Transnational Corporations

By Alex Jackson

A transnational corporation is a company that operates in at least 2 countries. The HQ is generally located in the country that the corporation was founded in while remaining assets, mainly the manufacturing plants, are located in LEDCs where labour is cheap and readily available.

The influence of a transnational corporation is great and there are few parts of both the developed and undeveloped world where the influence of a transnational corporation can not be felt. In the majority of countries, transnational corporations play a major role in the economy of the country and often have a lot of control over whether the economy is successful or unsuccessful.

Pharmaceutical Transnational Corporations

  • The largest ten pharmaceutical companies are among the top 400 companies in the world. One of the most famous pharmaceutical companies is GlaxoSmithKline (GSK) which employs 9650 people in over 100 countries and sell their products to 179 countries. GSK’s headquarters are distributed throughout MEDCs. There are 5 in the USA, 2 in Switzerland, 2 in the UK and 1 in France.

Branded Drugs

  • Medicines have two names, their generic names (normally the active ingredient) and then a brand name which the manufacturer trades the drug by.

When a company discovers a new drug, it’s put through clinical trials in order to gain approval for marketing. If the trial shows that the drug is safe and effective, it’s approved and given a license. Given that testing generally takes 12 years and costs £500,000, the company that developed the drug holds the exclusive rights to the drug for 10 - 12 years in order to recuperate the money they spent on research and development. The drug company will market the drug under a brand name and the drug is protected from being developed by competitors by a patent. When the patent expires, other companies can produce the drug however they can only sell it under another brand name or its generic name. When other companies produce the drug, they can generally do so for less and sell the drug for less money since most of the research and development has already been done. Given that branded drugs are normally 3 - 30 times more expensive than their generic counterparts they are prohibitive to the majority of the world. Consumers of branded drugs generally have no choice but to purchase the branded drugs since the branded drugs are normally prescribed by doctors, at least in the UK. The drug industry infamously targets doctors with incentives to hand out prescriptions for branded drugs too.

  • While drug companies may seem to be money grabbing corporations, they do in fact bring important advances to societies. Drug companies provided numerous jobs and invest in society by paying taxes and investing in new, more advanced technologies.

Essential Drugs

  • The World Health Organisation (WHO) defines essential drugs as:

“Those drugs that satisfy the health care needs of the majority of the population; they should therefore be available at all times in adequate amounts and in appropriate dosage forms, at a price the community can afford.”

This list of essential drugs is widely regarded as an important tool in increasing access for the world’s population to effective healthcare.

Drug Development

  • The largest profits in the pharmaceutical industry come from the sale of branded drugs in developed countries.
  • The most research money is spent on drugs to control diseases of affluence.
  • Research into tropical diseases affecting hundreds of millions of people in less developed countries receives only a small proportion of the sum spent on cancer research.
  • Many new drugs regarded by WHO as essential are not yet available in generic form.

GlaxoSmithKline

GlaxoSmithKline is the third largest pharmaceutical company in the world. Founded in London in 2000 (GlaxoWellcome is actually the original drug company, founded in 1880), the company has grown substantially and offers products for many diseases, especially diseases common to MEDCs such as diabetes and cancer. They also have treatments for viral diseases, mental health diseases and GlaxoSmithKline offers several over the counter products such as indigestion tablets.

The company’s headquarters are located in London, with more sub-headquarters spread around the world. GlaxoSmithKline has a presence in 99 cities across 39 countries.

While GlaxoSmithKline mainly targets more developed countries, the company has several programmes that help less developed countries. Since 2008, GlaxoSmithKline has been running trials of a vaccine against malaria, which would bring unprecedented benefits to most of the world, especially less developed countries. However the drug could end up being prohibitively expensive for less developed countries given its 25 years development period. Non the less, GlaxoSmithKline has made several pledges to try and bring its drugs to developing countries. The company has committed itself to lower the prices of its drugs in 50 of the least developed countries and to make its drugs more affordable to industrialising countries such as Brazil and India. In addition to this, all chemicals and processes that the company holds intellectual property rights to have been placed in a “patent pool” which will allow other companies to develop the drugs and improve upon them.

