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The Great Health Grab


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Big Pharma / KEYNOTE

The great health grab

The world’s giant drug companies pursue profit above all else.
Dinyar Godrej inspects an industry that’s more than a little sick.



Photo: Ian Nixon


‘I think there’s some mistake,’ I said, pushing the pack of pills back across the counter.

‘Nope. It’s the same drug, just a different name,’ replied the pharmacist with a patient smile.

It was high summer, the peak of the hay fever season and I expect she’d been dealing with quite a few quizzical customers. I picked up the pack again. Loratidine it read, instead of the expected Claritin – and, as I soon discovered, it worked just as well. What I didn’t know then was that a battle royale had broken out to delay loratidine (the generic drug) from reaching the market in any form apart from the branded version that I, and millions of other allergy-sufferers, knew by name.

Claritin is the golden goose for US pharmaceutical giant Schering-Plough – a drug with global sales of three billion dollars a year. It’s an effective medicine with relatively few side effects, and it soon dominated the anti-allergy market with nearly 40 per cent of sales. Schering promoted Claritin vigorously and pushed to have its patent monopoly extended beyond the standard 20-year limit, claiming the US Food and Drug Administration (FDA) had unfairly delayed the drug’s clearance. It is true that the FDA did take six years to approve Claritin for sale, largely because studies supplied by the company were considered inadequate. The agency was also concerned about data regarding carcinogenity in tests on animals. In addition, Schering-Plough submitted 37 amendments to the FDA during the application process, nearly four times the norm.

Eventually, Schering did receive two extensions on its patent, totalling nearly four years. But with billions at stake, every day the company could extend the patent was worth fighting for.

So it was that a certain Senator Torricelli introduced a bill in the US Congress in 1999 that would give Claritin and six other drugs the chance of a patent extension. The day before the bill was introduced Schering had donated $50,000 to the Democratic Senatorial Campaign Committee of which Torricelli was Chair. Later another Senator who chaired the hearings on the bill was reported to have flown five times with his staff on the Schering-Plough executive jet. The stories leaked, public outrage ensued and the bill faltered.

Then in 2002, the year the patent was due to expire, US consumers were bombarded by ads for Schering’s Clarinex – a ‘new’ product which is a more potent derivative of Claritin. It’s not necessarily better, but is patented. Schering was also fighting in the courts to extend patent protection to Claritin again – under the new patents granted to Clarinex!1

My little pack of loratidine represented a victory of sorts. It meant that Schering had failed to stop the generic competitors from producing the drug and the price could be expected to fall by two-thirds. There was, however, a further twist. Inspecting my non-brand medication, I discovered it was manufactured by none other than… Schering-Plough. The company was clearly dipping into both the brand name and generics markets until the competition got serious.

But what if such wrangling had gone on around a drug that treats something a bit more serious than allergies to pollen and cat hair? The consequences could be deadly. They frequently are.

Free to die
In February this year, a delegation of South Korean leukaemia patients, many in an obviously debilitated condition, protested in front of the local offices of the Swiss drug transnational Novartis. They were clutching at straws really.

Leukaemia patients in South Korea had taken part in trials for Novartis’ new drug Glivec (also marketed as Gleevec), helping to get it approved in record time. Glivec is a genuinely life-prolonging drug. But girded by patent exclusivity, the Korean leukaemia patients found it was prohibitively priced. It sells for $19 a tablet – a year’s treatment of eight tablets a day costs over $50,000. In desperation, a group of patients who had been part of the trials in Korea decided to apply for ‘compulsory licensing’. This is a World Trade Organization (WTO) provision from its warren of patenting rules which allows governments faced with a ‘national emergency’ or ‘extreme urgency’ to overrule patent rights and buy or produce a generic version of a drug. (The US had invoked it during the anthrax scare which followed 11 September 2001.) The Koreans soon found an Indian manufacturer who could produce the drug for less than a dollar a tablet.

