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Big promises from Big Pharma

GlaxoSmithKline created waves last year with a promise of cheaper drugs and patent waivers in developing countries. In this special report Qudsiya Karrim in Johannesburg looks at what the pledge means in practice

Qudsiya Karrim 9 January 2010 4618 words

Above: Doctor examining patients at a clinic in Nigeria.
Photo: Curt Carnemark/ World Bank



THE PAST DECADE has been a public relations nightmare for big pharmaceutical companies – and deservedly so, their critics say. Activists and non-government organisations the world over have slated Big Pharma for putting profits ahead of people and vigorously enforcing their intellectual property rights, preventing many from gaining access to life-saving medication. It’s an ugly story told repeatedly – in the media, over dinner, at AIDS conferences and during university seminars – and it has earned the pharmaceutical industry an unmatched notoriety.

Early in 2009, responding to the critics, the world’s second-largest pharmaceutical company, GlaxoSmithKline, announced a shift in corporate policy that it claimed would benefit the developing world by increasing access to medication and lowering drug prices. Many health activists and NGOs welcomed the company’s commitments, but they question whether it will translate into real gains for the people most affected, and they stress that more needs to be done in the area of HIV/AIDS. Other observers of the industry – including South Africa–based health economists I approached for comment – are waiting to see how much difference GSK’s pledges will make in practice.

During 2009 GSK’s chief executive, Andrew Witty, outlined ambitious plans which he says will help developing countries to tackle their healthcare crises. Africa, which bears 24 per cent of the global disease burden and a disproportionate number of the world’s poor, will particularly benefit from the company’s commitments, he says. These include much-reduced prices and the sharing of patents for various drugs.

Witty announced an initial package of measures when he addressed Harvard medical students in February. He committed his company to setting up a voluntary “patent pool” dedicated to researching and developing medicines for sixteen neglected tropical diseases identified by the US Food and Drug Administration. He pledged to reduce prices for patented medicines in the world’s least developed countries – which include much of western and central Africa as well as several countries in Southeast Asia – so that they would be no higher than 25 per cent of the prices in the developed world. He outlined measures to encourage greater involvement from the private and public sectors in researching diseases of the developing world at GSK’s dedicated facilities in Spain. And he promised that GSK would re-invest 20 per cent of the profits it makes from selling medicines in the least developed countries to improving health infrastructure in those countries. Not all the commitments are unique – other companies offer not-for-profit prices for poor countries and have comparable social responsibility projects – but activists acknowledge that the package does raise the bar significantly.

Patents placed in the patent pool, which was launched the following month, can be used by any organisations, researchers, academics or companies to create treatments for neglected tropical diseases. To date the pool contains 800 GSK patents, covering tuberculosis, malaria, blinding trachoma, buruli ulcer, cholera, dengue/dengue haemorrhagic fever, dracunculiasis, fascioliasis, human African trypanosomiasis, leishmaniasis, leprosy, lymphatic filariasis, onchocerciasis, schistosomiasis, soil transmitted helminthiasis and yaws. So far, Alnylam Pharmaceuticals has also contributed more than 1500 patents relating to its RNA interference technology. GSK is talking to other companies so that it can expand the pool, and plans to appoint a third party to manage its assets.

Andy Gray, lecturer at the Nelson R. Mandela School of Medicine in Durban, says any research into neglected diseases is welcome. But he points out that, although tuberculosis, malaria, schistosomiasis and soil transmitted helminthiasis prevalent in southern Africa, the majority of the diseases covered by GSK’s patent pool are not. He is also concerned that significant diseases are missing from the pool. “There is no reason for patent pools to be restricted to neglected diseases only,” he says. “That GSK has not committed their HIV-related intellectual property to their patent pool remains a problem.”

GSK counters such criticism by arguing that because HIV research is far from being a neglected field it should not be included in the scheme. But Michelle Childs, director of policy and advocacy for the Médecins Sans Frontières campaign for access to essential medicines, says that important areas of HIV research need more work: “The two areas of neglect are paediatric formulations for children and new fixed-dose combination treatments. We desperately need these and a patent pool [for HIV drugs] can help get it.”

While the pool could well stimulate research and development, GSK acknowledges that it will not resolve the issue of access and affordability of medicines. “In itself, the patent pool isn’t going to make a huge difference,” says Jon Pender, the company’s head of government affairs, global access programs, intellectual property and HIV. “It’s not the reason that the research into neglected diseases wasn’t being done in the first place. The real reason is there are no commercial incentives to work in this area. What we hope is that by creating it and starting R&D, we can build momentum and attract financing and funding.”