GlaxoSmithKline has numerous programmes within communities to help improve the health of those communities. Globally, GlaxoSmithKline provides disaster relief medicines. For example, after the events in Haiti GlaxoSmithKline committed £250,000 to the British Red Cross to fund a mass sanitation unit that prevents water born diseases from spreading. On a more local scale, GlaxoSmithKline provides services to local communities. Within the UK, GlaxoSmithKline has an independent living programme for young people living with disabilities. In the USA GlaxoSmithKline runs a programme to provide specialist care for homeless children. GlaxoSmithKline also runs educational programmes within the UK and USA to help develop an understanding of science issues and to encourage the young to take up careers in science.

Tobacco Transnational Corporations

Tobacco transnational corporations are perhaps the largest and most powerful of transnational corporations playing major roles in many countries economies and health.

British American Tobacco

British American Tobacco is one of the largest tobacco suppliers in the world. It sells its products in many countries, mainly targeting African, Indian & Indonesian markets. It uses controversial advertising techniques to sell its products and there are strong accusations that it attempts to advertise and sell its products to young children in an attempt to get them addicted to tobacco. One of the alleged techniques is to sell single stick cigarettes in less developed countries, a practice which is frowned upon and illegal in many countries. These single stick cigarettes are far more accessible to young children with limited incomes who couldn’t afford a full pack of cigarettes and are an effective way of getting people hooked while they’re young.

The primary brands sold by British American Tobacco are Pall Mall and Embassy. The tobacco for these products is grown in warm equatorial environments and British American Tobacco will often employ the local population in the tobacco farming industry. British American Tobacco and other tobacco companies bring numerous advantages and disadvantages to the countries that they employ people in. One country that relies heavily on tobacco farming and tobacco transnational corporations is Malawi, a small landlocked nation located in the south of Africa. The advantages and disadvantages tobacco transnational corporations bring to Malawi are outline below:

Advantages

  • Tobacco farming provides a very large source of income for the country as a whole. Tobacco farming accounts for 2/3 of Malawi’s yearly income.
  • Tobacco transnational corporations provide the people of Malawi with employment, stopping them from being forced to turn to crime. In Malawi, 75% of the population is dependent on tobacco farming in some way. The tobacco industry provides 1.7 million people with direct jobs and 5 million with indirect jobs relating to the tobacco industry in Malawi.
  • Tobacco transnational corporations provide employment for women in many less developed countries which is very unusual and good progress towards developing women’s rights.
  • Tobacco transnational corporations will often have ‘charitable givings’ where they provide clean water or health care to people in less developed countries. In Malawi, tobacco transnational corporations provide 40,000 people with clean water.

Disadvantages

  • Children are often employed on tobacco farms despite this being illegal in Malawi and many other countries. This is unfair on the child as it takes them out of their education and prevents them from attaining better careers.
  • Workers on the farm often die from tobacco poisoning including children.
  • In Malawi, the high dependency on the tobacco companies means that if they were to leave the country, the people and the country would be without a reliable source of income.
  • Due to the potential profitability of tobacco farming, many farmers choose to grow tobacco instead of food leading to famines within countries were tobacco farming is popular.
  • The pay for tobacco farmers is very low since the farmers often have to take out huge loans from the tobacco companies to run farms.
  • Tobacco farming acts as propaganda and increases the likelihood of people smoking in a country.

Health Implications Of Smoking

  • Smoking is the second major cause of death in the world. It causes 90% of the deaths from lung cancer; 80% of the deaths from bronchitis & emphysema; 17% of deaths from heart disease and a third of all cancer deaths.

Reducing The Impacts Of Smoking

In the UK, many government lead programmes have been carried out in order to reduce smoking in the country. Some of these programmes include:

  • Advertisement campaigns featuring shocking and graphic scenes relating to the risks of smoking aired during prime time TV.
  • A ban on the sale of cigarettes to under 18s.
  • All cigarettes must be kept behind a counter and away from public view.
  • Vending machines that dispense cigarettes are illegal.
  • Public smoking is banned except for in designated areas.
  • Cigarette packaging must be generic and plain and must feature large warnings about the risks of smoking.
  • The NHS offers free stop smoking clinics.

The Framework Convention on Tobacco Control (FCFC) is an international agreement that outlines the minimum standards on tobacco e.g. advertising bans. The framework was signed by most countries but, noticeably, the USA and Indonesia did not sign.