Home > Uncategorized > Neoliberal economics, Big Pharma and pandemics

Neoliberal economics, Big Pharma and pandemics

from Imad Moosa  

The spread of the virus has been aided by the neoliberal drive to privatise everything under the sun, including healthcare. Forty years of the privatisation of public health institutions (allegedly in the name of efficiency and for the benefit of consumers) has resulted in a disastrous situation as private healthcare providers have no commercial interest in preparing for or preventing emergencies. The spread has been aided by the lack of staff and material capacities in underfunded public hospitals, and the complete inability of the private, profit-motivated healthcare industry to provide even the most basic medical equipment and treatment when they are needed. The followers of neoliberal thinking disagree with this proposition and suggest that only the private sector can deal with the pandemic. 

Free marketeers argue that the development of a vaccine would not have been possible without the free market principles. In his defence of “Big Pharma”, Ralph (2020) praises the “global pharmaceuticals sector”, which “has been working for months with academia and governments to develop vaccines at unprecedented speed and financial risk, but also against a backdrop of cynicism from a public weary of controversies from drug price ‘gouging’ to bribery and marketing scandals”. In an editorial, City A.M. (2020) suggests that only those who know the principles of free market economics, or those who are observant, realise that “over the past hundreds of years it has invariably been the private sector, driven by need, who have innovated the world into progress”.

Those who argue along these lines seem to overlook the fact that vaccines would not have been developed without government action and public sector support. Typically, pharmaceutical companies take the risk of innovation in return for a profitable period under patent protection. If research fails (in the sense that a useful product does not materialise) the underlying company will likely fail to recoup the cost of research and development. This means that the risk of innovation is borne by pharmaceutical companies. However, this time it is different as the risk posed by the pandemic forced governments to accept innovation risk by pre-ordering vaccines without knowing whether or not they would be effective. This acceptance provided the incentive for pharmaceutical companies to develop multiple approaches simultaneously in order to find those that work, while letting the government take the risk of those that do not work. Pharmaceutical companies have also been allowed to progress the vaccines through the necessary regulatory clearance stages more quickly, continuing with testing while seeking regulatory clearance in parallel, rather than sequentially. Those same companies have been assured that they would not face lawsuits if the vaccines produced side-effects that could kill or harm people. And they have been receiving billions of dollars of taxpayers’ money in the form of research grants and subsidies.

This can hardly be a triumph for the free market as noted by Parker (2020) who argues that it points to the importance of government policy in setting the right framework for innovation incentives. The refusal of Big Pharma (with the approval of their governments) to waive patents, even after making billions in profit and the elevation of top executives to the billionaires club, has allowed the mutation of the virus and the wild fire of the Omicron that started in November 2021. Neoliberal ideas and policies provide a reverse-Robin-Hood redistribution of wealth from the poor and middle class to the rich and super rich. Being a neoliberal virus, it has done the same, providing cash cows for “Big Pharma”.   
read more: http://www.paecon.net/PAEReview/issue101/Moosa101.pdf 

  1. Romar Correa
    December 9, 2022 at 9:11 am

    Thank you for your punchy piece, Imad Moosa. I have two responses.
    Firstly, the headline in this morning’s The Economic Times in India reads “Blackstone now sole bidder for Care Hospitals” (Even typing the sentence makes my skin crawl!). Edging out the solitary competitor is a well-known strategy, reportedly, for beating the sales price down. The transaction heralds the entry of Blackstone into the healthcare business in South Asia.
    Secondly, the point you make about the development of vaccines has been generalised in the splendid scholarship of Mariana Mazzucato who lays bare the undergirding of entrepreneurship, particularly in the US, in the prior institutional and physical and financial infrastructure laid out by the US government. In addition, the transfer of risks hitherto borne by the pharmaceutical industry is redolent of de risking, the taking upon itself the riskiness of green investments by the public sector so as to induce global finance to enter. As you note, the universal conviction is that in terms of financing to scale, and R&D, there is no alternative to the private sector. The claim is easily contested because it is sovereigns that do not face a budget constraint and the R&D record of private corporations in the US and elsewhere is shameful. Most important, private capital is marked to market and concerned with the bottom line no less in the short run than in the long run. At the slightest sign of the euphoria generated by investments in hydrogen evaporating, for example, finance will fly out the window.

  2. Patrick Newman
    December 9, 2022 at 10:29 am

    Open-ended patents mean there is no real free market. Big Pharma also relies heavily on the research and analysis of publicly funded universities to facilitate product development.

  3. December 10, 2022 at 5:31 pm

    Reblogged this on Calculus of Decay .

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