Pharmocracy: Value, Politics, and Knowledge in Global Biomedicine
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Pharmocracy: Value, Politics, and Knowledge in Global Biomedicine
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Product Details
| ISBN-13: | 9780822373285 |
|---|---|
| Publisher: | Duke University Press |
| Publication date: | 03/02/2017 |
| Series: | Experimental Futures |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 344 |
| File size: | 977 KB |
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Pharmocracy
Value, Politics & Knowledge in Global Biomedicine
By Kaushik Sunder Rajan
Duke University Press
Copyright © 2017 Duke University PressAll rights reserved.
ISBN: 978-0-8223-7328-5
CHAPTER 1
Speculative Values
Pharmaceutical Crisis & Financialized Capital
Dialectics of an Industry
This chapter explores how logics of capital grounded in the generation of surplus lead to a structure of crisis in global pharmaceutical industries, leading to trials for the industry itself, for patients and consumers who constitute its markets, and for populations who are excluded from these markets. This is an analysis of the sectoral manifestations of logics of capital. It further explores how these logics operate within a trajectory of the progressive financialization of pharmaceutical corporate capital, especially in the United States. I show how this structure of crisis creates a terrain that allows for situations such as that seen in the conjuncture of the mid-2000s in India, when the country was being conceptualized as a global biomedical experimental hub at the same time that therapeutic access was becoming potentially more difficult under newly instituted product patent regimes (see introduction). This happens at the same time that places like the United States experience prescription maximization and therapeutic saturation among those segments of the population that are included within pharmaceutical markets (Dumit 2012a, 2012b; Petryna 2009).
Antonio Gramsci says of crisis that it "consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear" (Hoare and Nowell-Smith 1971, 276). I argue that the pharmaceutical industry is at present defined by a constitutive state of crisis. Crisis is a state that is simultaneously structural (a condition of the present) and exceptional (as being borne of the event). In pharmaceutical politics, crisis manifests in both a humanitarian register and as something that is structurally endemic to capital. This analysis focuses on the latter, analyzing crisis as constitutive to capitalist modes and relations of production.
My concerns in this chapter operate at multiple scales of analysis: first, to general conceptual questions concerning the logics of capital as they are grounded in imperatives to generate surplus; second, to the materialization of these logics in terrains of technoscientific capitalisms that are invested, quite literally, in the ideology of innovation; and third, to the specific sectoral logics of the pharmaceutical industry, as distinct from other kinds of high-technology, research and development (R&D)&–focused industries. The most important distinction to note here concerns the specific scales and temporalities of capital investment in R&D-driven pharmaceutical development. The development of a new drug molecule involves enormous initial investment in drug discovery and development. Drug discovery is the process of finding potential target molecules that might have a useful (and marketable) therapeutic effect; this is in the United States largely underwritten by public money, especially through the funding of university-based biomedical research. Drug development involves taking potential therapeutic molecules through preclinical and clinical trials — which is an expensive and risky process, with no guarantee of success. Clinical trials have over the past four decades increasingly moved to the private sector, and this is a capital investment whose risk is largely borne by the R&D-driven pharmaceutical industry. This structure of enormous upfront capital investment into a process that might take over a decade to realize that investment, and whose realization is filled with risk and uncertainty, leads to sectoral specificities in the pharmaceutical industry.
In global pharmaceutical economies, there are at least three sets of actors that are simultaneously in crisis. The first is the multinational pharmaceutical industry, largely Euro-American, which is involved in R&D-based drug development. The second is patients, both in developed-country contexts such as the United States and in developing-country contexts such as India. And the third is national pharmaceutical industries such as the Indian, which is primarily a generic industry with expertise in reverse engineering drugs and selling them at a lower cost than patented medication, and deeply impacted in its business models by patent agreements mandated by the WTO. Crisis itself, however, is polymorphic — it does not mean the same thing for each of these actors.
