Pineapples (TM)

If the last few decades of consumerism have taught us anything, it is just how much faith people are able of setting store in a brand. In everything from motorbikes to washing powder, we do not simply test and judge effectiveness of competing products objectively (although, especially when considering expensive items such as cars, this is sometimes impractical); we must compare them to what we think of the brand and the label, what reputation this product has and what it is particularly good at, which we think most suits our social standing and how others will judge our use of it. And good thing too, from many companies’ perspective, otherwise the amount of business they do would be slashed. There are many companies whose success can be almost entirely put down to the effect of their branding and the impact their marketing has had on the psyche of western culture, but perhaps the most spectacular example concerns Apple.

In some ways, to typecast Apple as a brand-built company is a harsh one; their products are doubtless good ones, and they have shown a staggering gift for bringing existed ideas together into forms that, if not quite new, are always the first to be a practical, genuine market presence. It is also true that Apple products are often better than their competitors in very specific fields; in computing, for example, OS X is better at dealing with media than other operating systems, whilst Windows has traditionally been far stronger when it comes to word processing, gaming and absolutely everything else (although Windows 8 looks very likely to change all of that- I am not looking forward to it). However, it is almost universally agreed (among non-Apple whores anyway) that once the rest of the market gets hold of it Apple’s version of a product is almost never the definitive best, from a purely analytical perspective (the iPod is a possible exception, solely due to the existence of iTunes redefining the music industry before everyone else and remaining competitive to this day) and that every Apple product is ridiculously overpriced for what it is. Seriously, who genuinely thinks that top-end Macs are a good investment?

Still, Apple make high-end, high-quality products with a few things they do really, really well that are basically capable of doing everything else. They should have a small market share, perhaps among the creative or the indie, and a somewhat larger one in the MP3 player sector. They should be a status symbol for those who can afford them, a nice company with a good history but that nowadays has to face up to a lot of competitors. As it is, the Apple way of doing business has proven successful enough to make them the biggest private company in the world. Bigger than every other technology company, bigger than every hedge fund or finance company, bigger than any oil company, worth more than every single one (excluding state owned companies such as Saudi Aramco, which is estimated to be worth around 3 trillion dollars by dealing in Saudi oil exports). How has a technology company come to be worth $400 billion? How?

One undoubted feature is Apple’s uncanny knack of getting there first- the Apple II was the first real personal computer and provided the genes for Windows-powered PC’s to take the world, whilst the iPod was the first MP3 player that was genuinely enjoyable to use, the iPhone the first smartphone (after just four years, somewhere in the region of 30% of the world’s phones are now smartphones) and the iPad the first tablet computer. Being in the technology business has made this kind of innovation especially rewarding for them; every company is constantly terrified of being left behind, so whenever a new innovation comes along they will knock something together as soon as possible just to jump on the bandwagon. However, technology is a difficult business to get right, meaning that these products are usually rubbish and make the Apple version shine by comparison. This also means that if Apple comes up with the idea first, they have had a couple of years of working time to make sure they get it right, whilst everyone else’s first efforts have had only a few scance months; it takes a while for any serious competitors to develop, by which time Apple have already made a few hundred million off it and have moved on to something else; innovation matters in this business.

But the real reason for Apple’s success can be put down to the aura the company have built around themselves and their products. From their earliest infancy Apple fans have been self-dubbed as the independent, the free thinkers, the creative, those who love to be different and stand out from the crowd of grey, calculating Windows-users (which sounds disturbingly like a conspiracy theory or a dystopian vision of the future when it is articulated like that). Whilst Windows has its problems, Apple has decided on what is important and has made something perfect in this regard (their view, not mine), and being willing to pay for it is just part of the induction into the wonderful world of being an Apple customer (still their view). It’s a compelling world view, and one that thousands of people have subscribed to, simply because it is so comforting; it sells us the idea that we are special, individual, and not just one of the millions of customers responsible for Apple’s phenomenal size and success as a company. But the secret to the success of this vision is not just the view itself; it is the method and the longevity of its delivery. This is an image that has been present in their advertising campaign from its earliest infancy, and is now so ingrained that it doesn’t have to be articulated any more; it’s just present in the subtle hints, the colour scheme, the way the Apple store is structured and the very existence of Apple-dedicated shops generally. Apple have delivered the masterclass in successful branding; and that’s all the conclusion you’re going to get for today.

Big Pharma

The pharmaceutical industry is (some might say amazingly) the second largest on the planet, worth over 600 billion dollars in sales every year and acting as the force behind the cutting edge of science that continues to push the science of medicine onwards as a field- and while we may never develop a cure for everything you can be damn sure that the modern medical world will have given it a good shot. In fact the pharmaceutical industry is in quite an unusual position in this regard, forming the only part of the medicinal public service, and indeed any major public service, that is privatised the world over.

