Battles with Big Pharma

In the law of the market, businesses charge whatever they think the market will bear – except in medicine, where costs come weighed with moral dilemmas. Now, some countries are telling drug companies they won't pay.

In the law of the market, businesses charge whatever they think the market will bear – except in medicine, where costs come weighed with moral dilemmas. Multi-billion dollar pharmaceutical companies are roundly, fundamentally, and universally scorned when they charge developing countries western-nation prices for their miracle pills. Now, some countries are telling drug companies they won't pay.

Over the past year, Thailand and Brazil began overriding the patents for a costly new AIDS medicine from Merck. Bill Clinton backed both countries for taking advantage of a "national emergency" clause under WTO rules. Clinton's charitable foundation heaped onto big pharma's pain by negotiating steep discounts on antiretroviral drugs from generic manufacturers. "No company will live or die because of high price premiums for AIDS drugs in middle-income countries, but patients may," explained the former US president. The drug companies defended their pricing.

In recent years, pharmaceutical companies have offered discounts on vital medicines to middle-income countries, while charging the poorest countries only production costs. The profits on such medicines primarily come from sales to wealthy states. Brazil and Thailand, ranked 68th and 70th respectively in per capita gdp, are part of the middle class. Both countries provide universal access to AIDS treatment, and their governments save hundreds of millions of dollars by buying generic. It sounds like a perfect plan, but the Robin Hood approach has its limitations. Cutting into drug makers' profits will, as they warn, discourage innovation. Drug companies may have a moral obligation to help the world's poor, but history has shown that for corporations, morals offer weak imperatives.

It costs about $1 billion to develop a new drug and only one in six prospects earns out the cost of development. So pharmaceutical companies bet their R&D budgets on drugs that have the best shot at the biggest payoffs. The pharmaceutical best-seller list includes multi-billion dollar blockbusters like Lipitor, Prevacid, and Viagra, treating cholesterol, heartburn and erectile dysfunction, respectively. They're the disorders of the wealthy, aging and overfed West.

Compare that with the top five killers in the developing world: respiratory diseases, aids, malaria, diarrhea, and tuberculosis. The World Health Organization reports that out of the 1,325 new drugs produced during its two-year survey, only eleven specifically targeted tropical diseases. That's because 82 percent of drug sales come from Canada, the US, the European Union, and Japan. Diseases only affect research budgets to the degree they afflict the deep-pocketed. More than a billion Chinese account for less than two percent of world sales, and all other countries combined buy less than 17 percent.

A more glaring sign of market failure is the scarcity of new vaccines. Immunization research is as expensive as drug research, but makes lousier business sense to pursue. Effective vaccines eliminate the customer base in a morally good, financially bad kind of way. So thousands of new drug treatments are introduced each year compared to a trickle of new or improved vaccines. Three of the world's great killers – aids, malaria, and tuberculosis – could be eliminated once and forever with viable vaccines.

Corporate responsibility and activist pressure have won important gains. Bristol-Myers Squibb voluntarily licensed an antiretroviral royalty-free to generic manufacturers for India and Africa. The mere idea of such royalty-free drugs owes to the activists who fought for them. But these and the savings in Brazil and Thailand will be short-lived victories if the pipeline for new medicines dries up. Why would a drug maker pursue AIDS medicine if there's more money in erectile dysfunction? Activists' gains may save lives now, but will ensure fewer AIDS drugs in the future.

Medicine is, unlike other goods, an issue of ethics and morality. With the power to save lives, drug makers bear a burden of responsibility that other manufacturers don't share. But it's futile to keep wishing that big pharma will take up more of that responsibility. The world needs to find and build new engines of innovation. We can't keep letting the laissez-faire economy dictate which medicines the planet's poorest nations receive.

There are encouraging signs. Non-profits like the International AIDS Vaccine Initiative, the Wellcome Trust, and the Global Fund to Fight aids, Tuberculosis and Malaria, contribute substantially to the development of new medicines. As the corporate well dries up, attention needs to shift from pressuring corporations to encouraging efforts like these so that more people in the developing world don't end up paying with their lives.