Some of the factors that combine to configure the fundamentals of the market terrain that we now recognize in pharmaceutical development include the following: first, the development and growth of the Euro-American pharmaceutical industry, which began to focus on R&D-driven business models in the 1980s, leading to the development of blockbuster drugs that could earn over a billion dollars in annual revenue; second, the elaboration of a regulatory infrastructure in which larger and more complex clinical trials became essential before drugs could be approved for market; and third, the emergent possibilities of biopharmaceutical development (the development of complex biological molecules, as opposed to small organic chemical molecules as drugs), enabled by the growth of the entrepreneurial university, the interest taken in biotech by both private and public speculative markets, and intellectual property regimes that facilitate patenting. All of these were in place as constitutive elements of the drug development process by the end of the 1980s.
In the 1990s, further significant developments occurred. These include, in the United States, first, a restructuring of the regulatory process in ways that recognized the need for facilitating the approval of drugs to market in streamlined fashion; second, the allowance of direct-to-consumer advertising by pharmaceutical companies; third, the release of a study by Tufts University's Center for the Study of Drug Development, which showed that the price of developing a new drug was on the order of $250 million, which made drug development costs a central part of the discussion in business and policy circles on the relationship of drug R&D to drug pricing (exacerbated by the estimation that only one in five drug candidates tends to make it through clinical trials to market; DiMasi et al. 1991); and fourth, the growth of off-label use as a business model, which involves selling a drug for an indication other than that for which it was initially approved. Along with these changes in the business models of pharmaceutical companies, the past thirty years have also seen the progressive movement of clinical trials into the private sector. In the mid- to late 1990s, trials started moving out of the United States to the rest of the world at a rapid rate (Petryna 2009).
By the turn of the twenty-first century, the contours of the pharmaceutical industry were as follows. This was a large industry that was extremely profitable. But these profits were built on the strength of a handful of blockbuster drugs, molecules that made in excess of a billion dollars a year. They offset the high rate of failure of drug candidates to make it through clinical trials (probably four drugs out of every five). Hence, this was an industry whose profits, although huge, depended upon a large amount of money from a small number of compounds. The ability to make so much money from these compounds was secured through strong intellectual property protection. Three historical, institutional factors make this configuration a structure that is potentially ridden with crisis: the place of the pharmaceutical industry in the speculative marketplace, pipeline problems, and the patent cliff. I elaborate.
Most major R&D-driven pharmaceutical companies are publicly traded. This means that value for these companies is determined less by profit (how much money they actually make over the amount expended) than by growth (how much potential there is for future earnings over and above the present rate of earning, which can be translated into shareholder value). The financial community expects a pharmaceutical industry growth rate of 13 percent earnings per share (EPS) annually. The industry growth rate typically operates at 8–10 percent EPS, and between 2002 and 2012 showed an annualized return on equity of -1.2 percent, according to the New York Stock Exchange Arca Pharmaceutical Index.
To reach the kinds of growth the stock market expects purely through the development of new therapeutics requires three to five new chemical entities to be approved each year. This is difficult to achieve. If only one in five drug candidates entering clinical trials makes it to market, then in order to generate three to five new chemical entities a year, the company needs a large pipeline of drugs entering clinical trials. The absence of a robust pipeline in the pharmaceutical industry exacerbates the crisis. The pharmaceutical industry has over the past two decades faced what is referred to as an innovation deficit, a concern that developed in the latter half of the 1990s. This was likely a function of the fact that by this time many of the low-hanging fruit, natural products that could be developed as potential therapeutic molecules, had already been picked, and more sophisticated, targeted forms of drug discovery that could address mechanistic aspects of disease were seen as necessary. The structural relationship between the pharmaceutical industry and the speculative marketplace thus intensified a scientific crisis that had already been in existence.
