Innovation vs. Access: Two Epidemics Transform the Pharmaceutical Patent Law Debate into an International Controversy

Author: Williams Shawna
Institution: Biochemistry
Date: May 2002

It looked like a clear-cut case of arrogance, even hypocrisy. The United States government, which for years had defended the patent rights of pharmaceutical companies from South African efforts to obtain affordable anti-retroviral drugs for its many HIV-infected citizens, seemed to execute a shameless about-face when it encountered a national crisis of its own: anthrax.

The facts are these: In 1997 South Africa, faced with a mounting death toll from its AIDS epidemic, passed a law allowing it to manufacture or import generic drugs from countries such as India and Thailand, which do not have drug patent laws, as long as it paid the patent holder a "wholesale" fee. PHARMA, a U.S. trade association of the pharmaceutical industry, quickly jumped into action, hiring lobbyists who helped persuade the Clinton administration that the act was a violation of international trade and patent agreements, and to put pressure on South Africa to revoke its new legislation.

In 1998 the United States put South Africa on a watch list, a warning that trade sanctions could follow. Then the 39 pharmaceutical companies of PHARMA filed suit against the South African government, even naming its highly popular then-leader, Nelson Mandela, as the "First Responder." Two years later, in what many saw as a bid to avoid creating more of the bad publicity that resulted from these actions, the companies dropped their suit, claiming they were willing to work with the South African government to develop affordable solutions to its drug shortages.

Months later, when a spate of anthrax mailings in the United States prompted the U.S. government to create a stockpile of the anthrax antibiotic Cipro, President Bush spoke of overriding Bayer's patent on the drug in order to obtain cheap, generic alternatives. He explained that this action was justified by a provision in World Trade Organization (WTO) guidelines that allows governments to override patents in times of national emergency. Ultimately, Bayer was to strike a deal with the American government to provide Cipro at a lower cost in return for the continued integrity of its patent, but this did not prevent the incident from receiving international attention. In November of last year, weeks after striking its deal with Bayer, the U.S. government supported a change in WTO policy to allow countries to seek a patent waiver from the WTO when public health reasons compel it.

To many, this about-face was an instance of the United States putting its own and corporate interests above those of poorer countries. The answer to why fewer than 20 anthrax infections in the United States constitutes an emergency, while millions of HIV-infected South Africans does not, appears simple to many: power.

"To me, [then-Vice President] Al Gore . never in his life bucked corporate interest. He hasn't shown any character by bucking big money," said James Love, director of the Consumer Project on Technology in 2000. Love was referring to Gore's role in applying diplomatic pressure on South Africa to reverse its 1997 law and preserve the drug giants' patents. Activists like Love allege that as far as developing countries are concerned, pharmaceutical companies callously value profits above human life, pricing anti-retrovirals and other medications far out of reach while doing everything in their power to ensure that other labs are not permitted to manufacture and sell the drugs at lower cost.

Supporters of the pharmaceutical industry argue an economic position that lacks the emotional appeal of 5 million dying men, women, and children. They claim that selling their products at far above the cost of manufacturing them is the only way to recoup the enormous costs of years of research and development, and continue to fund research.

Frank Kane, a business editor for the British newspaper The Observer, criticizes the popular view of South Africa's dispute with the drug companies as a battle of "good versus evil." He explains, "Without present profits, the stream of future drugs dries up, plain and simple. The only assets drugs companies have are their patents, which ensure this revenue stream."

Pharmaceutical companies and many economists claim that if a company's patents, which award it sole rights to market its products for 20 years, are not adhered to, then investment in research and development will dwindle. New drugs will cease to be created, and everyone will suffer the consequences.

The real situation, though, is more complicated than either of these two viewpoints. South Africa's AIDS problem goes far beyond the prohibitive expense of anti-retrovirals. The widespread myth that sex with a virgin will cure a man of AIDS has contributed to a rise in the number of reported cases of child rape, including a recent notorious trial of a handful of men for the rape of a baby just nine months old.

