Pfizer Plays Geoeconomics
The Drug Market Dilemma: Exit, Voice or Loyalty?
The truth is that we don’t really know what will happen.
One of the basic affects of our bewildering present is systemic and pervasive doubt. The trillion-dollar scale of healthcare, and the sheer number of moving parts, conspire to make forecasters even more uncertain than usual. Every new piece of data is scrutinized for augurs of the future, every new advance in technology has value, every new pharmaceutical holds promise of something better, entire news cycles turn on the finer points of sales or incremental progress.
Albert O. Hirschman is an economist from the last century who would have felt at home in our moment of perpetual uncertainty, where the creative challenge for strategic leadership, the new executive management skill, is learning how to ride chaos. And his life’s work could be summed up by the mantra “We don’t know, but let’s give it a try.”
Hirschman was one of the most prominent and original social scientists of the second half of the twentieth century. Hirschman theorized a uniquely pragmatic approach to economic (i.e., market) management, innovation and development that took surprises for granted — quite unlike mainstream frameworks today, the ones that are failing to find strategic fit to an era when “crisis” rather than “equilibrium” is the more obvious tendency of the system.
A cosmopolitan, German-born Jewish refugee to France, Britain, Italy, and eventually the United States, Hirschman became a specialist in Latin America and found a wide international audience for his work. Although an economist by training and pioneer of the nascent field of development economics in the 1950s, his was a different style of thinking, a new genre. From the outset of his career he pushed against conventional disciplinary boundaries and definitions, weaving together concepts from political science, anthropology, the history of ideas, and above all from encounters in the real world to form a unique perspective, writes Michele Alacevich in recent biography.
He was weird, in a way that Hunter S. Thompson would understand.
A onetime Republican volunteer in the Spanish Civil War, undercover fixer in Marseilles for refugees escaping the Nazis, and interpreter at the first Allied war crimes trial, Hirschman completed his peripatetic career by becoming a founding member of the School of Social Science at the prestigious Institute for Advanced Study in Princeton, from 1974 until his death in 2012 at the age of 97. For all this, “his intellectual legacy presents something of a paradox: he is, in a sense, both everywhere and nowhere,” says Alacevich.
Hirschman invented a measure of whether markets are competitive or concentered that has become a staple of antitrust investigations. He also invented an index to measure something else: the economic power — the political pressure and leverage — wielded not by individual businesses, but by countries. In other words, the ‘gravitational pull’ of an economic system, and the way that kinetic energy could be used by a country, as a way of flexing financial muscle.
The German economist would not have been surprised by President Trump’s tariffs or China’s own attempts at economic coercion.
And he would not have been surprised by yesterday’s Oval Office news conference with Pfizer CEO Albert Bourla and the executive management team of the healthcare economy in the United States, announcing a multi-pronged a “historic deal” with Pfizer to lower the price of some of the company’s medicines, while clearing a path for Pfizer to receive a three-year reprieve from certain tariffs.
Pfizer will also participate in a new direct purchasing platform named TrumpRx.govthat will let American patients buy a “large majority” of its primary care treatments and “some select specialty brands” at a discount. The deal comes after Trump demanded that 17 of the largest drugmakers voluntarily offer their medicines at levels similar to what they charge other nations. (For the Blue Spoon perspective, see Donald Writes to David).
The Next Narrative in PBM Disruption
“Geoeconomics” explains how countries flex their financial muscles.
It’s not a new concept. For thousands of years, powerful countries have used economic tools as carrots and sticks to get others to do what they want. The Romans, Medicis, French, and British all did it during their respective rules. Today, the United States and China are leveraging big market power (economic leverage) on multiple fronts — including the U.S.-led sanctions against Russia over its war on Ukraine and China’s massive funding of power plants, airports, and other infrastructure projects around the world to construct ‘infrastructural advantage’.
Hirschman understood the structure of power, how to see it, how to displace it.
And his thinking and ideas are the inspiration of a new set of economic concepts making the rounds. His work is now being used to “explain how geoeconomic power arises from the ability to consolidate threats [and value] across multiple economic [market] relationships to pressure a target entity,” according to Christopher Clayton of Yale School of Management and Jesse Schreger of Columbia Business School. They have a new paper out for the academically inclined that draws extensively on Hirshman. [For the more practically minded, conventional strategy plays the player. Strategy at a system level plays the board.]
Simon Torracinta, Lecturer in History of Science at Harvard and a contributing editor at Boston Review:
Radicals and reformers alike may need to embrace the uncertainty of the present, to make a virtue of improvisation, to seek out the exasperatingly disordered, nonlinear, incoherent, and unexpected sequences by which the status quo is always and ever undermined.
In the “creative disorder of the human adventure,” Hirschman wrote in A Bias for Hope, “radical reformers are unlikely to generate the extraordinary social energy they need to achieve change unless they are exhilaratingly conscious of writing an entirely new page of human history.” One of the basic affects of our bewildering present is systematic and pervasive doubt. As far as Hirschman was concerned, so much the better.
The concatenating crises — economic, ecological, epidemiological, political — of our time cry out for different, ambitious structural explanation and big system innovation.
And we are only coming to terms with what this transformation requires. We lack detailed, tried-and-tested blueprints to navigate the truly massive scale of social, economic, and technological transition of any kind. If Hirschman is to be believed, however, we could never fully know these things in advance: the only way to figure them out would be to try. If the system does turn out to be too corrupt, exhausted, or inert to offer up any meaningful change, it may be that “exit” of some kind really is the only option.
The past week’s news makes clear how quickly the drug pricing and access landscape is rotating into a new orbit, with Novartis, AstraZeneca and Boehringer Ingelheim all joining the DTC platform pack.
These all point to the same shape-shifting reality: the rebate-driven PBM model is breaking down. Big PBM is vulnerable to displacement. And pharma is now enabled to bypass the middle, to invent gravitational pull into a new industry ecosystem(s).
This is the moment for the drug market to define the system that comes next. To begin playing a different game. To get comfortable making history.
/ jgs
John G. Singer is Executive Director of Blue Spoon, the global leader in positioning strategy at a system level. Blue Spoon specializes in constructing new industry narratives.