Medicine as a Luxury

It's generally recognized that people have the right
to eat. When famine
breaks out, relief agencies rush food to the hungry. Politics and war may get in
the way (indeed, they are often the causes of the famine). Sometimes relief
efforts are too small or come too late. But the advanced industrial world usually
acts as if it has a moral obligation to respond to a hunger crisis.

In recent years, humanitarians have been taking a similar approach to
global public health. Shouldn't we be rushing medicine to people who need it, no
matter where they live and no matter how much money they have in their pockets?

Today, microbial plagues are devastating the developing world far more than
hunger is. Yet there is no rush to provide assistance. On the contrary,
governments and activists have had to force drug companies to help people who are
dying simply because they cannot afford the medicine that might save them.

The AIDS pandemic, which has killed 22 million people worldwide and has
infected an estimated 36 million (including 26 million in Africa), is only the
most notorious of these manageable global killers. According to Doctors without
Borders--a group that won the Nobel Prize last year for its tireless efforts to
secure medicine for the world's diseased masses--research and development would
go a long way toward fighting tuberculosis, malaria, and leishmaniasis (black
fever) as well.

Tuberculosis, largely eliminated in the industrialized world since the 1950s,
today infects eight million people a year, 77 percent of whom do not have access
to medicine. The result is two million deaths a year, many of which could be
avoided with antibiotics that cost less than $100 per course of treatment.
Pathogenic resistance to those drugs is growing, however, and few new medicines
will kill the most virulent strains of this age-old scourge.

Malaria infects more than 300 million people worldwide every year and kills an
estimated one million to two million. Chloroquine, the standard treatment since
the 1940s, is increasingly ineffective because of resistance; no new drugs for
malaria are in the pipeline.

Leishmaniasis, an immune-system disease that is transmitted by sand flies, has
infected more than 12 million people in 88 developing countries.
Leishmaniasis-related conditions, including diarrhea and pneumonia, kill more
than 500,000 people a year. The standard course of treatment--a derivative of the
heavy metal antimony--costs $150 and has nasty side effects. As with malaria, no
new drugs have been developed to combat this disease since the 1930s.

The escalating campaign to force the global pharmaceutical
industry to provide affordable medicines to fight these plagues took another step
forward this November in Doha, Qatar, where the World Trade Organization met to
launch the next round of trade negotiations. A coalition of more than 80
developing nations and nongovernmental organizations (NGOs) pushed the WTO to
reaffirm language that already exists in its charter. Every nation has the right
to void patent laws and grant licenses to generic manufacturers of essential
medicines in order to meet public-health emergencies, the resolution read. U.S.
Trade Representative Robert Zoellick, whose office usually acts on the industry's
behalf when faced with intellectual-property issues, opposed the language until
the last moment. The Clinton administration, with similar priorities, threatened
trade sanctions against South Africa after it passed an essential-medicines
licensing law in 1997. The Bush administration did the same until April of this
year, when 39 multinational drug companies finally dropped their suit against the

In the weeks leading up to Doha, the United States and Switzerland did
everything they could to water down the resolution that supports compulsory
licensing to meet public-health emergencies. They backed down only when it
appeared that the issue might doom the Doha talks.

Listening to Cipro

By the time Doha rolled around, Big Pharma and its allies in
the U.S. government were already on shaky ground because of the anthrax crisis.
As the government scrambled to acquire an adequate supply of antibiotics to treat
a worst-case bioterrorist attack, the Department of Health and Human Services
asked Bayer AG, maker of ciprofloxacin (the one anti-anthrax drug that is still
on patent), to give the government a special deal. Those negotiations revealed to
anyone paying attention--and that included virtually every health and trade
minister in the developing world--that the global pharmaceutical industry and its
U.S. government allies were more concerned with protecting pill patents than with
providing affordable medicine to meet a crisis.

Within a week of NBC anchor and terror target Tom Brokaw's on-air
declaration "In Cipro we trust," Health and Human Services Secretary Tommy
Thompson, the glad-handing former Wisconsin governor best known for cracking down
on his state's welfare mothers, began sounding like the minister in charge of
Canada's national health service. He threatened to void Bayer's patent for Cipro
unless it delivered up to 300 million tablets at cut-rate prices. Senator Charles
Schumer of New York and Congressman Sherrod Brown of Ohio introduced legislation
that would have compelled the administration to seize Bayer's patent for generic

Thompson, feeling the heat, told Bayer to get out its sharp pencils and cut
the United States a better deal. At a hastily arranged meeting in Washington, the
company delivered--but at twice the generic price. Three generic makers said they
could make Cipro for 40 cents a pill, less than one-tenth of the pre-September
11 average wholesale price--though their hands were hardly clean either: Generic
manufacturers have accepted more than $200 million from Bayer over the past
several years not to make Cipro. This arrangement, a common drug-industry
practice, is under investigation by the Federal Trade Commission. Trying to rein
in its galloping public-relations fiasco, Bayer ran dozens of full-page ads in
the nation's leading papers as it sought to reassure Americans that the company
stood by them.

Even the deal to purchase cut-rate Cipro was dubious public policy. Thompson's
big purchase also ignored the fact that there were far cheaper alternatives, like
generic doxycycline, that treat anthrax as well as Cipro does. The government's
rush to stockpile Cipro ignored the potent antibiotic's serious side effects,
which can include nausea, diarrhea, and potentially crippling damage to the
cartilage of weight-bearing joints. The high-profile move encouraged doctors to
write prophylactic prescriptions, thus ignoring the warnings of the government's
own public-health experts that the drug's overuse might breed superbugs resistant
to all strains of antibiotics.