While the South Korean Ministry of Health was considering the application, the US Secretary of Commerce sent a written threat warning against compulsory licensing of Glivec. The Korean Health Minister favoured the proposal but soon lost his job in a cabinet reshuffle. He denounced the role Big Pharma’s influence had played in his dismissal. That left the patients with little option but to talk to Novartis directly – with disastrous results. Rough-handed by the police, two sustained injuries that required hospitalization.2

Industry critics argue that trials are manipulated and negative results actively suppressed These two dismal tales reflect Big Pharma’s key obsessions – money madness, ruthless suppression of competition, an ability to bend rules to its own advantage, political clout and a contemptible disregard for the consumer. All this from an industry that takes every opportunity to crow about its noble mission to fight disease.

The fact is that Big Pharma has a captive market of consumers whose comfort and lives depend on its products. Medications are usually prescribed by a doctor; one cannot shop around for them. If a particular drug is the only one that can treat what ails, it’s either pay up or suffer the consequences.

No wonder the pharmaceutical industry is such a money-spinner, coming top of the profitability league. In 2001 when profits of the Fortune 500 corporations took a 53-per-cent dive, drug company profits shot up by 32 per cent.3 Last year pharmaceutical sales raked in $400.6 billion.4 Even scandals don’t seem to have an impact. Bayer has fielded more than 10,000 claims for alleged damages from its recalled cholesterol-lowering drug Lipobay, 1,200 of which have been settled at a cost of $433 million. Despite this financial setback Bayer remained buoyant – profits jumped 40 per cent.5

Drug companies are quick to point to the millions they spend on research. The industry claims it takes $800 million to bring a new drug to market. But this figure doesn’t bear close inspection. And drug companies themselves refuse to reveal how much they spend on developing a drug, claiming it would give away trade secrets.6

They are equally shy about their marketing expenses, though they do claim they’re well below research and development (R&D) investment. Industry observers consistently put them two to three times higher. According to Pharmaceutical Executive, over $500 million was spent promoting each of the six top-selling drugs last year.7

Hard sell: drug ads on the internet (above) go for emotional appeal. Nexium (below) was the most heavily promoted drug last year, with a spend of $756 million. Building blockbusters
With big bucks shaping the industry, the emphasis shifts from drugs that cure to those that sell. Well-heeled Western consumers account for most of Big Pharma’s sales. The companies race to produce competing drugs for the same ailment. One US study found that fully two-thirds of the new drugs approved by the FDA between 1989 and 2000 were ‘me-too’ drugs – copies or slight modifications of existing drugs.8 It’s easy to see why: such drugs require lower levels of research, can help retain market share and allow companies to hang on to patents. This is not to deny that some second- and third-generation drugs are genuine improvements.

Developing countries bear a disproportionate part of the world’s disease burden. But with 80 per cent of the world’s population they account for only 10 per cent of global drug sales. The whole of Africa’s drug bill is just one per cent of the world total.9

Take malaria, a disease which has developed several increasingly virulent drug-resistant strains and which affects up to 500 million people a year. In 2000 Glaxo Wellcome (now GlaxoSmithKline) launched the first new anti-malarial developed by a drug company in 40 years. However, it was aimed at prevention, not treatment. Its market was the estimated seven million tourists and visitors who venture into malarial regions, not the people who live in them.10 For meaningful research on new malaria drugs we have to look to publicly and charitably funded institutions.

If innovation isn’t the industry’s forte, adapting research to the profit motive certainly is. The top drug companies tend to keep management and marketing divisions well away from the researchers, who may get carried away by the mere health benefits of a new drug. It is management’s job to spot the blockbusters (drugs with potential sales of a billion dollars or more) and ruthlessly press for their development – often axing significant discoveries that don’t have the same selling power. Once a blockbuster is identified, research must be swift and show the best possible results. Industry critics argue that trials are manipulated with these aims in mind and negative results actively suppressed. Part of the fallout from this is a ‘dosing regime’ based on what was shown to work fastest in trials. This means that often when a drug comes to market a single dose is specified for all patients from 18 to 80 – regardless of individual sensitivities. Doctors follow the drug company’s dosing regimen and an epidemic of side-effects follows. According to Jay S Cohen, a doctor who has been campaigning for more ‘tailored’ doses: ‘Medication reactions are the fourth leading cause of death in the US, dwarfing the number of deaths caused by automobile accidents, hiv/aids, alcohol and drug abuse, infectious diseases, diabetes and murder.’ 11

