Pharmaceutical Corporations and Medical Research

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  • by Anup Shah
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Pharmaceutical companies have contributed to people’s improved health and prolonged life, generally speaking. Research and development of drugs that are brought to market can be costly and there are strict regulations and requirements that companies must follow in most countries. But the details reveal further concerns.

For example, marketing practices and priorities of the pharmaceutical industry have come under scrutiny for many years. It seems that there is increasing emphasis on drugs that fit scare-mongering and over-medicalized problems.

Testing and thorough clinical trials are fundamental to good medical drugs, but there are numerous accusations of shortcuts, including pressuring for favorable results, testing on people without their proper approval, using drugs for unapproved uses and much more.

Ideologically, many drug companies support the position of less government involvement, yet in the developing world in particular, diseases and illnesses affect the poorest the most who cannot afford expensive (or even sometimes cheap) treatments. In the past decade or so, pharmaceutical companies have therefore also been criticized for ignoring this “market” because they can’t pay.

[M]any people, most of them in tropical countries of the Third World, die of preventable, curable diseases.… Malaria, tuberculosis, acute lower-respiratory infections—in 1998, these claimed 6.1 million lives. People died because the drugs to treat those illnesses are nonexistent or are no longer effective. They died because it doesn’t pay to keep them alive.

Ken Silverstein, Millions for Viagra, Pennies for Diseases of the Poor1, The Nation, July 19, 1999

Public announcements of drug donations to poor countries are often welcome, but sometimes the details reveal murkier intentions; some of the drugs are close to, or even past, their expiry date (and are expensive to dispose, adding more costs to recipient countries) for example.

Poorer countries encourage their drug companies to make cheaper generic alternatives to expensive branded ones or use other tools available at their disposal to help bring the price of medicines down to more affordable levels. But they face immense pressure from international institutions and multinational pharmaceutical corporations, even when generics and other options pursued are legitimate under international rules. For these multinationals, they’ve poured billions into some of these drugs and therefore want a patent system that will protect their investments for as long as possible.

For the developing and poorer countries, as remote as these issues may seem, patents and intellectual property rights issues can mean life or death. (For example, at the end of the 1990s, the pharmaceutical industry lobbied the US government to threaten sanctions on South Africa for trying to produce generic drugs to fight its growing AIDS problem. It took huge public outcry to get the case dropped some 2 years later.)

The establishment of the World Trade Organization … imposed US style intellectual property rights around the world. These rights were intended to reduce access to generic medicines and they succeeded.

Developing countries paid a high price for this agreement. But what have they received in return? Drug companies spend more on advertising and marketing than on research, more on research on lifestyle drugs than on life saving drugs, and almost nothing on diseases that affect developing countries only. This is not surprising. Poor people cannot afford drugs, and drug companies make investments that yield the highest returns. The chief executive of Novartis, a drug company with a history of social responsibility, said “We have no model which would [meet] the need for new drugs in a sustainable way … You can’t expect for-profit organizations to do this on a large scale.”

Joseph Stiglitz (former World Bank Chief Economist and Nobel Prize winner for economics), Scrooge and intellectual property rights2, British Medical Journal, December 23, 2006, Volume 333, pp. 1279-1280

These and many other issues are discussed further below.

Priorities of the Pharmaceutical Industry

Historically, the desire to protect colonial interests and needs, such as the health of settlers and soldiers, typically drove medical research of tropical diseases.

Modern science has been able to research and develop cures for most illnesses and diseases, yet, politics and corporate greed affect who can benefit from this, resulting in what a French newspaper, Le Monde, describes as an apartheid of pharmacology3.

In addition, as observed by the British newspaper, the Guardian, more emphasis is placed on profitable research and cures for problems such as impotence and “diseases of affluence and longevity”, while many tropical diseases are given far less attention:

Multinational pharmaceutical companies neglect the diseases of the tropics, not because the science is impossible but because there is, in the cold economics of the drugs companies, no market.

There is, of course, a market in the sense that there is a need: millions of people die from preventable or curable diseases every week. But there is no market in the sense that, unlike Viagra, medicines for leishmaniasis are needed by poor people in poor countries. Pharmaceutical companies judge that they would not get sufficient return on research investment, so why, they ask, should we bother? Their obligation to shareholders, they say, demands that they put the effort into trying to find cures for the diseases of affluence and longevity—heart disease, cancer, Alzheimer’s. Of the thousands of new compounds drug companies have brought to the market in recent years, fewer than 1% are for tropical diseases.

In the corporate headquarters of major drug companies, the public relations posters display the image they like to present: of caring companies that bring benefit to humanity, relieving the suffering of the sick. What they don’t say, is that, so far, their humanity has not extended beyond the limits of the pockets of the sick.

Isabel Hilton, A Bitter Pill For The World’s Poor4, the Guardian, January 5, 2000

Additionally, corporate priorities of profits can imply that the most appropriate treatments won’t always apply (especially when they are cheap).

[T]here is a fundamental flaw [in corporate takeovers of medical complexes, hospitals etc, and the apparent efficiency gains that will come from it]; corporate owners of the facilities, tools, and services must maximize their use and price to maximize their profits. There is a direct conflict between the pursuit of health and the pursuit of wealth. If they have their ways, the pharmaceuticals, surgical procedures, and hospital corporations they own or control will be used at a level way beyond true need.

J.W. Smith, The World’s Wasted Wealth 2, (Institute for Economic Democracy5, 1994), p. 82.

J.W. Smith’s concerns do not seem too far-fetched given just a few examples:

In May 2001 the Guardian newspaper reported6 that a pharmaceutical company, Aventis, used to produce the only safe medicine for the late, fatal, stage of sleeping sickness. However, they stopped making it in 1995 because they couldn’t make any profit from it.

In 2000, Bristol Myers Squibb, used the drug for profitable purposes in the West—as an ingredient in hair-removing cream, under license from Aventis. That, together with the public outcries about the shortage of medicines in Africa at that time, and over the court case brought by 39 pharmaceutical companies against the South African government over access to cheap drugs, Aventis agreed to donate the drug to the World Health Organization and help fund research and treatment programs.

While that was definitely welcome, it was criticized that it had to come after public outcries, given that sleeping sickness “affects 500,000 people in 36 African countries, and 60m are at risk of its spread.”

The radio/TV show, Democracy Now!, adds to this with their January 19, 2007 broadcast, noting that pharmaceutical companies have gone to excessive lengths to portray common ailments and problems as diseases, and have even highlighted obscure problems as common diseases. Through the use of uncertainty and fear in advertising campaigns people are therefore encouraged to purchase drugs as solutions. As Democracy Now! found out when looking at a documentary called Big Bucks, Big Pharma: Marketing Disease & Pushing Drugs7, there are many examples. Here are some from their transcript:

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Big Bucks, Big Pharma: Marketing Disease & Pushing Drugs8, Democracy Now!, January 19, 2007

Amy Goodman, the host, goes on to explain:

Because patent life can be extended if new indications are approved, companies are constantly searching for new diseases to treat with old drugs. Antidepressants of the Prozac variety, or SSRIs, are a good example of this practice. Originally approved for major depressive disorder, these drugs are now prescribed for a variety of mood and anxiety disorders. Each new indication approved promises increased profits and must therefore be promoted heavily to the public. A striking example is how Paxil was revitalized as a treatment for Social Anxiety Disorder. Its company hired a public relations firm to frame this condition as a major and common medical problem, and the firm launched a multifaceted campaign that moved beyond advertising to get stories about Social Anxiety Disorder placed in print media and on television.

