The 2008-2009 crisis was shocking to many. Banks were vilified—though not punished—and we’re still recovering to this day.
Want to refresh your memory on the 2008-09 financial crisis and the current risks we face? This Journeyman Pictures video may do the trick.
The U.S. market may be at an all-time high, but the financial system is still sick and it may possibly suffer another blow because nothing has changed and some aspects of it are getting worse. The U.S., banks that were “too big to fail” are getting bigger, the same powerful people are running the show behind the scenes, important consumer-protection legislation has been eliminated, consumer debt levels are still high, the government’s financial position would make it difficult to weather another financial crisis, and the “fiscal easing” policy may backfire due to the risk of inflation it poses.
If you think the above is frightening, there’s another industry that should worry us just as much, if not more. It’s as big, as bad and as dangerous as the banks, but it doesn’t get nearly enough attention. Big Pharma is also out to get us and it has more in common with Big Banks than we might think.
The Top 10 things Big Pharma and Big Banks have in common:
- They want to own us - cradle to grave
- They don’t care about our physical, mental, or financial health
- They indoctrinate us early in life through “education”
- They're disgustingly profitable
- They have the government and the law on their side
- They're consolidating at an alarming pace
- Most of their products and services are “me-too”, limited-value products
- Their success depends on secrecy
- They spend more on marketing & sales than on any other activity
- They won’t offer a cure
1. A Life Sentence - Cradle to Grave
Big Banks and Big Pharma only care about how much revenue they can make over a customer’s lifetime. They want to make sure they have us as customers as early as possible and keep us as long as possible by pushing products for every stage of life. Their service model is based on making as much monthly recurring revenue (MRR) per person as possible. In the U.S., consumers spend an average of $210 per household per month on prescription drugs and the average household has $205,000 in debt, which includes credit cards, mortgages and student loans but excludes auto loans. At 5% interest*, that’s $833/month per household, not including the various service/late/overdraft fees.
These companies seek to increase the number of services we use over a lifetime and concurrently in various ways:
- Big Banks: bank accounts, overdraft protection, ATMs, credit cards, student loans, payday loans, mortgages, lines of credit, car loans, 401K loans, loaded investment products, service fees, etc.
- Big Pharma: preventive drugs, revised guidelines and diagnostic tools that increase their addressable market (cholesterol, diabetes, osteoporosis, blood pressure), the use of adult drugs on children and vice versa, advertsing directly to the consumer (DTC), introducing lifestyle drugs (sleep aids, stimulants, ED treatment), inventing dubious new conditions to treat, encouraging use of drugs that create dependence, and medicalizing natural phenomena and life situations (hair loss, menopause, the menstrual cycle and shyness).
2. Our Health Doesn’t Matter
These companies don’t care about our health, be it physical, mental or financial, other than ensuring we’re well-enough to keep paying for their services. They even have a vested interest in ensuring a good portion of the market is ill because that’s where the money’s made:
- Big Banks: Love lending to individuals who are in financial difficulty or who have already experienced bankruptcy because they have a "taste for credit" and are willing to pay high interest and fees for financial services.
- Big Pharma: Love the chronically ill because they use more of their products and even have to take additional medications to control side effects. They're also in the habit of paying the producers of generic drugs to delay production of cheaper drugs to enable them to continue to make high margins from existing products.
Big Banks and Big Pharma also don’t worry about the emotional stress their products and services may cause:
- Big banks are only concerned about their exposure, not the pressure customers may feel in trying to keep up with the financial obligations they're signing up for. Case in point: the size of mortgage a bank is willing to lend is 28% of gross monthly income and a total debt to income ratio of 36%. That’s what we can “afford” but it’s a stretch that can make us anything but comfortable.
- Big Pharma does its best to downplay or hide potentially devastating side effects, boost perceived drug effectiveness by ensuring it funds its own research, sets research parameters and only publishes favourable—often-exaggerated—results and “educates” doctors about the effectiveness of their products. They also push the more expensive and newer—though often less effective— drugs.
- Financial and pharmaceutical products are known to be linked to suicide. The link between certain drugs, such as anti-psychotics and anti-depressants, and suicide is well-documented, as is the link between seemingly insurmountable debt and suicide. Products and services offered by these industries are also linked to a sense of hopelessness and/or helplessness when users don’t see a way out of their current situation. Furthermore, the increasingly-powerful societal messages that imply that dependence on drugs and debt are an inevitable part of life only exaccerbated the situation.
3. Indoctrination - “Education” Is Key
Big Banks and Big Pharma want us as customers and the earlier the better, though they go about it differently:
- Big Banks love to prey upon college students with student loans and credit cards, but the relationship starts even earlier, as they are big supporters of “financial literacy”. They work diligently to control the message as they’re the ones who teach us how to think about money. A big bonus for banks: most of us consider that talking about money is as taboo as talking about sex. Not only are we not getting the birds and the bees conversation at home but we’re also not getting the one about dollars and [common] sense. Only the lucky few get one or both.
