Patents, Private Charity and Public Health

The diseases are in the developing South, but the money and the patents are locked in the post-industrial North. The world’s poor are in a free fall.

-by Rajashri Dasgupta

As governments of the develo ing world retreat from their welfare responsibilities and hive off public health functions to the private sector on advisement from international high finance, are we to begin depending on the charity and munificence of the multinational tycoons? When CNN founder and media magnate Ted Turner announced a billion dollars for humanitarian projects of the United Nations, everyone ooohed and aaahed without calling to account the many billions that are being wrested away from the social sector by governments of the developed and developing world.

Bill Gates, richest man in the world over in Seattle, then went one up on Turner and everyone else by endowing the largest philanthropic organisation ever, the Bill and Melinda Gates Foundation. Last year, outperforming the US government on this front, he donated USD 300 million to charitable causes, primarily aimed at ‘reversing’ the health crisis among the world’s poor. This fund targets global threats such as malaria, tuberculosis and AIDS, and Gates’ giving adds up to more than 25 percent of the total support given by the West towards health in the developing countries. What is the crisis in the globalised economy that governments both down here and out there, turn away so offensively from their public health commitments, leaving the field free for philanthropy and private benevolence—but most importantly to the rapacious market? 

Since 1978, by the United Nations’ reckoning, the number of countries that are ‘least developed’ has shot up from 28 to 48. This means that one country per year has slipped down the development ranking during the last two ‘development decades’. The assets of the three richest people in the world are more than the GNP of the 48 least developed countries, and the three richest officers of Gates’ Microsoft have more assets (upwards $140 billion) than the combined GNP of the 43 least developed countries. Meanwhile, health care eludes the poor who constitute 50 percent of the population of the least developed 46 poorest countries. About two billion people in the world live on less than a (US) dollar a day, and more than 800 million people have total lack of access to any form of basic health care. Nearly three billion do not have access to safe drinking water and appropriate sanitation.

The contributions by Turner and Gates underline the increasingly important role wealthy private individuals and philanthropists are playing in international development, but the fundamental question has not been asked with any sense of urgency—should private forces, however benevolent, be even permitted to draw up and drive the international health agenda, as is beginning to happen? Can donations and whimsical price reductions of patented drugs, so-called private-state partnerships and corporate-community welfare programmes ever be viable, sustainable substitutes to the long-term responsibility of the state to protect, promote and ensure the right to health care? In the process of privatisation, not only of public health programmes, but also of public health funding, are organisations which have led in the past, such as the World Health Organisation (WHO) being further sidelined?

“Private charity is an act of privilege, it can never be a viable alternative to State obligations,” said Dr James Obrinski, of the organisation Medicins sans Frontier, in Dhaka recently at the People’s Health Assembly (see Himal, February 2001). In a nutshell, industry and private donations are feel-good, short-term interventions and no substitute for the vastly larger, and essentially political, task of bringing health care to more than a billion poor people.

Medical globalisation

Amidst all this poverty, squalor and ill health that affect the global poor, there is a specific travesty relating to the non-availability of (or “lack of access to”) life-saving drugs, because of the very structuring of the international medical market and lack of conscientious activism from the developing world. The fact is, the vast majority of tuberculosis patients and the increasing number of those succumbing to the HIV virus today in Africa and South Asia did not—and do not—have to die.

Dr. Obrinski: “They die because they do not have access to essential life-saving medicines—not because the drugs do not exist but because the people with disease do not exist in the business plans of the major pharmaceutical manufacturers or of governments. The patented life saving drugs are beyond the reach of the poor.”

The problem is that while the diseases requiring urgent treatment are in the developing South, the clout of money and the monopoly over drugs is with the post-industrial North. The need clearly is for mass mobilisation to force the state in the developing countries to re-assume the responsibility it has all but sacrificed to the market at the instance of the donor nations and international financial institutions. Side by side, activists must organise to overcome the access barriers which keeps essential life-saving medicine away from the poor in the developing world.

Access to basic drugs is a critical aspect of public health, and yet this is exactly where the emerging globalised pharmaceutical regime is going to hit the poor the hardest. The developed countries are using the WTO and the Trade-Related Intellectual Property Rights (TRIPs) agreements to force those developing nations to change their patent laws so that the pharmaceutical multinationals can protect their products. The developing countries are being required to provide patent protection on chemical products and processes for 20 years.