Lifting patents should reduce drug prices by allowing for the manufacture of cheaper, generic medicines. But the pooling of patents has historically been unthinkable in the pharmaceutical industry for the simple reason that they don’t see it as financially viable. “More than any other industry, we’re reliant on intellectual property,” says Pender, weighing into one of the most controversial issues in the debate over Big Pharma. “It allows us to invest the 500 million to a billion [US] dollars and the ten to twelve years on average that it takes to develop a new medicine. The exclusivity that the patents grant us allows us to make a return on that investment, and importantly allows us to generate funds for current and future R&D so that new medicines and vaccines can be developed for the future.”

But Gray has a different view. He says that independent estimates of the real cost of creating a new tuberculosis drug, for example, are between a quarter and a half of the highest figures claimed by the industry. “Hence, the returns needed to justify that investment might not be as large,” he says. “Despite the claimed R&D costs, the pharmaceutical industry has historically been very profitable. The top dozen or so firms have enjoyed returns twice the average of the Fortune 500 companies.”

Equally complex are the likely effects of GSK’s new price structure on antiretrovirals, launched in April. The company has slashed the prices of its patented medicines – about seven brands – so that they cost no more than 25 per cent of the price charged in the developed world. GSK says this is just the beginning, as long as it can ensure that production costs are covered. At first sight, it looks impressive. The anti-diabetes medication Avandia now costs 76 per cent less, for example, while the anti-malarial tablet Malanil is 63 per cent cheaper. The cost of the Flixotide inhaler, used to treat respiratory problems, is now between 68 per cent and 78 per cent lower, while the anti-coagulant Fraxiparine costs 72 per cent less. Antiretrovirals are not included in the list, but GSK sells them at not-for-profit prices in all the least-developed countries and in sub-Saharan Africa.

Researchers have cautioned, though, that even these price discounts will not help the poor in developing countries, where nearly one in four people live below US$1.25 a day, according to the World Bank. Pender doesn’t deny this. “Frankly, if people have got no money in their pockets, reducing your prices by 45 per cent isn’t going to make much of a difference. If you haven’t got a dollar in your pocket, you can’t buy a dollar’s worth of medicine...”

Price is only one element of affordability, he says. “We’re trying to do what we can around pricing but the other side of affordability is ability to pay. Unless more resources are going into healthcare systems, unless government budgets are spending more on medicines, then the poor patients are not going to see the full benefits of the initiatives that we’re implementing.”

Many African governments have conceded that they need to spend more on their healthcare systems. In 2001, member countries of the African Union set a target of allocating 15 per cent of their annual government budgets to health. To date, many countries, including South Africa, have not reached this level.

According to Di McIntyre, a professor in the University of Cape Town’s Health Economics Unit, “The short answer is that governments are not spending enough on health. Evidence shows that countries that contribute at least 5 per cent of their GDP to health are better able to address their health problems and achieve high life expectancy rates and lower maternal and child mortality rates.” But although the continent’s wealthiest country, South Africa, spends more than 8 per cent of GDP on health, its public health sector is still not performing adequately.

Like other companies, GSK has offered its antiretrovirals and anti-malarials at not-for-profit prices in the least-developed countries and sub-Saharan Africa, a policy that pre-dates the company’s 2009 pledge packages. For middle-income developing countries, GSK says it negotiates prices on a case-by-case basis.

This distinction creates concern, especially among HIV activists. Catherine Tomlinson, an HIV researcher with the Treatment Action Campaign in South Africa, asks: “How much sense does it make to commit to low – but not low enough – pricing in least-developed countries but not in developing countries?” She points out that countries like South Africa, classified as middle-income, also face problems related to poverty and lack of affordable treatment.

Michelle Childs shares this concern, giving the example of China, where she says GSK charges over US$3000 for the antiretroviral Lamivudine in the absence of generic competition. Médecins Sans Frontières says that in Thailand, by comparison, another pharmaceutical company, Abbott, dropped the price of the Lopinavir/Ritonavir co-formulation from US$3000 to US$500, but only after the government issued a compulsory licence to allow for the generic manufacture of the drug.

John Musunga, managing director of GSK’s pharmaceutical operations in Kenya, doesn’t agree that only least developed countries benefit from the company’s price cuts. Musunga says that GSK offered a 75 per cent reduction to Kenya, even though it does not technically fall within that category. “We agreed to introduce reductions here due to the high number of people living in poverty,” he explains.

