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The History of Big Pharmaceutical Companies and Government Legislation

Updated: Jul 19, 2021



In the last few decades, the average consumer in America has seen a drastic increase in the prices of their day to day medications. Large amounts of people across the country are unable to afford basic prescription drugs, let alone buy life saving medication that is desperately needed. Once affordable drugs are now being sold at prices higher than ever seen before, and there are no checks and balances on the pharmaceutical industry that are powerful enough to stop this unaffordable price raise.


Why is this happening? In order to understand the complexity of the situation, it is important to focus on the relationship between the pharmaceutical industry and the U.S. government.


ORIGIN


Big Pharma refers to the combination of the world’s largest and most powerful pharmaceutical companies. This group is made up of companies like Merck, Eli Lilly, and Roche; all companies that have predominantly ruled the industry over the last century. These companies are responsible for the production and sales of prescription medication to pharmacies, and have almost entire control over how they operate their production.

The origin of this powerful group dates all the way back to World War II. At the time, there was a high demand for antibiotics and medications that could be effectively produced, like insulin and penicillin. This demand led to an unforeseen collaboration between small drug companies and the federal government.

This was the first time that state-wide healthcare programs were established throughout the country, and it created a more stable way for people to access prescription medication. It was a great win for the pharmaceutical industry because it allowed for a government approved, easier way of selling drugs. Since then, the FDA has been responsible for approving medications and regulating the pharmaceutical industry. However, as time went on, the pharmaceutical companies were able to gain power through their sales and means of production that would create influence over even the government meant to keep them in check.


HOW BIG PHARMA GAINED POWER AND RECOGNITION

There are multiple reasons as to how the pharmaceutical industry is able to hold this much influence over the government. The relationship between these two are rooted in ways that create revenue for both groups, and by doing this it is creating an imbalance of power. Big Pharma is able to hold leverage over the government through patents, lobbying, and advertisements.


PATENTS AND LOBBYING


Patenting gives companies a set right over a product sold for a certain amount of time, and during this time no other companies are allowed to create or distribute that product. Pharmacies use patenting to create a monopoly in the market where they are able to control the prices for their medications because they are the sole provider for it.


Patents are supposed to have a set time period, but there are loopholes to the system and pharmaceutical companies are able to extend their patents through lobbying the government. Lobbying is fundamental for the industry, so much so that in the 20 years, over 3 billion dollars have been spent on ensuring that legislation is drafted in favor of Big Pharma. This sphere of influence is massive, and ensures companies that they will have the legal rights over patenting these medicines to increase their prices.


ADVERTISEMENTS

Advertisement is the biggest reason that pharmaceutical companies are able to successfully sell to pharmacies. Over time the regulations for what should be advertised have become catered towards the consumer to encourage sales, rather than providing the most effective option of medication.

This started with the Federal Food, Drug, and Cosmetic Act passed in 1938, where the FDA allowed pharmacies to market their products to the public. The regulations that came with this loosened over time, and the main reason for this is because of how much money the industry gives to the FDA.


New medications must be approved by the FDA before they can be sold, and pharmacies must pay for their products to be inspected and approved. This began in 1992 with the Prescription Drug User Fee Act (PDUFA), and its intent was to have the money gained from this actually be given back to drug manufacturers to encourage the production of new sales. However, this only created a power source for the pharmaceutical industries. Present day, pharmacies are responsible for a large sum of the FDA’s annual pay. Through lobbying, patents, and being a primary source of money for the government, the industry is able to control their influence over the government just as much as they do over the public.


After gaining control over the creation and sales of these products, Big Pharma can now focus on how they will advertise these products to ensure sales. Advertisements are one of the biggest investments that the industry makes. Around 6.4 billion dollars were invested in advertisements alone in 2016, but this large investment pays off. The high budgets allow for pharmacies to create ads on television and the internet that focus on the entertainment aspect rather than the importance of the drug. These ads target specific brand name drugs, which are the ones that are being patented at the time.


The relationship between patenting and advertisement is what allows for the industry to be so successful. Instead of having a consumer have a wide array of options to choose from, the industry chooses to advertise exactly what products they want a person to buy. This may not even be the drug that will be the most effective, but instead be the one that creates the most revenue. The cycle between the two is continuous, and with the pharmaceutical companies contributing so much money to the government, there is no clear cut solution to this abuse of power.


By Pranav Pinapala



Bibliography

Authors Ariela Weinberger . “Capturing the Government: Big Pharma's Take Over of Policymaking.” Roosevelt Institute, 17 Sept. 2020, rooseveltinstitute.org/2019/05/22/capturing-the-government-big-pharmas-take-over-of-policymaking/.

commentupi.com/6979717, (0) Leave a. “Global Web of Patent Laws Protect Big Pharma, Keep Drug Prices High.” UPI, UPI, 28 Jan. 2020, www.upi.com/Top_News/Voices/2020/01/28/Global-web-of-patent-laws-protect-Big-Pharma-keep-drug-prices-high/9711580219498/.

Leslie E. Sekerka & Lauren Benishek. “Thick as Thieves? Big Pharma Wields Its Power with the Help of Government Regulation: Emory University School of Law: Atlanta, GA.” Emory University School of Law, law.emory.edu/ecgar/content/volume-5/issue-2/essays/thieves-pharma-power-help-government-regulation.html.

*, Name. “Big Pharma 's Hold Over The US Government.” Focus for Health, 23 Sept. 2019, www.focusforhealth.org/big-pharma-silent-hold-us-government/.


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