Themes > Current Issues
09.10.2001
Jayati Ghosh
A
new report on the activities of the multinational drug company Pfizer
reiterates the problems with enforcing patent rights in an increasingly
concentrated industry.
The developing world is never short of public health problems, most of which reflect overall material conditions rather than simply the inadequate development of medical technology. But one of the biggest and potentially most explosive of such problems reflects the complex interaction between the two : the emergence of drug resistant strains of a whole range of diseases.
A whole range of diseases which are especially common in developing countries - among them malaria, TB, meningitis, pneumonia, diarrhoea, cholera, HIV - now proliferate in strains which are resistant to the standard drugs in use against them. A major cause of this is sub-optimal drug use, as in incomplete courses of antibiotics, and this itself typically results from the combination of poverty and high drug prices which is now so common across developing countries.
This effect of the high real drug costs in turns feeds on itself, by making effective treatment of the new resistant diseases even more expensive. For example, a basic six month course for treating TB typically costs around US $20, but for drug-resistant TB, the cost of treatment can climb to as high as US $2,000. It is easy to see how such high prices would encourage further sub-optimal use, thereby creating a vicious cycle.
The need to provide affordable medicines, especially life-saving ones, to the world's population is so obvious that it hardly needs to be reiterated. But the current gap between pure technological availability and lack of access of the poor in developing countries, is probably greater than it has ever been. The World Health Organisation has estimated that each year, millions of poor people die from diseases that could in many cases be prevented or cured at a cost of less than $5 for each life saved
The TRIPS regime currently being enforced by the World Trade Organisation has been an important factor behind the relative lack of competition that has allowed drug prices to rule so high in poor developing countries. The TRIPS agreement requires the intellectual property regimes of all WTO members to provide patent protection on products (rather than processes) for at least 20 years,
along with other requirements.
TRIPS reflected the strong lobbying power of major drug multinational companies, which have subsequently been the major beneficiaries of the new regime. The drug industry is now one of the most concentrated and most profitable areas of business in the international economy. And there are important links between the inability of millions of people to get access to the medicines they need, and the profits of this industry.
All this becomes very clear in a new report from Oxfam, which examines the activities of the drug company Pfizer. ("Formula for Fairness : Patient rights before patent rights" Oxfam Company Briefing Paper Number 2, July 2001) Pfizer is the world's biggest pharmaceutical company, swollen by its merger with Warner-Lambert last year. Its sales of more than $23 billion give it a world market share of 7 per cent, and it dominates the market for certain drugs.
Pfizer is not only huge but growing very fast and also highly profitable. Its profits before taxes last year were around $9 billion, amounting to 30 per cent of sales. It expects to grow by around 25 per cent per annum over the coming years.
In some ways Pfizer fits very neatly into the stereotype of the big bad company. It has a long and highly effective track record of lobbying (with the US government in particular) and has been the most visible advocate for the interests of the industry, especially with respect to patents and TRIPS. Not only was it instrumental in putting intellectual property on the multilateral trade agenda, but it has been active in pressing the US government to use Super 301 and other unilateral trade measures against countries that it believes offer inadequate trade protection. It was also a leader of the group that pushed through the controversial Life Patents Directive in the European Parliament in May 1998, allowing companies to patent many life forms.
While 70 per cent of Pfizer's market is in developed countries, its pricing behaviour in poor countries has been inflexible and its attitude to competitors combative. In countries where it has patents, it has adopted a broadly uniform pricing policy which is little related to local capacity to pay. Also, it has a policy of not issuing licenses to generic manufacturers. It has led aggressive campaigns against the export of drugs by generic manufacturers such as the Indian company Cipla to Sub-Saharan Africa, which culminated in a legal case against the South African government which was settled out of court recently.
Pfizer owns patents on three important drugs for infectious diseases - the antifungal flucanazole, the antiretroviral nelfinavir and the antibiotic azithromycin. In each of these cases Pfizer charges very high prices in the developing world as well. Typically, the company does not even pretend that the drugs are being made available "at cost" since that is so hard to justify given the variety of prices available.
The case of flucanazole has received special worldwide attention because of its life-saving role in treating opportunistic infections associated with HIV-AIDS. Cipla of India makes a generic equivalent that costs $0.65, while Biolab of Thailand produces one at a price of only $0.29. By contrast, Pfizer charges $8.25 for the drug in South Africa, $10.50 in Kenya, $12.20 in the US and $20.24 in Brazil. There is clear evidence of Pfizer charging very high prices for the other drugs as well.
