It's time to loosen Big Pharma's monopoly stranglehold on our medicines

Medical systems around the world are in crisis -- and monopoly power is close to the heart of the matter, every time.

A wonderful new report by Global Justice Now shows how a small number of dominant pharmaceutical firms extract wealth from the rest of us.

The report, written as part of our Taken, Not Earned series of reports on monopoly power for the World Economic Forum meetings at Davos in January, shows how a few giant pharma firms control access to most of the medicines we need to keep us healthy.

But it's worse than that: their ability to act like tollkeepers at choke points in our medical supply systems also distorts what medicines are produced, who gets to use those medicines, and how much we must pay.

The problem is costing us tens of billions each year, and it's getting steadily worse, under lax rules on trade, intellectual property and competition policy that have allowed companies to merge and grow more powerful over the recent decades, and to consolidate their control over intellectual property.

But this controlling power is also having a profound impact on the industry itself – hollowing out the companies involved, and making them less able to produce the medicines of tomorrow.

Between 1995 and 2015, for instance, 60 pharmaceutical companies in the US merged into just ten.

These corporations make many medicines under patents, which are explicit government-approved monopolies over the drugs to which they own the intellectual property rights.

Crucially, just because they own the drugs doesn’t mean they discovered them. In fact, most medical breakthroughs stem from enormous public sector funding, and the work of (significantly public-funded) university departments and small biotech companies.

Contrary to what we’re told about private sector innovation, public sector funding is usually most important at the riskiest stages of development.

Particularly from the 1990s, top executives at the biggest pharma firms began to act on the idea that it was more profitable (and more immediately profitable) to grow, protect and milk these various forms of monopoly power, than to engage in long-term cutting-edge research to deliver better medicines for humanity. So some of the biggest players in the industry turned their attentions towards legal strategies to defend and extend their patents, and on lobbyists to push for international rules and domestic laws to entrench their monopolistic powers.

Covid provided a bumper harvest for the biggest pharma firms. For example, In early 2022, Moderna announced sales on its Covid vaccine the previous year had brought in $17.7 billion, of which $13 billion was pre-tax profit. That is a profit margin of around 70 percent: the kind of margin you'd expect to find on luxury goods, not essential medicines. By comparison, the 500 largest US companies averaged a (still hefty) 15 percent in 2021.

The graph below shows 'markups' - a close relative of profit margins - which are the difference between the cost of producing goods and services, and their sale price: essentially how far firms can jack up their prices above their costs.

Experts reckon that Moderna’s vaccines could be produced for as little as $2.85 a dose, yet they have been selling for an average $19 - $24, up to $37 to some customers. The excess profit margins are taken through force, not earned through productive activity. In Spring 2021, the People’s Vaccine Alliance calculated that the Covid-19 vaccines had created nine new billionaires, supporting the assertion by Oxfam that "every billionaire is a policy failure".

Monopoly power damages everything. Through raw power, the world's richest people and corporations are using their raw power to set up what are effectively private tax systems, where each of us pays an additional 'power fee' when we buy medicines - or nearly anything else.

We can push back against this: stopping the train wreck of mergers and acquisitions that build ever more monopoly power in pharma and in many other sectors; we can re-write trade rules, intellectual property rules, block mergers and re-vitalise competition law, and more.

• Read the full Pharma case study here.
• See also our main report, Taken, not Earned: How Monopolists Drive the World's Power and Wealth Divide