  1. Reporter:

    This morning, we begin a special two-part series on Social Anxiety Disorder. Many of us have suffered from shyness or fear of social situations at some point in our lives, but for millions of Americans, their anxiety could be debilitating.

Paxil’s award-winning product director was quoted as saying, “Every marketer’s dream is to find an unidentified or unknown market and develop it. That’s what we were able to do with Social Anxiety Disorder.”

Big Bucks, Big Pharma: Marketing Disease & Pushing Drugs9, Democracy Now!, January 19, 2007

The prestigious British Medical Journal also asked, Who needs health care—the well or the sick?10 (Volume 330, April 23, 2005, p.954). An interesting observation was noted whereby “the rates of self reported illness are paradoxical: low in Bihar [the poorest state in India], where the low expectations of health are disturbing, and enormously high in the United States, which is equally disturbing but for different reasons.” In summary, it seemed that “the more people are exposed to contemporary health care, the sicker they feel.” A key reason for this appears to be related to the industrialization of health: “more money can be made from selling healthcare interventions for the healthy majority than for the sick minority.”

That is, the problem for pharmaceutical companies in wealthy countries (where all their money can be made) is that the population is generally too healthy! They have therefore got to be fed fear and anxiety so that they will buy more products.

The accepted approach to health care generally is to treat symptoms of course, but to also address the causes, as preventative care will not only put less burden on health services, but mean people are healthy and have the chance to live more meaningful lives.

Yet, the preventative medicine that pharmaceutical companies need in order to stay in business partly requires using fear and anxiety, thereby getting people to purchase their preventative health rather than encouraging people to be healthy in the first place so that they typically minimize the amount they need to spend.

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But why should the Pharmaceutical Industry care about the problems of Developing Countries?

Some may argue that criticizing pharmaceutical companies for not spending as much on diseases of the poor is unfair, and that instead it should be up to those nations affected by such problems to invest in appropriate research, that the private corporations cannot be expected to solve all of the world’s problems and that they would also go broke from such activities. Furthermore, they provide jobs which helps create wealth. However, a number of issues, rarely discussed in the mainstream, makes this picture more complicated:

The western nations that the pharmaceutical corporations are typically based in have, through colonialism and post-war global economics, fostered an environment that has led to further poverty and dependency11 of the poorer nations on the first world countries. Post-War policies from the IMF and World Bank have forced most developing countries to cut back on such social expenditure as health and education, in the first place. Many countries have faced downward spirals due to such policies.

Furthermore, pharmaceutical companies often tout their strengths of having vast capital resources to do research, bringing benefits to humanity the world over. Unfortunately though, the quest for ever more profits are a hindering factor to what they will research. Tropical disease cures are not profitable for them because most people with such diseases are too poor to afford cures.

Of course, as well as addressing unfair practices by large pharmaceutical companies, poverty should be addressed too. Poverty is often a root cause, so tackling poverty (which may also be a major preventative measure, requiring less drugs in the first place) is ideal. But these are not necessarily separate; they are intertwined in a complex web. For example, poverty is also related to the way international trade rules and institutions are influenced by power politics:

The combined worth of the world’s top five drug companies is twice the combined GDP of all sub-Saharan Africa and their influence on the rules of world trade is many times stronger because they can bring their wealth to bear directly on the levers of western power.

Julian Borger, Industry that stalks the US corridors of power12, the Guardian, February 13 2001.

Pharmaceutical companies also make enormous profits that would probably not affect the ability to do some research and production of other more urgent medical problems.

“A corporation with stockholders can’t stoke up a laboratory that will focus on Third World diseases, because it will go broke,” says Roy Vagelos, the former head of Merck. “That’s a social problem, and industry shouldn’t be expected to solve it.”

Drug companies, however, are hardly struggling to beat back the wolves of bankruptcy. The pharmaceutical sector racks up the largest legal profits of any industry, and it is expected to grow by an average of 16 to 18 percent over the next four years, about three times more than the average for the Fortune 500 … Profits are especially high in the United States, which alone among First World nations does not control drug prices. As a result, prices here are about twice as high as they are in the European Union and nearly four times higher than in Japan.

“It’s obvious that some of the industry’s surplus profits could be going into research for tropical diseases,” says a retired drug company executive, who wishes to remain anonymous. “Instead, it’s going to stockholders.” Also to promotion: In 1998, the industry unbuckled $10.8 billion on advertising. And to politics: In 1997, American drug companies spent $74.8 million to lobby the federal government, more than any other industry; last year [1998] they spent nearly $12 million on campaign contributions.

Ken Silverstein, Millions for Viagra. Pennies for Diseases of the Poor13, the Nation, July 19, 1999

And when nations and companies actually do try to develop cures and possibilities, these same pharmaceutical companies will often complain about unfair trade practices! This can be seen in sharp detail in the AIDS crisis, where such companies lobbied the US government to threaten sanctions14 on South Africa just for trying to do something that the pharmaceutical companies would not do—help its people.

Pharmaceutical companies often claim they need intellectual property enforcement to help recoup their investments. Many have argued that pharmaceutical companies owe a lot to the public education sector for providing the scientific basis. Pharmaceutical companies do note that their taxes on profits are ploughed back into the government, and contributes to the GDP so that it is a reinforcing circle. Noam Chomsky adds that there is a LOT of base science that such companies have benefited from:

Well, the pharmaceutical corporations and others claim they need this [protection via patents and intellectual property rights] so they can recoup the costs of research and development. But have a close look. A very substantial part of the research and development is paid for by the public anyway. In a narrow sense, it’s on the order of 40-50%. But that’s an underestimate, because it doesn’t count the basic biology and the basic science, which is all publicly funded. So if you get a realistic amount, it’s a very high percentage that’s publicly paid anyway. Well, suppose that went to 100%. Then all the motivation for monopolistic pricing would be gone, and there’d be a huge welfare benefit to it. There’s no justifiable economic motive for not doing this. There’s some economic motive, profit, but it is an effort to impede growth and development.

Noam Chomsky, Unsustainable Non Development15, May 30, 2000

Furthermore:

More fundamentally, [Jamie] Love denies that the pharmaceuticals even own the rights to the drugs in the first place. He points out that many of the anti-retroviral drugs used to treat HIV and AIDS today stem from the government-funded cancer drug research of the 1980s. The rights to government-created innovations were sold to pharmaceutical companies at low prices (not at the astronomical rates demanded in recent airwave spectrum auctions, for example), guaranteeing companies like Bristol-Myers Squibb huge returns on investment. Given the public investment in these drugs, Love doesn’t believe drug companies have the moral authority to determine who can or can’t access them. And the fact that thousands of people in Africa continue to die because they can’t afford the drugs adds urgency to his argument.

Daryl Lindsey, The AIDS-drug warrior: Jamie Love16, Salon.com magazine, June 1, 2001

And commenting on the U.S. for example:

private, for-profit labs are portrayed as responsible for the critical breakthroughs that improve the quality of life.

The truth is mostly the reverse. Data submitted to the Joint Economic Committee of Congress by the National Bureau of Economic Research reveals that public research, not private, led to 15 of the 21 most therapeutically valuable drugs introduced between 1965 and 1992, and other studies done in the 1990s suggest that only a minority of important drug discoveries in recent years—estimates range from 17% to 40%—were the result of commercial research. Those new cures were instead the product of the federal National Institutes of Health (NIH), either the “intramural” (or in-house) research performed by NIH scientists, which accounts for 10% of the agency’s $20 billion annual budget, or the “extramural” research contracted out through NIH grants to universities, medical and pharmacy schools, nonprofit foundations, and private laboratories, which accounts for most of the rest.

