Monday, August 11, 2008

Dr. Patrick Soon-Shiong: Pro-Capitalist or Anti-Capitalist?

Stuart K. Hayashi

This is the story of Dr. Patrick Soon-Shiong, from ABC News's Nightline. Is this a parable about the evils of capitalism? The Nightline story says,

Back in 1985, when Soon-Shiong was working as a surgeon, he was poised to perform a pioneering transplant of cells from pigs to humans when he made a chilling discovery.

"We discovered a virus in pigs, and I refused to do that transplant," he said. "My investors said, You will do the transplants."

His investors later sued him for fraud, and he won in arbitration.

"I recall vividly, they said, 'You know, heroes and pioneers take risks, and all that you will suffer is a slap on the hand from the FDA.' And I said, 'No, that's not all I'll suffer. We'll put patients' lives at risk and I will not do it,'" he recalled.

Aha! Does this not prove the evil of capitalism? Dr. Soon-Shiong stood up to his greedy investors, who were willing to endanger the lives of transplant patients in order to make a quick buck? Were the investors not greater exemplars of capitalism than Dr. Soon-Shiong?

. . .

If I told this story in front of an audience, this is the part where anti-capitalists would not be nodding along, taking this as confirmation of their worldview.

But there is more to the story. Soon-Shiong got tired of this corrupt, unethical environment. And so he started his own pharmaceutical company, American Pharmaceutical Partners (APP). He built up a reputation for honest dealing. Consequently, a lot of consumers decided to stop doing business with the corrupt people, and to buy from Soon-Shiong instead. This has made Soon-Shiong a billionaire -- far richer than his get-rich-quick investors from 1985.

So capitalism does work.

This is how the Nightline article began.

The blood thinner heparin is one of the most used drugs in America, employed daily in hospital surgeries and for kidney dialysis patients.

But a safe supply of this critical drug fell into jeopardy last winter [2007] in a catastrophe that illuminated severe problems caused by the fact that most ingredients for American drugs now come from foreign sources. These sources are not being adequately monitored by either the pharmaceutical industry or the Food and Drug Administration.

The FDA told "Nightline" that as many as 55, or perhaps considerably more, people may have died from the contaminated heparin. So far it's only been able to definitively link three deaths to specific lots of the tainted drug.

Although so far it's only been able to definitively link three deaths to specific lots of the tainted drug. Heparin used to be primarily produced by the pharmaceutical giant Baxter, but Baxter recalled its entire stock, nearly half the nation's supply, after the deaths from contaminated heparin. A number of smaller companies also recalled supplies. To date, Baxter says they have received 955 reports about contaminated heparin in 2008.

That's when billionaire pharmaceutical executive Dr. Patrick Soon-Shiong and his company American Pharmaceutical Partners (APP) stepped in with a large, safe supply of the drug. Without it, countless more Americans would have died.

There are indeed criminals and corrupt people in the business world, and some of them may get rich. But, to the extent that the market is free, consumers are able to seek information about which businesses truly deliver on their promises, and which do not. For that reason, in the long run, businesses that endanger their customers lose potential revenue to competitors who consistently treat their customers better. In the end, free enterprise is the best means of rewarding good conduct. In this case, it was Dr. Soon-Shiong, rather than his 1985 investors, who behaved in accordance with the principles of capitalism.


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