On July 27, 1989 the Bristol-Myers Company and the Squibb Corporation
announced their intention of merging. The $10.5 billion deal will create
the world's second-largest pharmaceutical company. The move is of great
interest to the cancer field. B-M is already the world's largest producer
of cytotoxic anti-cancer drugs. With Squibb, it will fortify its position.
The move follows a wave of consolidations in the drug business: the
American Home Product¹s acquisition of A.H. Robins Company.
A few days later Montedison S.p.A announced that it was trying to
completely take over Erbamont, the Stamford, Conn. drug company that
produces the anti-cancer agent, Adriamycin.
The day the Bristol Myers-Squibb deal was announced, investors drove
up the price of all drug companies. The Wall Street Journal explained:
"Speculators are betting that drug companies will...succumb
to a widely held fear that smaller pharmaceutical firms won't survive
in the 1990s....only larger firms will be able to afford the increasing
costs of drug research, compete on a global scale in the U.S., Europe
and Asia, and achieve economies of scale in marketing and distribution"
(July 28, 1989).
Otherwise, they might "find themselves in the arms of foreigners,"
said one analyst. And in fact, Japanese and European giants are casting
a shadow on a field traditionally dominated by American companies. "The
new company will have the necessary size and the necessary strength
to be able to compete with the Japanese," Jere Goyan, former FDA commissioner,
told the New York Times (July 30, 1989).
Huge size will give the new company increased power in the global
market, especially the United States, Germany and Japan, according to
another pharmaceutical research specialist.
The drug industry has been a highly concentrated and profitable sector
of the economy. The cancer drug market is highly monopolistic. This
is both because patents create legal 17-year monopolies and because
the number of companies which dominate any particular disease-category
"Drug prices are largely determined by patents," wrote the
New York Times, "that give the holder a temporary monopoly and by the
demand generated by large sales forces that visit hospitals and doctors
to explain and promote the merits of the products" (ibid.). The Bristol-Myers
chief's comment on the merger was telling:
"There is nothing else in the health-care field that can
do what a good prescription drug can do--on the money side. It is a
business to be envied by all" (New York Times, July 28, 1989).
Prescription drugs are "tremendously profitable" said the Wall Street
Journal. The top 12 U.S. drug companies produced an average return on
equity of 29 percent. A number of drugs, such as Tagamet, Zatec, and
Squibb¹s own Capoten have sales of over one billion dollars each per
At the same time some companies are confronting the classic bind of
a falling rate of profit. "Profits are under pressure," said the Journal.
"Prescription drugs face increasing competition from generic drugs,
an over-supply of distributors, and a shortage of new products. Drug
research costs are rising, and the patents on many existing drugs will
expire in the 1990s, putting their manufacturers in a bind." In fact,
Bristol-Myer¹s rate of growth has recently slowed from 15 to 12 percent.
By combining with Squibb, the combined company will return to a 15 percent
growth rate, according to Neil B. Sweig, a drug industry analyst (New
York Times, July 30, 1989).
THE CANCER CONNECTION
This development is of great concern to people in the cancer field. Bristol-Myers
already controls an estimated 50 percent of the market. Their cancer division,
headed by a former National Cancer Institute official, makes Blenoxane,
Mexate and Mexate AQ, BiCNU, CeeNU, Cytoxan, Mutamycin, Platinol, Megace,
Lysodren and VePesid. It has at least five drugs under FDA-approved testing:
BMY-25801, BMY-28175, BMY 28090, L-6 Monoclonal Antibody, and Paraplatin.
Squibb makes Hydrea and Teslac and has other cancer drugs coming down
the pike. The two companies will start selling each others¹ products immediately.
The two men who struck the multi-billion dollar deal in a Central
Park South apartment are both important figures in the cancer drug field.
Richard L. Gelb, 65, chairman of Bristol-Myers and Richard M. Furlaud,
66, chairman of Squibb are both prominent members of the Memorial Sloan-Kettering
Cancer Center (MSKCC) Board of Overseers--a fact unmentioned by either
the Times or the Journal. (Gelb is also a director of the New York Times
American Express chairman James Robinson III, another Bristol-Myers
and MSKCC director, served as go-between for the merger (Wall Street
Journal, July 31, 1989).
