2. A History of Pharmaceuticals: A Case for Treatment

“‘If there was a company that was selling an Aston Martin at the price of a bicycle, and we buy that company and we ask to charge Toyota prices, I don’t think that that should be a crime.’

Martin Shkreli, CEO of Turing Pharmaceuticals, defending a decision to raise the price of a

62-year-old drug to fight parasitic infection from $13.50 a tablet to $750, 2017

Valeant’s approach found imitators, however. Martin Shkreli adopted an even more extreme strategy of price gouging at Turing Pharmaceuticals, increasing the cost of Daraprim, on the market since 1953, from $13.50 to $750. In 2007 generic drugs producer Mylan acquired the rights of the long-established EpiPen® – used to provide urgent relief to people with severe allergies – and over the next ten years gradually raised the price sixfold. The company paid almost a billion dollars to settle – ‘without admission of liability’ – claims that it had violated antitrust laws and defrauded Medicaid.

Leslie Hannah, an eminent business historian, has shown how the ‘rationalisation’ of industry, which was favoured by the British Government (represented by the Bank of England), set the stage for the new ‘corporate economy’ which would characterise Britain for decades. The 1920s saw the creation by merger of ICI (chemicals), the Distillers Company (Scotch whisky) and Unilever (soap and margarine). A similar wave of mergers in Germany established IG Farben and Vereinigte Stahlwerke as the dominant chemical and steel producers respectively. (Both these companies were dissolved by the victorious Allies in 1945.)

In 2020 the Fortune 500 looks very different. Fortune now includes service businesses, so the two top companies by sales are retailers – as would also have been true in 1955. But the current leaders are retailers that did not exist in 1955: Walmart and Amazon. No fewer than four companies are names that probably mean little to non-US readers – they are intermediaries in the fabulously costly US healthcare system. United Health is an insurer, McKesson and Cencora (previously known as AmerisourceBergen) are distributors of pharmaceutical products and CVS Health is both insurer and retailer.

Here’s a story about past strategic decision: Nokia once made rubber out of dandelions. They were actually very good at it; a Finnish Air Force plane which crashed into a lake in Karelia during the war in 1942 was recovered in 1998 with its tyres still inflated. Because they made rubber, they made insulation for electric cables. Because of that, they got into the telecoms industry;* for a while they were the world’s biggest manufacturer of mobile phones and today they make complicated switching equipment.

*I confess — this is an oversimplification. Nokia did dozens of other things and it’s very hard to trace the timing and logic of its entry into various different industries. Basically the only principle I could extract from its corporate history is that if Finns need something, Nokia would usually have a go at making it.