The third of Andrew Witty’s February 2009 pledges was the scheme to “reinvest” a portion of the GSK’s profits in the health systems of least developed countries. The company’s director for corporate affairs and community projects in sub-Saharan Africa, Lorinda Kroukamp, confirmed that GSK’s aim was to implement this initiative in five countries by the end of 2009. In collaboration with the World Health Organization, health ministries and non-government agencies, GSK says it will focus on maternal, neonatal and child health initiatives.

Kroukamp is upbeat when asked about progress, but cautions against over-optimism. “Initially our annual reinvestment will amount to £1 million to £2 million [approximately A$2 million to A$4 million], as we make less than £5 million in sales in the least developed countries each year. This may not be much, but it’s a great starting point. We’re planning to make every cent count and use resources wisely to maximise what we can do in the areas we’ve identified.”

The Treatment Action Campaign, however, is not convinced. “Wouldn’t it simply be better to slash profits and allow for countries themselves to invest in improving health infrastructure?” says Tomlinson. “The GSK argument is circular: ‘We charge so much money that we can give you some of your own money back!’”


DESPITE THE CRITICS, GlaxoSmithKline pushed on. In July, this big player among Big Pharmas parachuted into the biggest slum in Africa. The company chose Kibera – a sprawling informal settlement in Nairobi – as the launching pad for its second set of pledges. This time the focus was on HIV/AIDS, with Andrew Witty announcing another four-part plan.

GSK, said Witty, would create a ten-year £50 million Positive Action for Children Fund to help prevent mother-to-child transmission of HIV and to support orphans and vulnerable children. A further £10 million fund would support a Public Private Partnership into research and development of new paediatric antiretrovirals. The company would extend its voluntary licensing policy to include the second-line antiretroviral Abacavir on a royalty free basis. And Witty committed GSK to seeking collaborations with other companies to develop fixed-dose combination treatment.

The impetus for this impressive-sounding package? GSK’s Jon Pender says it’s simple: sub-Saharan Africa is home to two-thirds of the thirty-three million people living with HIV/AIDS globally. The bigger picture is equally sobering: fewer than half of the 9.5 million adults and children who require antiretroviral treatment are receiving it. And of the estimated 730,000 children in need of antiretrovirals in low- and middle-income developing countries in 2008, only 38 per cent had access, according to the World Health Organization.

“Interventions exist to prevent children from contracting HIV but they’re not well implemented in many countries due to resource constraints and other factors,” Pender says. “We want to take a holistic approach. Working with the medical industry, governments and experts, we want to help build a more comprehensive PMTCT program” – measures to prevent mother-to-child transmission – “and ensure that treatment for the mother and child continues for as long as they need it.”

Through its £10 million public–private partnership, GSK has promised to address R&D and access challenges associated with paediatric antiretrovirals in sub-Saharan Africa. The company says that it plans to involve other stakeholders too: from industry, the World Health Organization and AIDS organisations, as well as medical experts.

As part of this initiative, GSK has extended its voluntary licensing agreement with South Africa’s largest generic drug manufacturer, Aspen Pharmacare, to include the second-line antiretroviral Abacavir. The company has waived its 5 per cent royalty fee in an attempt to cut prices further. (GSK merged its South African operations with Aspen Pharmacare in May 2009 by purchasing a 16 per cent shareholding in the company. Following submissions by AIDS activist organisations, South Africa’s competition commission accepted the merger on condition that GSK grant voluntary licences for Abacavir to other interested generic manufacturers in South Africa.)

The company has granted eight licensing agreements for antiretrovirals in Africa since 2001 and believes it has made a real difference. “In 2008, licensees sold 279 million tablets of their version of Epivir and Combivir to Africa, which is four times more than [the amount] we did ourselves,” says Pender. “We’ve expanded access to treatment as a consequence of this policy and we’re hoping that by extending it to Abacavir, we can help to improve the affordability of second-line therapy and improve access as well.”

The responsibility for ensuring that GSK’s HIV-related commitments are met will lie with the newly formed specialist HIV company it formed with Pfizer in April. The new company will be focused solely on research and development of HIV medicines, including new fixed-dosed combinations. Pender is confident that the new company will begin financing programs and dispersing the pledged funds early next year.

But the HIV landscape is, of course, far from simple. HIV drug patents have come under the spotlight after the international drug-purchasing agency Unitaid recently announced its plans to establish a patent pool for HIV medicines. The Unitaid pool is a voluntary scheme in which companies can opt to share their HIV patents. Their participation will be crucial to the success of the pool, but Unitaid has to offer them attractive incentives to get them to commit. Royalties are the obvious option, but a multimillion dollar prize fund has also been proposed.

