E-drug: The Guardian: Big Pharma's tiny gestures
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An excellent article which explores pharmaceutical companies efforts to
enhance access to medicine in developing countries
http://observer.guardian.co.uk/business/story/0,6903,1192630,00.html
Corporate Social Responsibility
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Big Pharma's tiny gestures
Cheaper essential drugs for developing countries only come about as the
result of legal action and social pressure, writes Michael Bailey.
Sunday March 21, 2004
In the past few months, people suffering from HIV/Aids in developing
countries have enjoyed some good news.
In December, drug companies GlaxoSmithKline (GSK) and Boehringer
Ingelheim allowed generic firms to supply South African patients with
low-cost versions of their anti-retroviral medicines (ARVs). And in
January, the Brazilian Ministry of Health announced a pounds 40 million
reduction in its annual drugs bill for ARVs, due to price cuts by five
international companies - a saving that helps to ensure the
sustainability of its world-renowned treatment programme.
Meanwhile in Thailand, Bristol-Myers Squibb (BMS) recently surrendered
its exclusive right to produce its ARV, didanosine, enabling the
government pharmaceutical labs to manufacture a generic equivalent at a
fraction of the annual pounds 900 per patient charged by BMS.
So is 'Big Pharma' reforming itself and confounding those who accuse it
of relentlessly hunting for profits in poor countries? Sadly, the short
answer is no. These advances only came about after the companies were
facing legal action and widespread social disapproval.
In South Africa, the Treatment Action Campaign had successfully argued
to the competition authorities that GSK and Boehringer had greatly
overpriced their patented products the companies backed down rather than
challenge the finding and tarnish their image still further. In Brazil,
it took government threats to override patents and licence generic
manufacture before the price of patented ARVs fell. In the Thai case,
BMS dropped the case after a three-year legal battle initiated by local
activists, who claimed that the high price of the didanosine patent was
an infringement of the human rights of sufferers.
All this suggests that risk management has still not entered the
industry mindset, and that the rickety old business model trundles
along, regardless of advice from many quarters, including investors, to
swap it for a new one.
The old model contains three strategies. The first is to charge as much
as any market can bear, irrespective of public health needs. In the
developing world, this usually means charging a 'First World' price on
low volumes sold to the well-off. Even if you have to bring down ARV
prices in the glare of publicity, you hold the line on treatments for
other diseases such as hepatitis and cancer.
The second strategy - industry's version of the domino theory - is to
defend patents as ruthlessly as imperial Rome defended its furthest
outposts, even where they have little economic value. The third is to
make sure that you have the US government and a smattering of OECD
governments on your side, so that you can disregard public opinion and
the rest of the world's governments put together.
To be fair, some firms, notably GSK, have accepted the principle of
setting lower prices in the poorer developing countries, although the
range of medicines and eligible countries is too narrow and prices could
come down still further. However, Pfizer, the largest phar- maceutical
company in the world, still rejects this idea, preferring to respond to
public pressure by donating several drugs to treatment programmes in
selected countries. While such donations can be useful, they only
address a tiny part of the problem and are by their nature
unsustainable.
The welcome drop in the price of Aids drugs in Africa has certainly
opened the way for expanded treatment programmes and has prompted a
World Health Organisation campaign to have three million patients under
medication by 2005. However, the price falls did not coincide with
boardroom enlightenment but with the arrival of Indian generic medicines
at a fraction the cost of the originals. This underlines the critical
need for competition. Unfortunately, under World Trade Organisation
patent rules - the Trips (trade-related aspects of intellectual property
rights) agreement - India is no longer able to produce generic versions
of new drugs.
Despite furious industry lobbying, the WTO summit in 2001 stated that
patent privileges should not overrule public health interests. The Doha
declaration confirmed that governments could override patents and
commission low-cost generic production when necessary. This ability to
issue 'compulsory licences' gives developing countries real leverage
when negotiating prices, as Brazil has demonstrated. The declaration
also promised to amend a highly discriminatory Trips clause which
restricts poor countries from importing affordable generic medicines
from abroad.
Unfortunately, industry's acceptance of the declaration is only honoured
in the breach. In reality, it is fighting an intense rearguard action to
render the amendment of Trips unworkable. At the same time, the US
government, acting at industry's behest, is using bilateral trade
agreements and heavy diplomatic pressure to make developing countries
enact business-friendly national patent laws. These dilute the public
health safeguards allowed by Trips and offer longer periods of 'market
exclusivity' for medicines, which means higher prices.
In response to the claim that drug patents drive up the price of vital
medicines for people in poverty, the industry stresses that its enviably
large profits finance needed innovation. There is indeed substantial
investment in R&D (though it is only half the expenditure on marketing
and distribution), but little of this is directed at diseases specific
to developing countries because these are not lucrative markets. If the
annual toll of two million TB-related deaths occurred in Europe or North
America, we would not be waiting 30 years for a new TB treatment to
appear. The social contract implicit in a patent (citizens pay more for
medicines, but get innovation in return) simply does not hold for the
developing world. The solution to this massive market failure rests
largely on public funding. That said, companies such as GSK and Novartis
have increased their investment in infectious-disease research, as has
GSK in the critical area of vaccine development. The problem, as with
donations, is the small scale.
Another common industry answer to criticism of its role in poor
countries is 'don't point the finger at us'. In a remarkable reversal of
their normal advertising messages, companies argue that health problems
are due to poverty, lack of health infrastructure and sanitation, low
educational standards and so on. Lack of medicines comes well down the
list. This, of course, deliberately misses the point that affordable
medicines are one essential ingredient in addressing the health crisis
and are something that industry has the power to provide.
So how can society ensure that industry plays a more socially valuable
role? First, firms themselves should accept that corporate long-term
interest may be better served by a much more flexible approach to prices
and patents in developing countries. Greater sensitivity to the health
needs of developing countries will help to restore legitimacy to an
industry that depends heavily on the trust of the public and
governments. Institutional shareholders can reinforce this shift by
requiring better risk management and improved industry practices. The
framework for assessing corporate responses to the health crisis,
launched by City financial institutions in April 2003, was a
breakthrough in generating sustained pressure for reform.
Second, since no one firm operating in a competitive market can be
expected to take a significant hit to its bottom line, however good the
cause, the rules of the game must also change. One very simple policy
measure that will bring medicine prices down is to allow generic
competition in developing countries. This means facing the major
political challenge of reforming Trips, which demands a minimum 20-year
patent term worldwide.
Short of that, the governments of developing countries have little
choice but to wriggle around inside the straitjacket and ensure that
they have the best possible domestic laws and practices, including
compulsory licensing. Even this requires determination on their part,
continued support from concerned citizens worldwide and large injections
of enlightened business thinking into the industry.
Dr. Mohga Kamal Smith Health policy advisor
Oxfam UK
Tel + 44 (0) 1865 312290
Mobile +44 (0) 777 62 55 884
http://www.oxfam.org.uk
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