Wayne M. O’Leary, The Real Drug Lords17, Alternet.org, August 13, 2002

And for the developing world:

Of diseases in the Third World, AIDS is getting the most attention and focus. Not coincidentally, it is also one of the few diseases that remain a threat to First World countries.

Pharmaceutical companies but profits before needs, Censored 2000, P. 32

It could be argued that those corporations don’t need to spend much money on these things as before, because they have already spent that in the past, sufficiently, and have produced the medicines needed. Instead, it is a failure by governments to ensure that those in need get access to existing medicines.

There may be some truth to this. As discussed in this site’s section on health care around the world18, poor countries lack resources and sufficient health infrastructure. Even if some medicines are available, they may not be able to get it to the needy.

However, there are also cases where even in poor countries, much-needed vaccines have been widely distributed, suggesting that mobilization of resources is possible.

The other problem is that this is not enough of an excuse to reduce R&D in this area; new medicines are also needed — for example, to overcome bacterial resistance to existing drugs. This is a significant and growing problem for Malaria and TB, in particular.

In addition, new drugs are needed to help make it easier for poorer people to complete a course. It is harder for poorer people to finish a course that takes a long time — people either do not understand that they need to complete the course even when symptoms begin to improve, or they may horde part of the course for future use or for other family members’ use, because the costs may be prohibitive, or it is difficult to turn up for supervised treatment frequently over a long period, etc (which increases the risk of bacterial resistance to some drugs).

Furthermore, it is not just a government failure to get existing medicines to those who need it, but a more global failure that pharmaceutical companies are a key part of: an intellectual property rights regime that actually makes it harder for poor countries to use cheaper (and affordable) generic versions, or that makes the cost of those existing drugs higher than it could otherwise be in an Intellectual Property Rights (IPR) regime that was more forgiving. Many pharmaceutical companies, for example, are at the forefront of opposing governments attempt to make medicines cheaper, widely available, or generic.

In addition, first world diseases are increasingly a problem in the developing world. It can therefore be argued that R&D in this areas is also more important for the developing world than R&D in infectious diseases.

The problem is that for developing countries, research into these first world problems may seem beneficial, but the benefit can only be reaped by the developing world if it is in the context of good IPR programs that make the medication available and affordable to those who need it.

Smaller biomedical companies in emerging economies are trying to fill a gap 19 and provide affordable treatments for various neglected diseases which rarely make headlines but affect almost a billion people in some way. Many are creating new drugs, not just generics, which the large pharmaceutical companies are often against.

However, despite there being a market opportunity here for these smaller firms, they “typically lack expertise in such areas as international regulatory environments, market assessments, positioning products, including pricing, accessing financing, and identifying international commercialization partners”, according to Sarah Frew, a researcher of a study that found this trend (see previous link).

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Hiding behind patents to prevent legitimate — and cheaper — generic use

Meanwhile, the death toll mounts. And those who believe in compulsory licensing, or weaker intellectual property laws for drugs in developing countries, like to cite the case of Jonas Salk, the inventor of the polio vaccine. As the ancient scourge of polio was rolled back by his vaccine 50 years ago, Salk was asked why he never took a patent out on the medicine—a patent that would have made him wildly rich. “There is no patent,” he replied. “Could you patent the sun?”

Daryl Lindsey, The AIDS-drug warrior: Jamie Love20, Salon.com magazine, June 1, 2001

Patents are supposed to encourage innovation by providing incentives for private companies to further investment and research. But for areas such as health, patents can also restrict access to medicines for those who cannot afford them.

In addition, large corporations from developed countries are patenting so many resources from developing countries that it makes it difficult for those nations to be able to produce medicines for themselves.

The World Trade Organization’s TRIPS agreement (Trade-Related Aspects of Intellectual Property Rights) makes it difficult for other countries to produce medicines if the product is already patented.

However, there are some provisions in the TRIPS agreement to allow generics, but that is only when there is an emergency and the products are not used for commercial use (and even this clause is under attack from the US and pharmaceutical companies.)

Furthermore, as detailed further in this site’s global health overview21 section, poorer countries that do have industrial capacity to produce generic alternatives are facing pressure not to sell them to other poor countries who do not have such capacity.

Former World Bank Chief Economist and Nobel Prize winner for economics, Joseph Stiglitz explained in an editorial in the prestigious British Medical Journal that

Intellectual property differs from other property—restricting its use is inefficient as it costs nothing for another person to use it.… Using knowledge to help someone does not prevent that knowledge from helping others. Intellectual property rights, however, enable one person or company to have exclusive control of the use of a particular piece of knowledge, thereby creating monopoly power. Monopolies distort the economy. Restricting the use of medical knowledge not only affects economic efficiency, but also life itself.

We tolerate such restrictions in the belief that they might spur innovation, balancing costs against benefits. But the costs of restrictions can outweigh the benefits. It is hard to see how the patent issued by the US government for the healing properties of turmeric, which had been known for hundreds of years, stimulated research. Had the patent been enforced in India, poor people who wanted to use this compound would have had to pay royalties to the United States.

… The establishment of the World Trade Organization … imposed US style intellectual property rights around the world. These rights were intended to reduce access to generic medicines and they succeeded. As generic medicines cost a fraction of their brand name counterparts, billions could no longer afford the drugs they needed.

Developing countries paid a high price for this agreement. But what have they received in return? Drug companies spend more on advertising and marketing than on research, more on research on lifestyle drugs than on life saving drugs, and almost nothing on diseases that affect developing countries only. This is not surprising. Poor people cannot afford drugs, and drug companies make investments that yield the highest returns.

Joseph Stiglitz, Scrooge and intellectual property rights22, British Medical Journal, December 23, 2006, Volume 333, pp. 1279-1280

As Noam Chomsky points out23, “The World Trade Organization regime insists instead on product patents, so you can’t figure out a smarter process. Notice that impedes growth, and development and is intended to. It’s intended to cut back innovation, growth, and development and to maintain extremely high profits.”

It is also an example of inequality being structured into law, also summarized here:

[I]nternational intellectual property laws, which protect the patents and the bottom lines of pharmaceutical companies … encourage them to continue investing the millions in research required to develop new medicines. Western countries, led by the United States, have fought strenuously on the international front to protect those patents—in effect, placing a greater value on intellectual property, in the name of spurring innovation and saving more lives in the future, than on saving lives currently at risk.

Daryl Lindsey, The AIDS-drug warrior: Jamie Love24, Salon.com magazine, June 1, 2001

There is room, thanks to efforts by developing countries and others, in the WTO rules for some ability for governments to incorporate provisions in national patent laws to ensure and increase access to essential drugs, using mechanisms such as compulsory licensing and parallel imports.

WTO patent rules allow 20 years of exclusive rights to make the drugs. Hence, the price is set by the company, leaving governments and patients little room to negotiate, unless a government threatens to overturn the patent with a “compulsory license.”

Such a mechanism authorizes a producer other than the patent holder to produce a generic version of the product though the patent-holder does get some royalty to recognize their contribution.

Parallel importing allows a nation to effectively shop around for the best price of the same drug which may be sold in many countries at different prices.

These are potentially very effective tools to get the price down. But there has been constant threat by the large pharmaceutical industries in the U.S. and Europe for example, that feel threatened by these mechanisms. They have pressured developing nations and international agreements in various ways to minimize the impact these would have on them.

