(Disclaimer: I am a senior executive for a large media company. What some might call a "suit." A man who hired and fired and had (until cancer) fiduciary responsibility for a large group of consumer magazines. Every day for more than 30 years I had to make decisions about what was "best" for the company, for our employees and our customers, not necessarily what was "good" for them. My job was to make as much money for the company as possible. It was not always easy to balance those roles and I certainly did not make all the "right" decisions. I have been cursed many times as a corporate greed master, mostly by disgruntled ex-employees and some customers when we had to raise advertising or subscription prices.)
This essay is about the "greedy" pharmas, Pfizer in particular. I am not writing to necessarily overly praise Pfizer, nor am I writing in any whining attempt to bury it. On my lavatory counter is a bottle of Sutent. For more than a year, this drug has helped keep me and thousands of other Warriors stay alive. It is terribly expensive, some $8,000 a month. Many people on the message boards often question Pfizer's morality for charging such a huge amount for a life-saving drug (think oink, oink, oink). Further, many warriors are convinced that Pfizer and other companies are holding back on better treatments (such as the still experimenal Anixitib) until they have milked the financial value of Sutent and other drugs dry. In other words, for all the good Sutent does, the people who make it are corporate pigs, manipulating life and death for their selfish financial interests.
I don't think so. There is much more to any business than meets the consumer's eye, so I will try to make an example of a big business that most have seen in action.
Think about a major airline, say Delta, which just emerged from bankruptcy. There is much more to the cost of that business than the fuel to get from here to there. Think of the overhead from check-in until the time you take your skinny little seat and watch the service trucks and people scurry around your plane. Many a time I have sat next to another passenger and listened to them complain about the cost of a ticket. One man had multiplied his fare (which was probably not the highest on that plane) by the number of passengers and came up with a gross of some $70,000 for that one short flight. "Rip off," he grumbled, "just a rip off."
Consider for a moment the deeper meaning of that rip off. A Boeing 757 cost some $25 million, just the interest is a big bite, not to mention maintenance. The two pilots cost about $200,000 per year (and there are some 5,000 on Delta's payroll). And then there is the squad of flight attendants. There is the the ground crew that scurries around the plane like piggies looking for a teat and all that equipment they use (that little truck that pushes the airplane away from the gate, about $60,000 each). There is the baggage handling facility, the ticket sales operation and personnel, landing fees, the rent on the whole shebang, multiplied by every destination to which Delta flies. And no where did I mention the fluctuating price of fuel. There are the airplanes not flying (in repair or removed from the system, but the interest doesn't stop), the extensive maintenance system itself, the corporate staff that tries, not necessarily well, to keep the whole system humming. Oh, and those flights that have too few passengers to make the basic overhead for that flight. As I understand it, a trunk airline needs as least a 60% load factor to make a buck. And have you ever considered the costs for complimentary blankets and pillows. Millions, baby, millions. Hence, airlines for all their rip offs have one of the lowest margins (percent profit after expense) of almost any other business. How does one know this? Delta, and other trunk carriers, did not seek bankruptcy because they wanted to. That is a tough place to count your money.
Look at an airline that way and your ticket may no longer seem quite the rip off, especially since you are going to be somewhere in a few hours that 50 years ago would have taken a few days. Oh, yeah, that has a little value too.
As consumers, we don't see the overhead of a pharma as easily as we can that of an airline. What we see is the pill and the bill. But the investment that went into that pill is way out of the range of any average well-meaning billionaire, especially if he or she had to start from scratch, not to mention the years and failures it takes in the drug business to come up with one FDA-approved winner (spend, spend, spend). Take the airline example. Any jet sitting at a gate today is, over time, a multi-million dollar bet, a bet that enough people will fly on it to help the company make money and often the bet doesn't pay off. But the plane, normally, still flies, money loser or not.
It is pretty much the same for a new pharmaceutical product, often a far more expensive bet. If you can make it work, the world will beat a path to your door money in hand. If you can't, well, chalk it up to a very expensive education, sell more of something else and start all over again. For both airlines or pharmas, success is a big real dollar bet with only a so-so chances of winning. And when it comes to stakes like these only the really big boys can stand at the table--and must have a rock hard stomach while tossing those dice. In the pharma business, the old saying "hit me again," has a multi, multi million dollar meaning.
Pfizer has an army of employees worldwide from sales reps to engineers to researchers to managers. And about as many research projects. And they do make good money ($19 billion last year before taxes). Oh man, that does sound like such greed. But just a cursory view of Pfizer's primary products in the United States alone for all manner of diseases is amazing..and long (www.pfizer.com). And they make a lot of money because people need those products. And, like it or not, that profit is normally much more effective for research than that raised by all the volunteer cancer-thons held every year.
Only one of those products is our little darling, Sutent. And we think the shareholders must be rolling in the dough, the dough of poor sick people. Well, not really, since most shareholders are folks just like you and me who own a piece of Pfizer through our retirement plans, especially 401Ks. Therefore, a happy retirement requires that Pfizer and other public corporations make as much money as they can. We don't like it any better than their Chairman when our investment portfolio loses money. Whew, how contradictory all this can be.
One complainant asked why Pfizer would come out with specific medicines for kidney cancer when there are so many breast and other cancer warriors in greater need? The answer is simple: Kidney is the cancer drugs like Sutent can fight today. If they had one for breast cancer--or so my greedy little corporate mind believes--they would be all over it and just forget us poor old kidney cancer warriors. Man, the money would roll in like water over a fall: party, party, party. Then again, Sutent may be the pioneer for other cancer drugs and profits from it helps fund greater research. Oh, and it is saving thousands of lives, over time hundreds of thousands. I have a feeling that is a motivation as well. Every employee and executive at Pfizer--and every other pharma--know people who have cancer or may have it themselves. Might be hard to be a corporate "pig" under those circumstances.
But, you argue, for all my arguments based on business and other "non-humane" things, you are still convinced these people make too much money off Sutent, charge ridiculous prices, are milking the system and their own financial statement indicates they don't need it. Where is the heart? The compassion? The desire to help their fellow man?
Me thinks you miss the point. When it comes to finding the cures for such complicated illnesses just being in the business is humane. Most of the pharmas offer financial assistance to folks or at least temporary free product. But their primary job is to march forward in research and new products. Period.
Sure there are greedy people working for Pfizer. As there are for most any corporation, as there are attending your church and teaching your children. You may be greedy yourself, perhaps one reason you may think Phizer is. And there is no doubt there is waste. However, regardless of what they charge or what your heart thinks of them, our world (mine and yours) is infinitely better off with them, suspicions of greed or no.
Bottom line: The Chairman of Pfizer may have a wonderful over-sized home (0r two or three) and a big old yacht, maybe a private airplane as well, not to mention a steak every night. And a staff of valets and a yearly bonus that is 20 times what most of us will make in a lifetime.
You and I have our lives and realistic hopes for more tomorrows we did not have last year. A better than fair exchange.
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