CSR Issue Series  Debunking the Myths

The Pharmaceutical Industry in Contemporary Capitalism

Joel Lexchin

The pharmaceutical industry has remained near or at the top of the list for profitability for many decades. The myth is that its profits come from producing and selling the many therapeutic advances that industry research has generated, but the reality is far different. In the first place, after tax deductions only about 1.3 percent of the money that the industry spends actually goes into basic research, the type of research that leads to new medications. Second, most of the new medicines that come from the pharmaceutical corporations offer little to nothing in the way of new therapeutic options.

The industry also justifies its high level of profits with the claim Image that drug development is inherently risky. To this end, the pharmaceutical corporations maintain that only one in every 10,000 molecules actually results in a new drug. Though this may be true, most of the molecules that fall by the wayside do so in the very early stages of development when costs are minimal. The $2.6 billion figure that is now cited as the cost to bring a new drug to market comes from data that are confidential, and the calculations are based on a set of assumptions that have been widely challenged. Were drug development such a risky proposition, then one would expect that from time to time the fortunes of corporations would vary. On the contrary, since 1980, all the large corporations have done well financially.

Despite the continuing impressive level of profit, the industry is undergoing a crisis. But the industry is able to manipulate knowledge about the value of pharmaceuticals not only to the detriment of what doctors know, but more important, to the detriment of people’s health. At the same time as the industry is developing ways of coping with its internal crisis, a crisis that is inherent in the capitalist organisation of pharmaceutical production, there are also serious proposals to curb its power and to ensure that drugs are developed and priced to meet real health needs and not the need for ever larger profits.


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