Pharmaceutical groups have lobbied the U.S. government, to exert pressure on other countries about this — such as to threaten sanctions on South Africa for trying to develop cheaper and generic drugs, as mentioned earlier. (See for example, an article about the relationship between globalization and equitable access to essential drugs25, from the Third World Network for more on this).

(Some governments also levy various import taxes on such products, and the cost of transporting them etc may add to the cost of that medicine, but the point is that the price is high to start with.)

Some of the larger developing countries, such as Thailand, India, Brazil, Egypt and others, have tried to do something about the dual problems of high pricing and corporate/Western pressure:

  • Some, like Brazil, have tried to develop cheaper, more generic drugs
  • Others, such as South Africa, who may have tried this before, have also tried to purchase cheaper generic drugs or import them from where it is sold the cheapest. This works out well between developing countries.

These attempts are important because they recognize the need to reduce dependency upon large multinational corporations which charge high prices. It also shows a sign that these governments are attempting to meet their obligations to their own people.

In a radio interview26, Brazilian Ambassador to the WTO, Celso Amorim, points out that the United States provides vast amounts of aid and subsidies to its pharmaceutical corporations to research drugs and so forth, and yet when other developing countries try this, the US complains via the WTO about it.

In fact, the pharmaceutical corporations and the United States challenged27 Brazil, South Africa and other’s attempts by claiming that they were breaching the above-mentioned TRIPS. The fear has been that if a few developing countries succeed in this sort of independent path, then other developing countries will follow suit, and this will threaten “their” markets.

India’s successful pharmaceutical industry, built on its patent laws that allow the development of very cheap generic drugs has been under threat28 from WTO property rights rules on patent protection, and pressure from the large pharmaceutical companies.

The additional fear is also based on how if companies from developing countries are able to make inroads on profits on products that are not actually sold much by the large multinational pharmaceuticals, then for other products that generate more sales and profits, companies from developing countries could pose a real threat to their bottom line.

Furthermore, if other companies are able to offer similar drugs for much lower prices, it indicates potentially how much the public of the industrialized world are being over-charged.

A huge public outcry forced 39 pharmaceuticals to drop their case in April 2001 against South Africa. The publicity that had been generated by this had potentially wider implications to the whole TRIPS regime:

[T]he decision to drop the South African court case, and some recent announcements of price reductions on antiretrovirals can be seen as attempts by the pharmaceutical industry to avoid having HIV/AIDS catalyze an international movement seeking to address the problems in the TRIPS Agreement. The companies seem to be increasingly willing to sacrifice the (already marginal) sales generated on HIV drugs in Africa in an attempt to forestall the development of a larger social movement that might ultimately lead to the TRIPS Agreement being significantly altered or even removed from the WTO.

Toby Kasper, Developing Countries Must Stand Firm on People Over Patents29, South Centre Bulletin 11, 30 April 2001

Additionally, in June 2001 the United States dropped its WTO complaint against Brazil for the production of generic AIDS medications. However, it was at a potentially enormous cost30 to Brazil and other developing countries; While following even some “unfair” rules in the WTO TRIPS agreement, the U.S. agreed to drop its case as long as Brazil tells U.S. State Department 10 days in advance of any generic drugs being developed, allowing the U.S. in effect to monitor Brazil’s public health policies in these areas. Also, other countries might think twice about doing what Brazil and some others have tried—legally—to do here, as the fear of U.S. pressure might be persuasive enough.

Just a couple of months later, Brazil made a bold, but important move to produce AIDS drugs themselves31, but at the same time, breaking the patent rights of Swiss pharmaceutical company, Roche. The Brazilian currency, the real, had become weaker with its devaluation, therefore making the costs of imports even more expensive.

Furthermore, a subsequent global AIDS fund set up by the U.N. also led to warnings of concern at things like patents, pricing and so on, which is captured well by Philippe Riviére, who is worth quoting at length:

The Indian firm Cipla’s offer to MSF [Médecins sans frontiéres] to provide a cocktail of antiretrovirals for less than $350 a year (compared to the big boys’ $10,000) resounded like a thunderbolt. Suddenly, the emergence in the South of very low cost generics producers seems credible.

James Love, coordinator of the Consumer Project on Technology in Washington and kingpin of the Cipla offer, stresses: “The success in the developing world of the southern producers is quite important. Otherwise there is no real leverage. It is important not to link use of the global fund to purchases from European and US producers, but rather, to permit competition and buy from the firms with the best price that have acceptable quality. [Harvard economist, Jeffery] Sachs [leading a proposal from a group of researchers and international experts] has been terrible on this, urging purchases from big pharma exclusively.”

Is that why the Harvard mechanism found favour with the Bush administration, the European Commission, the WHO experts, UNAids, the Bill and Melinda Gates Foundation and the pharmaceutical industry? It offered an answer to “medical apartheid” without dropping the guard on patents. (Emphasis Added)

Philippe Riviére, Southern Sickness, Northern Medicine; Patently Wrong32, Le Monde Diplomatique, July 2001

And, as the following quote suggests, large Pharmaceutical companies’ claims on dents to profits and so on, seem hollow:

“[That a three-drug anti-HIV cocktail could be priced at $350 by CIPLA, a generic drug manufacturer] shocked everyone and blew up in smoke the idea that the pharmaceutical companies were making donations,” says [Jamie] Love. “It was a third of the best prices you could get out of the branded guys in what they thought were donations.”

Not surprisingly, the action didn’t exactly elicit praise from the pharmaceutical industry. At a recent industry conference GlaxoSmithKline CEO Jean-Pierre Garnier described CIPLA as price-undercutting “pirates”, and said the company “is not doing this to get a Nobel prize.” CIPLA’s Hamied responds to such criticism by saying, “Indeed, we are a commercial company. But I market 400 products in India. If I don’t make money on a half-dozen of them, it’s no big deal. I don’t make any money on the cancer drugs we sell or drugs for thalassemia, a blood disorder that’s common in India. We sell these drugs virtually at cost because I don’t want to make money off these diseases which cause the whole fabric of society to crumble. India alone will have 35 million HIV cases by 2005, and it’s something we can’t afford.”

Daryl Lindsey, The AIDS-drug warrior: Jamie Love33, Salon.com magazine, June 1, 2001

In the same article as quoted just above, the point is also made that while profits aren’t important to CIPLA, “they still needs to make a profit, however tiny, to demonstrate that the pharmaceutical companies can lower their prices dramatically and still turn a profit on AIDS drugs in developing nations like South Africa.” However, if compulsory licenses are not allowed, then it won’t be possible. Pharmaceutical companies are against these licenses, because large profits are important to them.

Ha Joon Chang, professor of economics at Cambridge University, writes in Bad Samaritans (Business Books, 2007) that the US, for example, has been able to successfully use compulsory licensing when it needs to: “In the aftermath of the anthrax scare in 2001, the US government utilized the public interest provision to maximum effect — it used the threat of compulsory licensing to extract a whopping 80% discount for Cipro, the patent-protected anti-anthrax drug from Bayer, the German pharmaceutical.” (p.123)

Chang, also writes that a number of specific industries are “exceptionally aggressive in promoting strong protection of intellectual property rights (IPR) … Unfortunately, this handful of industries has been driving the whole international agenda on IPRs over the past two decades.” (p. 122)

He also argues that pharmaceutical companies fears from critics of the current patent system do not hold:

During the debate surrounding the HIV/AIDS drugs, the pharmaceutical companies argues that, without patents, there will be no more new drugs — if anyone can “steal” their inventions, they would have no reason to invest in inventing new drugs.… Therefore … those who are criticizing the patent system (and other IPRs) are threatening the future supply of new ideas (not just drugs), undermining the very productivity of the capitalist system.

