[HN Gopher] McKinsey taught Big Pharma how to price-gouge
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McKinsey taught Big Pharma how to price-gouge
Author : bing_dai
Score : 157 points
Date : 2021-11-28 19:47 UTC (3 hours ago)
(HTM) web link (doctorow.medium.com)
(TXT) w3m dump (doctorow.medium.com)
| Emigre_ wrote:
| I worked as a contractor some time ago in a project that, I did
| not know it, but was managed by contractors from McKinsey. It was
| an awful experience and I left as soon as I could. They gave me
| the worst of impressions. A mixture of arrogance and
| incompetence. Strong command and control. Obviously this is just
| an individual's point of view... just my personal experience...
| who knows.
| smt88 wrote:
| Arrogance and incompetence is management consulting in a
| nutshell.
|
| They're mostly not hired to be competent, though. They're
| traditionally hired to cover the ass of the executive team that
| wants to take risks without getting fired by the board if
| something goes wrong.
| carabiner wrote:
| For reference, this is your modern McKinseyite:
| https://instagram.com/sophiehilaire?utm_medium=copy_li
|
| McK even profiled her: https://www.mckinsey.com/careers/meet-our-
| people/careers-blo...
|
| Her pedigree is elite, she's attractive with a variety of
| experiences. She would have no trouble being hired at a tech
| startup. She could be the pleasant person you grab a beer with
| after work, and would pass every culture fit test. And these are
| some of the most evil people in the corporate world.
| huitzitziltzin wrote:
| This is a gross comment. What evidence do you have that that
| employee ever worked on anything having to do with pharma?
| Delete this.
| klyrs wrote:
| FYI: replying "delete this" renders a comment un-deletable.
| adam_arthur wrote:
| I agree, but seems influencers would enjoy free backlinks for
| SEO/awareness purposes.
|
| Not good form to publicize somebody's personal profile though
| [deleted]
| gruez wrote:
| > For reference, this is your modern McKinseyite:
| https://instagram.com/sophiehilaire?utm_medium=copy_li
|
| can someone screenshot the page? I'm getting a login wall.
| finexplained wrote:
| It's just an instagram for a young (attractive) woman who
| likes taking nature travel photos. If you've seen one
| influencer instagram you get the gist.
| vladharbuz wrote:
| I don't fully understand your comment, is there some specific
| background story about this person related to the
| pharmaceutical industry?
| thebean11 wrote:
| It looks like she doesn't even work at the company anymore? Why
| are you posting this woman's instagram?
| radicalbyte wrote:
| My first-hand experience of them - clueless muppets - but luckily
| they were quickly replaced by a team of actual experts.
|
| They are masters of playing the one-eyed man in the proverb "in
| the land of the blind, the one-eyed man is king".
| 1cvmask wrote:
| This is completely evading the truth. Big pharma is protected by
| legislation. There are restrictions to importing medicine from
| other countries. There is even legislation preventing the world's
| biggest buyer (the US government) of drugs from negotiating
| prices downwards:
|
| When Medicare Part D was passed in 2003, lawmakers included the
| "non-interference clause," which essentially prevents the federal
| government from stepping in to negotiate prescription drug
| prices.
|
| https://www.alec.org/article/should-the-government-negotiate...
| croes wrote:
| One word: lobbying
| simonw wrote:
| Do you think Cory Doctorow avoided mentioning that for bad
| faith reasons, or do you think he just didn't mention it
| because he didn't feel it was relevant to the story he was
| covering here?
| gruez wrote:
| >or do you think he just didn't mention it because he didn't
| feel it was relevant to the story he was covering here?
|
| I feel like the regulatory environment that enabled such
| "price-gouging" is very relevant to the story he's covering.
| simonw wrote:
| I agree that it's relevant - but I don't think that means
| it warranted mentioning in the story.
|
| The specific new piece of information here is that newly
| released documents show that McKinsey have been helping
| pharma companies figure out how to extend their patents.
|
| At some point you have to stop adding extra background
| information to an article, otherwise it will never end!
| [deleted]
| pembrook wrote:
| The premise of this article is quite funny, the idea that Big
| Pharma wouldn't care so much about profit optimizing if it
| weren't for those evil jr. consultants!
|
| It seems McKinsey's chief value proposition of providing
| executives and governments cover for politically unpopular
| decisions (both internally or externally)...is in fact accurate.
|
| Amazing how this narrative manages to shift blame off of the
| government who created these bizarre incentives and the
| executives _who run the damn drug companies_ and responded to
| those incentives.
|
| Somehow our joke of a healthcare system is now the fault of
| 24-year-old powerpoint jockeys and their theatrically fake-
| analytical powerpoint graphs.
