Teva: Between Zionism and reality

Teva, a pharmaceutical company that started in Israel and went global, is collapsing and threatening to cut thousands of jobs here and abroad. Israel’s Prime Minister, Benjamin Netanyahu, is attempting to intervene in this decision to save the plants in Jerusalem from closure. If anyone bears direct and indirect responsibility for Teva’s situation, it is Netanyahu himself, and not only because of generous tax breaks granted to the company. Teva has fallen victim to neoliberalism (an ideological model that emphasizes free market competition). This is an economic model that Netanyahu has espoused and implemented since his first tenure as Prime Minister (1996-99), including a time as Treasury Minister in the Sharon government. There are those who compare Teva’s collapse to the crash of large banks owned by the Histadrut and the state in the 1980s, and there’s justice in this comparison. The collapse of the banks marked the end of a period of nationalization and cooperative economy in Israel. That was the beginning of privatization and free market policies that the PM, along with all the heads of the treasury and the Bank of Israel, have encouraged in recent decades.

In a December 18th article in The Marker, Yoram Gabison blames Teva’s failure on its founder Eli Hurvitz and his desire to preserve its “Israeli” identity, which led to the selection of Israeli directors without proper training to run an international company. Hurvitz and the government’s attempt to preserve Teva’s “Israeli” identity and to “continue production in Jerusalem for reasons not purely economic,” despite the fact that most of its activity and shareholders are outside of Israel, amounted to “burying one’s head in the sand,” according to Gabison. Yuval Steinitz, as Finance Minister, boasted during the social protest in 2011 that the Israeli economy was immune to the effects of the 2008 economic meltdown. The Israeli government refused to understand what the rest of the world understood: that the market economy creates structural distortions and that Israel, when connected to the global market, is not impervious to its pitfalls.

After Teva expanded beyond Israel’s borders, and as soon as the state opened its doors to foreign investments, the country’s “Zionist” identity diminished. Evidence of this is the transformation of another major company, Tnuva, from an Israeli dairy cooperative into a possession of China. The Israeli economy has long since become global, crossing borders and national identities, and its sole consideration is profit. Although there are forces today fighting for a “national” economy, like Trump’s “making America great again”, the horse is out of the barn. Companies are multinational, and mega concerns such as Facebook, Google and Amazon are virtual companies. They create nothing but platforms to exchange knowledge, information, and goods, while the individual consumer has become the creator of the content.

It is unfair to accuse Teva’s directorate of responsibility for the disaster. As soon as Teva ceased to be a “Zionist” company and became a global one, it adopted the administrative culture dictated by Wall Street. It was Ronald Reagan, much esteemed by Netanyahu, who created a business environment that benefited big companies and their directors. Under then-CEO Erez Vigodman, Teva’s $40 billion acquisition of Allergan Generics was cheered by the same people who later criticized the deal as adventurism. Vigodman fulfilled Eli Hurvitz’s legacy to keep Teva “Zionist.” The idea behind this ill-fated purchase was to prevent a takeover by a rival pharmaceutical giant: you either eat or be eaten.

Teva, like other giant companies, was the victim of the same economic policies that made it the generic drug giant. It became a company with a small Zionist head and a huge foreign body. Let’s remember, Teva did not make its big fortune in Israel but in the America, where the drug companies do whatever they like and ruthlessly exploit society and the little man. Teva’s big money was not made from generic drugs, where there is tough competition, but from its monopoly on Copaxone (used to treat multiple sclerosis). Its patent on Copaxone expired after 25 fat years. Despite the preaching of free market advocates about the benefits of unbridled competition, which is supposed to benefit the consumer, large profits do not result from free competition, but rather from cartelization, which fixes prices and limits supply.

In an article on Teva in the website “Seeking Alpha,” Terry Chrisomalis gives the secret of the company’s profitability in the US market. He claims that Teva has been responsible for the large price increases for multiple sclerosis drugs. In annual terms, he writes, Teva’s “drug Copaxone 20 mg was first approved back in 1996, and cost patients an average of $8,300 back then. Today, the same drug costs patients $91,400. That is a 1002% increase since the launch of the drug.” The question posed by the American public and politicians is, Why. And the answer is simple: Because Teva could get it. The real problem with Teva today is not that the Copaxone celebration ended when its patent expired, but that the greed of American drug companies aroused such hostile public opinion that the US Congress had to set limits on their piggishness. In fact, profitability in the US pharmaceutical market is diminishing. The prime motive for developing new drugs is greed, and most of the recent “advances” are based on market considerations, not on the needs of patients.

Netanyahu and his government are entangled in corruption charges. They are held captive by a messianic nationalist ideology. They have neither the time nor ability to embrace the future, not on a political level, and certainly not on a socioeconomic level. Teva and other international, monopolistic drug companies cannot be saved. The world of patents is being replaced by the development of drugs based on Open Source software (software with a source code that anyone can inspect, modify, and enhance). It is no accident that the government of India has started an Open Source initiative with 7500 participants from 130 countries. The idea is to create drugs for diseases which, because of profit considerations, are not being developed by the larger pharmaceutical companies. Today, drugs are also created using artificial intelligence and robots, which reduces their price on the one hand, but also ejects workers from their jobs, making it difficult for them to purchase these same drugs. In short, the economic model on which Teva has been based will have to change. Netanyahu and his Finance Minister, Moshe Kahlon, have no leg to stand on in their futile attempts to prevent Teva’s layoffs.

Teva maximized its monopoly status, and Israel’s right-wing government enjoyed the fruits of full employment. Bibi the magician! The Histadrut lent a hand to the celebration in exchange for one million shekels of membership dues from Teva employees, and the public also reveled in the increase in their financial portfolios as Teva’s stock rose. And here’s the good news: the neoliberal economy in its Israeli version is sinking.

We are in the midst of a new industrial revolution, ushered in by the Internet and renewable energy. Solar energy will replace the natural gas of monopolist Yitzhak Tshuva, the Bitcoin threatens Bank Hapoalim’s monopoly and its ridiculous commissions, the autonomous car replaces private vehicles, industrial robots are replacing human workers, and the social networks spread knowledge and information worldwide. Facebook, Google and Amazon are not Zionist companies; they are establishing a new global consciousness in which we are human beings before we are Israelis, Americans, Indians or Arabs.

For Netanyahu, reality is “Fake News.” Israel is not ready for the tremendous changes that are taking place in the world, but she is not immune to them either. Concerning the police investigations, Netanyahu declares: “There will be nothing because there was nothing.” This is also how he approaches the rapidly changing realities mentioned above. He thinks the status quo can last forever, whether we are talking about the Occupation or the economy. The collapse of Teva proves he is wrong, big time.

*Translated from the Hebrew by Robert Goldman

About Yacov Ben Efrat