The argument sounds reasonably enough, but it is only a half-truth. It is not as if we have to “bribe” clever people into inventing new things. Material incentives, while important, are not the only things that motivate people to invest in producing new ideas.… Countless researchers all over the world come up with new ideas all the time, even when they do not directly profit from them. Government research institutes or universities often explicitly refuse to take out patents on their inventions.

… This is not a fringe phenomenon. A lot of research is conducted by non-profit-seeking organizations — even in the US. For example, in 2000, only 43% of US drugs research funding came from the pharmaceutical industry itself. 29% came from the US government and the remaining 28% from private charities and universities.… A slight weakening of patentee rights — for example, being forced to charge lower prices to poor people/countries or even being made to accept a shorter patent life in developing countries — is even less likely to result in the disappearance of new ideas, despite the patent lobby mantra.

Ha Joon Chang, Bad Samaritans, (Business Books, 2007) pp. 124–125

Interestingly, the view on IPRs has not been constant. Free market champions in the past objected to the patent system, though the context was also different at that time:

In mid-19th century Europe, the influential anti-patent movement, famously championed by the British free-market magazine, The Economist, objected to the patent system on the grounds that its costs would be higher than its benefits.

Of course, [they] were wrong. They failed to recognize that some forms of monopoly, including the patent, can create more beenfits that costs. For example, infant industry protection does produce inefficiency by artificially creating monopoly power for domestic firms, as free-trade economists are only too pleased to point out. But such protections may be justified, if it raises productivity in the long run and more than offsets the damages from the monopoly it creates, as I have repeatedly explained in the earlier chapters.

Ha Joon Chang, Bad Samaritans, (Business Books, 2007) pp. 124–125

The issue is not just who benefits from the IPR regimes, but also at what cost to others:

In exactly the same manner [that monopolies can sometimes be justified], we advocate the protection of patents and other intellectual property rights, despite their potential to create inefficiency and waste.… But accepting the potential benefits of the patent system is different from saying that there is no cost involved. If we design it wrong and give too much protection to the patentee, the system can create more costs than benefits, as is the case with excessive infant industry protection.

… The most detrimental impact lies in [IPRs] potential to block knowledge flows into technologically backward countries that need better technologies to develop their economies. Economic development is all about absorbing advanced foreign technologies. Anything that makes it more difficult, be it the patent system or a ban on the export of advanced technologies, is not good for economic development.… In the past, the Bad Samaritan rich countries themselves understood this clearly and did everything to prevent this from happening.

Ha Joon Chang, Bad Samaritans, (Business Books, 2007) pp. 124–125

(More generally, as the last sentence above alludes to, Chang’s book looks at how today’s rich nations have developed and find they practice an almost opposite policy prescribed to today’s poorer nations, and as the title of his previous book says, once they reached industrialization and development, they attempted to “kick away the ladder” of economic development, in order to maintain a position of advantage, economically and geopolitically.)

The Doha WTO round34 in November 2001, while controversial in some aspects, included some provisions to make access to affordable medicines easier. However, just over a year after that, even this might be reversed:

  • All the other 140 countries of the WTO unsuccessfully opposed United States desire to block access for poor countries.
  • This was due to pressure from the pharmaceutical industry. The Guardian newspaper reports, for example, (December 21, 2002 35) that “Dick Cheney, the US vice-president, … blocked a global deal to provide cheap drugs to poor countries, following intense lobbying of the White House by America’s pharmaceutical giants.”
  • Since the Doha Agreement, “America’s drug industry has fought tooth and nail to impose the narrowest possible interpretation of the Doha declaration, and wants to restrict the deal to drugs to combat HIV/Aids, malaria, TB and a shortlist of other diseases unique to Africa” rather than all developing countries, as originally agreed. (The U.S. was part of that agreement process as well.)
  • The repeated concern has been that copy-cat drugs will under price and override patents, and research will dry up.
    • Yet, as the article continues, “cut-price drugs will only be sold in countries which cannot afford to buy them at first-world prices.”
    • In addition, “Aside from HIV/Aids, drug companies do almost no research into the diseases on the US shortlist. It excludes diseases like cancer, asthma and pneumonia which are killers in the developing as well as the developed world.”
    • In other words, dents on profits wouldn’t be as big as feared.

The above adds further consideration on the actions of pharmaceutical companies in response to growing criticism of the way they are pricing drugs, the way they are researching and so on;

  • That is, in response to the criticism while it is good they have reduced prices, the dependency on them that still exists is still a problem.
  • When fluctuations in currencies can be sharp, especially for poor countries, the effects can be enormous, as mentioned above with Brazil’s currency devaluation. This has a dramatic impact on the affordability of external medicines from the expensive multinational pharmaceuticals.
  • Currently, it seems as though pharmaceutical companies are hiding behind their patents, power and influence to accumulate profit and maintain their position, claiming they are the only ones that can help, with their approach. Real technology transfer and sharing with others around the world does not appear part of the debate. Only when it is profitable or not harmful to them too much, will they “help” it seems.
  • After all, the public “shared” their wealth in the form of huge government funds, public research and subsidies etc. to help pharmaceutical companies. It is only fair they “share” back!

Further denting the credibility of the U.S. in this area has been that President Bush has picked a former top executive of a major U.S. pharmaceutical company to head the U.S.’s global AIDS initiative36, leading to further accusations of a commercial agenda, and lack of real experience in the issues that matter. (As well as the previous link, see for example, similar criticisms37 from Health GAP and Global Treatment Access Campaign, two organizations campaigning for global access to affordable medicines.)

Despite the apparent success at Doha, the US has sought to undermine the agreement made there. Oxfam, a prominent NGO, has been highly critical of the practices of big pharmaceutical companies, arguing that, “The U.S. Trade Representative is pursuing standards of patent protection which go far beyond WTO patent rules, and it is doing so regardless of the devastating impact that this could have on … developing countries.” Oxfam also believes the US is “pursuing this pro-patent agenda on behalf of its powerful pharmaceutical lobby, PhRMA. The industry has an interest in strong patent protections, which limit generic competition and therefore protect its market share and profits.” In addition,

The cheapest generic versions of new patented drugs are being blocked from developing-country markets by U.S. trade policies on intellectual property, at the urging of the drug companies that benefit from the monopoly position that patents confer.

During the two years since Doha, the U.S. has contravened the goal of the Declaration—“access to medicines for all”—by pressuring developing countries to implement “TRIPS-plus measures”: patent laws which go beyond TRIPS obligations and do not take advantage of its public-health safeguards. The USA does this in a number of ways. It provides biased technical assistance in countries such as Uganda and Nigeria, which benefits its own industry by increasing drug prices and limiting the availability of generics, but reducing access. It uses bilateral and regional free trade agreements to ratchet up patent protection in developing countries. It has recently concluded free trade agreements with Chile and Singapore and is using the high intellectual property standards in the latter as a model for negotiations on the FTAA (Free Trade Area of the Americas … and with Central American, Southern African, and other countries. And lastly, the U.S. bullies countries into increasing patent protection by threatening them with trade sanctions under section 301 of the Trade Act of 1974; nearly all those targeted are developing countries, including countries in compliance with their WTO obligations. The Costa Rican Pharmaceutical Industry estimates that the implementation of such TRIPS-plus patent rules would mean an increase in the cost of medicines of up to 800 per cent, because these rules would seriously restrict competition from generics.