The reason for this is quite simply one of practicality; the sheer amount of startup capital required to develop even one new drug, let alone form a public service of this R&D, would feature in the hundreds of millions of dollars, something that no government would be willing to set aside for a small immediate gain. All modern companies in the ‘big pharma’ demographic were formed many decades ago on the basis of a surprise cheap discovery or suchlike, and are now so big that they are the only people capable of fronting such a big initial investment. There are a few organisations (the National Institute of Health, the Royal Society, universities) who conduct such research away from the private sectors, but they are small in number and are also very old institutions.

Many people, in a slightly different field, have voiced the opinion that people whose primary concern is profit are those we should least be putting in charge of our healthcare and wellbeing (although I’m not about to get into that argument now), and a similar argument has been raised concerning private pharmaceutical companies. However, that is not to say that a profit driven approach is necessarily a bad thing for medicine, for without it many of the ‘minor’ drugs that have greatly improved the overall healthcare environment would not exist. I, for example, suffer from irritable bowel syndrome, a far from life threatening but nonetheless annoying and inconvenient condition that has been greatly helped by a drug called mebeverine hydrochloride. If all medicine focused on the greater good of ‘solving’ life-threatening illnesses, a potentially futile task anyway, this drug would never have been developed and I would be even more hateful to my fragile digestive system. In the western world, motivated-by-profit makes a lot of sense when trying to make life just that bit more comfortable. Oh, and they also make the drugs that, y’know, save your life every time you’re in hospital.

Now, normally at this point in any ‘balanced argument/opinion piece’ thing on this blog, I try to come up with another point to try and keep each side of the argument at an about equal 500 words. However, this time I’m going to break that rule, and jump straight into the reverse argument straight away. Why? Because I can genuinely think of no more good stuff to say about big pharma.

If I may just digress a little; in the UK & USA (I think, anyway) a patent for a drug or medicine lasts for 10 years, on the basis that these little capsules can be very valuable things and it wouldn’t do to let people hang onto the sole rights to make them for ages. This means that just about every really vital lifesaving drug in medicinal use today, given the time it takes for an experimental treatment to become commonplace, now exists outside its patent and is now manufactured by either the lowest bidder or, in a surprisingly high number of cases, the health service itself (the UK, for instance, is currently trying to become self-sufficient in morphine poppies to prevent it from having to import from Afghanistan or whatever), so these costs are kept relatively low by market forces. This therefore means that during their 10-year grace period, drugs companies will do absolutely everything they can to extort cash out of their product; when the antihistamine drug loratadineĀ (another drug I use relatively regularly, it beingĀ used to combat colds) was passing through the last two years of its patent, its market price was quadrupled by the company making it; they had been trying to get the market hooked onto using it before jacking up the prices in order to wring out as much cash as possible. This behaviour is not untypical for a huge number of drugs, many of which deal with serious illness rather than being semi-irrelevant cures for the snuffles.

So far, so much normal corporate behaviour. Reaching this point, we must now turn to consider some practices of the big pharma industry that would make Rupert Murdoch think twice. Drugs companies, for example, have a reputation for setting up price fixing networks, many of which have been worth several hundred million dollars. One, featuring what were technically food supplements businesses, subsidiaries of the pharmaceutical industry, later set the world record for the largest fines levied in criminal history- this a record that persists despite the fact that the cost of producing the actual drugs themselves (at least physically) rarely exceeds a couple of pence per capsule, hundreds of times less than their asking price.

“Oh, but they need to make heavy profits because of the cost of R&D to make all their new drugs”. Good point, well made and entirely true, and it would also be valid if the numbers behind it didn’t stack up. In the USA, the National Institute of Health last year had a total budget of $23 billion, whilst all the drug companies in the US collectively spent $32 billion on R&D. This might seem at first glance like the private sector has won this particular moral battle; but remember that the American drug industry generated $289 billion in 2006, and accounting for inflation (and the fact that pharmaceutical profits tend to stay high despite the current economic situation affecting other industries) we can approximate that only around 10% of company turnover is, on average, spent on R&D. Even accounting for manufacturing costs, salaries and such, the vast majority of that turnover goes into profit, making the pharmaceutical industry the most profitable on the planet.

I know that health is an industry, I know money must be made, I know it’s all necessary for innovation. I also know that I promised not to go into my Views here. But a drug is not like an iPhone, or a pair of designer jeans; it’s the health of millions at stake, the lives of billions, and the quality of life of the whole world. It’s not something to be played around with and treated like some generic commodity with no value beyond a number. Profits might need to be made, but nobody said there had to be 12 figures of them.