The Role of Big Pharma in Drug Shortages During a Global Pandemic

The COVID-19 virus has spread disease, death, and disaster across the globe and has consequently harmed nearly every economic sector, although one major industry remains unharmed: the pharmaceutical industry. In fact, Big Pharma companies are not only surviving the pandemic but profiting from it immensely. As millions fall ill at the hands of the virus or have preexisting conditions which have worsened under the circumstances, the need for pharmaceutical products is more prevalent now than ever. The worse the pandemic, the greater the profits of pharmaceutical companies who, accordingly, see the public health crisis as a once-in-a-lifetime business opportunity (Lerner, 2020).In addition, the United States has been experiencing a increasing frequency of drug shortages over the last decade, which has caused difficulties for clinicians, health care facilities, patients, and federal regulators (Ventola 2011). Big pharmaceutical companies in the United States are uniquely able to profit off of the need for drugs during the global COVID-19 pandemic and consequently, are the cause of the drug shortages.

Driven by the relentless pursuit of lower costs, the pharmaceutical industry’s often unreliable, substandard supply chain causes drug shortages. The pandemic, along with causing a paucity of personal protective equipment for front-line workers, has also caused the shortages of essential drugs, particularly opiates, sedatives and paralytics. The blame for these shortages ultimately falls on the business decisions of big pharmaceutical companies such as Pfizer, Novartis, Merck and Johnson & Johnson, who have ceased production of certain drugs that fail to generate enough revenue and have outsourced the manufacturing of generic forms of their brand-name medicines with expired patents to foreign producers, predominantly in India and China. It is estimated that 80% of the raw materials in the pharmaceuticals sold in the U.S. are imported from abroad (Lerner, 2020). CEO Martin VanTrieste, a former chief quality officer at pharmaceutical giant Amgen, testified before the US Senate Committee on Finance regarding the supply of these life-saving generic drugs: “The desire for low-cost drugs — the race to the bottom in manufacturer pricing in order to get market share — is understandable, but it creates unintended consequences(Woods 2021).” With uncertain sales and low margins, companies have no economic incentive to invest in quality; instead, they benefit from outsourcing production to international economies with lower labor costs and lower regulatory compliance costs, where companies would likely receive support from foreign governments to build new facilities (Woods 2021). This outsourcing not only exemplifies the attitudes of American pharmaceutical companies, which view medicine as a business rather than a public good, but also poses a national security threat, as evidenced by the pandemic’s drug shortages.

Furthermore, in the healthcare industry, subsidies to the most costly, new, and advanced forms of medicine crowd out cheaper, decentralized alternatives, causing an artificial scarcity of treatments and further drug shortages. Cheaper forms of treatment, like substitute drugs, even when perfectly sufficient from the consumer’s standpoint, start to become more and more scarce as they are underproduced in favor of more sophisticated drugs with nearly equivalent efficiencies (Carson). With life-saving medications comes inelastic demand which means that a change in price wouldn’t result a large change in quantity demanded, especially when there are no readily available substitute goods.

To combat the gross rising cost of drugs, many states are attempting to allow a wider range of substitution through modifications to anti-substitution legislation: for example, pharmacists are now allowed to dispense drug products other than those prescribed (Salehi and Schewitzer). The production of drugs is fairly cheap to execute on a larger scale, but new drugs are very expensive. The drugs will, however, have much higher profit margins than their initial investment of billions of dollars and their high payoffs, causing companies to compete. It’s clear that the motivation of pharmaceutical companies is economic profit more so than maintaining public health by producing an ample supply of equally effective, less expensive drugs, perpetuating the fundamental problems leading to drug shortages.

Similarly, the patent system, which has been lauded as the driver of medical inventions, enables pharmaceutical companies to utilize strategic maneuvers in order to maintain their monopolistic hold over a particular product. Companies garner numerous patents around particular products in order to prevent competition for as long as possible, because once there is competition prices can drop more than 50%. This occurs because after a set number of years enjoying artificial scarcity, the patent wears off and cheap, generic versions of the product enter the market, allowing drug developers to gain returns on their investment (Amin 2019). Prices will drop as companies subsequently compete to lower prices, allowing patients to receive increased access to more affordable, FDA-approved drugs--but only after the patents expire (Kommendant). As these barely justified claims to intellectual property go unchecked, prices have hiked 68% on the top 12 selling drugs in the United States between 2012 and 2016 (Amin 2019). These exclusive holds that big pharma companies have over life-saving drugs exist solely to allow them to profit off of creations that are often publicly funded. Through the strategic use of patents, life-saving drugs become less accessible to the patients for whom they are intended.

This is apparent in the exclusive manufacturing capacity of the COVID-19 vaccine, which perpetuates an artificial scarcity that only exists to let pharmaceutical companies profit. Big Pharma announced an “unusual pact between fierce rivals” Merck and J&J, which will give Merck $268.8 million in U.S. taxpayer funding to use its capacity to manufacture J&J’s vaccine (McGinley and Rowland). However, these companies continue to obstruct endeavors to solve global vaccine scarcity to gain extortionate profits by maintaining their intellectual property rights. For the nearly 130 countries that have received no vaccines, this artificial scarcity will cause years of waiting, increased casualties and socioeconomic disruption, and the development of more contagious and vaccine-resistant variants (Beaubien 2021).

Rather than sharing their scientific progress with the world amidst a global pandemic that arose from collaborations with publicly-funded research centers and billions in public funding, companies are entering into contract manufacturing agreements with a restricted group of producers (Baker 2021). This expansion of vaccine manufacturing capacity solely within the oligopolistic big pharma companies will lead to long-lasting vaccine inequalities through artificial scarcity. In order to maximize collective economic profit, these companies coordinate rising prices and restricted quantities, to maximize collective economic profit, they collude in a cartel-like manner and mark themselves as such in all but name. Currently, because of language that industry lobbyists inserted into a $8.3 billion coronavirus spending package, it’ll be even easier for companies to maximize their profits from the pandemic: the aid package omits language that would have limited drug makers’ intellectual property rights and would have allowed the federal government to act if COVID-19 treatments or vaccines, developed with public funds, were priced too high. This omission will allow the company to raise prices without limit and to sell the vaccine back to the population who had paid for its development. Profiting off of intellectual property rights, these companies are able to keep the COVID-19 vaccines scarce and maximize profit.

The pharmaceutical industry has become overly financialized, so much so that the industry’s initially intended purpose to deliver health products to improve global health, save lives, and advance the human condition has been overridden by the economic incentives to maintain a more radical, profitable monopoly. These policies and practices continue to perpetuate artificial scarcity of life-saving drugs. When human life hangs in the balance, it’s important to take a hard look at the ethics of allowing the economic profits of big pharmaceutical companies to come before public health, now more than ever before.

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