Beneficiaries of COVID-19
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File picture of consumers outside an Ayurvedic medicine shop.
One of the supervisors of my doctoral research in the mid-1990s, the late Professor Peter Kloos from the Free University of Amsterdam, once told me that many social science scholars have a romantic idea about the past, which is anti-progressive: “They think that the past was better than the present, and lament about social change”. Since that day, I never forgot his statement and I remembered it today too, when I started to write this column by looking at healthcare as a business.
In the good old days, people in Sri Lanka went to see the indigenous physician in the village for any kind of medical treatment. He didn’t have medical equipment or machines. He would diagnose the internal issues of the body by observing and, perhaps rubbing the patient externally and determined the treatment. He would treat them with medicines prepared by himself. Perhaps, he would also give a prescription with herbal medicines to be found from the garden and jungle and provide instructions to prepare the medicine at home.
One of the amazing practices was that he didn’t have a “price” attached to his channeling, or treatment or the medicines. The patient customarily carried a bunch of betel leaves and offers it to the physician in a due respectful manner, placing few coins or a cash note on it, according to his ability or inability. The physician too never took into account what the patient has offered or not offered, when he treats him.
Economics in the world has, however, changed today. Healthcare – particularly the curative healthcare -, has largely been guided by private profit and market forces. Governments are also playing a key role in both curative and preventive healthcare, which I don’t think is a debatable issue among different economic ideologies. In spite of the role of the government in varying degrees in different countries, the private sector has played a major role in research and development (R&D) in the health sector either with or without government support, which was the key to the progress of healthcare and its global application.
Profits and markets
In the good old days, people believed in the ability of an indigenous physician and, sometimes even his miraculous abilities and strange practices to diagnose and treat without any support of medical equipment or machines. After all, the indigenous physician is only an individual and, not an organised healthcare system that the “nations” can depend on. The health requirement became more global than local, and more communal than individual. People did not live more than 40 – 50 years those days as life expectancy was short and new sicknesses and diseases, including epidemics, overwhelmed the world from time to time. The world populations were also expanding and health requirements were becoming more complex.
Indigenous healthcare systems in any country in the world, never had the ability and capacity to catch up the global dynamics, simply because such systems never had the “seeds of growth” – investment in R&D and healthcare as an institution.
Here comes the seeds of growth in healthcare industry in the capitalist world – the “profit motive” as well as a “market mechanism” to accommodate it. Healthcare services got split into different segments such as testing and laboratory, consultation, medicine supply, hospitals and financing in order to accommodate specialisation and economies of scale. We admired and, sometimes romanticised the indigenous health system that was, anyway fading away. In spite of our lamentation over the past, the world has been changing.
Today, if you step into a pharmacy looking for antibiotics, for example, unless your doctor has not specified a particular brand in the prescription for whichever the reason may be, you would have the choice of many different brands. In the local market of Sri Lanka, in fact, there are about 12 brands of antibiotics, at different prices. There is a local product from the State Pharmaceutical Corporation, which costs Rs. 2.50 a pill. If you go for an Indian product it is Rs. 3.50, and a UK product which is about Rs. 12 approximately.
Doxorubicin is a chemotherapy medication used to treat cancer. If you buy this injection produced by Taj Pharmaceuticals – a pharmaceutical company in India, it would cost about Rs. 2,400. If you select a US brand name, such as the one produced by Pfizer Inc, it would cost about Rs. 5,500. In fact, there are more than 40 companies in the world producing doxorubicin medication brands all over the world, while many of them are from companies either in the US or Europe.
Pharmaceutical business
The US as a country is dominating the pharmaceutical industry as a private business, but with the support from the government budget too. They also employ the best human resources – scientists in the medical fields, together with other supportive employees running production, distribution and marketing activities. Many of these pharmaceutical companies are big multinational corporations which have outsourced and invested in other countries being part of foreign direct investment (FDI) seeking cost advantage and strategic business initiatives. Many of them are also publicly-traded companies that are listed in the stock exchange. The US pharmaceutical companies dominate the global pharmaceutical market out of which their share is about 45 per cent. Their annual turnover is accounted for in US$ billions, perhaps not much different from the entire GDP of countries like Sri Lanka.
In the US, some of them receive government funding from organisations such as the Biomedical Advanced Research and Development Authority (BARDA) and the National Institute of Allergy and Infectious Diseases (NIAID). Along with all that external funding, companies also have their own private funding by themselves or from their partnerships with other companies especially for R&D.
For a number of reasons the US pharmaceutical companies have the ability to overcome the competitive market structures acquiring monopoly status as they used to do. And after all, the costs of R&D in billions of US dollars are ultimately added to the prices of medicine pills, capsules and vaccines that patients all over the world have to buy, which is the result of monopoly status.
One of the important reasons for monopoly prices are “patent rights”. The US pharmaceutical companies are leading the world’s R&D in the pharmaceutical industry, bringing out a new product of high quality for which they obtain patent rights – the exclusive right for the company to produce that drug or vaccine for a period of time, maximum 20 years. It is an incentive for the R&D effort to find a solution for a health issue. By the way, it is also an open secret that towards the end of the period of patent rights, an “improved version” of the same formula is produced and another term of a patent right obtained. This means that other companies, even if they steal the formula, cannot produce the drug or the vaccine under the legal intellectual property right law.
Vaccine for COVID - 19
While the pharmaceutical companies in many countries including the UK, Japan, China and other European countries are also engaged in R&D to produce a vaccine for COVID-19, it was reported that the US is leading the race of innovation with 23 US pharmaceutical companies trying for it. Some of these big companies are Johnson & Johnson, Pfizer, Gilead, Sanofi, Amgen, Altimmune, and Inovio. And the innovating companies will also get the patent right as usual, raising its global price under monopoly market conditions.
And it’s for the whole world for immediate use under exorbitant monopoly profits. Therefore, the world – individuals and governments, should also be prepared to spend big sums of money for immediate purchase. I have a question, anyway: If we have a negative attitude towards the undue profits of the ultimate beneficiaries of the COVID-19 pandemic – the big pharmaceutical companies, maybe we should think of the alternative – I mean the pragmatic alternative free from opinions, who has the capacity and incentive to invest in R&D for a COVID- 19 vaccine.
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk).