HCA is the world’s largest private healthcare company, as well as being both the UK’s and US’ biggest private hospital group. It runs London Bridge Hospital (LBH) as a for-profit business, as well as five other central London hospitals and partnerships around the UK.

Many of the cleaners at LBH are organised with the Independent Workers’ Union of Great Britain (IWGB). They are currently demanding fair pay, accusing their employers of failing to provide proper personal protective equipment (PPE) and bullying those who speak out.

Corporate Watch has investigated HCA and its business model, to provide information for action for the cleaners’ ongoing campaign.

In summary:

• HCA made billions from the pandemic in the US and the UK, yet it wouldn’t even supply workers with adequate PPE, let alone pay them properly.
• The pandemic created a perfect storm for the Tories to push more privatisation through the backdoor while ‘selling’ it as a strategy to help a broken NHS.
• Despite a huge government payout, HCA beds were greatly underutilised during the pandemic, resulting in the NHS terminating its contract only months later.
• Now, with NHS waiting lists at an all time high, it’s boosting profits further. The NHS has been forced to pay HCA millions for critical life-saving treatments for cancer patients. Meanwhile, record numbers of people who can afford to are paying the company privately for routine treatments.
• HCA has a long history of relationships with politicians who have pushed privatisation.
• Labour Party leader Keir Starmer has received donations from a HCA shareholder, who is a member of the House of Lords.
• Some NHS consultants are making money from shares in HCA, further undermining the integrity of the NHS.
• HCA has a documented history of fraud, negligence and malpractice: do we really want these people to run our healthcare?

This company profile shows that HCA’s agenda is to continue expanding and profiting from private healthcare, both in the US and the UK. HCA maximises its profits by hiring outsourced and underpaid workers, and cutting costs at the expense of workers’ and patients’ safety.

Henry Chango Lopez, IWGB General Secretary, told Corporate Watch:

“While HCA has made millions in profits during this pandemic and claims to value its employees, it treats its outsourced cleaners like second-class workers. Outsourced cleaners are overworked on poverty wages and are forced to work while sick because they cannot afford to take time off without proper sick pay. They also face unequal terms and conditions, worse treatment, being denied access to on-site medical care and other benefits enjoyed by directly-employed colleagues.

Their workers are not prepared to accept this discriminatory treatment any longer from such a prestigious corporation. They have launched their campaign at London Bridge Hospital with the support of their union – the IWGB, and will fight until they get the benefits, the dignity and respect they deserve.”

Unlike many healthcare companies, HCA managed to increase both profits and turnover throughout the pandemic. In fact, the company has seen its profits skyrocket as a result of Covid-19: company records show that in 2021, gross profits were up to nearly $50 billion. It reported turnover of $58.8 billion and a net profit of $7 billion.

A 2022 report from Service Employees International Union (SEIU), the largest US healthcare union, hit the nail on the head when it explained that as HCA profits soar, thousands of employees struggle on “poverty wages”.

Contents

– What is HCA?
– Who profits?
– Frist fortunes
– Pandemic profiteering, lack of PPE and union-busting
– New allegations of fraud
– Lobbyists and lurkers
– HCA in court
– Conclusion

What is HCA?

In the US, Hospital Corporation of America runs 182 hospitals in 20 states. It makes twice the profit of the US’ three other largest publicly-traded hospital companies combined. During the pandemic, its profits also soared above other private hospital groups.

HCA began operating in the UK in 1995 and now runs 30 UK facilities. The company is expanding its reach in the country, with a new joint venture partnership to build a $100 million hospital in Birmingham slated for completion in 2023.

HCA outsources the employment of the vast majority of its cleaners at LBH to Compass Group. Ultimately, because this deal saves it money.

The company has been plagued by scandals, including being implicated in “the longest and costliest investigation for health-care fraud in U.S. history”: it was forced to admit overcharging the US government for Medicare/Medicaid healthcare cases. In 2002, after pleading guilty, it paid over $2 billion in fines, the largest corporate fine in US history.

HCA has been expanding in the UK since 1995. Here is a list of its main UK facilities:

This global healthcare giant is now moving in on our NHS. It was one of several private healthcare companies paid millions by the British government to expand capacity during the pandemic. Yet most HCA beds remained empty. With further Covid waves looming, the NHS was compelled to end its agreement with HCA because, allegedly, HCA was demanding too high a fee while its beds weren’t being filled. Yet as waiting lists (for both planned and emergency operations) soared, this change meant the NHS paid further millions in vital treatments for critically ill patients. It also enabled HCA to lure thousands of people who could afford to pay into its hospitals for more routine surgery. Double whammy.

Meanwhile, the government is pushing through legislation that will make it easier for private healthcare companies to profit even more as the NHS continues to break.

Who profits from HCA?

In the UK, HCA operates through a complicated system of subsidiaries which eventually lead back to US-based HCA Healthcare Inc. The largest shareholder of the ultimate owner is a company called Hercules Holding II LLC.

In 2005, HCA was forced to pay $20 million to shareholders who sued the company following claims of insider trading and inflating share prices. The following year, HCA management and Hercules Holding II LLC, which was “a consortium of private investment funds including Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co. and Merrill Lynch Global Private Equity”, bought HCA.

Since then, the investment companies (Bain, KKR and Merrill) have cashed out their shares, leaving the billionaire Frist family—who founded HCA—as the sole owners of Hercules Holdings. Other shareholders of note include BlackRock and Vanguard, two of the world’s biggest investment funds which exist only to earn more money for the super-wealthy.

HCA may not pay its workers well, but things are different if you’re a director or shareholder. In 2020, HCA’s current chief executive Samuel Hazen earned $30.4 million. Hazen’s net worth is at least $137 million, and over $100 million of this comes from HCA shares. Despite taking a salary dip in 2019, his total compensation package was 556 times more than the average earnings ($54,651) of HCA employees. Indeed, the US executive management team and most directors are also HCA shareholders. Many are also multi-millionaires with wealth boosted significantly by their HCA shares.

In contrast, Jamelle Brown—a technician for HCA in Kansas City—reportedly earned just $13.77 (£10.48) an hour, and 1,000 times less than Hazen’s salary. In 2020, he caught Covid at work. On his return, he was named ’employee of the month’ which came with a ‘reward’: a $6 coupon to spend at the hospital canteen. The SEIU report also notes that although 43% of HCA’s 2020 revenue came from Medicare and Medicaid:

“since 2010 HCA has diverted over $29 billion to the pockets of rich investors like Bain, KKR, Merrill Lynch and the Frist family.”

Another shareholding director is Nancy-Ann DeParle, who joined in 2014. She previously worked for both Bill Clinton and Barack Obama and was credited as one of the key players of the Affordable Care Act (ACA). Also known as ‘Obamacare’, the ACA gave millions of uninsured American people access to health cover. But although DeParle may sound on paper like an altruistic supporter of cheap healthcare, the truth is far shadier. Before heading to the White House, DeParle was director of several corporations that were investigated, and in some cases found liable, for corruption, bribery or negligence. She stepped down from these directorships upon appointment to the White House, having earned millions from companies that would benefit from Obamacare. DeParle’s career has continued to flip-flop between the White House and then back to making millions from private healthcare companies.

Given HCA’s landmark Medicare fraud case, DeParle’s role suggests a clear conflict of interest.

Other directors’ previous positions read like a roll-call of honour of capitalist ‘greats’:

• Meg Crofton: Disney World
• Bob Dennis: McKinsey & Co.
• Charles Holliday: DuPont, Shell, Bank of America
• Hugh Johnston: PepsiCo, Microsoft Corporation
• Michael Michelson: Kohlberg Kravis Roberts
• Wayne Riley: Vertix Pharmaceuticals, Compass Pathways
• Andrea Smith: Bank of America

In the UK, the majority of the management team appears to have strong medical, rather than business, backgrounds. Although Andrew Coombs, the UK’s HCA commercial director, previously worked for AXA. As the Palestinian campaign for Boycott, Divestment and Sanctions (BDS) notes:

“AXA’s investment in Israeli banks that finance Israel’s illegal settlements makes it complicit in grave violations of international law”.

Until 2018, AXA also invested in Elbit Systems, Israel’s largest privately-owned arms and ‘security’ company.

From 1995 – 2001 Selvavinayagam Vireswer, currently HCA’s vice president of development, worked for management consultancy giant McKinsey & Co.—notorious for “giving bad advice and working with corrupt entities”. In 2001, Vireswer worked for a year in government under Tony Blair at the Forward Strategy Unit. He was there as warnings grew about Blair’s private finance initiative (PFI), which pushed more public services into private ownership for profit and started the onslaught of outsourcing giants.

Concerns have been growing in the UK about potential conflicts of interest given that NHS consultants can refer patients to private hospitals that they also own shares in. In 2019, the Centre for Health and the Public Interest (CHPI) drew attention to the rising income of consultants with stakes in private hospitals. Among the companies concerned was HCA, which co-owns The Christie Hospital in Manchester, where oncologists had earned millions from investments in HCA. In January 2022, a new CHPI report found that London NHS trusts paid HCA £36.4 million for cancer treatments between December 2020 and November 2021 after ending its agreement with HCA. As the NHS became overwhelmed with Covid patients, there was an acute shortage of beds, particularly for cancer patients needing urgent care. But it’s worth noting that HCA also held “joint ventures with 120 medical consultants” working at these same NHS hospitals. Those consultants earned income from HCA share dividends, on top of fees for treating private patients, an NHS salary and any additional fees paid to them by HCA.

The investigation also revealed that:

• HCA has the UK’s biggest number of consultants with joint NHS/private stakes;
• HCA dominates access to 80-90% of private chemotherapy treatment in Central London;
• Between 2015 and 2020, consultants earned an estimated £31.3m from joint HCA/NHS ventures. Most of this (over £25 million) went to those with stakes in HCA.

Although the revolving door between the government and HCA is more discreet in the UK than the US, Corporate Watch has found that Labour peer Lord Clive Hollick is an HCA (and KKR) shareholder. In 2020, he donated £50,000 to Labour leader Keir Starmer, and has a long record of donations to the Labour Party and to right-wing Labour MPs. He’s seemingly unaware of HCA’s treatment of employees and claims to support gig economy workers.

Frist fortunes

HCA was founded in 1968 by Thomas Frist, Jr. and Sr., and Jack Massey (who also co-owned Kentucky Fried Chicken). The co-founders saw the potential to generate wealth from healthcare. According to the SEIU:

“Thomas Frist, MD, and his co-founders were inspired by ‘seeing what Holiday Inns 10 years before had done in changing basically the travel industry.’ HCA did change the hospital industry. Prior to HCA’s creation, the hospital industry had long been dominated by nonprofits.”

The Frists own the largest stake of HCA shares. According to Forbes, the family’s net worth at the time of writing is $21.3 billion. Between 2020 and 2021, the family’s wealth nearly doubled. Although founder Thomas Frist Jr. no longer holds an executive position at HCA, sons Thomas and William (Bill) Frist sit on its board of directors.

In 2005, when HCA was accused of insider trading, Bill Frist was a long-standing Republican Senate Leader who’d considered running for president. His political career seems ‘almost’ magically charmed.

Following the Medicare scandal, the Frists escaped any criminal charges. George Bush Jr. was in the White House at the time and reportedly:

“dictated the Justice Department deal with HCA that let the crooks escape jail just as Frist was being anointed the Senate’s majority leader. A pure coincidence in timing, of course.”

In 2005, analysis of Frist’s voting record revealed a “pattern of supporting bills that benefit HCA”. During his time as senator, Frist was also implicated in pushing through legislation to protect pharmaceutical giant Eli Lilly from lawsuits over links between its Thimerosal vaccine and autism “and other neurological maladies” in young children.

Bill Frist also has a history “of race-related controversy”. He was accused of making racist remarks on a campaign tour in Tennessee during his first run for public office in 1994. He’s also openly opposed gay marriage.

HCA lobbying funding has continued to grow since 1990, totalling over $3.2 million in 2021. Although HCA donated $169,798 to Joe Biden in the 2020 election, it also hedged its bets with a $74,870 donation to Donald Trump.

Pandemic profiteering, lack of PPE and union-busting

HCA’s profits have increased since the Covid-19 pandemic. One might think this is because HCA hospitals treated increasing amounts of people suffering from coronavirus. But the reality is somewhat more complicated. In fact, the company has received large Covid-19 bailouts in the US and UK, while at the same time cost-cutting on PPE for workers, and clamping down on worker organising.

In March 2020, NHS England “block booked almost the entirety of the private hospital sector’s services, facilities and nearly 20,000 clinical staff” to expand capacity during the pandemic. This was not just to treat Covid-19, but to enable urgent care—such as cancer treatment—to be provided while the NHS scrambled to address the pandemic.

HCA received the fifth-largest contract for beds and staff from NHS England (NHSE) and was paid over £150m to treat NHS patients between March 2020 and March 2021. It also received about £3m in furlough payments from the UK government during the first eight months of 2021.

The company was one of eight private healthcare providers paid a total of £1.69 billion by NHS England for bed capacity during the pandemic. But this billion-pound payout didn’t translate into significantly higher capacity for the NHS. In fact, overall “private hospitals delivered 0.08% of COVID care”. Out of an estimated 8,000 private beds, the highest number ever occupied by Covid patients on one day was only 78.

And by August 2020, the NHS reportedly ended its contract with HCA and two other providers owing to the lack of beds filled and the fees that the companies were demanding.

Following the end of the contract, there was said to be a “real and imminent threat to London’s ability to perform cancer surgery.”

HCA made profits of $3.75 billion in 2021. Yet cleaners at HCA’s London Bridge Hospital had to go through the pandemic without even basic protections. The cleaners launched their campaign complaining of woefully inadequate PPE, unsafe working conditions and the lack of proper sick pay. Ramona Marredo Mendez, a cleaner working for HCA subcontractor Compass, told Freedom News in February 2022:

“We risk our lives working here. The managers have sent us to clean areas full of infected people without PPE. When I caught covid at work, I was forced to isolate for two weeks without the sick pay that directly-employed workers get. The pay is already so low, I can’t afford to take two weeks off on £96.35 a week. When I asked Compass for support in accessing the statutory sick pay, they did nothing so I ended up at home for two weeks with no money.”

A glance at LBH’s reviews on the Indeed ratings site shows that these concerns are widespread. Reviewers mentioned difficulties in taking annual leave, long working hours, difficulties with “dealing with the supervisors”, bad management, rubbish pay, lack of progression, “class culture”, bullying and low pay. Workers used the reviewing platform branded hospital management “terrible” and “despicable”.

The story is similar in the US, where nurses and other workers spoke out about the lack of PPE in several HCA hospitals during the pandemic. Outcry over worker safety in HCA hospitals there increased in 2020 following the deaths of nurses Celia Yap-Banago and Rosa Luna, who worked at HCA hospitals in Kansas City and California, respectively. Both had contracted coronavirus, despite the alarm having been raised about the lack of PPE at work.

But HCA executives’ attention was not on Celia and Rosa, it was on crushing workers’ organising. Instead of responding to the wave of criticism and discontent by taking proper steps to ensure worker safety, HCA hired professional union busters—reportedly costing $400 an hour—to break proposed union actions by nurses in North Carolina. This followed “widespread complaints over cuts in staff, poor communication, and lack of access to basic supplies and PPE”.

HCA received billions in Coronavirus Aid, Relief, and Economic Security Act (CARES Act) payments as a result of the pandemic. As profits grew, it was then able to return $6 billion of this in a stunning PR stunt, while it cut costs in areas directly affecting workers.

LBH cleaners protesting at HCA’s offices. Image: IWGB

HCA and backdoor NHS privatisation

The pandemic, and the toll it has taken on the NHS, has created a perfect storm for the Tory party to extend healthcare privatisation through the back door, creating even greater profits for private healthcare giants. Not only had HCA already earned billions in revenue, it was perfectly poised to step in and profit further from a decimated NHS, exhausted staff and rising waiting lists for vital treatment.

Before the pandemic, HCA reportedly carried out “virtually no work” for the NHS. But it’s used the pandemic to increase all NHS activity, especially in London where it runs six private hospitals and a large portfolio of private healthcare partnerships and clinics. London NHS hospitals’ increased reliance on private healthcare providers such as HCA has raised alarms about “backdoor privatisation” of the NHS. Allyson Pollock, a clinical professor of public health at Newcastle University said:

“Covid has been very much used as a cover for shrinking NHS care and expanding private healthcare provision.”

After the NHS ended its emergency contract with several private healthcare firms in 2020, including HCA, struggling NHS hospitals in London were forced to buy “£36m of cancer care, cardiology and other services directly” from HCA. This spending was in addition to HCA’s chunk of the £2 billion that was initially paid by NHS trusts to private hospitals in 2020. It was also the first time the NHS paid large sums to outsource complex treatments rather than more routine operations.

With waiting lists at breaking point, this is an issue that’s growing. A 2021 survey by openDemocracy revealed that doctors and NHS staff have already advised “one in five” patients to go private to get the treatment they need. And HCA is set up to step in.

The pandemic created a perfect window for HCA which had been moving in on lucrative cancer treatments for a long time. Former HCA special advisor Karol Sikora helped set up London Cancer Group, described as “the largest UK cancer network outside the NHS”, in HCA’s London hospitals. A high profile anti-lockdown campaigner, Sikora also has a long history of pro-privatisation, anti-NHS campaigns. In 2017, Sikora called the NHS “the last bastion of communism” on Newsnight. He’s also linked to Reform, a think-tank funded “by leading outsourcing corporations”. Now director of Rutherford Health, Sikora recently proposed “the biggest public-private partnership in NHS history”and is advising Reform about ‘What’s Next for the NHS’.

A 2021 CHPI report called ‘For Whose Benefit’ analyses the government’s growing use of private hospitals in 2020, which it tried to pass off “as a strategy for alleviating the burden on the NHS”. It found that:

• Government funding guaranteed private hospitals an income which buffered them from financial losses during the pandemic.
• Although private hospitals were initially paid to take the strain off NHS hospitals, very few beds were used and government figures over the exact costs remain hidden.
• So-called elective surgery is non-urgent surgery. It’s here that NHS waiting lists are soaring. Yet, during the pandemic, private hospitals carried out 45% less NHS-funded elective care than in the previous year—the very thing they were supposedly paid to do.
• The deal ultimately benefited private hospitals more than the (already) broken NHS and paved the way for them to increase profits further.
• When the NHS ended its contract with HCA, this benefited the private hospital sector further. It was able to step straight in to perform planned surgeries for additional money—as more people paid for private treatment—because of the huge backlog of patients needing treatment during the pandemic.
• By January 2021, HCA “was performing twice as many self-pay hip surgeries, cataracts and abdominal operations as it had carried out in the previous year”. Only now, these are funded by patients who could afford to pay, leaving those who can’t on ever-rising waiting lists.

HCA has fingers in other profit pies in the UK, too, because it also owns HealthTrust Europe. Listed as an NHS partner, it has £1 billion in purchasing power to provide “procurement and related services”.

All this comes as the Conservative Party is pushing a new Health and Care Bill through the final stages of parliament. Critics say that the Bill is set to continue “the dismantling of the NHS… by adopting more features from the US health system”. HCA—and other US-owned healthcare giants—will profit even more from a struggling NHS. Although MPs and the government insist the bill isn’t about privatisation, the British Medical Association said it would likely “do more harm than good” and make “it easier for private companies to win NHS contracts without proper scrutiny”. The bill contains a sweeping array of amendments designed to benefit private healthcare providers and insurers.

openDemocracy explains that the Bill will also push more people toward private healthcare, while those who can’t afford it are left dealing with a broken NHS and spiralling waiting times.

One key part of the new legislation is to extend Integrated Care Systems (ICS). In theory, these give patients easier access to a range of services in their community: merging health, mental health, social care etc. Extending ICS regions across the UK sets up a system to pay per head providing healthcare from a set pot of funds. But this actually means the less they provide, the more surplus or profit they make. And as NHS for Sale notes, there’s no legislation to prevent private companies running, or bidding for, large chunks of ICS. Critics have warned that the true remit of ICS is to embed “private companies in running the NHS together with digital and data systems imported from the US healthcare market and insurance firms”. Over 200 companies are now accredited with NHS England to support ICS dealing with data and digital systems, many of which are US-owned giants.

Privacy concerns have been raised in the US after HCA signed a deal with Google to develop “healthcare algorithms” by selling access to patients’ medical records.

This all comes amid growing concerns over ways the government used Covid to increase digital surveillance. A 2021 report on surveillance in the UK explains that not only did the government share NHS Test and Trace App (downloaded by over 20 million people) data with police, it also “made deals with private companies” so they had access to it.

Although there’s no mention of HCA (yet), the accredited list includes companies linked to its shareholders and IT is clearly a growth industry for HCA. Given the healthcare giant’s UK dominance and recent deal with Google, it’s not a stretch to assume that it may soon line up to grab more profits.

With a current Tory majority of over 80, the Bill will almost certainly pass. There’s not much hope that the House of Lords will make meaningful amendments either as a significant number of peers (from all parties) have private healthcare interests and business links to private companies. As noted above, HCA shareholder Lord Hollick has already donated significant amounts to Starmer. There’s little chance that the Labour Party will offer serious opposition, as it’s not only backtracked on pledges to end NHS outsourcing to private companies, but Starmer has also defended employing a private healthcare lobbyist. Meanwhile, the UK’s largest union Unite has cut funding to Starmer’s Labour in disgust over lack of support for workers.

For a detailed timeline about the history of NHS privatisation, read this article from Your NHS Needs You.

Photo by Ehimetalor Akhere Unuabona on Unsplash

New allegations of fraud

There’s another big reason to worry about HCA’s intrusion into our tax-funded NHS. Despite settling the huge Medicare fraud case in 2000, an SEIU investigation analysing Medicare data and lawsuits involving HCA has revealed its booming profits and huge investor payouts may yet again “originate, in part, from apparent fraud” by “routinely” admitting patients for spells in hospital “regardless of medical need”.

Alongside this, the pattern of HCA’s callous quest for profit echoes the same complaints of IWGB workers at London Bridge Hospital. The investigation found that HCA’s hospital markups are at least twice the cost of actual care yet, at the same time, it:

“pays tens of thousands of its employees poverty wages, and staffing levels in its hospitals lag the national average by about 30%, despite the fact that higher staffing levels are associated with better patient care. Given this unbridled pursuit of profit over all else, it should be no surprise that HCA’s profits are astonishingly strong…”

The LBH worker’s challenge to HCA abuses is hugely important. If not stopped, the healthcare giant looks set not only to treat more employees badly, but potentially to siphon off more of the NHS’s limited funds wherever it can.

Lobbyists and lurkers

Private healthcare companies in both the UK and US are notorious for lobbying activity.

HCA was part of the Private Hospitals Alliance (formerly known as H5). This UK-based lobby group launched in 2010 at the same time as the government’s NHS White Paper, Equity and Excellence: Liberating the NHS. This time-frame also coincides with HCA International donating £17,000 to the Conservative Party.

As we have seen above, HCA shareholder Lord Hollick was busy bankrolling right-wing Labour figures prior to the last UK general election. Since then he has made a sizeable donation to Labour leader Starmer.

From 2015 to 2016, HCA used consultant lobbyists Burson Cohn & Wolfe. The company has a long history of working with repressive regimes, major polluters and pretty much every dodgy company going.

HCA’s public relations are currently handled by the PHA Group. The largest shareholder of PHA group is Monaco-based, multi-millionaire Simon Dolan who also owns Jota Aviation—involved in delivering PPE. Dolan is also behind anti-lockdown group Keep Britain Free, which took the government to court over lockdown measures.

In the US, there has been a huge increase in the amount HCA has spent on political lobbying in recent years, in particular since 2019. In 2021, unionised workers in the US called for HCA to suspend political donations after evidence emerged that HCA had donated to many of the Republican politicians implicated in the Capitol siege.

HCA in court

There have been a large number of UK employment tribunal hearings against the company, including cases for disability discrimination, sex discrimination, unfair dismissal and breach of contract.

In the US, HCA has a long track record of being embroiled in fraud cases. These include:

• 2000: HCA pled guilty in the Medicare/Medicaid fraud case, and eventually paid $2 billion in fines in 2002.
• 2005: Accusations of insider trading and fraud led to a large court case and a $20 million payout by HCA to shareholders.
• 2012: A scandal erupted concerning unnecessary cardiac procedures being carried out on patients at HCA hospitals. This is one of the many scandals which have been brought to light by whistleblowers. Whistleblower Justice Network wrote at the time: “with the ever-growing healthcare fraud crisis that seems to plague the nation, HCA and its subsidiaries commonly find themselves in hot water”.

The NHS For Sale? campaign also makes the point that these US fraud cases show that HCA isn’t fit to run hospitals in the UK. It writes:

“The major concerns with HCA International revolve around the behaviour of its parent company in the USA, which has been found guilty of large-scale fraud over the years, and has been the subject of an extensive investigation by the US Department of Justice into the company’s practices.”

The company consequently paid the US government over $2 billion in fines for defrauding its healthcare programmes.

Conclusion

From corporate fraud to worker exploitation, HCA is a capitalist giant with a shocking track record. Now, it’s hovering like a vulture to pick the flesh of our broken NHS and boost its profits further. And it’s been enabled every step of the way by successive governments that are hell-bent on privatisation.

The pandemic created a perfect storm for politicians to sell the lie that private healthcare companies—like HCA—are helping to relieve pressure on the NHS with empty promises that it will always be ‘free at the point of use’. The terrifying truth is, that in post-lockdown UK we’ve now got a two-tier health system. Those who can afford private insurance and treatments are the only people who can pay their way out of impossible waiting times. Meanwhile with limited funds, NHS professionals are forced to pay the likes of HCA to save critically ill patients. This adds more to HCA’s billions; a company most people may not have yet heard of. Solidarity with IWGB workers and their campaign is vital because it shines light on what increased healthcare privatisation actually looks like. That picture is shocking. We need to fight to change it.

For more information on the ongoing London Bridge Hospital cleaners’ campaign, see the IWGB.

The post HCA: Promoting US style for-profit healthcare in the UK appeared first on Corporate Watch.

You can read the rest of our Vaccine Capitalism series, including analysis of how much money Pfizer may make from its vaccine, here.

1986: Pfizer had to withdraw an artificial heart valve from the market after defects led to it being implicated in over 300 deaths. The US Food and Drug Administration (FDA) withdrew its approval for the product in 1986 and Pfizer agreed to pay hundreds of millions of dollars in compensation after multiple lawsuits were brought against it.

2003: Pfizer has long been condemned for profiteering from AIDS drugs. In 2003 for example, it walked away from a licencing deal for its Rescriptor drug that would have made it cheaper for poorer countries.

2011: Pfizer was forced to pay compensation to families of children killed in the controversial Trovan drug trial. During the worst meningitis epidemic seen in Africa, in 1996, Pfizer ran a trial in Nigeria their new drug Trovan. Five of the 100 children who took Trovan died and it caused liver damage, while it caused lifelong disabilities in those who survived. But another group of 100 children were given the conventional “gold standard” meningitis antibiotic as a “control” group for comparison. Six of them also tragically died because, the families said, Pfizer had given them less than the recommended level of the conventional antibiotic in order to make Trovan look more effective.

2012: Pfizer had to pay around $1billion to settle lawsuits claiming its Prempro drug caused breast cancer. Prempro was used in hormone replacement therapy, usually for women going through the menopause. The settlements came after six years of trials and hardship for the women affected.

2013: Pfizer paid out $273 million to settle over 2,000 cases in the US that accused its smoking treatment drug Chantix of provoking suicidal and homicidal thoughts, self harm and severe psychological disorders. Pfizer was also accused of improperly excluding patients with a history of depression or other mental disturbances from trials for the drug. Later, in 2017, a coroner in Australia ruled that the drug had contributed to a man’s suicide. The man’s mother campaigned to change the label on the drug.

2020: Pfizer reached an agreement with thousands of customers of its depo-testosterone drug in 2018 after they sued it for increasing the likelihood of numerous issues, including heart attacks.

The post Pfizer: six scandals to remember appeared first on Corporate Watch.

Thanks to the sustained efforts of animal rights campaigners, fur farming was outlawed in the UK in 2000. The widespread awareness of the cruelties involved in its manufacture led to a decline in its popularity and fashion designers largely avoiding it.

But the industry bribed its way back onto the catwalk. In the 2000s, fur auction houses were said to have, ‘aggressively courted designers, especially young ones, to embrace fur by giving them free samples and approaching them through trade groups — sometimes when they are still in college.’

The strategy proved successful. By the early 2010s, fur was making a comeback with designers and celebs desperately searching for something new and unique, and the emerging herds of Instagram influencers promoting luxury lifestyles and products.

While much of the increased demand in the earlier part of the last decade was driven by the nouveaux riches of China, South Korea, and Russia, it was nevertheless noticeable that fur had once again become less taboo in the West. According to the HMRC, by 2019 the UK was importing more than £55m worth of fur, including £5.3m from China. A quick glance at sites such as Etsy, and there is clearly still custom, even if some buyers feel guilty about their purchases.

One major auction house revealed their strategy for manipulating consumers into buying fur, explaining the bizarre prevalence of pom-pom key rings on major furriers’ websites:

“We start with the young consumer buying a fur key ring, then maybe a little later she has more money for a fur bag … Eventually she buys a full coat…[it’s]…all part of the agenda, to inspire the upcoming generation of women.”

European sellers have also ridden on the green capitalist bandwagon, with many doing their best to rebrand their products as as ‘sustainable’ and ‘natural’. Lobbyists such as the British Fur Trade Association and Fur Europe, discussed below, play a major role in this PR effort.

One other likely reason for the industry’s resurgence during these years, ignored by the mainstream media, is the sustained repression against the UK animal rights movement in the mid to late 2000s. Although the brunt of this was felt by those fighting the vivisection industry, the widespread use of injunctions to prevent protests by animal rights activists was also used to stifle campaigns against major fur retailers such as Harvey Nichols, Harrods and Canada Goose (although the injunction against the latter was later overturned). Campaigners’ previous successes and the impact the clampdown had on the social acceptability of fur is testament to the power of grassroots resistance.

Thankfully however, fur sales in the UK have been on the decline again over the past few years. As the campaigns continue, hundreds of major fashion designers have gone fur-free, and the UK government is even considering a ban on the sale of fur. Now is is a better time than ever to make that happen.

Here we provide a non-exhaustive overview of those working to keep the fur trade alive in the UK.

Giles Roca, CEO of The British Fur Trade Association and former Head of Strategy at Westminster City Council

British & European lobbyists

The British Fur Trade Association (‘BFTA’) dates back to 1919 and describes itself as ‘the voice of UK fur’. A list of its members can be found here. Its CEO is Giles Roca. Roca is a PR man who seems to specialise in helping dodgy industries on the decline, having has previously represented the Tobacco Manufacturers Association. Last year he set up a PR consultancy firm, Capital Counsel UK Ltd, to support ‘highly scrutinised and sensitive industries’. Roca’s background is in communications and strategy at Westminster City Council.

The BFTA’s directors are Steven Hurwitz and Pierre Lipski (see below for more on their business interests), Paolo Borello, and Frank Zilberkweit. Zilberkweit was previously involved in the now-dissolved fur merchants Philip Hockley, a company which was the focus of major anti-fur protests in the late 1990s and early 2000s (protests which were also stifled by injunctions). The BFTA is currently fighting the prospect of a ban in UK fur sales.

While it has been officially registered to Sky Gardens in Wandsworth since 2019, the BFTA and its directors have a history of association with two neighbouring Archway addresses, Brookstone House and Bellside House1. Directors Steven Hurwitz and Frank Zilberkweit have run property businesses of the same names. Six members of the BFTA appear to be registered to Brookstone House.

The International Fur Federation (IFF) is an organisation with offices listed in London and Beijing. The IFF’s role has been described as ‘fighting obstacles to the global fur trade’. Its CEO is former Lib Dem MP, Mark Oaten. Oaten has no apparent experience in the industry for which he is now a global spokesperson and advocate. The IFF runs another platform which is used to promote members’ products, the Business of Fur. LinkedIn states that the IFF’s London office is at 100 Borough High Street, London, SE1 1NL. A list of national member bodies of the IFF can be found here.

Fur Europe calls itself as an association representing all parts of the European fur trade. The organisation is based in Brussels, and has been described as responsible ‘for lobbying for the entire fur sector in Europe’. It organises ‘This is Fur’ events in the European parliament where representatives make speeches, lobby MEPs and run stalls. Fur Europe is working hard on its greenwashing, and its website now redirects to sustainablefur.com.

Mark Oaten, former Lib Dem MP and now CEO of the International Fur Federation

British fur retailers

Major luxury brands

Harrods sells a long list of expensive fur products for the Cruella de Vils of the world, including an £18,000 chinchilla coat, and a hideous bag made of unspecified fur, crocodile, and stingray skin. Harrods is owned by Qatar Holding, a subsidiary of Qatar Investment Authority. The CEO is Mathew Powers.

Harvey Nichols is another Knightsbridge department store and purveyor of fur. It went fur-free in 2004 thanks to the efforts of campaigners, however, it abandoned its policy a decade later, triggering new protests outside its stores. It sells products made from coyote, racoon and fox fur, among others. Harvey Nichols has seven stores across the UK, and six abroad. Its parent company is Dickson Concepts, owned by Hong Kong businessman Dickson Poon. His son, Pearson Poon, is Harvey Nichols’ Executive Director, while Manju Malhotra has just been appointed its new CEO .

Flannels is a luxury department store that sells many fur items, including mink rabbit, fox and coyote products. Flannels is owned by Frasers Group plc, headed by Mike Ashley of Sports Direct notoriety. Flannels has repeatedly backtracked on promises to stop selling fur. As a result, the company has for years been the target of the Stop Fur at Flannels campaign, which has picketed its stores and crashed a fashion show.

Canada Goose is a Toronto-based company which sells glorified parkas, lined with real fur and fetching over £1000 in price. The company uses fur from coyotes caught in leg traps. Its Regent Street store has been the site of protestors opposing its use of fur as well as the treatment of geese whose feathers are used to stuff the jackets. Canada Goose is listed on multiple stock exchanges. Its president & CEO is Canadian Dani Reiss, who owns about 18% of the company. In 2017, PETA bought 230 of its shares, enabling it to file shareholder resolutions against the use of fur and goose down. Canada Goose recently announced that it will only use ‘reclaimed fur’ from 2022, but in view of its history, some campaigners view this with scepticism.

Moncler is a Canada Goose rival that sells fur-trimmed parka-type jackets, for which it uses fox and marmot fur. The company also owns menswear brand, Stone Island. Moncler is listed on the Milan Stock Exchange. Its CEO is billionaire Remo Ruffini, who owns over 20% of the company via his investment firm, Ruffini Partecipazioni Holding Srl. A list of other shareholders can be found here. It has over 200 shops around the world, including 12 in the UK – all in London.

Members of the British Fur Trade Association

Steven Hurwitz, British Fur Trade Association director

Hurwitz Exports Ltd is a British fur merchant active since 1945. It calls itself ‘one of the largest suppliers of all types of fur: mainly mink, fox, sable and wild fur’. It is run by British Fur Association directors, Steven Hurwitz and Pierre Lipski. Its subsidiary, Bleistein & Co., is based in Hong Kong and specialises in supplying Chinese fur to the Russian market.

Rachel London is owned by founder Rachel Zeitlin, who is also Vice Chair of the British Fur Trade Association. It sells fur products made of chinchillas, sables, mink, foxes & raccoons. The company also provides consultation services to others in the industry, ‘drawing on Rachel’s contacts, expertise and knowledge’. Rachel London has a ‘1200sq foot showroom’ in North London that can be visited only by appointment.

Rebecca Bradley creates bespoke fur products ‘from any fur’, restores and alters existing items, provides ‘consultation’ services, and runs a shop selling fur teddy bears, backpacks and more.

The Fur Hot Water Bottle Company. Actually a genuine company that sells £175 hot water bottle covers made from rabbits. The idea for the company came to the founder whilst doing some luxury shopping ‘following a girls’ ski weekend’. One of their slogans is ‘Real fur, real warmth. No conscience’. The irony is apparently lost on them.

Betwitched, a bespoke fur company run by Rozalind ‘Ninx’ Flanagan, aka Rozanne Valerie Bulmer. Flanagan’s company is a member of the British Fur Trade Association, and she has participated in a promotional video for Fur Europe.

Rozalind ‘Ninx’ Flanagan of Bewitched, member of the BFTA

Cara Mila flogs mink and sable coats, including one with a £30,000 price tag. The family-run business has an ‘atelier’ (shop) in Bayswater, London at Unit 1, 32 Leinster Gardens, W2 3AN, which must be visited by appointment.

Bijoux Bijon is London-based fur specialist selling remotely. Owned by Rufaro Cherry John-Baptiste.

Furs of Mayfair sells coats made from mink, foxes, chinchillas, unborn lambs’ skins, rabbits, beavers and sables. Directors’ details here.

The London Fur Company sells many mink coats, among other fur items.

Tatiana Bespoke Fur. Fur bomber jackets for hipsters.

For a fuller list of members, see here.

Other fur specialists

DaymisFurry is a significant Manchester-based fur merchant. It is a huge seller on Etsy (with nearly 2000 items on sale) and Ebay (with over 1,000 items available). The company claims to be ‘inspired by the British multicultural scene’ and is run by 26 year-old Weiwei Shi. DaymisFurry’s Facebook page can be found here.

Lanes of Fur London Fox and raccoon fur products. Also on Facebook.

English Rabbit Fur supplies dog coats made from rabbit fur. On Etsy, Facebook & Twitter.

Mad March Hare makes rabbit teddy bears from real rabbits and sells them on Etsy.

Weiwei Shi of DaymisFurry

Major international sellers

Auction houses

Kopenhagen Fur is a Danish fur auction house and the world’s biggest, selling millions of pelts each year to corporate customers. It has just announced its closure over the next 2-3 years.

Saga Furs is another major fur auction house, based in Finland. The company’s most important market is China, representing 70-75% of its buyers. In 2019, it took over the bankrupt North American Fur Auctions (NAFA), once the largest fur auction house in North America. Saga Furs is listed on the Helsinki stock exchange, though its share price has been on the decline since 2013. In a recent annual report, the company described fur production as unprofitable, ‘after three large producers were declared bankrupt’. Losses have been reported over the past three years, with COVID-19 resulting in a pre-tax loss of €10m in 2019-2020.

Sojuzpushnina is a formerly state-owned Russian fur auction house based in Moscow and St. Petersburg. The company sells pelts from a variety farmed and trapped animals at auctions two to three times per year. Well over 100,000 sable skins can be sold at a single auction.

Fur Harvesters Auction is an Ontario-based auction house which sells fur from animals trapped in the wild. In 2017, the company sold 386,400 animal skins, including foxes, badgers, coyote, otters, lynx, raccoons, and mink.

E-commerce sites

Etsy, the cutesy arts and crafts e-commerce site, is a major platform for fur products, listing well over 100,000 non-vintage fur items for sale at the time of writing. But perhaps Etsy’s most important role is in increasing fur’s social acceptability through buyers’ passive exposure to the many promoted accounts selling fur, and the plethora of accounts selling cheaper, more low-key fur products like cat toys and phone covers. The company has a selective policy on which animal remains can be sold. The US company is listed on the Nasdaq; a list of institutional investors can be found here.

Ebay is another major platform for new and second-hand fur products. It has a similar policy to Etsy, only excluding items made from cats and dogs, and animals considered endangered.

Amazon also provides a platform for fur sellers, and is one of many companies to have sold real fur items advertised as fake.

Miscellaneous

T&S Nurseries is a franchiser with farms across the UK breeding rabbits for meat and selling their fur as a ‘by product’. Rabbit Farm Resistance and Animal Aid have been campaigning against the expansion of the farms, with one in Cornwall successfully opposed last month, and another in Buckinghamshire currently seeking planning permission. It claims to be a family-owned company and is represented by Phil Kerry.

United Vaccines is a specialist US company that produces a variety of vaccines for the fur industry. It is headed by Dutch CEO Wim Verhagen (Facebook page here). Verhagen has reportedly been the director of the Dutch national fur breeders’ association since the early 1980s. United Vaccines appears to be majority-owned by a Dutch cooperative federation of furriers (CFE – Coöperatieve Federatie van Edelpelsdierenhouders).

Beyond Retro is vintage clothes chain which sells fur, among other items, at its stores in the UK and Sweden.

Useful resources & anti-fur campaign groups

Coalition to Abolish the Fur Trade (CAFT), a grassroots group campaigning against the fur industry in the UK.

Coalition Against Fur Farms (CAFF), US-based project which publishes details on fur farms in the country.

The Final Nail, a guide to destroying the fur industry and overview of direct action taken against it.

Fur Free Alliance, an international coalition comprised of national NGOs. It promotes bans on fur farming and encourages retailers to stop selling fur.

Humane Society International, a big animal rights NGO with branches around the world. Frequently reports on developments the fur industry and carries out undercover investigations providing insight into conditions on farms. HSI is currently promoting its Fur Free Britain campaign to end the sales of fur in the UK.

Rabbit Farm Resistance is a campaign opposing the expansion of rabbit farms for meat and fur in the UK.

Respect for Animals, a UK-based group campaigning against the fur trade.

The post The Fur Industry: a corporate overview appeared first on Corporate Watch.

Summary

• The WHO is currently exploring the possibility that China’s wildlife farms may be at the origin of the COVID-19 pandemic. Others have more specifically suggested that the country’s lucrative fur industry is a likely source.
• Mink, the animals most widely-bred for their fur, are especially susceptible to contracting the disease and are the only species known to infect humans. Coronavirus cases have been reported across hundreds of European mink farms.
• The European and North American fur industries have been on the decline for years, with a number of major companies going bust. The mass culling of mink to stave off the spread of the virus in Europe and the resulting bans on fur production have hit the industry hard.
• Despite the risks posed by mink farming, China has done little to regulate its fur industry, which is the world’s largest. In fact, Chinese producers are making the most of the global fall in production and rising prices.
• Concerted efforts by lobbyists to rebrand the company as sustainable, and the recent announcement of a new mink vaccine may be sufficient to rescue Europe’s fur trade unless action is taken to shut it down for good.
• The risk of recurring pandemics in the near future remains high so long as toxic industries such as factory farming and the fur trade continue to exist.

Introduction

A WHO delegation to Wuhan has recently announced that Wuhan’s infamous seafood and live animal market, long presumed to have been the source of the COVID-19 pandemic, may merely have served as an early super-spreader event. One prominent theory the team is investigating is whether the virus in fact originated in China’s extensive network of wildlife farms before being carried to the market.