Robbing the Poor to Pay the Rich? How the United States keeps medicines from the world’s poorest38, Oxfam, December 2003

The Third World Network reported on a global AIDS conference in Bangkok, July, 2004 and also commented on the negative impacts of the growing number of bilateral agreements signed with the US39 that Oxfam alluded to as well. These “agreements are creating new barriers to access to medicines, as they forbid the developing countries from policies (which the WTO allows) that promote generic medicines.” To add to the sour French-US political relations, “There was a diplomatic uproar when the French President Jacques Chirac accused the US of blackmailing developing countries to give up measures to obtain life-saving drugs through these bilateral trade deals.”

And its not just the US, but European countries, that seem to be aggressively looking for ways to prevent developing countries legitimately using generics.

In October 2009, Oxfam released a report criticizing the European Union of double standards: The EU was trying to reduce the price of generic drugs within its own borders while preventing developing countries doing the same40.

For example

  • Since late 2008, Germany and the Netherlands have made customs seizures together totaling 19 shipments of generic medicines bound for developing countries. They mostly come from India, and go through Europe in transit. Oxfam says the generic shipments were legitimate under WTO rules.
  • The EU is pushing for tougher new intellectual property rules in bilateral free trade deals that go beyond the WTO’s existing TRIPS agreement.
  • At the same time, the European Commission is carrying out a high profile investigation into the pharmaceutical industry for intellectual property abuses within the European Union, and is contemplating action against these companies.

The British Medical Journal also reported on this (October 24, 2009, p.937) and noted a response from the EU trade commissioner, Catherine Ashton who defended the powers to inspect to address counterfeit products, and “in particular dangerous fake medicines.”

Yet, it seems seizures of legitimate drugs have occurred. India and Brazil, for example, are filing a complaint against the European Commission at the WTO after the Netherlands seized anti-HIV and other medicines earlier in 2009. The medicines were going from India via Europe to Brazil, Colombia and Nigeria.

An additional point should be stressed here: the criticism levied at pharmaceutical companies and others is their reaction against legitimate generics. Fake drugs, on the other hand, are extremely dangerous on numerous levels. A Channel 4 documentary (unfortunately I do not recall the date, any more), highlighted as much, showing how an organized group in India were quite candid about their ability to create fake drugs to order (for example, mixing only a small amount of legitimate ingredient with chalk and other fake items to give the pills substance). The criminal, moral, economic and social damage such practice can cause is difficult to understate and has to be stamped out at all costs.

It is not so much that these developing countries are necessarily adamantly against the WTO or even the large pharmaceuticals, but it is the unfair deal they are being given by the imposition of the current system that is causing the problems; while international legal frameworks for trade is welcome, it is an example where institutions like the WTO have been used by the more powerful countries and their corporations to further their own interests without much regards to others; Western leaders go on about how rules-based systems are essential, but they don’t discuss the pros and cons of the actual rules themselves. This is how inequality can become structured into law.

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Dumping old or unsuitable drugs onto poor countries as aid and charity

While pharmaceutical companies have no doubt created life-saving drugs that have saved millions of lives, they have also participated in practices around the world that have come under a growing amount of criticism. John Madeley is worth quoting at length:

[NGOs] allege that the corporations:

  • sell products in developing countries that are withdrawn in the West;
  • sell their products by persuasive and misleading advertising and promotion;
  • cause the poor to divert money away from essential items, such as foodstuffs, to paying for expensive, patented medicines, thereby adding to problems of malnutrition;
  • sell products such as appetite stimulants which are totally inappropriate;
  • promote antibiotics for relatively trivial illnesses;
  • charge more for products in developing countries than they do in the West;
  • fail to give instructions on packets in local languages;
  • resist measures that would help governments of developing countries to promote generic drugs at low cost;
  • use their influence to try to prevent national drug policies;
  • give donations of drugs in emergencies which benefit the company rather than the needy;
  • use their home government to support their operation with threats if necessary, such as withdrawing aid, if a host government does anything to threaten their interests.

… The methods used by the corporations are highly controversial. Making use of advertising that is inexpensive in comparison to what they pay in industrialized countries, the drug TNCs use the most persuasive, not to say unethical, methods to persuade the poor to buy their wares. Extravagant claims are made that would be outlawed in the Western countries. A survey, in the Annals of Internal Medicine found that 62 per cent of the pharmaceutical advertisements in medical journals “were either grossly misleading or downright inaccurate”.

John Madeley, Big Business Poor Peoples; The Impact of Transnational Corporations on the World’s Poor, (Zed Books, 1999) pp. 145-146, 147

Madeley goes on to provide an example (amongst many others) where US-based drug company Eli Lilly made the largest one-time pharmaceutical donation at that time, to provide an antibiotic to Rwanda during their refugee crisis in 1994. They donated enough for 1.3 million people. However, the World Health Organization didn’t list this drug on their list of essential drugs for treating refugees. He also pointed out that “Médicins sans Frontiéres (Doctors without Borders) … said ‘it would never prescribe such medicines in the camps’.”

Many of the pills were past their expiry date, which added additional resource burdens to a country already suffering from the aftermath of a civil conflict. Madeley also shows some additional reasons to this apparent generosity that:

[w]hile Eli Lilly conceded that the tablets donated were excess stock nearing expiry date, they “felt it was the right thing to do.” … although drug donations may seem pure altruism, they can sometimes harm rather than help the victims of emergencies. However, they nearly always help a company’s balance sheet. European and USA-based TNCs receive substantial tax benefits when they give donations. For gifts to the needy, US tax regulations allow a write-off for tax purposes of up to twice the production costs.

John Madeley, Big Business Poor Peoples; The Impact of Transnational Corporations on the World’s Poor, (Zed Books, 1999) p. 153

Madeley wrote the above in 1999. A decade later, Elizabeth Sukkar notes a similar pattern in the British Medical Journal, “International Aid; The cost of donated drugs”, October 10, 2009 (p. 832):

One example: the 4000 tonnes of medicines donated to people in the Aceh region of Indonesia after the December 2004 Tsunami; 600 tonnes were out of date or about to expire and cost an estimated $2.4m (£1.5m; €1.6m) to destroy.

To help prepare [for new and updated guidelines on drug donations], WHO [World Health Organization] did a systematic review of drug donations during 1998 to 2008. It found that only 56% of donations were appropriate given the characteristics of the event and what the recipient needed, and only 12.5% of drugs requested by recipient countries were received.

Of the inappropriate donations, 57% had improper labels … and 40% had expiry dates of less than one year. Up to 80% of appropriate donations were surplus to requirement. “The ensuing cost of drug destruction, where documented, was significant,” says Dr Moller, one of the authors of the review.

Elizabeth Sukkar, International Aid; The cost of donated drugs41, British Medical Journal, October 10, p. 832

Sukkar adds that the current WHO guidelines were written for emergencies, but the new ones are to include other scenarios such as protracted emergencies, donations targeting specific diseases, and other forms of donations.

Noting that drug companies are one of the key donors for long term programs, she lists why they are so:

  • Tax incentives
  • Good public relations
  • Cost saving (it is cheaper to donate a drug than destroy it)
  • Surpluses in the market, and
  • A genuine desire to help

She also notes that the industry has improved over the past 2 decades, suggesting it may partly be because there is more scrutiny over what drug companies do, these days.