Once established, it’s hoped that the patent pool will accelerate research and treatment. It will allow generic drug manufacturers to produce HIV drugs immediately instead of having to wait the standard twenty years for patents to expire.

The European parliament and leading health organisations have put their weight behind the initiative and called on pharmaceutical companies to pool their HIV patents. So far, though, nobody has come to the party. GSK, Gilead, Johnson & Johnson and Merck have been talking to Unitaid but no company has yet agreed to put its HIV patents into the pool. “We have not ruled out the possibility of participating in the pool, but have yet to see any real proposal that provides benefits beyond GSK’s existing approach,” GSK said in a letter to the British newspaper, the Guardian, in September.


GIVEN THE CLOUD that has hung over Big Pharma, it’s hardly surprising that GSK’s commitments have been met with a measure of cynicism. Why has it made these pledges? And why now?

There is speculation that it’s primarily due to new management. Andrew Witty, who succeeded Jean-Pierre Garnier after he retired in May 2008, is respected for his innovative vision and commitment to social change. Having lived and worked in Africa in the 1990s, he is regarded by analysts as having first-hand experience of the challenges the continent faces and how the pharmaceutical industry can help.

But according to Jon Pender the impetus is company-wide. “When diseases like HIV, TB and malaria are killing up to 20,000 people a day and your organisation is in a position to do something about it, then you should,” he says. “But in addition to that, we saw the need to improve our reputation and image and rebuild our contract with society.”

He is referring, of course, to the battles the pharmaceutical industry has fought – and often lost – with activists and health organisations in the past years, especially in the area of HIV. When the epidemic began to spread in the 1990s, it was exacerbated by the historically poor healthcare conditions in the developing world. Lacking infrastructure and skilled health workers, and with a majority of citizens living in poverty, the developing world was simply unable to tackle the epidemic. Its people have historically lacked basic access to services like clean water and sanitation, let alone medical treatment.

The epidemic thus refocused attention on the massive disconnect between the global north, where most people could afford expensive treatment, and the global south, where people were dying by the day because they couldn’t. International pressure was piled on the pharmaceutical industry, a key player in providing antiretroviral treatment, to lift their patents and lower their prices. They were loath to do either.

“The industry responded really badly to this pressure. We basically said: ‘Don’t be stupid, it’s far more complicated than that. You don’t understand. Go away.’ It was a very arrogant, patronising position and of course they didn’t go away as they were driven by humanitarian imperatives… As a consequence, the industry’s reputation got very bad,” Pender says.

GSK’s reputation in particular – and especially in South Africa. GSK was one of thirty-nine pharmaceutical companies that brought a lawsuit against the South African government in 1998 for passing the Medicines and Related Substances Control Amendment Act. This law aimed to make medicines more affordable by allowing for generic substitution of drugs no longer under patent, implementing price controls, and making provision for parallel importation (allowing government to import the same medication sold by the same company or its licensee at a cheaper price from another country). The companies went to court to block the legislation, claiming it was unconstitutional and in contravention of the World Trade Organization’s TRIPS agreement.

The result was a global chorus of outrage against Big Pharma from international organisations, hundreds of thousands of protestors and some governments. “GSK’s history regarding pricing of their antiretrovirals in South Africa in the early part of this decade was shameful,” says Francois Venter, president of the Southern African HIV Clinicians Society. “I am glad the company is addressing neglected diseases and patent rights, as long as the intent is to extend access to medication. We have had instances where pharmaceutical companies have used these initiatives as a PR exercise, while actually entrenching patent protection. I am encouraged by these initiatives, but we must practically see whether patients in less resourced countries do benefit, particularly children. GSK needs to work hard to show us their intentions are good.”

Eventually the European parliament passed a resolution calling on the companies to drop the lawsuit. Yielding to pressure from multiple parties, the pharmaceuticals withdrew the case in 2001. It was a major – and rare – victory for South Africa and the developing world.

But for many, there was still little reason to celebrate. High drug prices remained one of the main barriers to accessing treatment and only a small percentage of people who required antiretrovirals were able to get them. Spurred on by this dismal situation, the Treatment Action Campaign, the Congress of South African Trade Unions and other groups successfully took a case against GSK and Boehringer Ingelheim to South Africa’s competition commission in 2003. The commission found the companies’ high HIV/AIDS drug prices to be in contravention of the Competition Act, and ruled that their refusal to grant licences to manufacturers of generic drugs was unfair.

