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Pharma giants making big profits in Covid-19 pandemic

America remained transfixed by anti-police protests, the chairman and CEO of the pharmaceutical company Gilead issued a much-anticipated announcement. In a breezy open letter, Daniel O’Day explained how much his company planned on charging for a course of remdesivir, one of many possible treatments for Covid-19. “In the weeks since we learned of remdesivir’s potential against Covid-19, one topic has attracted more speculation than any other: what price we might set for the medicine,” O’Day wrote, before plunging into a masterpiece of corporate doublespeak.

The CEO noted a study by the National Institute of Allergy and Infectious Diseases, a division of the National Institutes of Health, showing that Covid-19 patients taking remdesivir recovered after 11 days, compared with 15 days for placebo takers. In the U.S., he wrote, “earlier hospital discharge would result in hospital savings of approximately $12,000 per patient.”

Researchers writing in the Journal of the American Medical Association (JAMA) investigated the financial balances of pharma companies dealing in the business of developing, manufacturing, marketing and selling drugs.

Their calculations found that in the years between 2000 and 2018, 35 big drug companies received a combined revenue of $11.5 trillion, with a gross profit of $8.6 trillion.

The median net income margin reported by 35 pharma companies between 2000 and 2018 was almost twice as high as it was for the 357 non-pharma companies in the S&P 500 investigated by the study’s authors—13.7 percent versus 7.7 percent. Though they add the difference was less pronounced when company size, year, or research and development expenses were taken into account.

The results show a shift in recent years, with the gap between the two types of company appearing to narrow in the five years between 2014 and 2018. While gross profit and earnings before tax remained higher for pharma companies—the paper reports margins of 35.8 percent and 9 percent respectively—the net income margin shrunk to 2.3 percent.

Americans reacted in horror five years ago when a self-satisfied shark of an executive named Martin Shkreli, a.k.a. the “Pharma Bro,” helped his company, Turing Pharmaceuticals, raise the price of lifesaving toxoplasmosis drug Daraprim from $13.50 to $750 per pill. Shkreli, who smirked throughout congressional testimony and tweeted that lawmakers were “imbeciles,” was held up as a uniquely smug exemplar of corporate evil. On some level, though, he was right to roll his eyes at all the public outrage. Although he was convicted on unrelated corruption charges, little about his specific attitudes toward drug pricing was unusual. Really, the whole industry is one big Shkreli, and Covid-19 — a highly contagious virus with unique properties that may require generations of vaccinations and booster shots — looms now as the ultimate cash cow for lesser-known Pharma Bros.

Sandesh Ilhe
Sandesh Ilhe
With an Engineers degree in Advanced Database Management and Information Security, Sandesh brings the deep understanding of the digital world to the table. His articles reflect the challenges and the complexities that come along with every disruption in the industry. He carries over six years of experience on working with websites and ensuring that the right article reaches the right reader.