The obvious first step in stopping the AIDS epidemic is education, as Secretary of State Colin Powell pointed out while in Africa last year. "We don't want to lose focus on prevention," he said, adding, "The great humanitarian necessity is to get the young generation to protect themselves."

Prevention, though, is of no help to those millions already infected. According to South Africa's director-general, Ayanda Ntsaluba, even if the government obtained cheap AIDS drugs, it lacks the health care infrastructure to monitor the administration of them to all who need treatment. And this is a big "if," since the state might not be able to afford all the anti-retrovirals its population needs, even at manufacturing cost.

If the world needed a clear indication of the high hurdles that must be overcome in South Africa's battle against AIDS, it came with the government's recent announcement that it will distribute the drug Nevirapine only in some pilot hospitals, despite the fact that the drug's maker, Boehringer-Ingelheim, has offered to provide it free for the next four years.

Nevirapine has been shown to prevent the transmission of HIV from mother to child in about 50% of cases if administered at birth, but the South African state asserts that more studies must be done before it can be provided universally. Western scientists are coming to realize that such use of Nevirapine can result in the virus mutating resistance to the drug in a significant portion of women. Such resistance severely limits their options for successful treatment in the future.

As South African Health Minister Manto Tshalbalala-Msimang points out, "We, as a government, cannot say we've now provided Nevirapine so we can go home." Without a broader AIDS treatment program, the best that could result from widespread use of Nevirapine would be an even greater number of orphans.

Weakening the pharmaceutical companies' argument, on the other hand, is the fact that free market forces are not solely responsible for the development of new drugs. The U.S. government has spent billions of public dollars on the research and development of AIDS drugs, contributing to the development of most of those on the market today. One group that vocally supported South Africa's stance in the pharmaceutical dispute was composed of students and professors at Yale University. It was at Yale that d4T, the main component in the popular anti-retroviral Zerit, was developed. Although Yale, a non-profit organization, received millions of dollars in royalties for its role in formulating Zerit, some members of the university's community felt its distributor's actions in South Africa were unacceptable. So while pharmaceutical stock prices have been shown to drop when patents are threatened, reflecting a drop in investor confidence, private investments do not alone provide the impetus for new discoveries.

Often overlooked in this dispute of "people versus profit," as some have termed it, is a crucial question. Pharmaceutical companies, whose AIDS treatments may run to tens of thousands of dollars per year, could not have hoped to sell them at this price in impoverished sub-Saharan Africa. So why didn't they sell them at the cost of production, or allow other companies to do so? These other companies wouldn't have profited, but the larger pharmaceutical companies would certainly have saved money on lawyers and lobbyists.

One fear is that South Africa's law might set a precedent for policies in wealthier countries, such as the United States, Canada, and European nations, where the industry makes most of its profits.

Another is that drugs sold at reduced cost in the Third World will find their way back to markets in North America and Europe, re-imported through the so-called "gray market" as a way to save money. History offers numerous examples of corrupt officials in developing countries who have sold drugs donated to help those nations, and sent the proceeds to private Swiss bank accounts. The high cost of anti-retrovirals would present an even greater incentive for Westerners to find ways of procuring them from developing countries, should they become available there at reduced rates. This would, indeed, cut into pharmaceutical companies' profits, and, by extension, their ability to fund innovation.

Hidden in the heated debates over patents and profits, public funding versus private, is a question that has no easy answer: Are the world's rich to be the only beneficiaries of the latest advances? And if not, if rich countries wish to make the latest miracle drugs available to as many people as possible, then how should they go about it? This story of two nations and their respective epidemics is just one high-profile instance of the problems associated with the seemingly ever-rising costs of health care.

Last May, Kofi Annan, the secretary general of the United Nations, called for a $7 to $10 billion global fund to be set up to combat the AIDS epidemic, only to receive a discouragingly small starting donation of $200 million from the United States. To effectively treat not only AIDS, but also other diseases common in the developing world, would require a massive infusion of money from richer countries, many of which face looming health care crises of their own. Clearly, whatever stance one takes with regard to the morality of patenting drugs, the bottom line in saving Africa from disease and famine is money.

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