By the time public-health officials had stuffed the cotton back into the Cipro
bottle, developing-world health ministers, NGO activists, and generic-drug
manufacturers were having a public-relations field day. Weren't Thompson's
efforts to negotiate lower prices precisely what they'd been trying to do for
years--open up access to affordable HIV/AIDS medications? Hadn't the drug
industry and the U.S. government consistently thrown up legal roadblocks to their
efforts? Editorials supporting the Doha resolution popped up in almost every
major U.S. newspaper. "Americans today can surely understand the need to give
poor countries every possible weapon to fight back," said The New York

It's unfortunate that it took an anthrax-bioterrorism crisis for
the majority of Americans to finally get it. Only in the past year have
organizations like Doctors without Borders, the Consumer Project on Technology,
and the United Nations' agency UNAIDS succeeded in convincing the drug industry's
giants to sell AIDS medicines at reduced prices.

And why have the drug companies finally come around? Mounting media
scrutiny of the affordable-AIDS-medicines issue surely played a part. But in the
end, industry leaders voluntarily established cheap-treatment programs to avoid
what in their eyes was a worse fate: widespread adoption of the Brazilian

Free Trade, Free Drug Production

In Brazil, health authorities have one of the best records
in the developing world when it comes to providing drugs for their HIV-positive
population. They've used existing international trade law to issue compulsory
licenses to generic-drug manufacturers for the production of inexpensive AIDS
drugs. And when they haven't contracted with generic manufacturers directly,
they've threatened to do so in order to wrest lower prices from global
pharmaceutical firms. Last August, Swiss-based Roche reduced the price of the
AIDS drug nelfinavir to 30 percent of its U.S. wholesale price after the
Brazilian health ministry threatened to seize the patent and award it to a
state-owned manufacturer.

According to many activists, the Doha resolution didn't go far enough. The
TRIPS agreement, the WTO's protocol governing trade-related aspects of
intellectual property, still prohibits consumers from directly buying so-called
parallel imports, which are cheaper generics from countries with low-cost
production facilities. Many developing countries don't have the manufacturing
capacity to produce complex chemicals like pharmaceuticals. A reasonable
parallel-import clause would allow health officials in one country to ask a
generic manufacturer in another to produce the critical medicines it needs to
meet a national health emergency.

Despite the limited nature of the Doha resolution, Big Pharma reacted to the
setback with the usual complaints. Allowing generic manufacturers in developing
countries to produce branded products would lead to first-world gray markets. The
wily generic makers in India, Brazil, and South Africa would inevitably export
their low-cost medicines to Europe, the United States, and Japan at prices far
below the first-world patent holders' rates. Only by maintaining high prices for
medicines would industry have sufficient incentive to come up with new cures for
disease. Indeed, medical progress itself depends on maintaining the sanctity of
the global patent system. "This is a defeat for drug companies doing research in
AIDS, tuberculosis, and the like," said Harvey Bale, a lobbyist for the
International Federation of Pharmaceutical Manufacturers Associations.

Again, the Cipro case effectively debunked those claims. Ciprofloxacin,
Bayer's best-selling drug, is the top-selling antibiotic in the world. It
generated over $1.6 billion in sales last year, largely because it sold wholesale
for $4.67 a pill. Since generic manufacturers can make the drug for a tenth of
that price, Bayer no doubt was already earning enough from the markup to fund its
R-and-D labs, cover its marketing costs, and still make money. So when the
anthrax attack triggered unanticipated demand from the U.S. and Canadian
governments, any price set at more than production costs would have represented
pure profit to the firm.

Drugs for HIV-infected patients around the world follow a similar dynamic.
Pharmaceutical companies set their prices for AIDS drugs based on first-world
market conditions. A decade ago, there was a huge uproar over the price of the
initial AIDS drugs, which were largely the product of government research and
licensed to Glaxo Wellcome--now GlaxoSmithKline--and Bristol-Myers Squibb. Those
complaints died down once insurance companies and government agencies began
picking up the tab. We certainly don't hear many complaints these days from the
drug companies, although they occasionally grouse that profits on AIDS drugs have
not been as high as they had hoped.

The third world's desperate need for AIDS drugs can be compared to the
Cipro affair in that it represents a form of unanticipated demand. Most of the 30
million people in developing countries who have the disease can spare little or
no money to pay for drugs. And where there's no money, there's no market. Their
governments can make a market, but only by spending scarce public-health funds.
(Only recently have many governments, especially in Africa, been willing to take
that step.) Buying those drugs at the marginal cost of production would not
change the underlying research incentives for industry.

Indeed, if the global South's poor were the only people in the world who were
HIV-positive, there would be no industry R and D aimed at AIDS, just as there has
been precious little R and D--and virtually no new drugs--for tuberculosis,
malaria, and leishmaniasis. A recent Doctors without Borders survey of the
world's 11 largest pharmaceutical firms found that of the 1,393 new drugs
introduced over the past quarter-century, only 13 were aimed at tropical

Governments are the only parties that can fill the public-health gap.
Bioterrorism again provides a convenient example. A few weeks into the anthrax
crisis, several leading industry players called on the government to treat them
like defense contractors by giving out "cost-plus" contracts for research and
development of new antibiotics to counter germ-warfare agents. Given the
uncertainty about the size of the market and the demonstrated government concern
about price, they said, it would be the only way to keep the industry's hand in
the game.

Cost-plus R-and-D contracts to produce drugs for diseases that have no market?
Now there's a thought. But why stop at bioterrorism agents? Why not malaria? Why
not tuberculosis? And why not allow public-sector labs to compete with the
industry labs for those contracts, so the patents could stay in the public
domain? Any drugs that came out of such government-funded research should be
treated as a social good, both domestically and globally, and broadly distributed
based on need. Such a government-funded program might even lessen anti-American
hostility in the developing world.

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