Heather Bresch, the CEO of Mylan, should be ashamed of herself. She raised the cost of a life-saving device by a factor of six and then gave herself a massive pay raise. This is greed, pure and simple. It’s prompted by the same lust for money that underlies Trump’s routine bragging about being rich and Clinton’s sale of influence in accepting hundreds of thousands of dollars in speaking fees from banks.
Heather is quoted in the NY Times as saying, “I am a for-profit business.” Indeed, she and her company will end up with more dollars as a result of her action, but she sold her soul and her company’s good name in the process. For the rest of her life, she will be viewed as a greedy person. In my calculus and that of everyday Americans, she lost far more than she made. That’s her personal profit-loss statement.
Self-serving, profit-obsessed behavior by top CEOs is far too common in our country. Such business “leaders” think nothing of extorting the public with monopolistic pricing. They also think nothing of replacing American workers with machines and outsourcing jobs abroad. I wonder how they sleep on their yachts at night.
As an economist, I know the fantastic material benefits that the capitalistic system can produce, for the poor as well as for the rich. Just look at China today versus 40 years ago. But hyper-capitalism can backfire, especially in today’s world of automation and outsourcing.
The more greedy execs we have running our companies, the faster our country will lose jobs, or at least good jobs, and the quicker the middle class will disappear. The irony is that too much of this profits-before-all-else behavior could well put American business largely out of business. At some point, their individually profit-maximizing labor-saving decisions will mean that collectively they will have far fewer customers because too few people will be earning enough to buy their products.
If you want to see a simple economics study of how this can happen, take a read of Robots Are Us — Some Economics of Human Replacement. This is a paper I wrote with economist Jeffrey Sachs and two of my graduate students — Seth Benzel and Guillermo Lagarda. It shows, in a very simple setting, that substituting smart machines for people can lead, over time, to an economy in which everyone is worse off.
This Epipen monopoly pricing decision and the following except from the NY Times suggests the Justice Department’s Antitrust Division is asleep at the wheel when it comes to the pharmaceutical industry. That would change immediately under my Presidency.
Generic drug companies once dealt almost exclusively in making cheap copies of pills and railed passionately against the anticompetitive tactics of brand-name competitors. Now, through a series of acquisitions and mergers, the handful of large generic companies that are left are increasingly investing in expensive brand-name drugs, and in doing so, are embracing many of the tactics they once scorned.