In fact, where generic substitutes are available, as in Thailand, Pfizer has significantly reduced its prices to compete, although it has led the fight to prevent such substitutes being made available through parallel imports in other countries. The company has also not responded to the offer by Cipla in December 2000, to pay royalty of up to 5 per cent of sales in return for licenses to produce flucanazole.
The irony is that it is not as if all the research involved in developing the drug was conducted within or solely funded by Pfizer. Like all private companies, Pfizer has benefited greatly from and extensively used the results of publicly funded research in this area, although it has been quick to file patents for final results.
It is now much more widely recognised that there is no correlation between socially desirable and necessary R&D in drug development, and a tight patent regime which is supposed to encourage innovation by offering pecuniary rewards. Indeed, much of the major research in pharmaceuticals and medicine, both in the past and currently, is under the aegis of publicly funded institutions across the world.
The response of Pfizer and other drug companies to widespread public criticism, has been to engage in "philanthropy" in the form of some limited but well-publicised drug donation programmes. However, as the Oxfam report points out, such programmes not only are minuscule compared to the scale of the problem, but tend to be "piecemeal, reversible and frequently conditional".
Of course, citizens in developing countries are not the only victims of the power of the multinational drug companies. Oxfam's previous Company Briefing Paper was about GlaxoSmithKline, the second largest drug multinational. That company was in the news again recently, for hiring a public relations agency in the US to "spread awareness" about a new psychological problem called "social anxiety disorder", apparently a debilitating form of shyness, which could be treated with a drug - Paxil - coincidentally patented by the company. The advertising campaign covered newspapers, radio and TV, satellite and Internet communications, and used testimonials from advocates and doctors who said social anxiety was America's third most common mental disorder with more than 10 million suffer.
Subsequently health experts in the US have been alarmed at sudden rise of both media reportage of the spread of social anxiety disorder, and the number of people who have taken to using the drug. Paxil, which had been lagging behind other antidepressants in the market such as Prozac, has now jumped in sales and is on the way to becoming market leader. As one bioethics professor pointed out, "the way to sell drugs is to sell psychiatric illness."
Of course, such misuse of advertising power, while reprehensible, is still not on par with pricing and marketing policies that effectively deny access to life-saving drugs to the world's poor. But they point to a similar problem - that of increasing concentration and lack of regulation of an international drug industry that has been given much greater power by the current multilateral trade regime.
The developing world is never short of public health problems, most of which reflect overall material conditions rather than simply the inadequate development of medical technology. But one of the biggest and potentially most explosive of such problems reflects the complex interaction between the two : the emergence of drug resistant strains of a whole range of diseases.
A whole range of diseases which are especially common in developing countries - among them malaria, TB, meningitis, pneumonia, diarrhoea, cholera, HIV - now proliferate in strains which are resistant to the standard drugs in use against them. A major cause of this is sub-optimal drug use, as in incomplete courses of antibiotics, and this itself typically results from the combination of poverty and high drug prices which is now so common across developing countries.
This effect of the high real drug costs in turns feeds on itself, by making effective treatment of the new resistant diseases even more expensive. For example, a basic six month course for treating TB typically costs around US $20, but for drug-resistant TB, the cost of treatment can climb to as high as US $2,000. It is easy to see how such high prices would encourage further sub-optimal use, thereby creating a vicious cycle.
The need to provide affordable medicines, especially life-saving ones, to the world's population is so obvious that it hardly needs to be reiterated. But the current gap between pure technological availability and lack of access of the poor in developing countries, is probably greater than it has ever been. The World Health Organisation has estimated that each year, millions of poor people die from diseases that could in many cases be prevented or cured at a cost of less than $5 for each life saved
The TRIPS regime currently being enforced by the World Trade Organisation has been an important factor behind the relative lack of competition that has allowed drug prices to rule so high in poor developing countries. The TRIPS agreement requires the intellectual property regimes of all WTO members to provide patent protection on products (rather than processes) for at least 20 years,
along with other requirements.
TRIPS reflected the strong lobbying power of major drug multinational companies, which have subsequently been the major beneficiaries of the new regime. The drug industry is now one of the most concentrated and most profitable areas of business in the international economy. And there are important links between the inability of millions of people to get access to the medicines they need, and the profits of this industry.
All this becomes very clear in a new report from Oxfam, which examines the activities of the drug company Pfizer. ("Formula for Fairness : Patient rights before patent rights" Oxfam Company Briefing Paper Number 2, July 2001) Pfizer is the world's biggest pharmaceutical company, swollen by its merger with Warner-Lambert last year. Its sales of more than $23 billion give it a world market share of 7 per cent, and it dominates the market for certain drugs.