In this situation, the one thing that has saved pharmaceutical companies is the handful of blockbuster drugs that make billions of dollars a year. The only way these drugs have been able to make so much money is through the monopoly afforded by the patent. Hence, intellectual property becomes the critical factor that allows value generation in this business model. This is where the phenomenon known in industry circles as the patent cliff becomes such a potential source of crisis. Between 2009 and 2012, it was estimated that drugs representing over $74 billion in sales lost patent protection, and hence faced the prospect of competition from generic manufacturers (Deloitte 2009). This means that the pharmaceutical industry has been in crisis from both directions — the looming expiration of patent monopolies on currently profitable drugs; and the lack of an adequate pipeline of new drugs to replace those that start facing generic competition upon patent expiration. This led to the recognition on the part of the pharmaceutical industry of the importance of near-term revenue, and a resulting focus on mergers and acquisitions (M&A) rather than research and development (R&D). Hence, two tendencies are consequent to the structure within which the pharmaceutical industry operates. The first is monopolistic; the second is the tendency to consolidate through acquisitions.
The pressures from the financial markets that R&D-driven pharmaceutical companies inhabit in the context of their current pharmaceutical crises are indicated, for instance, in an article in the pharmaceutical industry newsletter Pharmalot. Titled "One More Reason That Lilly Must Do a Deal, Fast" (E. Silverman 2010), it cites figures that point to the crisis faced by the pharmaceutical company Eli Lilly (the makers, most famously, of Prozac), and arrives at the definitive conclusion — acquire or be acquired. Lilly is a big pharmaceutical company that at the time had a particularly anemic pipeline. They had had two major flops, including very poor sales performance of a blood thinner, Effient, and an Alzheimer's medication that was under development and failed to come to market. According to industry analysts, Lilly faced the steepest patent cliff of the big pharmaceutical companies. Another analyst was cited in this article as saying that Lilly's pipeline "still carries considerable risk. In our opinion, management must reconsider its long term strategy and will need to take short term actions." All the analysts cited in this piece who diagnose the crisis faced by companies like Lilly come from the financial sector — one from Sanford Bernstein, another from Leerink Swann, and a third from Deutsche Bank. In other words, on the one hand, there are actual events and figures — a failed clinical trial, poor sales performances, a certain amount of capital reserves ($5.1 billion in cash and equivalents at the end of the second quarter of 2010, according to the article). But there is also the interpretation of those events and figures through certain kinds of epistemology — in this case, financial risk. It is the financial analyst who assumes the role of the legitimate diagnostician when it comes to identifying the company's problems and its necessary solutions.
In the face of pipeline crises and patent cliffs, the logical response of the speculative marketplace is to push pharmaceutical companies toward M&A. The logic of this step is twofold. First, M&A potentially bolsters pipelines — instead of having to discover a drug candidate from scratch and take it all the way through drug development, companies could either in-license promising late-stage drug candidates from a smaller company that is looking for revenue, or they could acquire the smaller company altogether. This is often the mode of interaction of big pharmaceutical companies with biotech companies, which might have products in the pipeline but do not have the capital reserves or resources to take those products all the way to the market. Second, M&A reduces costs through streamlining, by consolidating projects and workforces in two companies. This leads to the large number of layoffs and redundancies in the industry.
A Deloitte (2009) report on M&A in the life sciences (between pharmaceutical companies, or between pharmaceutical and biotech companies) cites figures that show the increasing trends toward such deals, and the increasing valuation of such deals. For instance, the median value of deals in which a pharmaceutical company acquired a biotech company rose from $80 million in 2000 to $400 million in 2008. There was a similar sort of increase in the median value of out-licensing deals (when a company licenses out a single molecule to a pharmaceutical company, rather than selling the entire company), from $25 million in 2000 to $230 million in 2008. The single largest factor responsible for these trends, it has been suggested, is the patent cliff and the threat of competition from generic manufacturers, which leads to a "laser-like focus on near-term revenue growth and profitability" (Deloitte 2009). What this means is less of a focus on R&D within the companies, especially early stage R&D, since such R&D implies commercial expenditure on projects that have no guarantee of resulting in the successful development of a therapeutic. Therefore, one sees the reinforcement of the very conditions that led to crisis in the first place: there is a pipeline crisis because there are not enough drug candidates coming into the pipeline. Yet the short-term focus on M&A as the way to mitigate that crisis (and as the way that is suggested by the speculative logics of financial markets) leads to a further inattention to R&D within companies, ensuring the continuing lack of an in-house pipeline. Indeed, a 2008 Deloitte survey of 360 senior pharmaceutical industry executives predicted that before 2020, most research and development would be conducted outside large life science companies.