Once a new drug hits the market, a buzz is created through glitzy advertising (in the US and New Zealand/Aotearoa companies can pitch prescription drugs direct to the consumer) and favourable reports in professional journals. Drummond Rennie, a deputy editor of the Journal of the American Medical Association, suggests how such reports come to be written: ‘I’m the advertising guy for the drug. I tell a journal I will give them $100,000 to have a special issue on that drug. Plus I’ll give the journal so much per reprint and I’ll order a lot of reprints. I’ll select the editor and all the authors. I phone everyone who has written good things about that drug. I say, “I’ll fly you and your wife first class to New Orleans for a symposium. I’ll put your paper in the special issue of the journal and you’ll have an extra publication for your CV.” Then I’ll put a reprint of that symposium on some doctor’s desk and say, “Look at this marvellous drug.”’12

But patents are the icing on the cake, giving the drug biz exclusive control over a medication no matter how essential it is. Companies are keen on global pricing and keeping prices high. They will rush to punish patent violators with all the legal might at their disposal. Both Washington and European governments jump in to protect drug-company profits, threatening trade sanctions if violators don’t comply.

Why bother squashing minor-league competitors in the Majority World when sales there are such a small slice of the pie and the industry earns obscene profits anyway? Maybe it’s because Western consumers paying inflated prices may just realize they are being duped – and start demanding cheaper drugs.

Priced out
Big Pharma is keen to push the US model of stringent patent protection and no price regulation globally. And no wonder: American consumers pay the highest prices in the world for their medicines, with rates rising several times over inflation. US drug sales are equivalent to the next nine biggest markets combined.10 The industry has been up in arms recently fighting moves to import cheaper drugs from Canada for US senior citizens, 12 million of whom have no insurance for prescription medication. And earlier this year, during bilateral trade talks with Australia, the US pressed the country to alter its Pharmaceutical Benefits Scheme (PBS). Under the scheme the Australian Health Ministry is the sole purchaser of drugs; the Government searches for the best deals and then provides them to citizens at a subsidized price. The pharmaceutical giants didn’t give two hoots about the subsidy aspect, but found the price comparisons disturbing. Australia has, after all, the lowest drug prices in the rich world.13

But Big Pharma’s influence has been most pernicious through the WTO, where it has lobbied hard to try to impose a uniform global patent regime and to prevent poor countries from buying or producing cheaper generic drugs. All this despite a 2001 WTO commitment to allow countries flexibility in responding to their public-health needs.

In Pakistan, patent laws have been made to comply with the WTO’s TRIPS agreement which fences off intellectual property. Drug prices have shot up and there is a chronic shortage of essential medicines. The transnationals can’t be bothered supplying such a poor market.14 Meanwhile in neighbouring India, which doesn’t allow drug patenting, generic manufacturers have jumped in and competition is thriving, driving down the prices of high-quality, locally produced medicines. Countries like India and Brazil, which have the manufacturing capacity to produce cheap generics, are a constant thorn in Big Pharma’s side and are on the receiving end of legal threats.

Cracking open the patents shell and promoting generic manufacturing could be one way of breaking Big Pharma’s stranglehold. But the fear is that the big drug companies might then stop investing in critical research. A far better solution would be to work towards publicly funded research. This could lead to affordable patent-free drugs produced by competing companies.

If this seems pie-in-the-sky, consider the alternatives. There’s the charitable model: drug donations by companies or countries. But donations of branded drugs actually cost donor countries four times more than buying generics. And the big drug companies are not noted for their generosity. The best example of such generosity is Merck’s gift of Mectizan, a drug that prevents river blindness, to over 25 million people in Africa. But this philanthropic act was atypical. According to Merck’s CEO, Raymond Gilmartin: ‘Giving our medicines away in general is an unsustainable and unrealistic answer because, at the end of the day, we must earn an adequate return on our investment in order to fund future research.’ 15

Many are simply too poor to buy drugs, no matter how cheap Public-private partnerships are another option. The public partners can run from small NGOs right up to the World Health Organization. These projects are ends-focused – as long as drugs can be delivered to a target audience, Big Pharma can carry on as usual.