Pfizer is not only huge but growing very fast and also highly profitable. Its profits before taxes last year were around $9 billion, amounting to 30 per cent of sales. It expects to grow by around 25 per cent per annum over the coming years.
In some ways Pfizer fits very neatly into the stereotype of the big bad company. It has a long and highly effective track record of lobbying (with the US government in particular) and has been the most visible advocate for the interests of the industry, especially with respect to patents and TRIPS. Not only was it instrumental in putting intellectual property on the multilateral trade agenda, but it has been active in pressing the US government to use Super 301 and other unilateral trade measures against countries that it believes offer inadequate trade protection. It was also a leader of the group that pushed through the controversial Life Patents Directive in the European Parliament in May 1998, allowing companies to patent many life forms.
While 70 per cent of Pfizer's market is in developed countries, its pricing behaviour in poor countries has been inflexible and its attitude to competitors combative. In countries where it has patents, it has adopted a broadly uniform pricing policy which is little related to local capacity to pay. Also, it has a policy of not issuing licenses to generic manufacturers. It has led aggressive campaigns against the export of drugs by generic manufacturers such as the Indian company Cipla to Sub-Saharan Africa, which culminated in a legal case against the South African government which was settled out of court recently.
Pfizer owns patents on three important drugs for infectious diseases - the antifungal flucanazole, the antiretroviral nelfinavir and the antibiotic azithromycin. In each of these cases Pfizer charges very high prices in the developing world as well. Typically, the company does not even pretend that the drugs are being made available "at cost" since that is so hard to justify given the variety of prices available.
The case of flucanazole has received special worldwide attention because of its life-saving role in treating opportunistic infections associated with HIV-AIDS. Cipla of India makes a generic equivalent that costs $0.65, while Biolab of Thailand produces one at a price of only $0.29. By contrast, Pfizer charges $8.25 for the drug in South Africa, $10.50 in Kenya, $12.20 in the US and $20.24 in Brazil. There is clear evidence of Pfizer charging very high prices for the other drugs as well.
In fact, where generic substitutes are available, as in Thailand, Pfizer has significantly reduced its prices to compete, although it has led the fight to prevent such substitutes being made available through parallel imports in other countries. The company has also not responded to the offer by Cipla in December 2000, to pay royalty of up to 5 per cent of sales in return for licenses to produce flucanazole.
The irony is that it is not as if all the research involved in developing the drug was conducted within or solely funded by Pfizer. Like all private companies, Pfizer has benefited greatly from and extensively used the results of publicly funded research in this area, although it has been quick to file patents for final results.
It is now much more widely recognised that there is no correlation between socially desirable and necessary R&D in drug development, and a tight patent regime which is supposed to encourage innovation by offering pecuniary rewards. Indeed, much of the major research in pharmaceuticals and medicine, both in the past and currently, is under the aegis of publicly funded institutions across the world.
The response of Pfizer and other drug companies to widespread public criticism, has been to engage in "philanthropy" in the form of some limited but well-publicised drug donation programmes. However, as the Oxfam report points out, such programmes not only are minuscule compared to the scale of the problem, but tend to be "piecemeal, reversible and frequently conditional".
Of course, citizens in developing countries are not the only victims of the power of the multinational drug companies. Oxfam's previous Company Briefing Paper was about GlaxoSmithKline, the second largest drug multinational. That company was in the news again recently, for hiring a public relations agency in the US to "spread awareness" about a new psychological problem called "social anxiety disorder", apparently a debilitating form of shyness, which could be treated with a drug - Paxil - coincidentally patented by the company. The advertising campaign covered newspapers, radio and TV, satellite and Internet communications, and used testimonials from advocates and doctors who said social anxiety was America's third most common mental disorder with more than 10 million suffer.
Subsequently health experts in the US have been alarmed at sudden rise of both media reportage of the spread of social anxiety disorder, and the number of people who have taken to using the drug. Paxil, which had been lagging behind other antidepressants in the market such as Prozac, has now jumped in sales and is on the way to becoming market leader. As one bioethics professor pointed out, "the way to sell drugs is to sell psychiatric illness."
Of course, such misuse of advertising power, while reprehensible, is still not on par with pricing and marketing policies that effectively deny access to life-saving drugs to the world's poor. But they point to a similar problem - that of increasing concentration and lack of regulation of an international drug industry that has been given much greater power by the current multilateral trade regime.
© MACROSCAN 2003