Thus crisis is created by the coming together of a political economic structure of financialized capital that demands growth with an epistemology of risk assessment through which crisis comes to be naturalized. This is a form of diagnosing and understanding crisis that does not question the institutional structure of financialization itself, just the growth and performance of industries operating within the structure. Consequent to this, there is a monopolistic tendency that is enforced through patent protection, which has consequences for drug access, especially (but not just) in the developing world. And there is a tendency toward consolidation through acquisitions, thereby increasingly turning the R&D-driven industry into an M&A-driven one. In the process, one sees a fundamental shift away from the R&D model that has defined the industry for much of the past two decades. Pharmaceutical industries, it could be argued, function less and less as discoverers of new therapy and more like investment banks themselves, controlling, regulating, and betting on the flow of capital.
Ramifications of the Structure of Pharmaceutical Crisis
I argue that the process of the appropriation of the pharmaceutical industry by logics of speculative, financial capital results in the separation of value from considerations of patient needs or good health. Indeed, the very definition of health comes to be at stake and reconfigured in this process. What one is seeing within pharmaceutical industry logics is the implicit understanding of health in terms of surplus health, where health itself becomes a potential source of value for capital (Dumit 2012a, 2012b; see introduction, this volume). Indeed, health has to be thus valuable if one is to even imagine making the kinds of speculative financial bets on it that one sees in this model of pharmaceutical development. This is because the bet that is made here is not one that has anything to do with healthiness or therapeutic efficacy; it is, rather, a bet on market size, market penetration, and the potential for market growth. It is a bet on therapeutic consumption — which, in order to be a source of surplus value, must by definition be potentially greater than the amount of therapeutic consumption required to maintain healthiness. This creates a structure of crisis for patients.
(Continues...)
Excerpted from Pharmocracy by Kaushik Sunder Rajan. Copyright © 2017 Duke University Press. Excerpted by permission of Duke University Press.
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Table of Contents
Acknowledgments xiIntroduction. Value, Politics, and Knowledge in the Pharmocracy 1
1. Speculative Values: Pharmaceutical Crisis and Financialized Capital 37
2. Bioethical Values: HPV Vaccines, Public Scandal, and Experimental Subjectivity 62
3. Constitutional Values: The Trials of Gleevec and Judicialized Politics 112
4. Philanthropic Values: Corporate Social Responsibility and Monopoly in the Pharmocracy 157
5. Postcolonial Values: National Industries in Pharmaceutical Empire 193
Conclusion. Constitutions of Health, Responsibility, and Democracy 229
Notes 247
References 301
Index 321
What People are Saying About This
"This book offers the most incisive, compelling analysis yet of the multinational pharmaceutical industry—of the mechanisms by which health is appropriated by capital, and the empirically distinct ways in which this takes place in different locations across the globe. As Kaushik Sunder Rajan makes plain, the 'pharmocracy' thus produced is no mere instrument of profit maximization: it also yields complex regimes of governance, knowledge, and ethics that are contested and rendered political in unpredictable, polarizing ways. The account is a tour de force in the study of bioscience, value, and the nature of power in our times."
"Pharmocracy is deeply unsettling, taking world systems ethnography and postcolonial science and technology studies in new directions with its intricate account of how the global pharmaceutical industry is making its mark in contemporary India. Superbly written and argued, Pharmocracy examines the fate of science and innovation, public health, and democracy while telling of next-generation imperialism and of the many nodes and modes of politics engendered by contemporary structural conditions. It is also a story about and a call for governance. One comes away both sobered and impressed by Indian institutions."