But while it may appear to be the ultimate ethical investment choice – the companies involved are those charged with healing the world’s ills after all – the murky world of pharmaceuticals may mean the reality of some investments in the sector could be far removed from the utopian vision.
Last week some drug companies hit the headlines amid allegations they had been colluding with pharmacists to exploit a legal loophole which enables big pharmaceutical firms to sell on medicines used by the NHS to businesses acting outside the Government’s price-regulation scheme. The purchasing firm is then free to rebrand the product and increase the price they charge the NHS.
Around 20,000 drugs are estimated to have been affected, including a schizophrenia treatment, testosterone patches used by both men and women with hormone imbalances, and cod liver oil capsules.
At the centre of the scandal is Epanutin, a drug used by around 100,000 patients with epilepsy. Original patent holder, Pfiezer, sold the drug on to Flynn Pharmaceuticals which renamed it Phenytoin and increased the price of the drug from 67p per 50mg to around £16 per 50mg. This is an increase of 2385%, which will cost the tax payer £50m per year.
A Flynn Pharmaceuticals spokesperson said the cost of the drug was competitive, and necessary to keep it on the market, while Pfizer were unable to comment on the price hike as they no longer own the marketing rights.
Flipped ownership is not the only dirty tactic drugs companies are using to generate profits. They have been found guilty of manipulating and even hiding results of clinical trials for their own gains.
Missing information
In his book Bad Pharma, Ben Goldacre wrote: “In 2010, researchers from Harvard and Toronto found all the trials looking at five major classes of drug – antidepressants, ulcer drugs and so on – then measured two key features: were they positive, and were they funded by industry? They found more than 500 trials in total: 85% of the industry-funded studies were positive, but only 50% of the government-funded trials were.”
Further research has proved around half of all the trials that are conducted and completed never get published, and those with positive results are about twice as likely to be published as those with negative ones.
Goldacre said: “When the results of clinical trials are withheld, the well is poisoned for everyone. No doctor can work around missing information.”
Reconciliation?
Bad business practice is inexcusable in any industry, but somehow when it’s happening in an industry which deals with matters of life or death it seems to be an even more difficult pill to swallow. Can the ethically-aware investor work around the issue?
Mike Appleby, a sustainable and responsible investment analyst at Alliance Trust said: “We invest in a number of pharmaceutical companies including GlaxoSmithKline and Roche. We choose our investments based on two factors, the product or service they provide, and the way they do business.
“Of course we are disappointed when any company we hold is embroiled in a scandal and our holdings are under constant review.
“GSK was hit with a $3bn fine in the US for drug miss-selling last year. But we concluded it was still eligible as a holding because of its robust and industry-leading responses to the problems.
“It is currently under investigation for bribary and corruption in China, and we will be meeting with the company to specifically discuss the allegations.”
He said issues like this shine the spotlight on the drugs companies, and can be a good catalyst for challenging behaviour: “We continue to invest in GSK, and indeed other pharmaceutical companies, because of the positive outcome from their development of drugs which can ultimately reduce the burden on the public purse.”
In the case of GSK, this is in its vaccine business.
“Vaccines for pneumococcal and rotavirus are now being offered to developing countries at a 90% discount to developed market pricing. The World Health Organisation identifies pneumococcal as the number one vaccine-preventable cause of death in children under five worldwide and rotavirus is the most common cause of severe diarrhoea in young children. This development is a significant step towards reducing child morbidity in developing countries.”