Wildlife farming involves the capture and breeding of wild animals for a broad variety of uses, including food, fur, medicine, experiments, the pet trade and entertainment. A 2017 report by the Chinese Academy of Engineering valued the industry at 520bn yuan, or £57bn.

It goes without saying that the conditions in the farms are hellish, with animals confined to tiny cages and deprived of all needs bar the minimum required to keep them alive. This industrial, 21st century effort to domesticate wild animals is seen as more cost-efficient and lucrative than trapping them in the wild, and has been subsidised by the Chinese government and promoted as a way to alleviate rural poverty.

If the farms were indeed the source of the virus, this would make COVID-19 just the latest disease suspected to have made the leap to humans through intensive animal farming.

Animal exploitation & pandemics: a brief history

Factory farming is one of the biggest risk factors for epidemics and pandemics. Reasons for this include overcrowded, stressed, poorly-nourished and selectively-bred animals with low genetic diversity; unhygienic conditions; the overuse of antibiotics; and the proximity of this population to humans. The risk of a virus successfully infecting a new species is increased with the degree of contact; therefore, animal agriculture heightens this risk.

Leading origin theories for some of the 20th century’s largest pandemics point the finger at animal farming.

The Spanish Flu, possibly the most deadly pandemic in modern history, has its origins in birds, and one leading hypothesis is that it emerged from North American poultry farms. Almost all cases of flu pandemics among humans – including some of the deadliest of the twentieth century – have been caused by descendants of the Spanish Flu virus, having mutated in pigs and poultry to produce new strains along the way. One form infected captive pig populations and later recombined with both human and avian flu to produce a new type of swine flu, which resulted in another pandemic in 2009.

SARS, a coronavirus responsible for a 2002-4 epidemic mainly in China, is believed to have originated in palm civets (also known as civet cats), which have been bred for meat and the production of an expensive coffee known as ‘Kopi Luwak’. The production of this coffee involves such cruelty that even its first importer to the West has since called for the end of the industry, yet it is still being sold to wealthy tourists in destinations such as Bali (in the UK, Harrods sells it for £500 per 250g bag). An alternative hypothesis, however, suggests that the roots of SARS lie in the Chinese fur industry.

MERS is a relatively new coronavirus which is far deadlier than COVID-19, but less transmissible, with cases having been mostly localised to Saudi Arabia. While the virus is still not fully understood, it is known to infect humans via camels, which are bred and farmed on the Arabian peninsula for milk, meat, leather and racing.

Meanwhile, the emergence of COVID-19 in China came fresh on the back of an epidemic of African Swine Fever, which resulted in the culling of over half of the country’s 440-odd million pigs. Although this particular virus does not affect people, a senior Russian epidemiologist has said that mutations which could lead to human infection are possible.

How new viruses emerge

New viruses tend to evolve in two ways:

Mutation: As a virus replicates, mutations can occur along the way. These can alter its characteristics, such as the severity of an infection. An accumulation of mutations can enable a virus to reinfect a host (for example a pig or human) since their antibodies fail to recognise its newest incarnation. These changes can also undermine vaccination programmes.

Recombination: This is when a host is simultaneously infected with two different viruses of the same family, leading to the production of unique viral offspring. So it may well be possible, for example, for a virus to emerge with the transmissibility of coronavirus and the lethality of MERS, if a host is infected with these viruses at the same time. Recombination can happen across species, with the risk being higher the greater the degree of contact.

Captive populations are ideal sites for recombination. A hypothesis under active investigation is that the virus that has caused the COVID-19 pandemic was the result of recombination between coronaviruses circulating among bats and pangolins, with the pangolin strain contributing the elements required to penetrate human cells. The 2009 Swine Flu pandemic is thought to have resulted from a complex recombination in pigs between two pig strains, an avian strain and a human strain. Pigs’ susceptibility to these different types of flu has led to them being called ‘mixing vessels’. However, since they are animals which are intensively farmed in appalling conditions the world over, the odds of them contracting multiple viruses simultaneously are high.

Mutation and recombination can both produce viral strains that have the ability to infect new species, such as that which gave rise to COVID-19.

China’s wildlife trade

Despite having encouraged the growth of wildlife farming in recent years, within the first few months of the pandemic, the Chinese government shut down almost 20,000 sites rearing animals for food. It issued a list of animals which from then on could be legally consumed. Off the list are bamboo rats, porcupines, peacocks and dogs. The government said that dogs could now only be considered pets, in accordance with the ‘progress of human civilisation’ and changing cultural values in China.

However, many animals can still be reared for consumption, including tortoises, ostriches, deer, crocodiles, salamanders, and numerous species that are extensively farmed in the UK and Europe. Meanwhile, the changes failed to curtail any other form of wildlife farming. The condition of the 10,000-odd bears kept on Chinese bear bile farms is likely to deteriorate since the government recommended bear bile as a treatment for coronavirus. Likewise, monkeys can continue to be captured and bred for medical research labs at home and abroad, with the COVID-19 vaccine quest increasing demand. China, along with Mauritius, is a leading exporter of monkeys for vivisection, supplying 80% of the tens of thousands of monkeys imported to the US prior to the pandemic.

Perhaps most noticeably, however, the changes do nothing to address the most lucrative form of wildlife farming: the fur trade. On the contrary, by classing mink, foxes and racoon dogs as ‘special livestock’, the changes only seal their fate.

COVID-19 & the Chinese fur trade

China is the world’s leading producer of fur, rearing over 40 million animals for their pelts in 2019. It is a sector worth 389 billion yuan (£43 billion) a year – that’s 75% of all the country’s wildlife farming. The number of fur farms in the country mushroomed in the 2000s, with European companies facilitating this by supplying mink for breeding and even running joint venture farms in China. And far from being shut down, the fur trade in China is now experiencing a pandemic-induced boom.

The French environmentalist publication, Reporterre, among others, suggests that the pandemic’s origins lie not just in China’s wildlife farms, but more precisely in its fur industry. Its investigation found:

• The three main species bred for fur in China (mink, foxes and raccoon dogs), are all highly susceptible to coronavirus.
• In the top mink farming region of Shangdong, the production of mink fur dropped dramatically by 55% in 2019 (from nearly 15 million mink pelts in 2018 to 6.5 million the following year). After being pressed on this, trade representatives claimed this was merely the result of market stagnation and overproduction.
• Mink have been inexplicably left out of studies on the origins of COVID-19.
• The fur industry may not only be the origin of COVID-19, but the source of the 2003 SARS outbreak too, as ‘China manoeuvred to incriminate the civet, a species of marginal economic importance’ and whose numbers are dwarfed by that of animals bred for their fur, ‘in order to divert attention from and protect the fur industry’.

It has been established that mink are particularly susceptible to coronavirus and transmit it easily among each other. In their recent report, the WHO names the animals as possible ‘intermediate hosts’ which first allowed the virus to spillover to humans; the other contenders are rabbits and raccoon dogs (both widely bred for their fur), pangolins, which are used in traditional medicine, and cats. It recommends that surveys be carried out on animals ‘bred for fur such as mink and racoon dogs’, since there has been a ‘massive’ undersampling of potential hosts. The report was followed by further criticism of the Chinese government’s obstruction and the the lack of access to full data.

Since mink are the only animals so far confirmed to be capable of transmitting the virus to humans, the Chinese government’s failure to thoroughly investigate and rein in its fur trade betrays its eagerness to protect its multi-billion pound industry.

While COVID-19’s full origin story remains inconclusive, scientists have nevertheless highlighted the risks of people being infected by captive or runaway mink, in particular, the threats that mink variants could pose to vaccine efforts. If there were strong reasons for shutting down parts of China’s wildlife industry, there are overwhelming reasons to shut down its fur farms.

COVID-19 & the European fur trade

In Europe, mink’s susceptibility to coronavirus has devastated the fur industry, with infections reported in over 400 of the continent’s 5,000 mink farms, as well as a number of significant mutations. Governments have responded with mass culls, including the slaughter of Denmark and the Netherlands’ entire mink populations. As the world’s top producer of mink pelts, this is ultimately expected to be the death knell of the Danish industry. In fact Kopenhagen Furs, which is the biggest fur auctioneer in the world and reportedly accounts for 40% of Denmark’s production, announced its closure within the next 2-3 years

Yet the industry was on the decline in Europe even before COVID-19 reared its head. Despite growth in demand for fur in the early 2010s, primarily driven by Chinese buyers, the expansion of Chinese mink farming and fall in fur prices had a major impact on European producers. By 2019, mink fur production in Europe and North America dropped 25% year-on-year, with some banks being unwilling to continue financing ailing businesses. In Poland, a major fur-producing country, a third of the country’s farms closed down between 2015 and 2020.

Since the start of the pandemic, public health concerns associated with mink farming have precipitated bans and suspensions in production across the continent. Europe’s fur industry is now on its way out, and it’s time to put the boot in once and for all.

New bans on fur production

In June 2020, the Netherlands announced all mink farms must close permanently by March 2021, bringing forward its phase-out plans by two years. Meanwhile Ireland is expected to ban mink farming by the end of the year, with the 120,000 mink on Ireland’s three remaining fur farms ordered to be culled.

Poland, the world’s third biggest fur producer, is in the process of passing a ban – although rabbits will be excluded from its scope. Similarly, Hungary announced a ban due to ‘animal welfare concerns’ and public health risks, but inexplicably excludes chinchillas.

In September, France declared an end to mink farming, yet is dragging its heels and wants to postpone the closure of its four remaining farms until 2025.

Denmark, Sweden, Belgium and Italy have all made more lacklustre announcements: mink farming will be suspended in these countries until 2022.

As we can see, the changes don’t spare all fur-bearing animals, and while the Chinese fur trade is horrific, many exposés by undercover activists shed light on equally harrowing scenes in European fur farms. These include cages littered with dead or dying animals, starvation, and cannibalism. Filthy conditions, sick and injured animals, cages barely large enough to move in, and animals driven to madness, aggression and self-mutilation are the norm.

Despite having banned fur production in the UK 20 years ago, rabbits are still farmed in the country, with fur being passed off as a mere ‘by-product’ of meat. Campaigners are currently fighting against one franchiser’s proposals to build more such farms in the UK.

Industry survival strategies: mink vaccines & greenwashing

As it clambers to maintain a foothold, the fight against the European fur industry is far from over. And its salvation may come in the form of a vaccine.

The Russian veterinary and agricultural agency Rosselkhoznadzor has just announced the creation of a successful vaccine for mink, foxes and other animals, known as Carnivak-Cov. Mass production expected to begin this month. Breeding facilities in various countries, including prominent fur producers such as Greece, were said to have ‘expressed interest’.

Meanwhile, the US firm Zoetis, which calls itself as the ‘largest global animal health company’, is still working on its own a vaccine for animals including mink. Medgene Labs, a much smaller US company, has also been developing a vaccine. If the mink coronavirus vaccines prove viable and affordable, they may be enough to rescue the decaying industry from its death throes.

Mink are already vaccinated against many diseases. In the US, fur farmers are said to be precariously dependant on just one vaccine supplier, United Vaccines, a US company which specialises in producing vaccines for the global fur trade.

The concerted efforts of fur industry representatives such as the International Fur Federation, Fur Europe and British Fur Trade Association over the years to promote fur as ethical, natural and sustainable are also likely to present further obstacles to change.

And while mass mink culls have taken place in Europe, ‘little action’ has been taken in China against its mink farms. In fact, the culls have caused the global price of fur to shoot up by a third, which has been fully taken advantage of by Chinese producers. The year’s events will likely leave China the world’s biggest producer of mink pelts, overtaking Denmark’s plummeting output. This only adds further credence to the theory that the state has been protecting the country’s fur trade and shielding it from the scrutiny of COVID-19 investigators.

The COVID-19 vaccines: why we can’t technofix our way out of a pandemic

The various human coronavirus vaccines now being used are likely to shield us from the worst of the disease. However, neither the human nor animal vaccines should signal a return to business as usual.

For one, the virus could evolve as it seeks to ‘get round’ the inoculation drive, meaning there is likely to be a sustained effort to develop vaccines that are effective against new strains for years to come.

The risks of mutation and recombination as the virus continues to infect captive populations, whether intensively-reared animals such as those held in the UK’s expanding network of megafarms, or humans kept in institutions such as prisons or detention centres, remain high. Various strains of COVID-19, as with other coronaviruses, are highly unlikely to just disappear. So long as there are vast pools of captive animals, viruses will simply continue to evolve – even if the original strain becomes less deadly.

This risk of mutation or recombination is particularly high as long as fur farms continue to operate, given mink’s susceptibility to the disease. Attempts to develop a vaccine for farmed mink are aimed at propping up an industry that may well be the origin of the pandemic. Capitalism has always seen animals as commodities and intensive farming is merely an extension of this mentality. As long as resources are injected into the survival of this system, our species is being committed to successive plagues, and we have no control over what form they will take, nor how deadly they will be.

Today, our species may be considered to be at the height of medical and technical skill, but we can’t break the current bind with more vaccinations, antibiotics and steroids – for either humans or livestock. Despite the staggering scientific advances of the past 200 years, the conditions that make us vulnerable to pandemics are arguably more present than ever: dramatic changes to ecosystems, and the massive growth in industrial animal farming.

By upsetting the balance, encroachment into wild spaces increases the risk of viruses and other pathogens infecting new animal species, while the growth in intensive animal agriculture provides the perfect environment for their leap to humans. The frequency of ‘spillover events’ in which pathogens jump from animals to humans, has doubled or even trebled in the past 40 years, and this has been linked directly with the conversion of forested areas to livestock production.

From ‘virus factories’ to a sustainable future

Following Denmark’s national mink cull, stories emerged of the animals resurfacing from their graves and contaminating the local groundwater. A striking metaphor perhaps for a toxic industry that needs to be laid to rest once and for all.

Many former wildlife farms in China are now being subsidised for conversion to other uses, such as mushroom-farming and brewing. Mushrooms are popping up, quite literally, in former cages where once sad and terrified wild animals were raised to be eaten. This must happen in fur farms too.

The European fur industry is slowly dying, it just needs a push. Recognising intensive animal farming as a major source of pandemics, particularly the vulnerability of mink farms to COVID-19, is the first step. Humane Society International is pushing a #FurFreeBritain campaign to ban the sale of fur countrywide, and there’s no better time to back this demand. But ending the industry in one part of the world will not safeguard us from future coronaviruses. It must be wiped out everywhere, along with all other forms of animal exploitation.

