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Drug conglomerates: surging earnings

Chemicals gave birth to the pharmaceutical industry, and these, in turn, spawned worldwide financial conglomerates, all driven by relentless pursuit of profits, particularly evident in Switzerland. As noted by our collaborating paper 'WOZ'.

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Pharmaceutical companies originated from chemical research, then expanded into global financial...
Pharmaceutical companies originated from chemical research, then expanded into global financial powerhouses, with the primary objective being profit maximization. This business strategy is particularly evident in Switzerland, as reported by our partner newspaper 'WOZ'.

Drug conglomerates: surging earnings

Taking a Close Look at Big Pharma's Profit Motives

Ever wondered how much the pharmaceutical industry profits from a human life? When healthcare costs, therapies, and medications skyrocket, it's time to rethink the question – it should be: how much can the pharmaceutical industry grab from a human life?

A few weeks back, the CEO of Novartis (a multibillion-dollar pharma titan based in Basel – let's call it Big Pharm Inc.) and Paul Hudson, CEO of Sanofi, France's pharmaceutical powerhouse, penned a letter to the Financial Times. They voiced concerns about Europe's artificial restriction of the biopharmaceutical market through excessively low prices. If immediate action isn't taken, they warned, European pharmaceutical companies would shift bases to the US – and that would mean crippling prices, three times higher than in Europe on average.

The left-leaning media landscape in Europe isn't vast, but it exists, championing progressive perspectives on national and global happenings. The WOZ, an independent, Swiss weekly newspaper based in Zurich, is one of these outposts.

Big Pharm Inc. isn't hurting for cash. Last year, the Basel-based conglomerate raked in a profit of around twelve billion US dollars. With profit margins few companies in the legal economy can boast, Big Pharm Inc. is currently running a share buyback program of over 15 billion dollars.

Multinationals are playing a high-stakes game. Taking advantage of impending tariffs in the US, their primary sales market, they can shift profits where it's most favorable and move employees around the globe. This puts political pressure on governments, with Big Pharm Inc.'s maneuvers in Basel and the US being prime examples.

The problem with corporate innovation, as seen in Big Pharm Inc.'s latest blockbuster Leqvio, a cholesterol-lowering drug, is that it often involves little actual innovation. Developed by The Medicines Company, Big Pharm Inc. shelled out around ten billion dollars to own this asset in 2020. To recoup the investment, it plans to charge high prices and aggressively market the drug to US hospitals, which will sift through electronic patient data for suitable customers on behalf of Big Pharm Inc.

There's a disturbing lack of political and societal debate surrounding the business model and power of the pharmaceutical industry in Switzerland. Given its economic importance, this needs to change – and fast.

This text originally appeared in issue No. 20 (May 15) of our Swiss partner medium "Wochenzeitung." The contribution was edited and shortened.

The Profit Machines: Big Pharm Inc.

Big Pharm Inc.'s profit margins are significantly influenced by factors such as research and development investments, market competition, and regulatory environments. Here's a breakdown of Big Pharm Inc.'s profit margins compared to medication prices in Europe and the US:

  • Big Pharm Inc.'s Profit Margins: With a gross profit margin of about 75.68%[3], Big Pharm Inc. has a strong financial position. Its core operating income margin reached 38.7% in 2024[2]. The ability to maintain profitability despite heavy research and development investments, which exceed $9 billion annually[2], is indicative of Big Pharm Inc.'s financial clout.
  • Medication Prices in Europe and the US: Prices for medications in Europe and the US vary due to differing regulatory frameworks and market dynamics:
  • Europe: Lower medication prices in Europe are due to stricter price controls and regulatory policies. Despite these restrictions, Big Pharm Inc. maintains strong profit margins thanks to a diversified product portfolio and innovation-driven strategies.
  • US: Higher prices in the US are possible due to less stringent regulatory controls on drug pricing, allowing companies like Big Pharm Inc. to maintain higher profit margins compared to Europe.
  • The Impact of Generic Competition: The arrival of generic versions of key products like Entresto and Promacta presents a significant threat to Big Pharm Inc.'s revenue and profit margins[3]. In response, the company focuses on operational efficiency and strategic acquisitions to shield itself from financial hardship and maintain growth.
  1. The profit margins of Big Pharm Inc., as seen in their multibillion-dollar earnings and ongoing share buyback program, indicate a strong interest in areas beyond just science and health-and-wellness, notably extending to finance and business.
  2. As expenses for healthcare, therapies, and medications continue to escalate, it's worth questioning not only how much the pharmaceutical industry profits from a human life but also whether these profits find their way into other sectors such as finance and business, potentially affecting the overall wellbeing and prosperity of society.

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