Medicine For All: The Case for a Public Option in the Pharmaceutical Industry

https://portside.org/2019-09-16/medicine-all-case-public-option-pharmaceutical-industry

Portside Date: September 16, 2019

Author: Dana Brown

Date of source: September 10, 2019

The Next System Project

A new report published today by The Democracy Collaborative proposes the creation of a public pharmaceutical industry as an alternative to privately owned drug companies focused on the pursuit of profit at the expense of the needs of patients and communities.

Exorbitant drug prices have prompted millions of patients to engage in sometimes deadly rationing of their medications and act as a form of double taxation since the public has already paid for the basic research on which private drug manufacturers then capitalize. Drug industry profit extraction has also given it tremendous resources with which to distort our democracy.

"The only option for comprehensive reform is a transformational alternative that would fundamentally shift the balance of power in the sector and provide mechanisms for true transparency and accountability," writes report author Dana Brown. "Public ownership can be the vehicle for the designs we need to ensure that public health needs are prioritized by our pharmaceutical industry."

Critical needs like addressing the high cost of insulin—which affects more than 7.5 million people—are ideally suited for a public option in pharmaceuticals. Without waiting for the federal government to act, states and municipalities can take the lead in setting up a system that addresses the health needs of their populations, using lessons drawn from successful public pharmaceutical operations in several other countries. (A brief on how this would work in California has been published by the Sustainable Economies Law Center.)

A resilient ecosystem of publicly owned companies across the healthcare supply chain can offer improved outcomes for our health, economy, and democracy.

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Executive summary

Too many Americans are suffering and dying prematurely because we have ceded control over a key part of our infrastructure for public health—the pharmaceutical industry—to unaccountable corporations, for whom the pursuit of profit trumps the needs of patients and communities. Instead of continuing to push the boulder of regulation up the hill in hopes that it one day finally proves effective, we can displace corporate power over our health and lives by moving towards a democratic, publicly-owned pharmaceutical sector, designed to respond to public health needs and deliver better health outcomes at lower costs.

Democratic, public ownership of pharmaceutical development, production, and distribution in the U.S. is necessary to combat the increasingly harmful impacts of Big Pharma which decades of regulation have failed to counteract. These impacts are:

Catastrophic for public health: Dangerous, and sometimes deadly, medication-rationing is on the rise due to skyrocketing prices. Big Pharma also has a well-documented history of dangerous and illegal misbranding and promotion of medications and distortions of evidence-based medicine, leading to tragedies like the opioid epidemic which has claimed over 400,000 lives so far. Profit-motivated business decisions have also created increasing rates of post- market safety issues and critical shortages1 with decreasing rates of innovation.2
Economically regressive: Much of the profit extracted by pharma companies represents a form of double-taxation, as public funding underpins pharmaceutical R&D, but the public pays again through out-of-pocket prescription costs, contributions to Medicare and Medicaid and rising insurance premiums. We also lose massive amounts of public revenue (which could be used for healthcare and public services) through the tax evasion rampant in the sector. The highly financialized nature of the industry also makes it a contributor to growing economic inequality. The highest drug prices in the world, coupled with differential pricing further impact our most at-risk patients and communities. Concentration in the market produces anti-competitive behavior which contributes to rising costs and lack of availability of new medications.
Dangerous for democracy: With the largest lobby in the US, and a well-oiled revolving door, Big Pharma exemplifies regulatory capture. The money it pours into political donations contributes to corporate influence over government that has left us with an industry essentially immune to regulation. Massive waves of mergers and acquisitions which obscure the flow of money through the pharmaceutical supply chain and the industry’s rejection of all attempts to increase transparency has left consumers and lawmakers without the information they need to effectively hold the industry to account through the democratic process.

Developing a public pharmaceutical sector presents a systemic approach to these issues, superseding the need for piecemeal reform which could be rolled back in the future. We see this new public pharmaceutical sector as a resilient ecosystem, with publicly-owned companies across the supply chain set up at local, state, regional and national levels. Moreover, public pharmaceuticals would produce improved outcomes for our health, economy and democracy even in the absence of other interventions such as patent reform, anti-trust action, or changes to our health insurance system.

Public control of pharmaceutical manufacturing, wholesale distribution and retail pharmacies could serve as the basis for large-scale upstream investments in public health3 through the development of associated educational opportunities and job pipelines—part of an inclusive industrial strategy for economic development and stabilization, with profit now captured by corporations reinvested to meet public needs. Existing public resources like the Veterans Health Administration and the US Postal Service could be leveraged to help deliver medications, and public, unitary pricing on medications and their distribution would create transparency in the pharmaceutical supply chain that could inform further policy efforts.

Public ownership in pharmaceutical R&D would ensure that more intellectual property related to drug development would be held by public institutions and utilized in the public interest. Right now, a small number of newer medications are responsible for the majority of pharmaceutical spending by public programs like Medicare and Medicaid. Ensuring that new drug development is done in the public interest assures that not only do we get the medications that we need for the most pressing public health concerns (rather than the most profitable health issues), but also that those medications come at an accessible price.

Public production of generic medications alone could have great benefits for public health, as well as economic benefits for patients and insurers alike. Currently there are around 180 off-patent drugs with no generic equivalent on the market.4 There are a further 500+ drugs with only one generic on market5, and as the FDA has found, when there’s only one generic, it is usually priced just below the brand name drug. It is not until the second generic is introduced that prices drop precipitously.6

Coupled with the issue of recurring shortages, a clear role for public pharmaceuticals would be to assure the adequate supply of generics, especially for essential medicines—many of which are currently in short supply in the United States. However, we maintain that truly ensuring the affordable medicine a healthy America needs requires looking beyond generics to a fully public pharmaceutical sector running from the R&D lab all the way to the end user in the hospital room or pharmacy.

Pharmaceutical spending is now the fastest growing portion of a healthcare sector that is already approaching a fifth of the US economy—while life expectancy declines. No reform currently under serious consideration would challenge the underlying profit-driven structure of the industry which allows it to function outside democratic, public control and contrary to vital public needs.

Publicly-owned pharmaceuticals, free of the structural need to appease profit-hungry shareholders, would be able to focus first and foremost on public health priorities, working hand in hand with public health departments (as they do in other countries) to assure an adequate supply of medications priced to be accessible to the broadest array of Americans. Countries including Sweden, Brazil, Cuba, and China have successful public pharmaceutical industries from which we can learn. Furthermore, Americans from across the political spectrum already support the idea of public production of essential medications.7

With mounting public pressure to take action against Big Pharma and control drug prices, now is the time for bold long-term solutions that can help secure the future health and wellbeing of our communities. Public pharmaceuticals can play an important role in constructing that future we so desperately need.

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Dana Brown is the Director of the Next System Project. Her research focuses on health system models and the intersection of health and economics. She has a background in human rights advocacy and holds a B.A. in Sociology from Cornell University as well as an M.A. in International Relations from the Universidad del Salvador (Argentina) where she held a Rotary World Peace Fellowship.