| 88913527 wrote:
| It's easier to make a villain out of McKinsey than it is out of
| Congress. While it's true Congress is universally disliked, the
| discussion devolves into opining about my-team-versus-other-
| team, even though teams spend a great deal of time with
| lobbyists and fundraising. And even that point faces the
| critique that "both sides aren't the same", which sure, they
| aren't identical, but the means for securing influence are the
| same. None of us have pre-conceived notions about how to 'fix'
| McKinsey in the way we would with Congress. How to implement
| preventative measures that would block deeply unpopular policy
| from becoming law in the first place conjures discussions of
| first amendment rights.
| throwawayboise wrote:
| This is part of why I avoid doctors and prescription medication
| whenever possible. They are not motivated to get me healthy, they
| are motivated to keep me coming back for more.
| ectopod wrote:
| Medium won't let me read it. Alternative link:
|
| https://pluralistic.net/2021/11/25/strikesgiving/#cool-story...
| armagon wrote:
| > The problem with [the plan of changing the formulas of drugs so
| they can be re-patented, from the patent-holder's perspective] is
| that a reformulation doesn't stop the old drug's patent from
| expiring, opening the market for cheap generics. To head this
| threat off, McKinsey developed a disinformation campaign to
| discourage doctors from prescribing generics and to convince
| patients to refuse such prescriptions. The McKinsey campaign
| included outright lies -- false statements claiming that the old
| formulations were unsafe. Alongside those lies, McKinsey
| developed messaging to convince patients and docs that the old
| drugs were "a step backwards.""
|
| Great explanation of Merck disclaiming Ivermectin (see
| https://www.merck.com/news/merck-statement-on-ivermectin-use... )
| despite the drug being safer than Tylenol when used by humans (
| https://www.thedesertreview.com/opinion/columnists/the-great... )
|
| Edit: They specifically called out "A concerning lack of safety
| data in the majority of studies" and spread FUD saying
| "Ivermectin should not be used during pregnancy since safety in
| pregnancy has not been established."
| ab_testing wrote:
| This sounds like a blame shifting article. Sure McKinsey as a
| consulting company would advise its clients on how to do
| something / anything while staying within legal fringes.
|
| But it was the pharmacy companies that wanted to price gouge
| while avoiding any kind of scrutiny . So they roped in McKinsey
| for how to best do that without attracting any kind of government
| attention and McKinsey advised them on that.
|
| The author blames McKinsey for gaming the system . But what is
| the system - it is just a list of laws and regulations written by
| Congress . If Congress finds any kind of gamification-it should
| change the laws accordingly.
|
| The biggest reason for higher prices for drugs for Medicare was
| the prescription drug bill passed under the Bush administration
| that prevented the government from using its buying power to
| negotiate prices. I understand that affects only Medicare
| patients but that became the springboard for other opportunistic
| pricing employed by all drug companies.
|
| Also the age old practice of buying the patents of an old drug
| and hiking the price by 10000% or more ( as employed by Daraprim
| (Martin Shakreli) or numerous other companies )was not Mckinsey's
| brainchild but rather the demand from the drug companies that
| McKinsey helped to materialize.
| hogFeast wrote:
| The point isn't that McKinsey is solely to blame but that a
| hugely powerful consultancy firm that expounds upon their
| higher morals at any opportunity was recommending something
| that was, at the very least, morally bankrupt (and btw, it was
| also financially catastrophic for any firm that took that
| advice in the end).
|
| A great example is Valeant...long forgotten today but the stock
| went from $10 to $250 to $10, it was a huge story at the time,
| and was in the news every day when their stock was at the peak.
| The guy who masterminded this actually worked at McKinsey as an
| outside consultant for Valeant before he became CEO. This was
| the McKinsey special strategy: jack up prices, reduce R&D
| spending, make acquisitions and repeat step 1 and 2 (ofc, there
| was accounting fraud and the CEO tried to make off with
| multiple billions...again, this guy was a very senior
| consultant and was one of the most greedy kleptomaniacs I have
| seen in corporate life...this is not a coincidence).
|
| Also, this strategy was McKinsey's brainchild. I have seen this
| over and over where a consultancy firm gets known for their a
| certain strategy in a certain industry, and they sell it
| everywhere and it looks like they all just came up with it
| independently. This strategy was not common pre-Valeant to any
| great degree, Daraprim happened far after. It became huge
| because McKinsey were recommending it to clients.