With three top officers, the new company will have a major presence
on the Memorial Sloan-Kettering board‹and the cancer world.
This gives them access to the latest developments in biomedicine.
They oversee the use of their own products at the Center and even the
ownership of company stock. (As of December 31, 1987 MSKCC owned stock
in the two companies worth $1.8 million at today's prices.) Most importantly,
however, their position gives them an influence on the overall direction
of cancer medicine.
Their contacts are many and invaluable. Furlaud, for example, is a
personal friend of former Memorial physician Burton Lee, M.D., who now
serves as President Bush's White House physician. Lee has, in fact,
indicated a willingness to serve as a go-between in clearing the way
for new drug development (Village Voice, August 1, 1989).
This merger is being hailed on Wall Street as a "marriage made in
heaven" (Wall Street Journal, July 31, 1989). It may be less than heavenly
for the cancer patient who wants a choice in medical options. By concentrating
greater power in fewer hands, this merger bolsters the patented-drug
solution to all problems, even when prevention or non-toxic therapy
provides a better way.
The drug companies, major research centers, and the major media fall
into fewer and fewer hands. We can thus look forward to higher prices,
more propaganda in favor of the drug approach, the suppression of uncomfortable
facts and, of course, a stepped-up ³quack attack² on those who dare
At the same time, the deep-seated crisis which is driving mergermania
brings with it many opportunities. The greatest is presented by the
impending radical reform of FDA. We must continue to press for removal
of the Kefauver efficacy requirement so that not just Bristol Myers
and Squibb will benefit from a deregulated pharmaceutical marketplace.
PART TWO: THE JAPANESE CHALLENGE
The Japanese are moving into the American pharmaceutical and biotechnology
industries. Fujisawa Pharmaceutical Company offered nearly one billion
dollars for Lyphomed, an Illinois generic drug manufacturer. This is another
indication of the fantastic profits in AIDS. Lyphomed was purchased in
1981 for $2.7 million and even lost $21 million last year. But the company
received FDA's approval, last June, to market aerosolized pentamedine,
a drug used in AIDS (New York Times, August 22, 1989). Dr. Peter S. Arno
of Montefiore Medical Center, an expert on the cost of AIDS drugs, has
accused Lyphomed of "price gouging and profiteering" (The New York Times,
Sept. 15, 1989).
(from Cancer Chronicles #3)
"Most of the profit is now in the ethical drug business," said one
analyst. "Ethical" in this case means patentable.
At the end of October, Chugai Pharmaceutical Co. of Tokyo agreed to
purchase the San Diego-based Gen-Probe, Inc. for $110 million. Gen-Probe
makes diagnostic products called "genetic probes."
Are these haphazard purchases? Not likely. The Japanese government
has set a national goal of having 10 to 11 percent of its entire gross
national product come from biotechnology (Wall Street Journal, October
31, 1989). There are fears on Wall Street that "Japanese companies will
buy American know-how and use it to obtain the upper hand in biotechnology
trade and competition" (ibid.). The Japanese are simply beating the
Americans at their own game. In cancer, at least, the American drug
industry has become conservative and is afraid of technological innovation.
The Japanese are not newcomers to medical research. In 1915, they
were the first to demonstrate in the laboratory that chemicals could
cause cancer. They had a national cancer institute long before the U.S.
did. But while they certainly have a large drug industry, it doesn¹t
begin to dominate the $127 billion world drug marketplace. Hence the
We should not join in chauvinist appeals to fight the Japanese, or
anyone else. Our interest is in the conquest of cancer, by any means
necessary. Japanese vs. American competition may actually be useful
in that regard. When Dr. S.R. Burzynski could find no acceptance for
antineoplastons here, he turned to the Japanese. Fair studies are now
underway at Japan¹s Kurume University. The FDA managed to stop these
tests for three years on the grounds that antineoplastons were not approved
in the USA and therefore could not be exported for testing. Catch-22!
But all such moves must be read against the background of what the Wall
Street Journal has called "the biggest economic battle of the future...America
vs. Japan" (Nov. 14, 1988).
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