Profiteering on Human Misery

For the first time, the International AIDS Conference will be held on the African continent in South Africa — in a country where a significant proportion of the population has AIDS. It is being held in the background of a situation where people with AIDS in all developing countries are facing a severe crisis of access to life-saving medications. The antiretroviral drugs (i.e. drugs used to treat AIDS) that have transformed AIDS from a death sentence to a chronic disease in developed countries are largely unavailable in developing countries, priced beyond the means of most people.

Treatment of AIDS with a combination of drugs — called Highly Active Antiretroviral Treatment (HAART) — has decreased mortality from AIDS by 84% in Switzerland from 1992 to 1998. This relative fall of 84% is greater than the 72% fall produced by penicillin in the treatment of severe pneumonia between 1930 and 1965, and of course occurred in a much shorter period of time. Unfortunately less than 5% of AIDS infected people have currently access to such treatment, because the estimated cost of treatment by HAART is about $12,000 per person per year.

A Few Crumbs to Deflect Criticism

At the heart of this problem lies the Intellectual Property Regime, which confers monopoly patent rights for vital drugs to giant Multinational Corporations. UNAIDS (the UN body coordinating policy issues on AIDS) WHO, and a group of five pharmaceutical companies  (including Merck, Pfizer, Glaxo-Wellcome, and SmithKline Beecham) recently announced that they are discussing price reductions for AIDS drugs.

However this announcement has not been followed up by any concrete proposals. The move is being seen by anti AIDS activists as an attempt to deflect mounting criticism of drug multinationals for earning through super-profits through sale of ant-AIDS drugs, while the toll due to AIDS keeps on rising. The proposal by the companies says that it will voluntarily reduce its prices of ant-AIDS drugs by as much as 80% in African countries. However the proposal does not mention how long this “charity will be available, nor, to how many. Even more crucially, the proposal, in fact, stands in opposition to moves for allowing Compulsory licensing of these drugs — i.e. allow local manufacturers to produce these drugs while the patents are still held by these companies. The attempt, thus, is to safeguard the provisions of a stringent Patent protection regime, and satisfy critics with a few crumbs.

Meanwhile, health ministers from Southern African countries have set themselves on a collision course with pharmaceutical manufacturers by announcing that they will circumvent companies’ drug pricing policies and buy essential AIDS drugs at the cheapest prices. At a meeting held in Pretoria last month they announced that strategies being planned to improve access to anti AIDS drugs would include: Parallel importation (buying drugs at the cheapest prices available on the world market);  Compulsory licensing (whereby governments license local manufacturers to produce patented drugs); and Facilitating the immediate availability of generic (non Branded) drugs once a patent on a medicine has expired. Pharmaceutical manufacturers have challenged the right to use these measures. A South African law that would allow such strategies is being held up in court by the S A Pharmaceutical Manufacturer’s Association.

Earlier, in May, a group of developing countries, led by Brazil and Zimbabwe, pushed to broaden WHO’s field of activities related to AIDS at the World Health Assembly (attended by ministers of health from across the globe) despite strong opposition from many developed countries including the United States and some members of the European Union. The resolution called on the WHO to expand its current databases to include information on the prices of many crucial medicines, including AIDS drugs. This is the first time the WHO has been urged to look at the crucial issue of drug pricing. With that information in hand, countries can assess industry offers and can use legal options to find and negotiate the best prices for the drugs they need. Developing countries also urged the WHO to play an active role in advising countries on the public health implications of international trade agreements. During a discussion on the Revised Drug Strategy, numerous countries urged the WHO to guard its independent voice when giving countries advice on health-related aspects of trade. The pharmaceutical industry and countries sympathetic to its views (the US and some European countries) were unhappy with the resolution and the industry continues to argue that they alone should have the right to make and sell their drugs and any action to help reduce prices should be made by them.

Weak-Kneed Response by the WHO

The WHO’s response to the resolution has been, at best, ambivalent. The WHO  seems to be bent upon defending the interests of big pharmaceutical monopolies. It admits that the recent announcement by 5 large pharmaceutical companies to reduce anti AIDS drug prices is void of concrete proposals, and that the negotiations concerning pricing have not really started. At the same time, WHO, though given a mandate by its Assembly to support Member States in their efforts to procure affordable treatments, is not ready to set up or support initiatives conducive to competition between multinational drug companies and generics manufacturers. The WHO argues that it has neither the capacity, nor the mandate, to circulate an updated database on comparative world prices of AIDS drugs, thus quoting the exact words of the pharmaceutical lobby. The WHO now says that it prefers to leave the giant pharmaceutical companies to negotiate with “client” countries in a bilateral fashion, rather than define a negotiation framework which would better represent the public health interests of the developing countries.

R&D Costs or Profiteering?

The International Federation of Pharmaceutical Manufacturers Associations (IFPMA), on its own part, is sticking to the argument that strong Patent protection, that allows it to reap super-profits, allows it to spend resources on development of new drugs. The AIDS case brings out the hollowness of this whole argument.

It is true that research and development (R&D) for new drugs is expensive and R&D costs are required to be recovered during the initial years of marketing. The moot question, however is, how soon are such costs recovered by companies in a monopoly situation. Estimates show that for top selling “block-buster” drugs, such costs are recovered within one year of commencement of marketing. Even making allowance for the fact that all new drugs may not be equally profitable, creation of monopolies for twenty years (as mandated by the WTO agreement) is a clear license for sheer profiteering.