- Big Pharma gets to us by convincing physicians that prevention is key and that children can use drugs meant for adult consumption—though the vast majority of these have never been tested to ensure they're safe for children. They also achieve awareness and use through the school system’s assessment of behavioural problems and via the media. An alarming 25% of children are taking medication on a chronic basis, with 7% using two or more drugs.
4. Disgustingly Profitable
Both Big Banks and Big Pharma are two of the most profitable industries in the U.S., tied for top profitability with an average profit margin of 18%. US banks posted $40B per quarter, or $160B in annualized net income in 2013. The combined profits for the top 10 global drug companies has reached $90B annually. These are staggering sums and these companies put this money to good use but, as we'll explore below, their definition of “good use” differs greatly from ours.
5. Government & The Law Is on Their Side
Big Banks and Big Pharma have the government and the law on their side, thanks to their use of lobbying, regulatory influence and circumvention of the court system.
Lobbying: Big Banks and Big Pharma spend a staggering amount of money on lobbying, marketing and compensation. Over the past five years, their lobbying efforts represented 16.5% and 8.3% of the total U.S. spending of $16.1B respectively. That is staggering. The idea that these funds don't influence government is difficult for most of us to believe, given that the ratio of financial and pharmaceutical lobbyists to members of congress is greater than 2:1 and the easing of regulation for both industries over the last 20+ years.
Managing Regulation: These industries also have undue influence on their respective regulatory bodies. Top government advisors and regulators for both industries have usually worked in the industry and often return to work in the private sector after completion of an often-predetermined term. These individuals have a vested interest to protect their ability to seek high compensation upon exit, which offers a compelling deterrent to recommending further industry restrictions or regulations. What's the incentive to bite the hand that feeds you?
The Law Is on Their Side: Out-of-court settlements are the norm when it comes to law suits brought about by consumers who were harmed by financial or pharmaceutical products. Individuals often don’t have the financial means to support costly court proceedings and Big Banks and Big Pharma doesn’t want the publicity, which leads them to prefer to buy silence instead. Tort reform has also reduced the number of claims and the level of compensation individuals can seek when they believe a corporation has caused them harm. Court settlements are more-often-than-not dwarfed by the profits made from the sale of their harmful products, as are the fines levied against participants in both industries. The result: fines and settlements are nothing more than a cost of doing business.
6. Industry Consolidation
Big Banks and Big Pharma are getting even bigger:
- The number of commercial banks in the U.S. has declined by 50% from 1992 to 2014 (with similar decline in credit unions) and the 5 largest financial institutions are even bigger than they were in 2008.
- The number of large pharmaceutical companies (members of the PhRMA lobby group) has declined by 75%, from 42 in 1988 to the current 11.
The result of this consolidation is a reduction in the level of competition, a greater ability to influence regulation and market forces, and reduced pressure to spend on developing humanitarian products.
7. "Me-Too" - A Lack of Innovation
Despite what we might like to think, Big Banks and Big Pharma are in the business of making money and not much else. Players in both industries worry more about the spin of the message, propagating misleading or false information and stimulating demand by either pushing more of the same or creating new markets. Most of their “solutions” are copies of their competitors’ offerings, differentiated only by colour pallet and font choice. Identical products are sold side by side under different names, sometimes by the same company. This lazyness is grossly profitable. It costs next to nothing because it’s a “reuse/remarketing of existing assets”.
The only thing that causes either industry to innovate is the threat of market protection or regulation. Big Banks modify products and services to circumvent regulation and Big Pharma tweak products or find new uses for existing drugs to ensure drugs remain under patent protection. Indeed, the lion's share of Big Pharma R&D goes toward new drug research, with the bulk of the effort being spent on sure-fire “me-too” products to treat chronic diseases. So much for the industry justifying that the high cost of pharmaceuticals is based on the need to fund life-saving research.
8. Success Depends on Secrecy
When it comes to information that should be made public, the government maintains and/or accepts unbelievable levels of secrecy, such as the extent of participation of the various banks in the mortgage fraud conducted in the 2008-2009 financial crisis and the signifiant conflicts of interest of individuals sitting on FDA-lead drug review panels (unbelievably, any amount under $50,000 —per drug company—received by a panellist does not represent a conflict of interest). An informed public might be able to avoid being exposed to sources of malfeasance, if it knew of them.
Big Banks and Big Pharma are also known to buy secrecy regarding internal practices, product and service effectiveness, and safety by ensuring important stakeholders are in their corner. Here are some examples of their practices:
- They offer significant compensation to employees, including both base salary and performance-based bonuses to ensure compliance and confidentiality regarding internal practices.
- They pay university professors and top thinkers in relevant fields to serve as third-party validation and/or to promote of the quality and good-standing of the product and/or company. Many of these conflicts of interest are never disclosed.
