Dubious price-cutting must not let drug companies off the hook

Crescent International

Dhu al-Hijjah 20, 1421 2001-03-16

Special Reports

by Crescent International (Special Reports, Crescent International Vol. 30, No. 2, Dhu al-Hijjah, 1421)

Western pharmaceutical companies, which monopolise the right to fix the price of life-saving drugs throughout the world by patents protected by the World Trade Organization and governments, are facing new challenges that demand unprecedented concessions. Rattled by the worldwide campaigns organized by anti-AIDS and anti-globalization activists, and by the policies of several developing countries to make cheap generic copies of patented medicines, pharmaceutical corporations are embarking on PR exercises to restore their shattered credibility. But all they have offered so far is the reduction of prices of certain drugs that will make little difference, while continuing to fight efforts to make them available to the poor of the world.

Late last year, for instance, five corporations offered some African countries (including South Africa, which is planning to import generic medicines) discounts of between 70 and 90 percent on several drugs that treat HIV infection. But hardly any government accepted the offer and the stage was set for further reductions. In early March Merck, a top American company, announced that it was cutting the price in Africa of two of its AIDS drugs to a tenth of what they cost in the US. Other companies are planning to follow suit, triggering fears in the West of an imminent price war.

The world’s leading drug companies are currently suing South Africa’s government over its plans to circumvent patents on their products in accordance with a valid exception to the patent rules of the WTO. In fact, Merck’s price reduction was partly prompted by the outcry that followed the companies’ court case in South Africa. The case was opened on March 5 by 39 companies, and then adjourned until April 14. On the day the case opened, protesters in South Africa and in other countries, including Australia, Canada, France, Germany, Britain and the US, rallied against the drug companies.

The companies claim that a new law, which will permit the import of generic drugs and patented medicines from suppliers at prices lower than those of the main drug giants, breaches South Africa’s constitution and international agreements. They cite in particular the Trade Related Intellectual Property Rights (TRIPS), which recognizes patents on medicines that are consequently enforceable by the WTO. They want the court to strike down the law to prevent the government from importing from Brazil and India generic medicines produced at prices that poor countries can afford to pay.

The South African government argues that it has a right to put the health of its own people before the profits of multinationals, and that, in any case, the new law is allowed under an exception to the TRIPS rules which states that if a country faces a national emergency it may license a drug from a patent-holder and make cheap generic copies. As a recent editorial in the Washington Post put it, this loophole “ought to allow extensive manufacture of generics - given that the developing world is in a state of permanent medical emergency, because of AIDS, malaria and tuberculosis, to name just three killers.”

It was in 1995 that the industrialized countries first talked the developing world into signing the TRIPS agreement, which gives the drugs companies patent rights for 20 years. Seeking to enforce that right, the drug corporations obtained a court injunction in South Africa three years ago that blocked the implementation of the new law. The Clinton administration backed the companies and put South Africa on a “watch list” of countries declared “patent pirates”.

But by the end of 1999 the drug giants’ reputation had fallen so low that Clinton was forced to withdraw support from them, and South Africa was taken off the pirate list. Even the Bush administration, which is heavily financed by the companies, says that it does not oppose the new South African law. And the European Commission (the executive branch of the European Union) says it supports the South African proposals too.

The Red Cross has now added its voice to the campaign against the drug giants, saying that it is unacceptable that the poor countries of the world cannot afford to obtain life-saving medicines because of patent laws. It has also called on the international community to side with South Africa and to open negotiations with the pharmaceutical corporations to find an early solution to the problem.

But there is unlikely to be any early or easy solution for the problem as long as the US continues to dominate the so-called international community, and as long as big business continues to hold American politicians under its thumb. As a recent editorial in the New York Times put it, “the pharmaceutical industry, whose donations favor Republicans, is likely to be even more influential with this president than it was with Bill Clinton. If the US and the EU have their way there will be a tinkering arrangement fiddling with the prices of drugs but leaving patents on medicines intact. If that is allowed to happen the ludicrous and lethal concept on which the TRIPS agreement is based will remain.”

The rationale of the patents is that if the pharmaceutical corporations are not allowed to recoup the costs of research, new drugs will not be developed because it would be too costly. The absurdity of this argument as far as the developing world is concerned is that the neediest countries cannot afford to buy medicines anyway, and so have no interest in the development of future drugs either.

What is needed is an arrangement that scraps TRIPS or expands and clarifies the exception to it to the extent of making it harmless. Victory for South Africa will go a long way to make that happen. And for that, strong support for Pretoria from the developing world is necessary.