McKinsey taught Big Pharma how to price-gouge
Leaked slides document the lies, sleaze and profiteering.
Americans pay 300% more for their medicine than people in other wealthy countries, thanks to the dirty tricks, lies and profiteering of the pharma industry. As part of its investigation into this, the House Oversight Committee is looking into the role that archvillain “consultants” McKinsey and Co. play in pharma’s lethal price-gouging.
It makes sense that Congress would want to investigate McKinsey; they are at the heart of so much sleaze.
They built Trump’s gulags for ICE, then lied about it, then used dirty SEO to bury Propublica’s coverage of their role:
https://www.propublica.org/article/mckinsey-called-our-story-about-its-ice-contract-false-its-not
They profiteered off fake reforms at Riker’s Island, exacerbating the jail’s violence crisis to the point of lethality:
The organization is incapable of remorse or even self-reflection. Its own internal mythology compares its consultants to “the Marine Corps, the Roman Catholic Church, and the Jesuits.”
https://www.propublica.org/article/how-mckinsey-makes-its-own-rules
This mixture of unrepentant self-mythologizing and rapacious greed makes the company especially dangerous in health contexts. McKinsey played a starring role in nearly every American covid fuck-up, and profited handsomely from their fatal bungling:
https://pluralistic.net/2020/07/15/3-frauds-in-a-trenchcoat/#failing-up
But when it comes to pharma, things get especially bad. McKinsey once advised the opiod-pushers of Purdue Pharma that they could goose their sales by paying bonuses to pharma distributors based on the number of fatal overdoses in their sales territories:
https://www.nytimes.com/2021/02/03/business/mckinsey-opioids-settlement.html
So it makes sense that if Congress wants to know how the inability to afford medicine is turning into a leading cause of American deaths, they would start by investigating McKinsey. But even so, what they found was shocking.
https://s3.documentcloud.org/documents/21112003/abbvie.pdf
The advice that McKinsey gave to pharma giant Abbvie isn’t just a playbook for gaming the system to impoverish the sick and enrich the shareholders, it’s also a manual for a disinformation campaign meant to distort the public discourse over pharma prices.
On Techdirt, Mike Masnick breaks down the McKinsey slide-decks that Congress extracted froom Abvie:
The sleaze begins about a decade ago, when analysts started warning that pharma’s profits were in danger because the companies were no longer making any real breakthroughs. That’s when McKinsey developed a plan to abuse the patent system to extend the patents on old drugs and keep generics out of the market, and then raise prices on these old drugs to extract higher profits.
A great case-study here is Humira, used to treat autoimmune diseases (arthritis, Crohn’s, etc). With McKinsey’s help, Abbot (Abbvie’s predecessor) took Humira through a “formulation change” — a meaningless change in the molecular structure — that allowed the company to re-patent the drug as a new invention. The company then produced a stockpile of new “reformulations” that it could execute in series, extending the patent forever. As part of this program, they offered free Iphones to research staff who came up with new ideas for formulation changes, without regard to whether these changes conferred any advantage upon patients.
The problem with this plan (from Abbvie’s perspective, anyway) is that a reformulation doesn’t stop the old drug’s patent from expiring, opening the market for cheap generics. To head this threat off, McKinsey developed a disinformation campaign to discourage doctors from prescribing generics and to convince patients to refuse such prescriptions. The McKinsey campaign included outright lies — false statements claiming that the old formulations were unsafe. Alongside those lies, McKinsey developed messaging to convince patients and docs that the old drugs were “a step backwards.”
As a complement to this messaging, McKinsey helped Abbvie spread lies about its need for the extreme profits it generated from new formulations. These are part of an industry-wide practice of inflating R&D costs — for example, pharma companies routinely put the average price of new drug development at $1.2 billion, while the true figure is more like $35m.
https://slate.com/business/2011/03/drug-company-r-d-nowhere-near-1-billion.html
The imaginary billions supposedly spent on R&D are key to price-gouging, and again, Humira is a great example. Humira costs $84k/year, and even with insurance, a patient’s out-of-pocket is likely $60k/year. This represents almost pure profit to Abvie, a fact they cover up by following the disinfo playbook that McKinsey developed for them.
It’s a great scam. According to the Institute for Clinical and Economic Review, Abvie’s dirty tricks transfer an extra $1.4b/year from Americans’ bank accounts to Abvie’s shareholders:
As Tahir Amin writes in a must-read thread, this is the true innovative genius of Big Pharma and the enablers who serve it, like McKinsey. They’re not figuring out how to make more effective medicine; they’re figuring out how to tell more effective lies:
https://twitter.com/realtahiramin/status/1457065616427335682
Image:
Foundin_a_attic (modified)
https://www.flickr.com/photos/foundin_a_attic/32844169425/
https://www.flickr.com/photos/foundin_a_attic/31992834414/
Cory Doctorow (craphound.com) is a science fiction author, activist, and blogger. He has a podcast, a newsletter, a Twitter feed, a Mastodon feed, and a Tumblr feed. He was born in Canada, became a British citizen and now lives in Burbank, California. His latest nonfiction book is How to Destroy Surveillance Capitalism. His latest novel for adults is Attack Surface. His latest short story collection is Radicalized. His latest picture book is Poesy the Monster Slayer. His latest YA novel is Pirate Cinema. His latest graphic novel is In Real Life. His forthcoming books include The Shakedown (with Rebecca Giblin), a book about artistic labor market and excessive buyer power; Red Team Blues, a noir thriller about cryptocurrency, corruption and money-laundering (Tor, 2023); and The Lost Cause, a utopian post-GND novel about truth and reconciliation with white nationalist militias (Tor, 2023).