Patently unfair

The effect of patenting on the availability and price of drugs will be devastating, taking critically-needed medications beyond the reach of most patients in South Asia, for example. Without patent obligations, local drug firms in India and Bangladesh, for example, are presently able to provide quality drugs at a tenth to a hundredth of the prices charged by the Western MNCs. “India, which has a strong indigenous drug industry, will now be forced to impose patents on all newly invented drugs,” says Professor Sudip Chaudhury of the Indian Institute of Management, Calcutta.“ It means Indian companies will be confined to producing patent-expired drugs in the future.”

The reason consumer groups and health activists find the 20-year rule so patently unfair is that modern drugs have short life spans because of constant and accelerating innovations in pharmaceutical research. Hardly any drug at the end of the 20-year moratorium period will be worth manufacturing because better ones will have been introduced, and so the wait for a patent to expire will be in vain.

There would be no reason to rail against the 20-year stipulation if the patented drugs were available to all and sundry at affordable prices. But that is not the case, for the price of patented drugs are fixed by drug MNCs with an eye on the Western clientele, supported as they are by social safety nets, health insurance and strong currencies. The result is a fast-emerging ethical violation of mind-boggling proportions, in which the drugs are being produced, but the price barrier erected by a patent regime thrust upon the supine governments of the Third World denies treatment to people who are poor.

“The drug industry is instigating the United States to use its power to force unworkable arrangements on poor countries which cannot afford US-priced medicines. This is bound to lead to millions of needless deaths over the years,” says Amitav Guha, of the Medical Representative Association of India. The emerging scenario is such that even in emergency situations involving mass-trauma, such as in earthquakes, epidemics or floods, the supply of drugs will at some point be under the control of the MNCs.

The patent regime will have the developing countries held to ransom by the pharmaceutical multinationals, which have the resources, know-how and research capability to produce vital new drugs. Look at the data: Northern countries today hold 97 percent of the patents and the multinationals 90 percent of all technology and product patents. On the flip side, Third World countries where TB, HIV and malaria wreak havoc, never developed a pharmaceutical research base and have little to gain from the TRIPs Agreement. Even the economics does not seem to be in favour of drug development in the South. On average, R&D of a new drug costs approximately USD 150-200 million in the West. Even considering the lower costs of development in a developing country, the fact is that the total costs can rarely be offset from sales.

The fear of the Third World poor being denied access to critically necessary drugs is real and proximate. Medicine for HIV, for example, could have been manufactured at one tenth of today’s price if it were not for patent restrictions. As a result, 90 percent of HIV patients in poor countries, including all over South  Asia, cannot afford the drugs which can cost more than USD 10,000 for a year’s treatment.

One does not even have to refer to the Third World to study the impact of TRIPs patent regulations — a United States study estimated that just by increasing the patent moratorium by just three years from 17 to 20 (as per the TRIPs Agreement), American patients would have to pay USD 6 billion extra due to delays in the introduction of generic drugs. If this is true for the US, the scenario is nearly homicidal for the poor countries.

Though the pharmaceutical companies have assumed an international character, the industry is far from global in terms of ownership. Dr K Balasubramanium of Consumers International, who has extensively researched the drug industry, points out that the industry severely lacks “competition”, which is ironically the main plank on which the United States and other developed countries are pushing the globalisation agenda.

Dr. Balasubramanium says the multinational pharmaceuticals are concentrated in ten countries, and a mere 50 of them account for more than two-thirds of the world’s production and exports. The annual sales of pharmaceuticals worldwide add up to USD 320 billion, and in 1995 the sales of the top 50 MNCs stood at USD 273 billion. In fact, the sales of the top ten MNC drug firms amounted to USD 130 billion, or 40 percent of the global production.

The GDP of the 76 poorest developing countries put together is less than the annual sales of the top ten drug firms, each of whom sell upwards USD 10 billion to USD 19 billion each year. This financial clout gives the multinational giants power over the agenda-setting function in both the developed and developing countries. With the weakening of international commitment to stand behind public health—with agencies like the WHO losing clout and a backing away by others such as Unicef from the critical socio-political arena—the defence of the poor in the poor countries is left to the governments, which have themselves shown how little they care.