- Big Pharma owns its research and is in the habit of not publishing unfavourable studies, only releasing partial data, or falsifying results in order to provide misleading or incomplete information. Big Pharma will even pay ghost writers to produce research results and pay a top researcher to agree to “author” a report he or she is not familiar with.
- Big Banks have repeatedly been found to condone and even promote insider trading by withholding or manipulating information and technology.
- Unbeknownst to their customers, Big Banks secretly bet against the very products they sell to their customers as “top investments”.
9. More Money on Marketing
There’s little incentive for Big Banks and Big Pharma to spend on innovation when managing the message and pushing products is more effective. That’s why the bulk of their resources are spent on sales and marketing. They spend a great deal on their image as trustworthy and caring, creating an emotional connection between us and their products or company. Their sales force is aggressive, focusing on upselling and managing the channels that make them the most money:
- Big Banks make sure they sell each person a mortgage, a HELOC, credit cards and investment products. This is effective for numerous reasons:
- It’s cheaper to sell more to an existing customer, thereby maximizing the return on investment and maximizing what they know about your financial habits.
- It ensures their hold on you becomes absolute. Want to test it? See what happens to the assets under their management when you can’t stay current on a loan.
- It ensures they know what terms you’ll accept and they’ll never have much incentive to offer you their products at a discount, thanks in part to the psychological cost of switching.
- Big Pharma focuses a great deal on medical professionals in a number of ways:
- Pharmaceutical reps provide free samples, food, entertainment and gifts to physicians knowing this often leads to increases in prescriptions.
- They collect prescription data from physicians to ensure they’re getting a good return on a physician/rep relationship.
- They produce and deliver the vast majority of educational materials and events physicians depend on to complete their required continuing medical education (CME) credits.
- They pay top physicians and researchers speaker fees to deliver presentations they didn't prepare to their peers regarding the latest drugs.
- They influence guidelines doctors use to determine who should be treated with a given category of drugs (statins, blood pressure, osteoporosis), essentially leading them to medicate by numbers. Incidentally, physicians fear being accused of malpractice for not following recommended guidelines.
- Big Banks and Big Pharma make heavy use of direct-to-consumer (DTC) advertising to ensure they manage the message regarding their products and services and stimulate demand for them**. They consumerize their offerings in a way that’s similar to car, clothing and food sales. We’re conditioned to think of their offering as no different from anything else we’d buy in our everyday. The effectiveness of these ads is irrefutable, with 17% or more of sales now driven by this type of advertizing and our unmistaken ability to now ramble off at least a dozen drug names just as we can for consumer products in any other brand category. "Ask your doctor about [insert drug name]" has done irreparable harm to the doctor-patient relationship.
- Big Banks and Big Pharma market their solutions through a network of not-for-profit organizations that don’t always disclose their source of funds.
10. No Cure
There’s no money in offering customers a solution that makes them discontinue the use of their services or products. That’s why Big Banks don’t want you debt free and Big Pharma doesn’t want you drug free. At best, they’ll offer your substitutes or find new reasons for you to need to keep using one or more of their “solutions”. They use many tactics to keep you under their thumb. They:
- Work to convince you that you need more by creating new needs, new problems to solve.
- Offer improvements to current products that make it easier to stay.
- Make you dependent on the product or service.
- Make it painful to leave.
- Dismiss alternatives by either avoiding comparisons or emphasizing their drawbacks.
- Make you feel irresponsible or ignorant for not using their solutions.
11. BONUS Point: We Don’t Need Them!
Most amazingly, the biggest point about Big Pharma and Big Banks is that they really need us more than we need them. Most of the top-selling products they offer are not needed. The demand for them is created out of thin air and supported by our unwillingness to believe that what we have and who we are is “enough”.
Case in point: When studied, lifestyle changes such as improved nutrition, reduced stress and increased levels of physical activity are universally more effective than drug therapy (depression, anxiety, obesity, diabetes, cardiovascular disease, blood pressure, sleep quality, osteoporosis, cognitive abilities, anxiety, pain management, arthritis). Further, in a number of studies, the placebo effect has been found to be as effective—if not more powerful—than the drug being tested.
I hope I’ve convinced you to look at Big Pharma with as much suspicion as you do Big Banks. Though each have their place in our lives when/if we want them to, we need to be aware of their practices and protect ourselves and our family and friends from their undue influence on our lives and from the threat they pose to our wellbeing.
If you want to know more about this topic, I’d encourage you to review the supporting materials below. Happy viewing/reading!
*I used 5% for simplicity. For some consumers it will be high and for others low. Given the mix of credit card, student loan and mortgage debt, it may not be unreasonable.
**The U.S. and New Zealand are the only two countries in the world where DTC advertizing of pharmaceuticals is legal. Unfortunately, some of this advertising seeps into other countries thanks to in-program ad spots.
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