More fundamentally, however, UNICEF and others feel that after the acute phase of an emergency is over, cash donations may be better than drug donations as that can be better targeted as needed. (Many humanitarian organizations find that in emergencies they sometimes receive many items in excess, where cash donations may be better for it can help mobilize local resources as needed). Of course, the problem of cash donations is corruption and misuse of such funds as well. These and more are discussed in more depth on this site’s section on foreign aid42.

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Testing drugs on the poor

In March 2005, India’s new patent law was passed that would bring it into line with the WTO rules that requires more protection of produced drugs, and restricted scenarios in which generic drugs (which are cheaper) can be produced. Oxfam has criticized this as saying the WTO rules will restrict access to life-saving drugs worldwide43, not just in India, because India’s generics industry was popular around the world for its ability to produce more affordable medicines.

And as Wired News reported at the end of 2005, those new laws, somewhat ironically, now enable pharmaceutical companies to test drugs on India’s poor 44 by using India’s cheaper, but highly skilled workforce to conduct drugs trials there, rather than in industrialized countries, thus saving significantly on the costs. However, as Wired also noted, this introduces a number of issues, such as:

  • That although administrations in the industrialized countries, such as the Food and Drug Administration of the US, require that testing shows safety of the products, it is largely up to the country that hosts the trials and tests to ensure that procedures used have been sound and ethical. A developing country such as India does not have the ability to do this as effectively.
  • Furthermore, many drugs are being developed for markets in industrialized countries. Yet, using incentives such as $100 for participation (even though patients may not be fully aware of all the issues, which poses other ethical issues) in effect, poor people in other countries are being used for testing drugs on, while the potential benefits would be for people elsewhere. Wired News cited an assistant professor of medical history and bioethics, Srirupa Prasad, who said, “Third World lives are worth much less than the European lives. That is what colonialism was all about.”

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Power and influence in drug testing

On April 27, 2003, Britain’s Channel 4 aired a documentary titled Dying for Drugs, raising many of the hard issues discussed here, that drugs bring billions to those companies, and hopes to people. Yet, how far would drugs companies go to get their drugs approved and the prices they want? As the documentary said in their introduction, the implications are alarming and if their “power remains unchecked, many more people will soon will be dying for drugs.”

In Africa the documentary showed how one of the world’s biggest drug companies experimented on children without their parents’ knowledge or consent. In Canada it revealed how a drug company attempted to silence a leading academic who had doubts about their drug. In South Korea it followed the attempts of desperately ill patients to make a leading drug company sell them the drugs they need to save their lives at an affordable price. And in Honduras they showed the brutal consequences of drug companies’ pricing policies. This documentary therefore covered four basic areas:

  1. Testing on humans without permission
  2. Voluntary human trials but where doctors are pressured not to reveal problems
  3. Successful human trials, but drugs priced beyond the reach of many patients
  4. Prices that kill, and resorting to breaking the law to save lives by smuggling medicines from other countries.

Testing on humans without permission

Increasingly, the documentary highlighted, human trials without permission are taking place in the developing world, far away from scrutiny of European or American authorities.

The documentary focused in on a case in 1996 in a northern Nigerian town of Kano, already suffering from severe cholera and measles outbreaks. At that time, a third problem occurred: meningitis, where some 150,000 people were affected, and some 15,000 dies, many of which were children.

While this was mostly unreported in the West, it was noticed by the world’s biggest and richest drug company, Pfizer. They moved fast and flew to Nigeria with a new drug, a “potential life-saver and a potential billion dollar money spinner”, Trovan.

Trovan had never been tested on children before, and Médicins Sans Frontiéres (Doctors Without Borders, or MSF) had been at the hospital that Pfizer came to, and had for a number of weeks been offering free life-saving treatments, successfully treating thousands of people.

Yet it turned out that Pfizer were doing human testing or experiments without the voluntary consent of patients, a violation of basic human rights:

  • From standards set at Nuremberg trials after WWII, there are strict rules on the conduct of experiments on humans.
  • The first rule (and sentence of the Nuremberg Code) is that voluntary consent of the human subject is absolutely essential.
  • This basic right was ignored, the documentary pointed out.
  • Consent and risk explanation is normally recorded.
  • Yet Pfizer had “never produced a single consent form from the 200 odd children treated in the … experiment.” Pfizer claimed this was because parents were illiterate, so was explained verbally.
  • But interviews with some 100 sets of parents highlight that they too were not asked for consent, and that many could read and write.
  • A lawyer trying to sue Pfizer on behalf of some of the parents says that if they were told that this was experiment and there was option for actual alternative treatment (which groups like MSF were offering) then they would have gone with them.

But there was also apparent outright lying as well. Not telling your test subjects what you are doing is a fundamental breach of medical ethics, but that was not the only charge.

  • Trials like this must be approved in advance by an ethics committee.
  • Pfizer claimed an ethics committee approved Pfizer’s actions.
  • Their ethics committee approval letter was shown to be a backdated later, because when dated, the committee didn’t exist at the time.
  • A Pfizer doctor later admitted to doing this.

Unfortunately, as the documentary also noted, this is “sadly far from unique. Several leading drug companies have also conducted questionable trials. Increasingly, in the poorer countries of the world.”

One explanation given by James Love (also mentioned above on this page), Health Economist with the Consumer Project on Technology was due to lack of accountability. “This is a problem,” he said, “because you are operating in an environment where there is really very few people around to protect the patient.”

The United States had refused to license Trovan for use on children because of known side effects it caused.

  • Some children in Nigeria died when on this treatment.
  • It is not known if they could have been saved had they been on the other more standard treatment that organizations like MSF were already helping with, but it is standard practice to change treatment if a patient is not responding to one treatment when their life is on the line. Pfizer doctors did not do this.
  • A doctor in the Nigerian hospital said that “I think they [Pfizer] played with that baby”, referring to a baby that died when under such treatment and had not been switched to an alternative.
  • One of the most damning pieces of evidence was a letter sent to the Pfizer chairman, by the company’s own childhood disease specialist, Dr Walterspiel, protesting in the strongest possible terms about the trial.
    • The letter detailed 8 major objections, including that the drug was not tested against this particular form of meningitis.
    • The letter also referred to the lack of consent forms.
    • As a result of this letter, the company sacked him.

As well as the issue of human experimenting without permission, the actions of Pfizer highlighted the various ways power could be exercised to deal with the controversy. For example:

  • Sacking the doctor who sent a message about the challenges to research scientists.
  • Lawyers in New York took this case, but Pfizer succeeded in getting the NY courts to agree that this trial should be held in Nigeria, which as the documentary pointed out, was rated the second most corrupt nation according to Transparency International, implying that Pfizer would be able to take advantage of that.

But even where trials were going well but doctors had concerns about side-effects, pharmaceutical companies have used their power to try and stifle concerns and criticisms.

Voluntary human trials where doctors are pressured not to reveal problems

The documentary moved on to talk about a situation in part of the wealthy world, Toronto, Canada, where even where trials were voluntary, doctors may have been pressured not to reveal concerns to their patients.

This was a case at a hospital where children were suffering from a blood disease, thalacemia, (where the body doesn’t make red blood cells), requiring blood transfusion, regularly, to prevent certain side-effects, requiring lots of injections, which can be painful for children. Dr. Nancy Olivieri, one of world’s leading experts on thalacemia had been searching for alternatives to painful nightly infusions for many years and the inconvenience of the process that could affect compliance in patients to adhere to the things they needed to do.

She came across a pill, L1, by a drug company called Apotex offered this alternative. They agreed to fund international trials, which went very well. Dr. Olivieri was chair of these worldwide trials. But she began to detect worrying effects.