Their financial robustness also helps the MNCs to set drug prices without bothering too much about the Third World market, which is seen merely as a bonus to the larger takings in the developed world. In fact, there is even sometimes a topsy turvy situation in which the patients in the poorer countries pay more than those in the richer ones. Based on a survey of retail prices of selected drugs in some representative countries, the organisation Health Action International (HAI) charges that the pharmaceutical multinationals practice price discrimination. For example, HAI reports, 100 tablets of 150 mg Zantac (Zinetac in India) produced and marketed by the same manufacturer varied from USD 2 to USD 196 across the world market. And the prices in the two of the least developed countries, Mongolia and Tanzania, were much higher than in the advanced countries.

The drug giants have their allies in medical professions all over the world, in a line that extends from great hospitals of the United States to the roadside clinic in Calcutta. The habit of prescribing expensive, patented drugs, despite the availability of generic substitutes, after all, is universal. “The trend is to prescribe newer but not always effective and efficient drugs. Drug companies in developing countries tend to encourage doctors through various mechanisms to prescribe particular drugs,” says Dr Zafar Mirza, Association for the Rational Use of Medication in Pakistan.

Viagra and vitamins

In the cold calculations of the pharmaceutical corporates, the diseases of the developing countries are to be neglected because this is no profitable market. This conviction, of course does not hold for other ‘medications’ where there is income to be milked, such as in the case of Viagra, obesity drugs, or inessential tonics and vitamin tablets. The allocation of funds for developing pharmaceuticals and cosmetics for Western middle class consumption, dwarfs what is spent on research and development of preventive medicines for poor countries.

Of the USD 60 billion spent worldwide annually on health research by both the public and private sectors, only about 10 percent is spent on 90 percent of the world’s health challenges, which also affect the poorest. The trend was obvious even in the 1970s with the drug companies unwilling to invest in research on more sophisticated drugs to tackle tuberculosis, the disease of the poor. According to Lancet 1998, only 10 percent of the bilateral and multilateral aid in the world is being spent on health. Tackling tuberculosis through a worldwide campaign would cost no more than an additional USD 700 million from Third World governments and donors, which is the cost of building and staffing one modern hospital in New York.

TRIPs and WTO are all about control over technology and access to markets and, according to Dr Balasubramaniam, the only way to beat the drug MNCs at the game is to ensure that raw material and finished products are available at competitive prices in the world market and that capable developing countries can freely import them. “This can be possible if countries have appropriate domestic legislation that will provide for parallel imports and compulsory licensing,” he says. While parallel imports allow governments to shop around for cheaper generic drugs at the expense of patented ones, compulsory licensing recognises the right of governments to license the use of a patent within the country for public health emergencies and making drugs more affordable to the population.

Only a few developing countries like India, China, Argentina and Brazil have the technological capacity to have their own integrated drug industry and can make use of compulsory licenses to manufacture essential drugs, however. Other small and poor countries will need to import finished products. But what has also to be kept in mind is that the United States Government—regardless of whether the Republicans or Democrats are in power—has been notorious for using pressure on those who try to defy the patent regime. When Thailand attempted to manufacture and to import low cost AIDS and other life-saving drugs from third countries, its arm was twisted with threats of trade sanctions on some of its key exports.

 However, there is also the example of the South African government, which, in view of the HIV epidemic, is determined to implement compulsory licensing and parallel imports that are legal and allowed in rich developed countries. The South Africans are talking with generic drug manufacturers in countries that operate without patent laws and produce drugs at one-half to one-tenth the price. Anxious that the wide use of generic versions of drugs will undercut their ability to charge premium prices for medicines, five of the world’s largest drug firms have announced that prices of HIV
drugs will be slashed in developing countries.

But, neither charity by monopolists like Gates nor cosmetic price reductions by drug multinationals will provide succour to the majority of the world’s poor, neglected by the donors and abandoned by their own governments. With the US government supervising the country-by-country change in patent laws, the future looks far bleaker than over the last 50 years.

Simply put, holding a drug patent allows the owner of that patent to charge a significantly higher price than it would without a patent. That is simple economics. But the question is whether ‘simple economics’ can be allowed to hold sway when the issue is not consumer goods—garments, electronics or sports shoes where there is at least customer choice—but the lived life or excruciating death of tens of millions every year.