Pharmaceutical industry is undermining its own future as millions of poor people denied access to medicines

The pharmaceutical industry is denying medicines to millions of poor people and undermining its own future because companies are refusing to change the way they do business in developing country markets, according to a new report by international agency Oxfam.

The report "Investing for Life" looks at the world’s top 12 pharmaceutical companies, including their drug pricing policies, their record in developing medicines relevant to poorer countries and their stance on protecting intellectual property rights.

Oxfam says the industry is failing to ensure universal access to medicines because it refuses to put the issue at the heart of its business model. As a result, it is failing to capture the full potential of emerging markets touted as the “new frontier” for its business success.

According to a major consultancy firm, a loss of faith in the industry on the part of its investors has so far cost pharmaceutical's shareholders $1 trillion dollars.

“The industry is burying its head in the sand. More than 85% of world consumers are underserved or have no access to its medicines. The industry must recognize that charging high prices, quashing generic competition, developing medicines only for those rich enough to pay and fighting for harsher patent laws is an ineffective business strategy for new markets, as much as it is a moral outrage,” said Jeremy Hobbs, Oxfam International Executive Director.

“Investors are worried about the industry’s performance. They know that emerging markets are key for the industry’s future growth but companies have been responding to the challenge of breaking into emerging markets in an ad-hoc and inconsistent way. This is bad for the industry and bad for poor people who are still facing devastating diseases like malaria, tuberculosis, asthma, cancer, and HIV/AIDS without affordable medicines,” Hobbs said.

The report reveals shortcomings where the industry:

• Has failed to implement a systematic and transparent tiered-pricing policy, where prices for all essential medicines are set according to people’s ability to pay;
• Continues largely to neglect research and development into diseases that predominantly affect poor people in developing countries;
• Continues to be inflexible in protecting intellectual property, including challenging poor countries in court to stop them using legal public health safeguards;
• Continues to rely too heavily on donations to get affordable medicines to people, even though this is unsustainable and sometimes counter-productive.

Oxfam notes that some companies are offering differentiated prices but this is extremely limited and mainly for high-profile diseases such as HIV and AIDS. However, these offers are not systematic worldwide and are often still priced well above the means of people living in developing countries. Oxfam says that drug companies often adapt pricing in developing countries solely as a reflection of the publicity that surrounds the disease or the country.

For instance, Abbott Laboratories was selling Kaletra – a second line anti-retroviral medicine – at $2,200 per patient per year in low middle-income countries like Guatemala, where a person’s average wage is $2,400 a year. Only until Thailand, in response to the needs of poor HIV patients, issued a compulsory license to reduce the price of Kaletra to $1,000, did Abbott reduce the price of Kaletra worldwide to $1,000 per patient per year. Also in Thailand, French giant Sanofi-Aventis offered its cardiovascular disease medicine Plavix at a price that was 60 times more expensive than Emcure, the Indian generic version. In March 2007, it responded to Thailand’s use of compulsory licensing by offering a 70% cut.

Oxfam’s report says that companies are still not investing enough into researching and developing medicines for diseases that predominantly affect poor people in developing countries. Between 1999 and 2004, there were only three new innovative drugs targeted at diseases affecting the developing world out of 163 medicines brought to the market.

“Even people suffering from tuberculosis – which kills nearly two million people a year – need six months of treatment and the most recent medicine is 30 years old,” said Helena Vines-Fiestas, author of the report.

On the industry’s approach to intellectual property rights, Vines-Fiestas continued: “High levels of intellectual property protection have not resulted in new cures for diseases that affect poor people.” Despite this, the report notes that the industry continues to insist that the global intellectual property regime does not prevent poor people from accessing affordable medicines. Oxfam says not only is the industry’s view narrow-minded and wrong, but that the evidence is overwhelming that generic competition is the most effective and proven method to reduce drug prices.

In recent years companies have mounted legal challenges or exerted direct pressure to protect their patents against the legitimate use of safeguards in Thailand, Brazil and India. “These challenges are made at the direct expense of poor people,” Oxfam said.

Pfizer even challenged the Philippines government over their use of public health safeguards in relation to the drug Norvasc.

“The industry is failing to make the systematic changes needed to serve developing country markets and meet its responsibility to make medicines universally available. Public pressure will intensify if companies continue to offer only patchy concessions, for example around high profile diseases such as HIV/AIDS and malaria,” said Vines-Fiestas.

The report concludes by arguing that companies will need to revamp their approaches on pricing structures, R&D investment and patent policies in order to serve these markets and make its medicines more accessible to poor people. Companies should adapt to the realities of developing country markets because up to 80 per cent of people in developing countries are vulnerable to falling or staying below the poverty line if they have to bear the cost of expensive medicines, particularly where treatment is long-term.

“The industry is operating in a short-sighted way because it could gain enormous benefits from emerging markets, including lower research and development costs and cheaper manufacturing. Yet instead it continues to blindly use its same strategies in poor countries.  Even today, the richest 15% of the world consumes over 90% of its pharmaceuticals. At this rate, both the industry and millions of sick patients are losing out,” concluded Jeremy Hobbs.

Download the full report:

Investing for life: Meeting poor people’s needs for access to medicines through responsible business practices

(pdf, 943kb)