The most ambitious of these partnerships is the recently launched Global Fund to Fight aids, TB and Malaria. The Global Fund is an international effort involving governments, charities and the private sector to provide drugs for diseases which kill six million people every year. But the Fund has run into a $1.6 billion funding shortfall as the world’s wealthiest countries continue to renege on their commitments.16

It is in this gloomy context that we must take a stand against the commodification of lifesaving drugs. Many of our world’s citizens are simply too poor to buy drugs, no matter how cheap they are, whether or not they’re controlled by Big Pharma. We need to ensure that no-one goes without lifesaving drugs and their ability to pay should not enter into the decision. The WHO’s essential drugs programme piously notes: ‘Confronted with [the] unacceptable burden of ill health, the international community has become increasingly committed to reducing health gaps between rich and poor.’17 But this doesn’t go quite far enough.

The list of what’s needed for genuine reform is long: purging the pharmaceutical lobby from the bastions of political power, rescuing medical research from corporate control so it can focus on genuine health needs, freeing up countries both to produce and buy generic drugs. This would help to cleanse the production end of the drug biz. Governments North and South could do much better in prioritizing health needs. They could improve on drugs delivery and work out policies to encourage the production of cheap, essential drugs, possibly by public non-profit companies. And they could discourage frivolous ‘lifestyle’ medication. International institutions like the WHO could work from a needs agenda – responding quickest to areas suffering the greatest neglect – with sufficient funding to back up their work. At present it is impossible for many of the humanitarian health agencies who are doing invaluable work to think of solutions in which Big Pharma does not play a part. When that becomes possible, the real victory will have been won.

The selfless approach to public health is foreign to the bottom-line myopia of corporate capitalism. But it’s the only hope for tackling problems like the global aids pandemic. Although important victories have been won against Big Pharma to license generic antiretroviral drugs (ARVs), the truth is that even with lower prices the drugs are beyond the reach of the vast majority of people with aids. Of the six million people in the developing world who need ARVs only five per cent are currently receiving them.

But don’t expect too much help from Big Pharma. As Bernard Lemoine, director-general of France’s National Pharmaceutical Industry Association put it: ‘I don’t see why special effort is demanded from the pharmaceutical industry. Nobody asks Renault to give cars to people who haven’t got one.’ 9

1 Jeffrey Robinson, Prescription Games (Simon & Schuster 2001); Common Cause, ‘Prescription for power’, June 2001, www.commoncause.org; Wes Allison, ‘Ad blitz on for Claritin alternative’, St Petersburg Times, 17 April 2002.
2 ‘Dying for drugs’, Channel 4 TV UK, 27 April 2003; www.cptech.org/ip/health/gleevec/korea-arrest.html
3 Julian Oram, ‘Addicted to profit’, 2002, www.rarie.org
4 ‘2002 World pharma sales growth: slower, but still healthy’, www.ims-global.com
5 ‘Cholesterolmiddel brengt Bayer in nauwe schoentjes’, Het Nieuwsblad, 7 August 2003.
6 Russell Mokhiber and Robert Weissman, ‘Stripping away big pharma’s figleaf’, 6 July 2002, www.zmag.org; Julian Oram, as above.
7 May 2003, www.PharmExec.com
8 ‘New US study underscores lack of industry innovation’, HAI-Lights, October 2002.
9 Martin Foreman, Patents, pills and public health: Can TRIPS deliver? (The Panos Institute 2002).
10 Jeffrey Robinson, as above.
11 Over Dose: The case against the drug companies (Tarcher/Putnam 2001).
12 Sheldon Rampton and John Stauber, Trust us we’re experts!(Tarcher/Putnam 2001).
13 ‘Free trade and the PBS’, Radio National, 25 May 2003, www.abc.net.au/rn/talks/natint/stories/s863199.htm
14 ‘118 essential medicines missing on the market’. Daily Dawn, 18 September 2003.
15 Alain Guilloux with Suerie Moon, ‘Hidden price tags: Disease-specific drug donations: costs and alternatives’, MSF, October 2000.
16 www.fundthefund.org/gfatm.html
17 www.who.int/medicines/strategy/access/stacstrat.shtml

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