See here for part two of our series on the fur trade, which explores the marketing strategies used by the industry to maintain consumer demand, and maps the companies and lobbyists sustaining the fur trade in Britain and abroad.

Illustrations by Lanternfish.

The post Animal farming & COVID-19: from China’s wildlife trade to the European fur industry appeared first on Corporate Watch.

Telling the story of the search for the COVID-19 vaccines puts capitalism under the microscope. It is a story that helps us to zoom in on why the pharmaceutical industry is set for one of the biggest profit windfalls in its history. And it magnifies our view of the commanding role of the capitalist state in a process that the likes of Boris Johnson present as driven by corporate ingenuity and naked competition – but in reality is driven by our wealth and by scientific knowledge that is part of the commons.

As we get to the end of the story, we find out that the search for the vaccine is not really a search for a cure at all, but a search to avoid dealing with the causes of the virus.

A sustainable business model

In April 2018, long before COVID-19 emerged from the zoonotic swamp, a report by Goldman Sachs analysts proposed that providing a “one shot” cure for diseases could never be a “sustainable business model.” Noting the advances made in gene cell therapy and gene editing – advances that paved the way for the COVID-19 vaccine – they said (with more than a hint of regret): “such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies”.

The Goldman Sachs analysts were only saying what everybody in the drug business knows: there is much less money in preventative medicine and vaccines than there is in treatment for chronic conditions. Until this virus came along, it was much more profitable to keep people with chronic conditions ill than to actually cure them. And, as the Prime Minister rightly says, Big Pharma follows the money. In 2019, the global vaccines’ market size was $47 billion. Sales of just four ‘treatment’ drugs matched this volume of sales (Humira, used to treat rheumatoid arthritis; Keytruda, the cancer treatment; Revlimid, used to treat multiple myeloma and Opdivo, also a cancer treatment). Before 2020, the vaccine industry was a classic oligopoly: four big players accounted for about 85% of the market (GlaxoSmithKline, Sanofi, Merck and Pfizer).

The concentration of power in the industry, and its constant benchmarking with the lower risk business model that shapes the rest of the industry explains why earlier coronaviruses SARS 1 and MERS had no vaccine. With both viruses, tests were initially conducted on animals but not on humans. As the virus died out, so did the research. The Ebola vaccine – largely funded by WHO aid – was finally approved in 2019, a full 6 years after the start of the epidemic in West Africa. The Zika virus is currently undergoing clinical trials, but no vaccine is expected on the market soon.

There can be little doubt that racial capitalism and geo-economics has shaped our response to this virus. Previous viruses did not threaten our economy. Contrast the costs of Ebola to West African countries (estimated at over $50 billion) and the costs of the 2015 Zika virus outbreak to Latin America and the Caribbean (estimated at $18 billion). The most advanced economies stand to lose at least 4.5% of GDP as a result of this pandemic, as cost to production that is estimated at $28 trillion. This is counted in the trillions. The COVID-19 vaccines were needed to save the people of the Global North (and of course our economic system).

Indeed, equity held by the richest investors jumped in value at key stages in the vaccines’ development. The first of the vaccine trials published hopeful results in early August. By the end of the month, the world’s stock markets were reporting the best August in decades. The ongoing recovery in shareholder value through the last quarter of 2020 encouraged by the imminent vaccine roll-out also saw hedge funds reporting the biggest gains in more than a decade.

Our vaccine

The vaccines developed to deal with COVID-19 have undoubtedly given us a unique springboard to develop other vaccines in future. Yet this does not make up for years of neglect. We started from a low knowledge base about COVID-19 precisely because the big four had calculated that developing vaccines for the earlier coronaviruses was not worth the portfolio risk.

Our earlier Vaccinating Capitalism report on the profits being made by the main vaccine producers shows how this time portfolio risk was taken out of the equation. The reason the COVID-19 vaccines arrived at such warp speed is that the risk model changed overnight. Indeed, the normal risks associated with vaccine development were almost completely removed from investors. First, research and development, combined with direct subsidies, were mobilised on an unprecedented scale. Second, governments used our money to place the biggest drug advance orders in history and remove all market risk from future sales. Those two things prompted an unprecedented single-purpose investment in the sector. This unprecedented investment will, of course, be followed by unprecedented profits.

The development of this vaccine is part of a vast system of public subsidy that deceives the public into thinking that it is private capital in the form of Big Pharma that saves us through its innovation. Yet perhaps the biggest subsidy to those companies is hidden.

Universities provide trained scientists, a foundation of knowledge that has been built up over hundreds of years. It is in universities that the rules for clinical research are developed, and it is university researchers who establish the system of peer review and publish results in academic journals. Universities make the largest social contribution to verifying and disseminating scientific breakthroughs. It is knowledge that we hold in common. Part of the ‘commons’ it may be, but in economic terms, this knowledge production counts as an ‘externality’: an invisible subsidy that never shows up on a corporate balance sheet.

The infrastructure that produced the vaccines was nurtured in publicly funded universities, in public institutes and in heavily subsidised private labs. When we recognise this, we realise that it is we who are saving Big Pharma from its failure to develop an effective vaccine against similar viruses in the first place.

Vaccinating Capitalism

Most infectious disease experts expect that new viral diseases resulting from zoonotic ‘spillover’ – moving from animals to humans – will become ever more frequent occurrences. SARS-Cov-19 is not the first case, and we are likely to face many more. There are difficult issues that we need to face regarding this unprecedented vaccination programme: how it allows governments to avoid tackling the root causes of SARS-Cov-2, and indeed may help weaken our defences against the next pathogen that spreads from animals to humans.

We know some of the main drivers of spillover. One is deforestation. New pathogens are released when land that has been left relatively un-touched is cleared for development and industrial use by humans. Once wild animals carrying those pathogens are displaced, the pathogens then need to maximise the opportunity to ‘leap’ from one species to another in a process of genetic drift. This is not an easy process. But, as writers like Rob Wallace have been warning us for years, large scale industrial farming can vastly increase the chances of a virus mutating into a form that can make the leap. Once it is in the human pool, it finds its most fertile conditions in closely packed workplaces like factories, warehouses and call centres.

The problem is that it is not just us who are being vaccinated but capitalism itself. The danger is that the vaccines will merely provide a short-term “technofix” which helps ensure the survival of the system that keeps on killing us.

The entire public funding effort – furlough, government loans, suspension of the normal regulatory rules – has had one primary aim: to keep corporations on life support. Some of our most damaging and irresponsible corporations have been kept alive by public funding, often in ways that have allowed them to sack workers, rip-off customers, and profit from intensifying poverty. Meanwhile, the Covid crisis (despite all the celebratory news about falling pollution levels) has also been used to weaken efforts against climate change. Corporations in Europe and North America have taken the opportunity to lobby hard – with some success – for environmental deregulation and further weakening of Paris Agreement targets.

The development of the vaccines will save many lives, but there is a price to pay. The profit-maximising, risk-minimising model ensures that we, not the corporations, will ultimately end up paying the financial costs. But there is an even higher social cost that might be paid. If we don’t deal with the root causes of the problem, and simply continue to reproduce the same uncontrolled conditions of capitalist development and industrial farming, then we will keep being exposed to more and more zoonotic pathogens long after we have got rid of this one.

The post Vaccinating Capitalism: corporate pharma raids the commons and leaves the root causes untreated appeared first on Corporate Watch.

Here we look at the three leading vaccines now approved in the UK and Europe: those made by BioNTech and Pfizer, Astra Zeneca and Oxford University, and Moderna. Just how much money are the companies behind them going to make? How have they been supported by the public sector? And whose pockets will the money end up in?

How much profit will they make from the vaccines this year?

BioNTech/Pfizer: estimated $4 billion profit, after sales of $15 billion. Pfizer says it already has orders for at least $15 billion worth of vaccines, at around $19 a shot. According to the Financial Times, the profit margin could be close to 30% this year. Unashamedly working to maximise profit, Pfizer is reportedly driving a hard bargain when negotiating sales with both richer and poorer countries.

Moderna: estimated $8 billion profit (i), after sales of $18.4 billion. Moderna says it is on track to produce at least 700 million pre-ordered vaccines in 2021. Moderna’s jabs are the most expensive, between $25 to $37 a shot and the company says the cost of producing its jabs will be as low as 20% of sales.

Oxford/AstraZeneca: unknown profit, after forecast sales of $6.4 billion in 2021. It is selling at the cheapest price (for now) and they have promised to produce at cost without making a profit “during the pandemic”. But what does that really mean? One leaked contract seen by the Financial Times suggests they could declare the pandemic over and hike prices at any time from July. And AstraZeneca’s contract with Oxford University reportedly allows the company to make as much as 20% on top of the cost of manufacturing the jabs. In another sign of the limits of the “at cost” pledge, poorer countries including Bangladesh, South Africa and Uganda all appear set to pay more for the vaccine than the EU.

NB: The vaccines are being bought by governments around the world in advance bulk orders. Those profit figures, therefore, come overwhelmingly from sales to public authorities. As we see below, governments also massively subsidised the vaccines’ development. So the public sector is paying twice over: first to fund research, next to buy the results at inflated prices.

What about future years?

This is anyone’s guess. Given the amount of vaccines in development, competition may keep costs down. But if some prove more effective than others, and COVID-19 jabs become a regular event with annual boosters as for flu vaccines, the profits could keep rolling in for years to come. And once the pandemic’s intensity dwindles, all companies may feel free to hike prices further. For example, Pfizer’s chief financial officer told analysts the current price is “not a normal price, like we typically get for a vaccine — $150, $175 per dose. Let’s go beyond a pandemic pricing environment, the environment we’re currently in: obviously, we’re going to get more on price”.

How much did the vaccines cost to develop?

Exact figures are corporate secrets, but it seems likely they each cost around $1 billion to develop. Initial research for a new epidemic vaccine may cost an average of $68 million – though the COVID-19 jabs were developed much quicker. But the main cost is running large scale “Phase 3” trials – for the COVID-19 vaccines these have been bigger than usual, with tens of thousands of volunteers.

How else will the companies benefit?

The vaccines are a massive PR coup. The companies have become household names, and in a good way. That’s quite a turnaround for an industry that was reviled like few others after decades of profiteering. Whether the vaccines could have been produced in a more accessible, fairer way is only now starting to enter public debate, at least in the UK.

The science that underpins the company’s COVID-19 vaccines may also be put to use to treat – and profit from – other diseases. Moderna hopes its mRNA technology can be used to treat cancer, the most lucrative pharma ‘market’. Vaccitech, mentioned above, is raising huge amounts from investors on the hope its COVID-19 tech can be used to treat hepatitis and MERS. Development of the science has likely been helped by ‘road-testing’ through the vaccine roll-out.

Who invented the vaccines?

BionNTech/Pfizer: Research was done by BioNTech, a German pharma research company. Pfizer came in as partner once the vaccine was ready for trials.

Moderna: The vaccine was “co-developed” by Moderna and US government scientists working for the National Institute of Health (NIH). There is some mystery over the exact roles of the NIH and Moderna, just who owns the intellectual property – and why the US government has apparently allowed Moderna to keep all the profits.

Oxford/AstraZeneca: Oxford University scientists at its Jenner Institute and Oxford Vaccines Group, led by Professors Sarah Gilbert and Adrian Hill.

The companies’ spin presents the COVID-19 vaccines as a triumph for corporate science. In fact only one of the three leading vaccines, the BionNTech/Pfizer one, was developed by the private sector (making money from the inventions of others is a classic big pharma play – read our explainer here). Also: all the teams benefited from initial research by the Shanghai Public Health Clinical Center, which published the first genomic sequencing of the COVID-19 virus freely on the open source site virological.org.

Were there any plans to produce vaccines without Big Pharma profits?

Oxford first considered allowing a range of manufacturers to produce its vaccine without selling exclusive rights to any corporation. But, according to the Wall Street Journal, senior executives at the university, along with major funder the Bill and Melinda Gates Foundation, argued they couldn’t manage a “global roll-out” without the help of big pharma. The university initially entered talks with US pharma giant Merck, before eventually signing with AstraZeneca in April 2020. The deal involves a full license to produce and sell the vaccine in return for $90 million and a 6% share of future royalties, which the university says will be reinvested into medical research. Vaccitech Ltd, a private “spinout” company whose directors include Professors Gilbert and Hill, will get 24% of the university’s cut.

How much public subsidy did they get?

BioNTech/Pfizer: €465 million (around $550 million). Research was funded privately. But they received a €100 million development loan from the European Investment Bank, and a €365 million grant from the German government, to help with manufacturing.

Oxford/AstraZeneca: around $1.3 billion. The vaccine came out of long-term research at Oxford University funded by the UK government and others. The government contributed over £87 million more to develop the new vaccine in early 2020.ii The US added up to $1.2 billion more as part of its “Operation Warp Speed”.

Moderna: over $955 million. US government funding included: an undisclosed amount for phase 1 trials in March 2020; $483 million in April for phase 2 and the start of phase 3 trials; another $472 million to expand phase 3 trials in July. Moderna also got a $1 million donation from Dolly Parton.

As well as these research subsidies, the companies received huge pre-orders from governments even before their vaccines had been approved for use. The US government for example made massive $1.95 and $1.53 billion pre-orders of the BioNTech/Pfizer and Moderna jabs through its Operation Warp Speed.

Who will get the money?

Pfizer/BioNTech: Profits are split 50/50 between the two companies.

Shareholders will receive ‘dividends’ – cash paid out from company profits. Pfizer’s main shareholders are global investment funds: especially Vanguard Group (7.6%), State Street Global Advisors (5%), and BlackRock (4.9%). Run by some of the world’s richest, most powerful people, such as Blackrock CEO Larry Fink, between them this “giant three” control approximately $20 trillion of the world’s assets. Meanwhile, Pfizer’s CEO Albert Bourla made headlines selling £4.2 million of Pfizer shares the day it announced its vaccine worked.

BioNTech is generally presented as a rags-to-riches success story for two immigrant doctors, the husband and wife team of Uğur Şahin and Özlem Türeci. The vaccine has made them billionaires. But the company’s main owners, who owned around 50% last year, are the biotech investor twins Thomas and Andreas Struengmann. They made their first billions from generic medicine company Hexal they set up in the 1980s, then sold to Novartis in 2005.

