Saturday 10 May 2014

Pfizer's Bid for AstraZeneca

A huge US pharmaceuticals company, Pfizer, wants to buy a huge UK pharmaceuticals company, AstraZeneca, for £63bn, possibly more. Is there a side to take in the battle? Or is it more revealing to consider what each company represents?
Consider these points:
- Both companies operate in markets heavily protected by patents that keep the prices of proprietary drugs high.
- Both companies have lucrative deals with public sector purchasers of their drugs, financed by taxation.
- Both market many branded drugs whose effect is little different from generic and much cheaper products (eg Pfizer's Anadin is basically a combination of aspirin and caffeine, but at a price that roughly equals a regular aspirin plus a cup of coffee at Starbucks).
- Both operate in a sector that is infamous for producing research on the efficacy of medicines that is biased by deliberately distorted evidence (see the valuable work by Dr Ben Goldacre, in Bad Pharma and elsewhere).
In the UK, opponents of the Pfizer takeover argue that it buys up other companies rather than investing in new pharmaceuticals research itself, and that it cuts back research operations. In Sweden, home of the Astra part of AstraZeneca, there are opponents of the Pfizer bid too. But they need to take account of AstraZeneca's actions before they press their case.
Zeneca is an offshoot of the former British monopolist, Imperial Chemical Industries, and its takeover of Astra in 1999 also led to a shift of corporate power and decision making to the UK from Sweden. Like Pfizer, AstraZeneca has also been involved in many takeovers of other companies to boost its ownership of pharmaceutical products. It has not been immune from the high cost of research, which, for example, led it to close research facilities, most recently in Loughborough in December 2011 with the loss of 1,200 jobs.
For every jobs-related worry on the European side about the deal, there is an equal concern in the US. However, while understandable, to get a more grounded view as to what is happening one needs to see the bigger picture of the economics of imperialism today.
Take tax. Pfizer admits that a key factor in its bid for AstraZeneca is the tax regime in the UK that it can use to boost its corporate profitability. On the bid being accepted, the formal corporate location will probably be changed to the UK, something that has led British Prime Minster Cameron to be favourable, despite other UK opposition. It is probably only this tax deal that stops Pfizer, like many other corporations, from otherwise using the alternative infamous 'Double Irish' or 'Dutch sandwich' tax tricks to achieve the same result by locating elsewhere.
Corporations, and their owners, always want to avoid tax. But the more significant point is that scientific ingenuity is used under capitalism as a means for private appropriation not social gain, something exacerbated by the power of monopolistic corporations. This would be true even if the corporate executives were not, on the whole, a bunch of useless bastards.

Tony Norfield, 10 May 2014