Pharmacies on Every Corner: The Problem with Puerto Rico’s Pharmaceutical Industry

Walking down the streets of Salinas, Puerto Rico, my grandmother’s hometown, I have always wondered why there is a pharmacy tucked into almost every three blocks distance.  Salinas, a town and municipality in southern Puerto Rico, is located south of Aibonito and Cayey, southeast of Coamo, east of Santa Isabel, and west of Guayama. A small fishing town in Puerto Rico, Salinas is a territory with a population of fewer than 30,000 people.¹“Life Sciences Industry in Puerto Rico” Department of Economic Development and Commerce, 2003. https://www.vice.com/en/article/v7v5d8/george-santos-lies-legal-issues. Strangely enough, the island of Puerto Rico is the home base for 49 pharmaceutical companies as well as 70 manufacturers of medical devices.²Julio López Varona. “Puerto Rico has a Big Pharma Problem.” The Nation, August 19 2022. https://www.thenation.com/article/economy/puerto-rico-big-pharma/#:~:text=The%20pharmaceutical%20industry%20is%20one,create%20jobs%20and%20enrich%20communities. In fact, Puerto Rico is the fifth largest pharmaceutical manufacturing area in the world.³Medical Devices industry in Puerto Rico’ Department of Economic Development and Commerce, 2003. https://www.vice.com/en/article/v7v5d8/george-santos-lies-legal-issues. So how did Puerto Rico reach this status in the pharmaceutical world, and is this position something for which Americans should feel proud?

While the pharmaceutical industry is widely regarded as the backbone of Puerto Rico’s economy, the truth is that the advent of these companies were primarily motivated more by capitalistic interests than a desire to impact the livelihood of the local inhabitants. Pharmaceutical companies first came to Puerto Rico in the late 1960s and early 1970s to take advantage of Section 936, a now-expired federal tax incentive. This incentive allowed U.S.-based manufacturers to send all profits from local plants to parent plants in the United States without paying any federal taxes. In the small town of Nocorá, the main field site for this project, there are more than a dozen drug factories representing a small number of multinational corporations, the world’s highest concentration per capita of such factories.⁴Sharife, Khadija. “BIG PHARMA’S TAXING SITUATION” Duke University Press 2016. https://read.dukeupress.edu/world-policy-journal/article-abstract/33/1/88/30883/Big-Pharma-s-Taxing-Situation Pharmaceutical companies controlled entire towns in Puerto Rico in the 1990s and early 2000s. Barceloneta, a coastal town known as “Ciudad Viagra,” produces approximately 100 million of Pfizer’s little blue pills every year. Moreover, Puerto Rico had 77 pharmaceutical companies in 2000, and by 2004, 19 of the world’s top 25 prescription drugs were manufactured on the island.⁵Dietrich, Alexa S. “Project Muse” NYU press, 2013. https://muse.jhu.edu/book/23014 

In order to keep them on the island, the government provides significant tax breaks to these many pharmaceutical companies, arguing that the companies will create jobs and enrich communities. The tax breaks, however, come at a high cost to Puerto Rico. Puerto Rico’s government gave its manufacturing sector, which includes the pharmaceutical industry, $100.5 billion in tax breaks between 2017 and 2023.⁶Sharife, Khadija. “BIG PHARMA’S TAXING SITUATION” Duke University Press 2016. https://read.dukeupress.edu/world-policy-journal/article-abstract/33/1/88/30883/Big-Pharma-s-Taxing-Situation Add to that the estimated $140 billion avoided by nine of the top pharmaceutical companies through the use of offshore tax havens. This number is significant tax revenue that could be invested in Puerto Rican communities desperately in need after a number of recent natural disasters: over 43 percent of the population is in poverty, and one-third is food insecure.⁷Julio López Varona. “Puerto Rico has a Big Pharma Problem.” The nation, August 19 2022. https://www.thenation.com/article/economy/puerto-rico-big-pharma/#:~:text=The%20pharmaceutical%20industry%20is%20one,create%20jobs%20and%20enrich%20communities. Many schools in the public education system are unable to open due to a lack of resources and personnel. Several of these same schools cater to the children of the pharmaceutical company’s employees. Additionally, while the tax breaks attract pharmaceutical companies to Puerto Rico, they have not resulted in an equal number of job opportunities or benefits for residents.⁸Julio López Varona. “Puerto Rico has a Big Pharma Problem.” The nation, August 19 2022. https://www.thenation.com/article/economy/puerto-rico-big-pharma/#:~:text=The%20pharmaceutical%20industry%20is%20one,create%20jobs%20and%20enrich%20communities. In a territory with a population of over 3.3 million people, the tax breaks, directly and indirectly, created only an estimated 7,000 jobs which only ended up supporting 0.2% of the population.⁹Julio López Varona. “Puerto Rico has a Big Pharma Problem.” The nation, August 19 2022. https://www.thenation.com/article/economy/puerto-rico-big-pharma/#:~:text=The%20pharmaceutical%20industry%20is%20one,create%20jobs%20and%20enrich%20communities. 

Lack of stability and low wages are just some of the many ways these workers are exploited by the Pharma companies. Workers are exploited even more when compared to the booming profits of companies dominating the market like J&J, Roche, Pfizer, Novartis, and Merck, as well as the pay of their CEOs, who earn an average of $20 million per year. This is 1,131 times what their lowest-paid employee in Puerto Rico earns. It is clear that the tax breaks granted to the pharmaceutical industry have done little more than increase corporate profits, which never reach the majority of Puerto Rican workers.¹⁰Sharife, Khadija. “BIG PHARMA’S TAXING SITUATION” Duke University Press 2016. https://read.dukeupress.edu/world-policy-journal/article-abstract/33/1/88/30883/Big-Pharma-s-Taxing-Situation 

The arguments used by pharmaceutical companies to justify tax evasion are non-existent. The fact of the matter is that these tax evasion only lead them to making large amounts of profit: “The big Pharma game changed from who could develop the biggest blockbuster drug to who could license it first.”¹¹Julio López Varona. “Puerto Rico has a Big Pharma Problem.” The nation, August 19 2022. https://www.thenation.com/article/economy/puerto-rico-big-pharma/#:~:text=The%20pharmaceutical%20industry%20is%20one,create%20jobs%20and%20enrich%20communities. The true cost of drug development is intentionally obscured, but it is clear that pharmaceutical companies rely on intangible assets such as patents, which are financed, subsidized, and developed by public institutions. While pharmaceutical companies are necessary for the mass commercialization and distribution of drugs, their value is overwhelmingly related to intangible assets, which are largely untaxed in comparison.¹²Dietrich, Alexa S. “Project Muse” NYU press, 2013. https://muse.jhu.edu/book/23014

It’s past time for pharmaceutical companies, which have long viewed Puerto Rico as a place to get cheap labor and deep tax breaks, to treat the workers who make vital medicines and medical supplies for the rest of the world with the dignity they deserve. It’s also time for the Puerto Rican government to realize the effects of the disproportionate amount of pharmaceutical companies on the island and work to mitigate the many injustices that are caused because of them. In tandem, it is important to bring awareness of this issue to North Americans in the USA so that the effort to promote equity and democracy is extended to Puerto Rico, a territory of the United States. 

Cover Image: “Drugs” by Konstantin Lazorkin is licensed under CC BY-NC 2.0