Moderna: Shareholders include chairman Noubar Afeyan (14% share at start of pandemic), CEO Stéphane Bancel (9%), and professors Timothy Springer (Harvard) and Robert Langer (MIT). They have suddenly gone from directors of a loss-making company to multi-millionaires. Moderna shares have massively increased in value during the pandemic and Bancel in particular has sold off chunks of his holdings in recent months, taking out millions in cash. Moderna listed on the stock exchange in 2018 and its biggest institutional investor is Scottish investment fund Baillie Gifford, which has been buying up more shares recently and now has over 11%. The US giants Vanguard and BlackRock are next, with 5.7% and 4.1% each. One mystery over the Moderna vaccine is if any money will go back to the US government who “co-developed” and funded it.

Oxford/AstraZeneca: AstraZeneca, headquartered in London, is a global megacorp owned by the same big investment funds as Pfizer and others. At the end of 2020 its three biggest owners were BlackRock (7.5%), Wellington Management (5.2%) and Capital Group (4.3%).

According to the Wall Street Journal, Oxford University stands to get 6% of future royalty payments. 24% of those will be passed on to Vaccitech Ltd, a “spinout” private company whose directors include vaccine researchers Professors Gilbert and Hill. They each own around 5% of Vaccitech’s shares. The main shareholder (46%) is an investment company called Oxford Sciences Innovation (OSI), set up by the university to channel capital into its spinout businesses. OSI has numerous shareholders besides the university itself – including Google Ventures, Huawei, Chinese pharma company Fosum (which also owns shares in Moderna), the sultanate of Oman, as well as banks and private equity funds.

Could it have been different?

The initial research that sequenced the COVID-19 genome and kick-started the vaccine race was published open source, free for all to use. Imagine if vaccine research was also published openly and without patents, so that all manufacturers, including in the global south, could produce what they need at cost price. How many lives could that save? But that would threaten the profits and property rights of some of the world’s most powerful companies and investors.

The post Vaccine Capitalism: a run-down of the huge profits being made from COVID-19 vaccines appeared first on Corporate Watch.

With some of them becoming household names in the UK with the mass vaccine roll-out, we have made this short guide to help people understand the industry and just how it makes money from our health (see also: our breakdown here of the profits big pharma companies are set to make from the COVID-19 vaccines).

1) Follow profit, not need

One of the biggest problems with a system that directs medical research towards profits rather than needs is that R&D funding is channelled to those products that can make pharma companies the most money. The best prospects are drugs targeted at patients who are high-value and who will use the drugs long term. Best of all are patients in the US, where prices are highest, and with chronic conditions requiring repeat prescriptions. Or, as in the case of opioids like Oxycontin, where the drugs are highly addictive. On the other hand, one-shot vaccines for epidemics that mainly affect poorer countries are the classic example of a bad business prospect. Thus vaccine research was relatively neglected until last year – when COVID-19 suddenly became a rich country issue, and state funding poured in.

2) Patent everything

Pharma companies hold patents – licenses guaranteeing their “intellectual property” rights – on new medicines. This means no one else is allowed to produce the drug without their permission for the life of the patent, which is 20 years in most countries.

The theory of free market capitalism is that if one company makes high profits, then others will come in and make the same thing but cheaper, pushing down prices and profits. But the pharma industry is no competitive market. Patents mean that pharma companies have legal monopolies on particular drugs: because no other company can undercut them, they can set high prices and make big profits.

The intellectual property system is enforced by governments worldwide under the TRIPS agreement, which is one of the key documents of the World Trade Organisation (WTO). Some states are more ardent enforcers than others. The US is particularly well-known as a strong defender of companies’ intellectual property; the EU is not far behind (see this recent report by Corporate Europe Observatory).

Governments including India and South Africa, along with NGOs such as Medécins Sans Frontières, have called for vaccine patents to be waived during the COVID-19 pandemic. This could allow poorer countries to start manufacturing their own vaccines at cost price – rather than wait until 2023 for pharma corporations to meet their orders. The idea is being strongly opposed by the US, EU, UK and other rich countries.

3) Price much, much higher than costs

How do pharma industry supporters justify a system that denies affordable drugs to billions of people? The argument is that this is the only way to cover research and development (R&D) cost for new drugs. The main US industry lobby group Pharmaceutical Research and Manufacturers of America (PHRMA) says: “On average, it takes 10-15 years and costs $2.6 billion to develop one new medicine, including the cost of the many failures.” Without patents, they say, rivals could just copy their recipes and no one would ever bother to develop new medicines.

Drug companies on average spend about 20% of all their sales revenue on R&D.ii This is indeed high compared to other industries: only the aviation and space industry is more R&D intensive. But even so, sales cover costs many times over. Once drugs are on the production line, the actual manufacturing costs are tiny compared to often sky-high prices (unlike spacecraft, which are quite expensive to produce). Which explains that 20% profit margin.

Insulin usually costs less than $6 a vial to make, but sells for as much as $275 in the US (one example given by the campaign group Patients for Affordable Drugs). In Europe, pharma giant Gilead charged an average of €55,000 for a 12 week Hepatitis C treatment – when pills cost less than €1 per pill to manufacture. Such extreme examples illustrate a general pattern. One academic study found US pharma companies have an average 71% “gross profit” margin on drug sales – the money they make from a drug after the cost of producing it, but before company-wide costs such as marketing, taxes or executive bonuses.

4) Minimise risk

The pharma companies argue they have to bear the risk of developing experimental drugs that never make it to market. For example, the average cost of a new cancer drug has been estimated at $648 billion. The $2.6 billion figure cited from PHRMA above is actually a “risk weighted” estimate which “includes the cost of many failures”. If a pharma company invents 10 drugs costing $260 million each, but only one gets approved, then it has cost $2.6 billion overall to produce one it can sell.

Except that isn’t what happens. The reality is that major pharma companies only “invent” a handful of the drugs they patent and sell. In 2019, PHRMA’s member companies only spent $13 billion on preclinical research – most of their R&D spending goes on later stage development trials, after drugs have been discovered. An analysis of two Big Pharma giants shows that Pfizer only developed 10 out of 44 best-selling drugs “in house” (23%) – and Johnson & Johnson only developed 2 out of 18 (11%). The “innovation” largely happens in university and government labs, or in those of smaller research companies.

And a lot of it is state-funded. The US National Health Institutes, the main (but not the only) government medical research body, gives $39.2 billion a year to universities, medical schools and other research organisations.

Once the drugs have been found, the pharma giants step in – to buy up a license, or a whole company – once the drug has already proved itself through initial tests. (See also: recent US report on this.) The COVID-19 vaccines are classic examples.

5) Lobby, lobby, lobby

The pharma industry is powerful, with a lot of friends in high places. In the US, the country with the world’s highest drug prices, pharma spends more than any other industry on lobbying. Over 22 years pharma companies and industry groups have spent $4.45 billion on lobbying US politicians – almost twice the amount of the next highest spending industry, insurance. According to OpenSecrets, the industry has over 1,450 lobbyists working for it, 66% of whom are former government employees. And this is just the most public, officially declared, face of pharma’s political influence – it just scratches the surface of a grubby world of political donations, board positions, “revolving doors”, and more.

A report by Corporate Europe Observatory details how the EU has become a “complacent or complicit” tool defending pharma property rights. The price tag seems to be cheaper in Brussels: the top ten pharma companies spent up to €16 million on lobbying there in 2019. In the UK, stories have emerged such as the industry funding patient groups to help lobby for new drug treatments; or NHS England commissioning research for its purchasing strategy from a lobbying group funded by the industry.

And of course, these governments are also major big pharma customers: they pay out billions of their taxpayers’ pounds to buy the companies’ drugs.

Some further reading:

Bad Pharma – Ben Goldacre. Very detailed survey of pharma industry malpractice, particularly looking at issue of who trial results are systematically fiddled.

Pharma – Gerald Posner (2020). A journalistic history of the pharma industry (mainly US) and its crimes.

US Government Accountability Office (2017) report on US pharma industry, gives a useful overview of main issues.

Patients for Affordable Drugs – US campaign group

Corporate Europe Observatory – reports on pharma industry politics in Europe

Notes

The post Vaccine Capitalism: five ways big pharma makes so much money appeared first on Corporate Watch.

Over the past four years Corporate Watch has supported Deliveroo couriers with research to help their campaigns for better pay and rights. In this profile we look at Deliveroo’s business model, how it makes money, who’s in charge, its important partners, who is set to benefit from its upcoming stock market splash, and who it needs to please for that to go well. Some stand-out points:

• CEO and co-founder William Shu could see his personal stake in Deliveroo rise to £500 million when the company puts its shares up for sale on the stock market this year. Other major Deliveroo shareholders, including corporate giant Amazon, also hope to make big sums.

• Meanwhile, Deliveroo couriers continue to struggle with poverty wages and insecure employment. They have taken strike action in at least 9 of the 11 countries Deliveroo works in over the last three years.

• Analysis of company accounts suggest Deliveroo was making good money from couriers’ work even before the pandemic and could have afforded to pay them better while still making money from its deliveries. The huge overall losses reported by Deliveroo appear to have been caused by its rapid expansion, a strategy designed to please investors, not riders.

• Ahead of the stock market launch Deliveroo has recruited new directors such as Lord Wolfson, multimillionaire boss of clothes chain Next. He has spoken out against the Living Wage and has said £6.70 an hour is enough for workers to live on.

• Deliveroo’s biggest partners include restaurant chains Wagamama, KFC and Nando’s, with grocery deliveries for Aldi, M&S, the Co-op and other supermarkets another growing business.

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Deliveroo couriers in the UK are currently organising and campaigning through the IWGB union’s ‘RooVolt’ campaign. Click here to find out more.

What’s the business?

Deliveroo was founded in 2013 by William Shu, the current CEO, and Greg Orlowski. Customers order food from over 140,000 restaurants and takeaways through its app; Deliveroo sends its 110,000 couriers to pick up then deliver that food, and takes a cut from the orders, plus a delivery fee from customers.

Company propaganda paints Deliveroo’s rapid growth as due to its innovative business model and tech – the efficiency of its ‘Frank’ algorithm for allocating drivers. In reality, its money-making formula is nothing new: it takes as big a cut as possible from the restaurants, while also squeezing workers’ pay to the bone.

On the restaurant side, commissions in the UK can be as much as 35% plus VAT. In May 2020, one pizza restaurant owner told CNBC that Deliveroo’s cut works out at 42% per order when VAT is factored in.

On the other side, the business model means making sure very little of that commission reaches the people who actually deliver the food. Deliveroo has claimed it pays its couriers over £10 per hour, on average, across the UK. Couriers dispute this. A report compiled by MP Frank Field in 2018 found some made as little as £2 per hour once their costs were taken into account. Other common complaints include being classed as self-employed contractors with fewer rights than other workers, lack of safety and protection, job insecurity, and lack of support during the COVID-19 pandemic.

Registered under the name Roofoods Ltd, Deliveroo is headquartered in a swanky London office and is active in nearly 800 towns and cities across 11 countries. As well as the UK these are: Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, United Arab Emirates and Kuwait. A failed attempt to enter the German market ended in 2019, as the company failed to win sufficient market share against established competitors.

Deliveroo has not yet published information on where it makes most of its money but research firms reckon the UK is easily its biggest market, followed by France, Italy then Spain. Within the UK, the company appears to do the most business in London, followed by Manchester, Birmingham and Leeds. The company delivers from a range of different restaurants but the most important appear to be the big corporate chains – particularly KFC, Wagamama, Nando’s and Burger King (see more on these at the bottom of this profile).

Rise of the dark kitchens

A further twist in Deliveroo’s business model is its use of “dark kitchens”. Also called “ghost” or “cloud” kitchens, these are low-cost food preparation units in industrial estates. The food may be prepared using the recipes, branding and pre-packaged ingredients of a recognised high street chain – without going anywhere near an actual high street restaurant, so slashing the bill for rent as well as front of house costs. As Financial Times columnist Tim Hayward puts it, dark kitchens are “the logical extension of a system that sees food as a manufactured item and replaces hospitality with a supply chain”.

Deliveroo helped pioneer the model in the UK. In June 2017 it had five “Deliveroo editions” sites in London and one in Brighton, hiring out kitchens it had built and equipped to restaurant chain partners. Shu then described the model as the “the biggest development in the market since we first launched”. By the start of 2021 Deliveroo operated 32 of its own dark kitchen sites worldwide, each of which may hold a number of actual kitchens, and it has announced plans to double this number.

Deliveroo is now by no means the only player in the market. Investment capital has piled into the idea in the last couple of years, including funding start-ups such as Karma Kitchen whose whole business offering is to hire out dark kitchen space.

However, there could yet be problems ahead for dark kitchen operators. Many may operate in a grey area without adequate planning permission. Deliveroo has clashed with local authorities over planning and nuisance complaints, and this could become a bigger issue as the sector grows – and possibly provokes resistance.

Worker resistance

In most places where Deliveroo works, there is resistance from its riders. There have been strikes across the UK and court cases around the company’s employment practices. A ‘RooVolt’ campaign by the IWGB union is currently focusing on unfair termination or dismissal, alongside longer-standing grievances over pay and the employment status.

Outside the UK, after a first flurry of transnational industrial action in 2016-17 (click here and here to read more about it), the struggle has been fought on diverse fronts across the world. Since 2018 there have been strikes in Spain, Ireland, Italy,the Netherlands, Hong Kong, France, Belgium and also Germany before Deliveroo pulled out.

Legal challenges to the couriers’ working conditions have been brought against Deliveroo in Spain, Italy, and Australia. In Italy its booking system was deemed “discriminatory”, while the Spanish Supreme Court ruled that couriers are employees, not self-employed contractors. This is similar to a recent Supreme Court decision in the UK concerning Uber, which may also affect Deliveroo in the future.

In addition, there have been some some moves by riders to set up their own courier platforms as a co-operative. This attempt to set up a rider-owned alternative started in France – in the UK, there is currently a branch in York.

Where’s the money?

The COVID-19 pandemic has been a boon for Deliveroo’s finances (see next section). Before the pandemic, Deliveroo was growing rapidly – yet also losing money in eye-watering amounts. Between 2016 and 2019 Deliveroo’s revenues grew sixfold, reaching £772 million at the end of 2019, the last year results are available for. However it posted overall losses of over £100 million in each of those four years: it lost £317 million in 2019.