Although GSK initially rejected the commission’s findings, a settlement was eventually reached in December 2003. GSK granted voluntary licences to four generic companies to make, sell and distribute AZT and Lamivudine antiretrovirals. In return, they would receive a royalty fee of no more than 5 per cent of the net sales of the drugs. Prior to this agreement, according to the Treatment Action Campaign, GSK had only granted a voluntary licence to Aspen Pharmacare in 2001, and requested a 30 per cent royalty fee.

For the first time, the agreement also allowed for licensees to export their generic medicines to all forty-seven countries in sub-Saharan Africa. It further allowed the licensees to make, sell and export their own versions of the compounds to these countries, enabling triple-drug fixed dose combinations to enter the market.

The 2003 settlement is regarded as a significant landmark in the struggle for increased access to antiretroviral treatment in the region. To an extent, this has been achieved. The latest World Health Organization report states that the greatest expansion in the number of people receiving antiretrovirals has been in sub-Saharan Africa. Almost three million people in the region were receiving the treatment at the end of 2008, compared to just two million in the previous year. Despite this progress, however, less than half of the 9.5 million people requiring treatment are receiving it, making the need for further scale-up absolutely critical.


IT’S IMPORTANT to remember that pharmaceutical companies are just part of the mix in dealing with Africa’s enormous healthcare challenges. The complex history of HIV/AIDS prevention and treatment in South Africa illustrates the point. There, in the midst of a triple health crisis of insufficient antiretroviral funding, a tuberculosis epidemic and an ongoing struggle to contain HIV, activists are demanding urgent, collaborative action.

South Africa bears an estimated 17 per cent of the global HIV burden – 5.5. million people – and has the biggest antiretroviral program in the world. Poor leadership, staff shortages, funding shortfalls and a lack of concerted action and policy on AIDS have left the country struggling to address the epidemic. The AIDS denialism of the former president, Thabo Mbeki, was a huge problem, and when the former health minister, Manto Tshabalala-Msimang, started promoting beetroot instead of antiretrovirals the country’s health policy became something of an international joke – albeit a bitter one.

South Africa introduced free antiretrovirals only in 2003, years after other countries. Mark Heywood, deputy chair of the South African National Aids Council, says the delay has left the country to play catch up with the rest of the world and has placed the country’s health system under immense pressure.

“If we’d implemented ART [antiretrovirals] say in 2000, then we would have got ahead of the curve of the epidemic and would have had more time to prepare our health system to gain the benefits of experience under less pressure. Now we are [implementing] the treatment program at a point when very large numbers of people are already sick with AIDS, creating pressure on hospitals and health facilities,” says Heywood.

He adds that government did not anticipate that the demand for antiretrovirals would escalate so rapidly. More than 700,000 people have been initiated on antiretrovirals since 2004, but this still means that only a little more than half of patients who require antiretrovirals are receiving them.

The country is currently facing a shortfall of one billion rand (A$146 million) for its antiretroviral program, brought about by insufficient monitoring, planning and budgeting for HIV/AIDS treatment. This could derail treatment programs across the country, making it unlikely that the government will meet its goal to provide antiretrovirals to 80 per cent of HIV-infected people by 2011.

Lack of funds is also preventing the country from following international best practice guidelines on HIV treatment. As Eric Goemaere, head of mission for Médecins Sans Frontières in South Africa explains: “There’s a disconnect between scientific evidence and funding realities. Scientific evidence tells us to improve treatment regimens from D4T [first line treatment] to Tenofovir [second line treatment], to treat children in their first year of birth, to start patients with a CD4 count below 350 and not 200 on antiretrovirals. But the financial reality cannot follow the science.”

Acquiring additional funding is bound to be difficult, given the current economic climate. International aid has slowed, and the US President’s Emergency Plan for AIDS Relief and the Global Fund to Fight AIDS, Tuberculosis and Malaria are facing budget constraints themselves. In July, Médecins Sans Frontières reported disruptions and shortages of antiretroviral drugs in six African countries because of delays and a lack of international funding.

“Unless there’s a serious plan which also involves the private sector, I don’t see how we are going to sustain the numbers of people on treatment and reach the 80 per cent treatment target,” says Heywood. There is no single solution, he adds. Funding alone can’t address problems such as antiretroviral shortages in some provinces, or patients being turned away from understaffed clinics.

The South African National Aids Council and Médecins Sans Frontières believe that task-shifting may be the best way to bring about change, and they are lobbying for it to be legally implemented. Such an approach would increase the responsibilities of healthcare workers: nurses would initiate and administer antiretroviral treatment, and lay counsellors would be able to perform HIV testing, especially in rural areas.

The battle for better healthcare is far from over, and it will take more than court victories, price cuts, voluntary licences and patent pools to win it. •

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