarily come from sales to wealthy states. Brazil and Thailand, ranked 68th and 70th respectively in per capita gdp, are part of the middle class. Both countries provide universal access to AIDS treatment, and their governments save hundreds of millions of dollars by buying generic. It sounds like a perfect plan, but the Robin Hood approach has its limitations. Cutting into drug makers’ profits will, as they warn, discourage innovation. Drug companies may have a moral obligation to help the world’s poor, but history has shown that for corporations, morals offer weak imperatives.

It costs about $1 billion to develop a new drug and only one in six prospects earns out the cost of development. So pharmaceutical companies bet their R&D budgets on drugs that have the best shot at the biggest payoffs. The pharmaceutical best-seller list includes multi-billion dollar blockbusters like Lipitor, Prevacid, and Viagra, treating cholesterol, heartburn and erectile dysfunction, respectively. They’re the disorders of the wealthy, aging and overfed West.

Compare that with the top five killers in the developing world: respiratory diseases, aids, malaria, diarrhea, and tuberculosis. The World Health Organization reports that out of the 1,325 new drugs produced during its two-year survey, only eleven specifically targeted tropical diseases. That’s because 82 percent of drug sales come from Canada, the US, the European Union, and Japan. Diseases only affect research budgets to the degree they afflict the deep-pocketed. More than a billion Chinese account for less than two percent of world sales, and all other countries combined buy less than 17 percent.

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