|
| Ironically, I have an almost identical story from another
| industry. In the early 2010s, some consultant (I never was able
| to find out from execs who, they referred to an NDA) suggested
| to housebuilders in the UK that they pull back on capex. These
| housebuilders controlled a good portion of the land that was
| available for planning permission in the UK, the industry is
| heavily consolidated so they control the market for new houses,
| the market was in massive shortage, and then house prices would
| go up. Right on cue, pretty much every major housebuilder
| announces within the space of a year that they are going to
| begin returning capital to shareholders...in a housing market
| that is in shortage by roughly 200k homes/year, and in which
| any housebuilder could have taken massive share in a free
| market. Either way, new house prices go through the roof (the
| govt also announces a subsidy program), margins are now 20%
| against the 5-10% previously, everyone is making out like
| bandits. That wouldn't have happened if the consultant didn't
| come along (because the only way it worked is if other
| housebuilders knew this consultant had been around the
| industry, and knew other firms would cut back on production
| too).
|
| Consultants have an absolutely huge role in determining company
| strategy, and they do deserve blame if they recommend things
| that are unethical (the fortunate thing about US pharma is that
| politicians came down on these firms like a ton of bricks, this
| didn't happen in UK housing). They are totally unaccountable
| too because when you talk to management, they just refer to
| some faceless consultant who is pulling the strings...if you
| are a shareholder, what do you do? The CEO is the monkey, not
| the organ grinder but it is the CEO who is the public face (and
| ofc, the Board are totally uncommunicative about what is going
| on). It is a huge problem because, as happened in pharma, it
| ended up with lots of companies doing things that were legally
| questionable and incinerating massive amounts of capital
| (Valeant had something like $40bn in debt at the peak, and
| equity was worth near $100bn at peak). ESG investing becomes
| impossible because there is no governance.
| civilized wrote:
| > The author blames McKinsey for gaming the system . But what
| is the system - it is just a list of laws and regulations
| written by Congress . If Congress finds any kind of
| gamification-it should change the laws accordingly.
|
| This is such a crap concept of business ethics. You expect
| Congress to be everyone's mommy and daddy and tell them right
| from wrong? Have you seen how Congress operates?
|
| If you do wrong, don't act all surprised and aggrieved if
| people blame you. It doesn't matter if the authorities happened
| to have a law on the books at the time. There's more to life
| than pursuing maximum profit.
| AlphaSite wrote:
| I mean there are plenty of people who deserve blame here, the
| pharma companies for doing this shit, congress for enabling
| it and McKinsey for consulting on it, but really I think
| that's the order the blame flows in.
| PathOfEclipse wrote:
| "Our Constitution was made only for a moral and religious
| people. It is wholly inadequate to the government of any
| other." - John Adams.
|
| We will find that the more we lose our morality, the less
| we are able to abide in freedom, and the more we will
| require an authoritarian state to control ourselves.
| javajosh wrote:
| Good quote. Atheists might be right, but turns out a
| pretend panopticon has better value than a real one, or
| none, along every dimension.
| chasd00 wrote:
| You guys are asking a lot of McKinsey. Asking that org to be a
| moral and ethical part of society is like asking a rake to be a
| shovel. It doesn't make any sense to the point of being unfair
| to the rake.
| jancsika wrote:
| > So they _roped in_ McKinsey for how to best do that without
| attracting any kind of government attention and McKinsey
| advised them on that.
|
| My emphasis.
|
| From thefreedictionary.com[1]:
|
| > rope in. To persuade, entice, or enlist someone to do or
| participate in something. A noun or pronoun can be used between
| "rope" and "in." I really didn't want to sing in the talent
| show, but Janet roped me in.
|
| Notice that all the examples there involve either someone who
| would rather not get involved in the given activity, or a
| person or animal that lacks the ability to avoid being "roped."
|
| In conclusion: have you ever considered working for McKinsey?
| If not, you should!
|
| 1: https://idioms.thefreedictionary.com/roped+in
|
| Edit: clarification
| [deleted]
| jen729w wrote:
| > But what is the system - it is just a list of laws and
| regulations written by Congress
|
| This attitude stinks, I'm sorry. "If it's legal, it's ethical"
| is no way to run a society.
|
| I had my neighbour on my lawn regarding a minor (cat-related)
| dispute the other week. He brought his kid with him, trying to
| show him how to behave I guess. At one point he said "well it's
| not illegal" and I thought, wow, there you have it. This guy,
| 12-year-old in tow, thinks that actions are de facto fine if
| they're "not illegal".
|
| I should have offered to take him to the local brothel. He's
| married, I have a long-term partner. But that's not _illegal_
| so I'm sure they would have been A-OK with it.
| croes wrote:
| >But what is the system - it is just a list of laws and
| regulations written by Congress
|
| And how are this laws and regulations made? By massive
| lobbying. So first they rig the game then play the game.
