JAMES SUROWIECKI’s excellent piece highlights the threat
posed to the American economy by the corporate focus on financialization rather
on actual innovation:
“Valeant used to be
a small drugmaker, struggling to stay afloat by doing what pharmaceutical
companies typically do: invest heavily in R. & D. in order to discover new
drugs. But Pearson, who took over in 2008, scrapped that approach. He argued
that returns on R. & D. were too low and too uncertain; it made more sense
to buy companies that already had products on the market, then slash costs and
raise prices. So Valeant became a serial acquirer, doing more than a hundred
transactions between 2008 and 2015. It invested almost nothing in its core
business; R. & D. spending fell to just three per cent of sales. It was
ruthless about bringing down costs, sometimes laying off more than half the
workforce of a company it acquired. And though Martin Shkreli may be the public
face of drug-price gouging, Valeant was the real pioneer. A 2015 analysis
looked at drugs whose price had risen between three hundred per cent and twelve
hundred per cent in the previous two years; of the nineteen whose prices had
risen fastest, half belonged to Valeant.”