Also, although the majority of the world’s population live in developing countries, these countries represent only a small proportion of the global pharmaceutical market. Africa, for example, accounts for only 1.3 percent of that market. Consequently, lower prices for essential drug therapies in developing countries should not be a serious threat to R&D funding. In fact, the very small size of the global pharmaceutical market represented by developing countries is the reason why only extremely limited investments are made into the diseases that mainly or solely affect people in developing countries. For example, the last new anti-TB drug was introduced more than fifty years back. It can be argued that the global pharmaceutical market is so large (over $400 billion per year) and the proportional contribution of Africa, S.America and Southeast Asia to both turnover and profit so small, that these markets could be completely isolated from the global total and pharmaceutical manufacturers would not be affected in any measurable way. In addition, universal or widespread health insurance in most industrialised countries ensures that the burden of drug costs is rarely substantial for any individual. This is in marked contrast to the situation in most developing countries.

We have to, hence, look elsewhere for the reason why drug MNCs are desperate to safeguard the stringent Patent regime that they won for themselves at the WTO negotiations. Indeed we don’t need to look very far — India’s drug Industry provides much of the answer. Armed with its liberal Patent regime of 1970, that did not allow product patents on drugs, the Indian industry was able to develop capabilities that could challenge the global monopoly of a few MNCs on drug production and drug pricing. The same can be said to be true for Brazil, Thailand, Malaysia, and a few other developing countries. It is significant that when the indigenous industries of these countries were poised to mount this challenge in the global market, the WTO agreement stepped in to disarm these industries. Thus, in spite of the mounting misery of deaths due to AIDS, the MNCs cannot countenance any dilution of a strong Patent protection regime. One wonders whether our negotiators at WTO even realised the magnitude of what they bartered away when the WTO agreement was signed.

Let us now return to the question of how much was invested by the companies who hold the monopoly rights, in the development of anti AIDS drugs. The IFPMA argues, the only feasible model for promoting innovation in the high-risk and resource-intensive pharmaceutical industry is to guarantee the companies that invest in research an adequate period of exclusive rights for their products. However, with respect to AIDS-related drug therapies, it has usually been governments (rather than drug companies) that have paid for initial development, pre-clinical research and clinical research. For the pharmaceutical companies, this significantly lowers the costs of bringing these products to market. For example, the costs of securing Federal Drug Authority approval in the United States for AIDS drugs have been estimated to be only about $25 million per drug — which may be contrasted with the near $1 Billion annual turnover for some of these drugs! Often, the pharmaceutical industry is not engaged in any significant effort to develop new drugs — the efforts are superficial and primarily restricted to the refinement of government-produced products, or the development of alternative copycat drugs to government-sponsored efforts. This is particularly obvious in the case of AIDS drugs, where every class of drug was discovered, tested and developed by government agencies. Among these drugs are ddI, AZT, d4t, Ritonavir, and T-20. Support for the position that drug prices are not related to replacement of R&D costs is provided by the current price for Pentamidine. Pentamidine was a cheap treatment developed to treat sleeping sickness. However, when it was found to be effective in the treatment of AIDS-related PCP (pneumocystis carinii pneumonia), the price of Pentamidine increased 500%!

Bridging the Gap

Meanwhile, millions will die from diseases like AIDS every year though drugs to treat them are available, and can be made affordable. Two years ago the 12th World AIDS Conference took place in Geneva. Its logo contained a rainbow of hope and the slogan “Bridging the gap”. But today the gap between rich and poor, in relation to access to highly active anti AIDS therapy, yawns as wide as it did in 1998.

Table 1:

Table 1 shows the population of Switzerland, Ivory Coast, Uganda, Zimbabwe and India (in millions), the number of AIDS-positives (in thousands). The theoretical costs of Highly Active Antiretroviral Treatment (HAART) for all AIDS infected at 12,000 dollars per person per year is contrasted with the percentage of GNP required to treat all AIDS patients. How cheap would HAART have to become for the gap to close? At present rates, Zimbabwe is required to spend 265 times its GNP to treat all its AIDS patients! Even in the case of India it is 11.5% of the GNP, i.e. almost ten times the total government expenditure on all health care in the country. Of course the figures for India are theoretical as Indian companies are still able to produce patent protected drugs at lower prices as the changes in Indian Patent laws are yet to take effect. This will, however, change in a matter of months as the new Patent Act stands poised to be introduced in Parliament.

Organisations, and, even more crucially, countries across the globe are ranging themselves against this gross violation of human rights — depriving millions of people access to life saving drugs. AIDS is being seen as a test case — there are many others like TB, Malaria, etc. The AIDS debate may well make or break the counter offensive launched by developing nations and concerned activist groups across the globe to redraw the contours of the iniquitous global Patent regime hammered out at the WTO. Countries like South Africa, Brazil, Thailand and Zimbabwe are battling it out at various international fora. In India, its government makes shrill noises about statistics that indicate that India has the largest number of AIDS infected patients in the world. Yet not a peep is to be heard from Indian delegations attending negotiations related to Patent laws and access to medicines. India, which once gave leadership to the Non Aligned Movement is today Uncle Sam’s most dependable lackey.