| mchanson wrote:
| It seems that if you use the AITA way of looking at things you
| can just assign it to ESH (Everyone sucks here).
|
| McKinsey is awful for helping enable an immoral business
| practice. The pharma companies engaging in it are also
| practicing an immoral business practice. And Congress is
| failing in its duties to reign in the excesses of American
| capitalism.
| IncRnd wrote:
| > The biggest reason for higher prices for drugs for Medicare
| was the prescription drug bill passed under the Bush
| administration that prevented the government from using its
| buying power to negotiate prices. I understand that affects
| only Medicare patients but that became the springboard for
| other opportunistic pricing employed by all drug companies.
|
| It does no good to always blame those government people for
| current circumstances. They are just riding on the wave of
| money like everyone else. The reason for high drug prices is
| that people continue to pay those prices. Drugs sold in other
| countries are less expensive than the same drugs sold in the
| US. Pharma gets paid high prices, because people pay them those
| amounts.
| version_five wrote:
| > The author blames McKinsey for gaming the system . But what
| is the system - it is just a list of laws and regulations
| written by Congress . If Congress finds any kind of
| gamification-it should change the laws accordingly.
|
| I support this view but I've had a lot of difficulty arguing
| it. It's similar to tax loopholes- accountants find legal, even
| if unintended ways to avoid or reduce tax. Government can
| either close the loophole or let it stand, but the point is
| that accountants are economically incentivized to find flaws in
| regulations that can be identified and corrected, so the laws
| get better. It's a form of arbitrage, and is a feature of a
| well functioning regulatory system.
|
| Another example is what all the electricity companies were
| doing in California when deregulation happened. All the Enron
| tactics of sending power out of state and back in, or bringing
| down generators to game the prices (this is distinct from the
| accounting fraud the company was known for, was generally
| legal, and done by all energy players). The root cause was poor
| regulation, and energy companies were identifying and
| demonstrating these flaws in a way that could only happen when
| there is money to be made. The government response should have
| been to quickly close the loopholes, but from what I remember,
| there was a lot of blaming the companies.
|
| It's the same here. People would rather blame an evil company
| because they are a convenient scapegoat than actually
| understand the root of the problem.
| ayngg wrote:
| I agree too, for me it sort of boils down to don't hate the
| player, hate the game, and congress are the ones that make
| the game's rules. The game right now rewards unscrupulous
| behavior, so it makes sense that successful companies "get
| away" with doing it. As demonstrated, simply player hating
| doesn't do much.
| wpietri wrote:
| Nah. Was regulation inadequate to keep up with Enron's level
| of sociopathy? Sure. Should we have had better regulation?
| Also yes. Does that in any way excuse Enron's behavior? Not
| at all, I say.
|
| But let's see if you're sincere in your principles. If I can
| find a way to get away with murdering you, is that ok? What
| if I turn a profit doing it by, say, taking all your assets?
| After all, it's kinda ridiculous how fragile the human body
| is. I'm practically doing you (and your next of kin) a favor
| by demonstrating how dangerous it is to have major arteries
| and veins so exposed. And I could also surface issues with
| the legal system; we know that the homicide clearance rate is
| only 55%, [1] so by your logic I'm helping the laws get
| better by giving lawmakers more data to work with.
|
| I of course wouldn't do this, because I think one shouldn't
| do harmful things just because one can get away with it. But
| if you truly believe in this, just post your name and
| address, and I'm sure some public-spirited person will take
| you up on your offer of a little bit of for-profit, blame-
| free murder.
|
| [1] https://www.statista.com/statistics/194213/crime-
| clearance-r...
| wpietri wrote:
| Responsibility for an outcome is not zero sum. The pharma
| companies and McKinsey can both be morally responsible. As can
| Congress, lobbyists, etc.
|
| As somebody who has done consulting, it's perfectly possible to
| do it in a way that isn't totally amoral like "how to do
| something / anything while staying within legal fringes"
| indicates. As an example, read through the IEEE/ACM code of
| ethics for software engineering: https://ethics.acm.org/code-
| of-ethics/software-engineering-c...
|
| Big chunks of that are applicable to consulting too. That
| McKinsey doesn't care is a choice they made, and one we can
| hold them accountable for.
| m_ke wrote:
| Speaking of consulting firms, I just recently came across this
| from deloitte
| https://www2.deloitte.com/us/en/insights/industry/health-car...
| sokoloff wrote:
| Here's another Deloitte gem. I can't decide if the overall
| diagram is the peak of humorous or if the inclusion of two
| different items, one called "Simple Design" and the other
| "Rules of Simplicity" makes it even funnier.
|
| https://twitter.com/isaach/status/804726366038093824?s=21
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