Deliveroo revenues and losses 2016-2019

Source: Company accounts

This does not mean the company can’t afford to pay its workers better. Look deeper into the accounts and it turns out Deliveroo was making decent profits from its couriers’ work but its desire for international domination incurred huge costs that led to huge losses. This is important as it shows that even after the pandemic restrictions have passed, the business should be generating enough money from couriers’ work to increase their pay.

In 2019, Deliveroo spent £583 million delivering food. According to the accounts, “the largest element” of that spend is “the cost of delivery from restaurants to customers”. In other words, couriers’ pay. Deliveroo’s revenue from those deliveries was £772 million, meaning it made £189 million from deliveries in 2019 (its “gross” profit, in the jargon). After barely breaking even from deliveries in 2016, the profitability of its deliveries has been strong every year since 2017. Given the boom to Deliveroo from the pandemic and the increased cuts it can take from restaurants, this will likely have increased again in 2020.

Source: Company accounts

So if Deliveroo has been making decent money from its deliveries, why has it been making such huge losses overall? The accounts say its poor overall results came “principally as a result of the Group’s focus on investment, given it is still in a rapid growth and expansion phase”. The extra costs caused by this expansion are grouped together in “administrative” expenses. They peaked at a massive £502 million in 2019 but have been high throughout Deliveroo’s existence.

Source: Company accounts

These numbers will include some costs essential for the running of the business. The wages of software engineers running and maintaining the app, for example, or other workers employed in head office or other administration and a variety of other admin costs. But it is the costs of Deliveroo’s investment in its rapid expansion plan that appears to be causing the real damage to the company’s overall results. In just a few years since starting in 2013, Deliveroo has muscled its way into at least 13 countries and has set up a range of new business lines. That does not come cheap. Neither does failure: the 2019 admin expenses included a £43.4m “impairment” charge after it shut its operations in Germany and Taiwan.

The cash it used for this expansion has come from confident investors who have ploughed money into the company to push up its market value. But it has also come from the profit Deliveroo made from deliveries, generated by squeezing its couriers’ pay to a minimum.

Thank you Amazon and COVID-19

At the start of 2020, things were not looking great for Deliveroo. It seemed like Shu might have pushed his rapid growth strategy too far: delivery profits had grown, but expansion costs and so overall losses had grown even more. To keep going, Deliveroo needed more capital. It turned to the global platform capitalism behemoth Amazon, which in 2020 bought a £450 million chunk of Deliveroo, becoming the company’s biggest shareholder with a 16% stake.

The controversial deal was initially mooted in May 2019, but then blocked for a year by the Competition and Mergers Authority (CMA). They feared that even as a minority shareholder Amazon could wield “material influence” on Deliveroo and seriously impact competition in the delivery industry due to its massive market power. But in 2020 the CMA eventually backed down and agreed the deal – after Deliveroo convinced the authorities that it would indeed go bust without Amazon’s help.

Then came COVID-19. In the words of Will Shu, the pandemic has “accelerated strong underlying trends, and there is an enormous opportunity ahead”, After a rocky couple of months, restaurants opened up again and more people ordered meals to eat at home.

Buoyed by its new success, Deliveroo has played hardball with restauranteurs who have dared play away with any of its rivals. One London restaurant told the Financial Times that Deliveroo threatened to increase its commission after the restaurant also sold through UberEats. Deliveroo also struck deals with supermarkets to deliver groceries ordered through the app. The company now delivers for Aldi, Morrisons, Sainsbury’s and Waitrose.

Thanks to this, Shu announced in December his company was signing-up more customers, seeing existing customers place more orders, and seeing the average value of orders grow. All this helped it make its first ever operating profit in the first six months of 2020.

In short, COVID appears to have boosted revenue so much that the huge ‘admin costs’ are finally outweighed by increased sales. Again: this undermines any justification Deliveroo may give for not paying its couriers better. It has the money and can afford to do it.

The IPO

Thanks to its COVID boost, Deliveroo is now planning to ‘list’ its shares on the London Stock Exchange. The ‘Initial Public Offering’ (IPO) was officially announced on Monday.

Until now Deliveroo’s shares have been traded privately: the company has solicited money from specific investors, then given them shares in return. By ‘going public’, Deliveroo will issue new shares through the stock exchange, which greatly increases the number of investors it can reach. This should bring a huge amount of cash into the business – as Deliveroo will receive the money paid for the new shares.

It also means a potential bonanza for William Shu, Amazon and its other current shareholders, with increasing demand pushing the value of their stakes higher. We don’t know how much investors will decide Deliveroo is worth for the IPO but the company is reportedly targeting a valuation of £7 billion. This would make Shu’s stake worth around £500 million.

While individual investors will be able buy Deliveroo shares after the IPO, the biggest prize for corporations are the ‘institutional’ investors: huge investment firms that manage trillions in savings and pensions, many of which can only be invested in shares listed on a stock market. A look at who now owns rival Just Eat shows some of the firms that may be interested: Blackrock, Vanguard, Standard Life and other mainstays of global capitalism.

The more they like Deliveroo, the higher Deliveroo and its banks can set the share price (and the higher it is, the more money it can generate). Potential institutional investors will not be concerned about the ethics of Deliveroo’s business model – but they may be put off if they think workers’ challenges will be successful.

Deliveroo has already signed-up JP Morgan, Goldman Sachs and other investment banks to take care of proceedings and will currently be marketing itself directly to institutional investors to drum up demand. A next step will be to issue a ‘prospectus’ that will present the business to potential investors and should contain a lot of new information about the workings of the company. It should also identify any “material risks” that could cause problems for its business model.

This has to be signed-off by the state regulator, the Financial Conduct Authority. Will it insist Deliveroo list legal cases around workers’ rights or resistance as material risks? Let’s see, but given the government is currently trying to lure future tech companies’ IPOs to London, don’t expect too much.

Size wars

What is Deliveroo’s plan to impress potential investors this year? The company can’t bank on COVID lockdowns being around for ever – so can it use the current momentum to find more sustainable long-term profit?

Deliveroo’s biggest market is the UK. But it is not alone and is a long way from dominance. Its two main rivals are Just Eat and Uber Eats. Uber has a wide network and partnerships with major restaurant chains, while Just Eat’s app is still the most popular app for orders. Just Eat has also recently developed its own courier fleet (restaurants on its app previously had to arrange delivery themselves). Neither are short of cash to grow their businesses further. Ominously for Deliveroo, Just Eat’s CEO Jitse Groen issued a declaration of war earlier this year, announcing his company will “go all out” against Deliveroo and Uber Eats, with dominating London a particular focus.

There are also other up-and-coming players challenging Deliveroo: for example, dark kitchen specialist Karma Kitchens, which has a partnership with Uber Eats, raised £252 million in 2020 to massively expand its network.

In response to this competition, Deliveroo’s strategy appears to be simple – keep bulking up. So far in 2021 it has announced the following plans to expand its operations:

• Grow across the UK, with more restaurants and chains on its app. In January 2021 Deliveroo said it plans to cover 100 new towns and cities.

• More dark kitchens – plans to “more than double” the number of its ‘Editions’ sites worldwide in 2021 (there are currently 32, containing over 200 kitchens).

• More “on demand grocery” partnerships with supermarkets – the “fastest growing part of the business”.

It goes without saying that another key part of the strategy will be to continue to challenge any attempts by its workers to increase their pay.

Who runs Deliveroo?

Deliveroo is led by William Shu, who is also its co-founder (the other, Greg Orlowski, has since left the company). Shu used to work for investment bank Morgan Stanley. The Deliveroo origin story tells of Shu dreaming up the company while working late nights in the London office, where his number-crunching was interrupted by having to leave his desk to pick up food.

Also on the board is Deliveroo’s head bean-counter, Adam Miller, who was appointed as Chief Financial Officer last year. He used to be an executive at the travel business, Expedia.

The rest of the board are either representatives of existing shareholders or big corporate ‘stars’ hired to impress potential investors for Deliveroo’s big stock market opening.

Deliveroo signed Claudia Arney, Richard ‘Rick’ Medlock and Simon Wolfson last year and the company hopes they will all polish its image with investors – and thereby increase the cash it hopes to raise.

Medlock has a background in finance and is former Chief Financial Officer at Worldpay, a payment processing firm. Medlock was CFO at telecomms firm Inmarsat for nine years, where he oversaw its initial public offering.

Arney has a more impressive corporate CV: she has worked for Pearson, the Financial Times, Goldman Sachs, HM Treasury and has experience as a director at Ocado, Halfords, property firm Derwent London, Aviva, Which? and TFL. She was previously interim chair of the Premier League.

She will need to balance her commitments at Deliveroo with her directorship at Kingfisher plc, a large DIY retail group whose name is less familiar than its brands: B&Q, Castorama, Brico Dépôt and Screwfix. She is also currently a director of Bedales school, a boarding school in Hampshire. Bedales boasts an impressive list of alumni including Cara Delevingne, Daniel Day-Lewis and Lily Allen as well as knights, nobles and royals.

But perhaps the biggest signing is Simon Wolfson. Currently the CEO of Next, Wolfson is the FTSE 100’s longest-serving chief executive (when appointed in 2001, he was also its youngest). A Tory peer, ‘Lord Wolfson of Aspley Guise’ is the ‘scion of a well-known retail family’ and is reportedly worth an estimated £112m.

Wolfson is no stranger to Deliveroo’s key business strategy of squeezing worker pay. In 2015 he made headlines by criticising campaigns calling for firms to pay a Living Wage of £7.85 an hour. He said £6.70 an hour was “enough to live on” for a lot of people.

Wolfson has given serious financial backing to the Conservative Party and to Brexit. He has personally donated £630,850 to the party and to David Cameron, plus another £100,000 to the Vote Leave campaign. He has also been Chairman of Open Europe, a Eurosceptic research and propaganda outfit that merged with Policy Exchange, a powerful Tory think tank of which he is now a trustee.

Wolfson has further Tory connections through his family. He is married to Eleanor Shawcross, a Non-Executive Director at the Department for Work and Pensions, and former economic advisor to George Osborne. His father, David Wolfson, is a businessman and former chief of staff to Margaret Thatcher who was also raised to the peerage as Baron Wolfson of Sunningdale – though later kicked out of the House of Lords for non-attendance.

Some Next shareholders are reportedly none too happy with Wolfson’s new appointment at Deliveroo. They are worried the role will distract him from his duties at the fashion retailer at what seems a crucial time for the company. Some insiders reckon he wants the Deliveroo post as a way to get closer to Amazon, his ultimate target destination.

Aside from Next, Wolfson currently has shareholdings in the following companies: Superdry clothing, biotechnology firm ADC Therapeutics, Pembroke Venture Capital Trust, and nuclear fusion research company Tokamak Energy.

Also on the board is Darrell Cavens, an entrepreneur and founder of Zulily, an ‘e-commerce company’, who joined Deliveroo in 2017. The rest of the directors all represent current shareholders:

• Antoine Froger, representing Bridgepoint. He also currently sits on the board of Burger King’s France franchise, another of Bridgepoint’s investments.

• Martin Mignot, representing Index Ventures, one of Deliveroo’s earliest backers. A keen cyclist, he recently collaborated with London Cycling Campaign on a webinar about how to make London a ‘friendlier and safer for pedestrians and cyclists’. He has 45,000 followers on Twitter where he uses hashtags such as #humansnotcars.

• US-based Jayant Mittal, representing Amazon, where he is a Corporate Development Director.

• Benjamin ‘Benny’ Peretz, representing Greenoaks Capital.

• Seth Pierrepoint, representing Accel. Pierrepoint is described as having played a key role in Accel’s early investment in Deliveroo.

• Adam Valkin, representing venture capitalist firm General Catalyst. He posts about his business on Twitter.

Who owns Deliveroo?

Co-founder William Shu still owns a fair chunk of Deliveroo’s shares – 6.8% as of January 2021. His former partner Greg Orlowski also keeps a stake, possibly now around 2%. However, most Deliveroo shares are owned by investment firms – both big global investors and more specialist private equity funds – as well as the megacorporation Amazon.

As discussed above, Deliveroo never made a profit until COVID. It is only still in business thanks to being given piles of cash by these investors. They are betting that the value of their investment will increase and make them handsome profits if the coming IPO is well received by the stock market.

The current shareholders are:

Amazon

The delivery and cloud computing leviathan is now one of Deliveroo’s largest shareholders, and has a seat on the board. In 2020 it bought a £450 million chunk of Deliveroo in a controversial deal which at the time gave it a 16% stake – after a year of wrangling with the Competition and Mergers Authority (CMA). Amazon was fined £55,000 for failing to provide timely information during the competition inquiry – an amount that will mean little set against its multi-billion dollar profits.

Amazon’s intentions with Deliveroo are an interesting question, given its massive wealth and drive to dominate most of the markets it enters. One analyst speculates that the endgame may be eventually combining Deliveroo’s food-ordering app into an Amazon “super app”. Or perhaps Amazon could use the business knowledge it gains from Deliveroo to launch its own dark kitchen operations in other countries.

Fidelity

Just last month (Janary 2020) Deliveroo topped-up its capital by selling another $180 million in shares. The sale was led by two investment managers – Fidelity and Durable. It is not yet clear how many of the shares they kept for themselves, and how many they sold on to other existing investors. Fidelity is one of the world’s biggest investment fund managers, based in the US with a London office in Cannon Street. In June 2020 it managed assets of over $3.3 trillion.

Durable

Durable is a venture capital fund based in Maryland in the US. It was set up recently in 2019 by Henry Ellenbogen, a former “star fund manager” at big investor T. Rowe Price – which also owns shares in Deliveroo.

Index Ventures

US venture capital firm, putting its money into Deliveroo through two Jersey registered investment funds (essentially pots of money). Invests in 160 companies in 24 countries, including: Dropbox, Etsy, Sonos, SoundCloud, Squarespace, Lookout, Hortonworks, Pure Storage, Funding Circle, as well as Deliveroo rival Just Eat. Its London office is in Mayfair, naturally. Represented by Martin Mignot on the Deliveroo board.

DST Global

Hong Kong-based firm founded by Yuri Milner, Russia’s “most influential tech investor” according to Forbes. It is one of the world’s most successful internet company backers after making huge sums from stakes in Alibaba and Facebook. It invests in Deliveroo through three different funds. It has a London address in Mayfair.

Greenoaks Capital

San Francisco-based venture capitalists specializing in tech investments. They invest in Deliveroo through three different funds, all of which appear to be registered in the Cayman Islands. They are represented by Benjamin Peretz on the Deliveroo board.

Accel Partners

Another investment firm specializing in tech companies. They were one of the first investors in Facebook and also own stakes in Dropbox, GoFundMe, Groupon, GoCardless, Squarespace, Walmart.com, Wonga and a host of other companies. They have a UK office in Mayfair, London.

General Catalyst

US-based venture capital fund manager that invests particularly in “growing” tech companies. Has also backed Airbnb, Snapchat, among others. Represented on the board by Alexander Valkin.

Deliveroo’s key restaurant and grocery partners

Nando’s

Nando’s deliver exclusively with Deliveroo and have recently expanded the amount of restaurants on the Deliveroo app.

Nando’s is owned by Dick Enthoven, a South African billionaire who owns the company through a string of offshore companies. His son, Robby Entoven, heads the UK operation of Nandos.

Burger King

Burgers were the most popular Deliveroo order during the UK’s COVID lockdown, and Burger King has been ramping up its delivery business.

Burger King worldwide is owned by Restaurant Brands International, a massive Canadian-American company. The Franchise to operate Burger King restaurants in the UK is owned by UK-based private equity investment firm Bridgepoint Capital, which is also a Deliveroo shareholder.

KFC

KFC and Deliveroo’s relationship extends to holding joint publicity stunts together. KFC is another COVID winner, expanding business during the pandemic: they have recruited almost 10,000 new staff by the end of 2020.

KFC is part of major US company Yum! Brands Inc, which also owns Taco Bell and Pizza Hut. Pizza Hut also used Deliveroo, though is testing its own delivery options. Yum! Brands Inc Previously invested $200m in GrubHub. In the UK KFC’s restaurants are run by 37 franchise partners, who range from small family owned businesses to bigger franchise companies that run multiple outlets.

Wagamama

Wagamama was already expanding via “Dark Kitchens” before the pandemic in early 2020. It cited strong courier operations as part of its “covid resilience” strategy for the future in its annual report.

Wagamama is part of The Restaurant Group Plc, whose other restaurants include: Chiquito, Frankie & Benny’s, TRG Concessions, Brunning & Price, Coast to Coast, The Filling Station, Fire Jacks, Garfunkel’s, and Joe’s Kitchen. Not all of the group’s brands have done so well: during the Covid-19 outbreak and subsequent quarantine, The Restaurant Group closed 250 restaurants, with a loss of nearly 4,500 jobs.

Five Guys

The “Golden Burger” marketing stunt with Deliveroo that amounted to £25,000 worth of cash prizes shows the effort that has gone into marketing Five Guys on Deliveroo. There’s also evidence of the chain growing in the UK despite the pandemic. As a highly successful burger chain, and burgers being named the most popular take away during the pandemic, it’s safe to assume that Five Guys is an important partner to Deliveroo.

Five Guys internationally is owned by the US-based Murrell family. The UK operation is owned jointly by the Murrells and Freston Ventures, an investment company run by Carphone Warehouse founder Sir Charles Dunstone.

The Co-Op

The Co-Op has paid for TV ads to promote its partnership with Deliveroo. It has become the most “widely available supermarket on Deliveroo” with 400 stores now available.

The Co-Op is technically still owned by its five million members: anyone can become a member by subscribing for a £1 share. Co-Op members vote on motions at the AGM and also elect the members council which consists of 100 members from across the UK.

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In late March 2020, Dignity Plc were on the wrong end of a string of angry messages from members of the public who had received advertising leaflets through their letterboxes. The leaflets read “Save money and protect your loved ones with a Dignity Funeral Plan”. At the very top of the page a brightly coloured offer boasted a “£100 off Discount ends 30 April”.

As the UK headed into coronavirus lockdown, the timing could not have been worse. One user commented: “@Dignity_UK you despicable beasts. Mass posting flyers through doors on the first day of lockdown is abhorrent and you should be ashamed!!!!” Another highlighted the emotional impact on local residents: “#badmarketing you couldn’t make it up […] It’s really upset some elderly residents”. Several people bemoaned ‘profiteering from misery’, accusing Dignity of “callous commercialism” and stating: “Absolutely disgusted […]. We are in lockdown and this is posted to our house and to pensioners’ bungalows! Putting people’s lives at risk for profiteering! Sickening practices.”

Dignity was put on the back foot immediately, issuing repeat apologies and promising to stop all marketing activity, as citizens from far and wide lambasted their advertising strategy. One user contributed their photograph of the funeral leaflet to a separate thread – “compiling a list of people to avoid after we return to normal. The c**ts list!” – a thread kicked off with Virgin tycoon Richard Branson, Mike Ashley of Sports Direct, Wetherspoons owner Tim Martin and celebrity chef Rick Stein, each included for their appalling treatment of staff during the economic downturn.

Who are Dignity Plc?

Let’s roll back 12 months. Following a mild winter, in May 2019 Dignity expressed concerns that a shortfall in projected death rates in the first quarter of 2019 was hurting their underlying profits by nearly £7m. Deaths were down 12% for the period, leaving the firm hoping things would “improve” in the second half of the year. Using language many people might not readily or comfortably associate with death and dying, they accepted:

“Operating performance in the first quarter was below the board’s expectations as a result of the significantly lower than expected number of deaths. Funeral market share and average income were in line with the board’s expectations.”

As the world continues to make sense of the Covid-19 crisis, it has brought attention to a whole range of commodity networks, supply chains, and labour processes that usually go unseen or are taken-for-granted. We are often better able to see how things work when they stop working. Or, in the case of Dignity’s mistimed marketing, when business as usual is out of tune with the mood music of the day.

So, what, or who, is Dignity? Dignity Plc, to be more precise, is the UK’s largest “single” funeral provider. It is currently the only publicly listed UK funeral provider on the stock market, with reported annual turnovers of £324m and £316m in 2017 and 2018 respectively.

Dignity has over 350 subsidiary companies within its somewhat dizzying corporate structure. Many have names such as ‘Dignity Services’, ‘Dignity Limited’, ‘Dignity Finance Holdings Limited’, ‘Dignity Finance plc’, ‘Dignity Holdings No.2 Limited’, ‘Dignity Holdings No.3 Limited’, etc., but most are funeral directors that Dignity has bought out, retaining their original trading names such as ‘G.M. Charlesworth & Son Limited’ or ‘F.E.J. Green & Sons Limited’, in a bid to keep the family-run traditional high street feel. Many such funeral directors have premises in several locations, meaning Dignity control over 700 individual funeral branches – with plans for further expansion.

Crematoria ownership represents significant capital accumulation for the corporate group too. By June 2018, there were 293 crematoria in the UK — 183 operated by local State authorities and 110 by private companies. Of these private companies, Dignity is again the largest operator with 46 crematoria. And these expanding operations mean Dignity has been building up a considerable real estate portfolio, ‘driven by the need to meet shareholder and investor expectations in terms of profit and growth’.

As with many other publicly listed companies, Dignity’s listed shareholders include many of the big investment funds that own most of the world’s capital – the likes of Standard Life, Aviva, Barclays and Blackrock.

But Dignity plc’s largest current shareholder, with 26% ownership, is a smaller specialist UK investment manager called Phoenix Asset Partners. Based in Barnes, West London, Phoenix is headed by founding partner Gary Channon, who had his “investing epiphany” after reading US billionaire investment guru Warren Buffet.

Channon’s claim to be the Warren Buffet of Barnes is boosted in a glowing recommendation from the Financial Times’ Investors Chronicle magazine, which says Phoenix’s UK investment fund has “smashed the total return of the FTSE All-Share since its launch in May 1998.” Channon’s strategy is to buy chunks of a small number of UK listed companies he believes are going cheap – “good companies that can be bought for less than half their so-called ‘intrinsic value’ due to short-term problems.”

Gary Channon, the Warren Buffet of Barnes

Dignity’s troubles

Unfortunately for Phoenix, Dignity hasn’t yet made the expected turnaround – according to Investors Chronicle, the company has been a “major drag” on Phoenix’s overall performance. With many other shareholders pulling out, the market value of the company has collapsed – Dignity’s share price had fallen to a quarter of its peak 2016 level by 2019.

Again, one of the main reasons Dignity had given for its declining profits before the pandemic was a falling death rate. On top of that, the company has faced increasing competition, including what the Evening Standard described as a “price war” with its main rival, Cooperative Funerals. This has pushed the company to start cutting prices on its cheaper funeral products.

Then there is the fact that Dignity is saddled with heavy debts. At the end of 2019, the company owed £542 million to the bond market. This, plus its other liabilities, were actually worth more than its assets, which is never a sign of financial health. Dignity borrowed heavily to fund its buyouts of local funeral directors and crematoria, and to climb to the top of the industry. This strategy worked out so long as prices and profits kept rising – but makes the company vulnerable if the market turns.

Finally, there is a big unknown that may have spooked investors: two ongoing regulatory investigations into the funeral industry.

In March 2019, off the back of a preliminary consultation in November 2018, the Competition and Markets Authority (CMA) announced it would be launching ‘an in-depth market investigation into the funerals sector’. This will investigate the soaring cost of funerals over more than a decade, and current ways of operating by business providers of these services. Then in June 2019, in light of accusations of ‘high pressure’ and ‘bullying tactics’, the UK Treasury announced plans to seek to regulate funeral service providers through the Financial Conduct Authority (FCA).

The results of both investigations were due for completion and release in late 2020, but have been delayed for the time being due to the Covid19 pandemic.

Clive Wiley, chairman of the board

The high cost of dying

As Dignity and its shareholders complain about price cuts and dropping profits, we need to put those complaints against a longer-term backdrop. Prices and profits in the funeral trade soared for more a decade from the early 2000s until the late 2010s. The average cost of a funeral is now many times higher than it was 20 years ago, and this cost has largely been driven, and pocketed by, funeral companies.

In March 2019, the CMA published a detailed “Funerals Market Study” as part of “phase one” of its investigation. This set out some key points, including that:

“Over the past 14 years, the price of the essential elements of a funeral is estimated to have grown by 6% annually, twice the inflation rate over this period.” (p.6)

The study further concluded that:

“for a considerable number of years the largest firms of funeral directors have implemented consistently large annual price increases, without reference to underlying operating cost pressures.” (p.6)

Since 2002, Dignity maintained a company policy of increasing their prices by 7% annually (p.99-100). One reason the companies have been able to get away with this relates to the nature of their product. According to the CMA study (p.100), only 8% of bereaved families “shop around” for alternatives.

For the companies, this long boom of rising prices has meant extremely high profit margins. The CMA study compared the profits of Dignity and other big UK operators with equivalent companies in Europe, the US, Canada and Australia, for the four years between 2014 and 2017. It found that profit margins (before deductions) in these regions were between 19-26% on average. Some were much lower. For example, Ahorn AG in Germany and the Park Lawn Corporation in Canada were 6-13%. In contrast:

“Dignity’s profit margins have been 36-38% in all years, so more than 10% higher than international benchmarks. [..] Dignity’s margin appears to have been significantly higher than both international benchmarks and larger UK companies in the funerals sector.” (p.123)

But while funeral profits were being driven up to finance the asset growth and accumulating debts described above, many of the households paying for them were facing the violent impacts of austerity. Basic average funeral costs are now over £4,000, or more than £9,000 when professional fees and discretionary extras such as memorials, flowers, and catering costs are considered – compared to around £1,900 in the early 2000s. For many, the inability to pay these rising costs means the growth of personal debt and funeral poverty. This trend is one example of a much broader serious problem in society today – the transference of corporate debts into personal bank accounts.

As the CMA study notes (pages 20-21), total funeral expenditure varies very little by average household income: households earning over £100,000 per year do not pay 10 times more than households on less than £10,000. In 2017, the total expenditure of a family in the lowest 10% of the population by income was £11,050. This means that a “basic” funeral could cost nearly 40% of the total year’s budget – higher than total spends for food, energy and clothing combined (at 26%).

In short, this morphing of the market hits working-class families, exacerbating income inequality and compounding existing poverty in the UK.

Dignity have responded to this problem, in their own way, by promoting a range of budget alternatives through their sister brand Simplicity Cremations – again, readers may have noticed their avid marketing campaigns. Simplicity provides direct cremations without the added extras associated with an expensive “send off”. Like other Dignity products, they also offer pre-need payment plans – a major point for regulatory scrutiny at the heart of recent investigations.

Despite these efforts, and being able to stake their claim as the largest provider, Dignity are lurching from one crisis to another. Their CEO Mike McCollum recently left the company with immediate effect and their profits have actually fallen during the pandemic as they are unable to sell the full range of service extras that some of these profits rely on. After almost two decades of extortionate price increasing – “a core part of Dignity’s strategy for a considerable period of time” (CMA study cited above, p.99) – the inherent contradictions of exponential growth and driving capital accumulation alongside debt accumulation look like they are finally taking their toll. This period has also served as a painful reminder to so many mourners that what they miss most at the funerals of their loved ones is not the expensive funeral service add-ons, but their family and friends.

Need for systemic change

Soon after Dignity received the above barrage of criticism we outlined at the start of this article, the UK government introduced the Coronavirus Act 2020. Nestled among a raft of emergency changes to existing legislation are a series of “temporary” changes to the funeral industry, which will continue to “have a significant impact on what happens to the dead and how funerals are conducted in the coming weeks and months”.

As well as family-only funerals with limited attendance, this includes a more flexible approach to registering deaths, scrapping inquests for suspected Covid-19 deaths, and multi-organisation provision for transporting and storing growing numbers of bodies which would otherwise overwhelm existing mortuaries. While these are emergency measures, which must subject to ongoing scrutiny, they do nothing to address long-standing issues within the industry including poor working conditions and inadequate protection for workers.

Similarly, we can ask whether the CMA and FCA investigations will even begin to satisfactorily address all the issues of cost, profit, competition and exploitation that shape the industry. At best, these investigations aim to ensure the industry is ‘fair’ under the rules of the market itself – there is no hint of any significant or radical challenge to the way funerals are marketised, financialised and provided.

The funeral industry is a peculiar space that provides a vital frontline service every single day. Without serious systemic change, there will be no end to the vulgarity in profiting from death that people now recognise more acutely. While not at all downplaying the seriousness of the Covid-19 crisis, we want to raise broader questions about unfettered corporate freedoms to profit from … well, strictly anything, including death, at all times, both in the midst of a global pandemic and beyond.

The post “You despicable beasts”: Dignity Funerals and commodified death in the spotlight appeared first on Corporate Watch.