  • She wanted to simply inform patients to help in decision-making
  • Therefore she wanted to adapt the trial to help work out why these problems were occurring
  • The reaction from Apotex was shocking because, as the documentary said, she was questioning Apotex’s potential multimillion dollar drug.
  • She was basically reminded of confidentiality clauses in the trials and threatened to keep quiet. In addition Apotex immediately ended the trials and indicated that the product was going to market. This threat came from Mike Spino, Apotex Vice President.
  • She was fired as chair of worldwide trials and gagged from telling her patients or anyone else about her concerns about the drugs.

Professor, Sir David Weatherall, of the Weatherall Institute for Molecular Medicine at Oxford University, raised the issue of threats to “academic freedom” with this situation.

Also commenting on Dr. Olivieri’s situation, Dr. Drummond Rennie of the Journal of the American Medical Association added that, Apotex “may disagree with her medical opinion, but they cannot disagree with her right and duty to tell her patients....they can’t interfere with that. They cannot. And so what they did was outrageous. People have to grasp that.”

As well as patients suffering, Dr. Olivieri was showing signs of strain and this was an example of the threat to doctors as well as impact on patients.

As Dr. Rennie also added, “I was … writing … an editorial bringing attention to the strong-arm tactics on the part of drugs companies when they didn’t like the results of a good trial. She was extremely frightened, extremely intimidated. [and they threaten to] just have her professional life destroyed.”

All the while, concern about the effects of L1 were increasing. A panel of experts agreed with Dr. Olivieri’s concerns and findings, so despite legal threats, she advised patients to go back to the needles instead of using this drug, which she felt was unsafe.

After a year of silence, she confided with a senior colleague who, with other colleagues lobbied the university for support in the battle against Apotex. What they didn’t know was that the then president was negotiating a multi-million dollar donation from Apotext to fund a new building (some $20 million).

“Who’s pulling the strings?”, asked Dr. Rennie, “Because money tends to become the strings. THAT is the problem.… if you've got tons and tons and tons of cash, lo and behold, how do you use it? You use it to smooth the way; to get your product out there; to influence people, to influence institutions, research institutions and specific scientists.”

One of the first colleagues Dr Olivieri had confided in had received “poison pen” letters, with various threats.

  • But they managed to find out who sent those letters from DNA tests.
  • It was a colleague, the man who first involved Apotext in the trials and who was still receiving substantial research funding from the company, associate director of research, Dr. Gidian Corran.
  • He strenuously denied the allegation, initially. But after months of denial, with DNA proof, he finally admitted to sending the hate mail.
  • As the doctor receiving the threat commented, “It horrifies me that an individual in a position of trust, who is not only caring for children, is in the position of leadership and power in one of the largest pediatric institutions in the world would lie and lie and lie continuously.”

Under apparent pressure, the hospital fired Dr. Olivieri. But, intervention by a few key people led to her being reinstated. Apotex decided to move elsewhere. In 1999 Europe became the first territory to license L1 under the brand name Ferriprox.

The issue raised was not if doctor was right or wrong, but really the premature licensing of a drug without proven safety. The safety of this L1 drug had not been fully determined, and so this would not have been the time to release the drug. Apotex alleged that the trials Dr. Olivieri conducted were flawed, but this was proven wrong by independent verification. This whole process also took months away from Dr. Olivieri’s important work by having to defending these claims. The documentary highlighted that many other doctors had suffered similar problems in many situations, and their professional lives had been destroyed.

As Dr. Rennie also added, Dr. Olivieri “had a choice, and she took a courageous choice.… but what a huge hole she’s left in the field by taken herself out and not doing any research worth anything very much during those years.” Dr. Weatherall described her as a foremost person in this field that would be hard to replace. But as he also concluded, “nobody seems to want to discuss these issues: there is so much money involved … [universities that are short of funds] don’t want to rock the boat.”

But there are also other situations, where even if all these trial processes were going well, the issue of pricing beyond the ability of many patients had also been causing concern.

Successful human trials, but drugs priced beyond the reach of many patients

In the next example, the documentary highlighted how after successful trials, high pricing of drugs meant they were sometimes beyond the means of the very same patients in the trials who depended on those drugs. The case in question involved an innovative drug for a form of Lukemia, developed by Novartis, trialled successfully in South Korea, but the issue highlighted deeper political and economic problems.

Even though the trials were very successful (the drug was approved in record time, for example), the eventual price of the drug was out of the reach for many, who ended up protesting on the streets.

This drug was going to be priced by Novartis at around $55K a year, 19 dollars a tablet, 8 a day. Yet, even with the Korean government helping with costs, many patients said they could not afford the drug.

As Jamie Love commented, “Products are priced according to what it is worth someone to get access to the drug. If it saves your life, it is worth quite a bit. It is certainly worth everything you have. What the companies want to do is they want to say is ‘this is how much a human life is worth and this is what our company wants to keep that life on.’”

Commenting on why this was more than merely economic issues, Dr Drummond Rennie pointed out, “Pharmaceuticals, they are a commodity. But they are not just a commodity. There is an ethical side to this, because they are a commodity that you may be forced to take to save your life. And that gives them altogether a deeper significance. But they [the pharmaceutical companies] have to realize that they’re not just pushing pills, they’re pushing life or death. And I believe that they don’t always remember that. Indeed I believe that they often forget it completely.”

But high pricing for drugs are often controversial. As the documentary noted, “Big pharma generally defends high prices for new drugs saying they have to cover costs for researching and developing new drugs. But in fact, most new drugs launched are just slight variations of existing medicines. So called Me Toos.”

Commenting on this Nathan Ford, of Médicins Sans Frontiéres said, “At the moment we are getting more and more drugs of less and less use. Me Too drugs; the tenth headache pills; the 15th Viagra. There are currently eight drugs in development at the moment for erectile dysfunction. Do we need 8 more drugs for erectile dysfunction? I don’t think we do. Meanwhile diseases like Malaria, TB that kill 6 million people every a year, are neglected—no new medicines are coming out and we are left treating people with old drugs that increasingly don’t work.”

Ben Goldacre, in his book, Bad Science, (Harper Perennial, 2009), also adds that “the number of ‘me-too’ drugs has risen, making up to half of all new drugs.” And yet, “for all the hard work they involve, they don’t generally represent a significant breakthrough in human health. They are merely a breakthrough in making money.” (p.202, emphasis added)

As noted earlier on this page, this is related to how markets for pharmaceutical companies are not just about finding people to target, but people with money. Dr. Jonathan Quick of the World Health Organization (WHO) added that the majority of the market for some of the tropical diseases is in developing countries but, “it’s a market in terms of numbers of people but the purchasing power is not there. And if the purchasing power is not there then the normal dynamics of the research and development industry just don’t address those problems.”

The drug’s price from Novartis was justified due to the research and development costs, yet, as Jamie Love pointed out, the price was still too high:

  • A lot of important development was paid for by U.S. government.
  • The speed to approval and get to market was quick.
  • Short, small trials and short development period implies a relatively inexpensive product to bring to market.

All this touched deeper issues of intellectual property rights and international institutions such as the World Trade Organization (WTO).

  • WTO patent rules allow 20 years of exclusive rights to make the drugs.
  • Hence, the price is set by the company, leaving governments and patients little room to negotiate, unless a government threatens to overturn the patent with a “compulsory license.”
  • Such mechanism authorizes a producer other than the patent holder to produce the product though the patent-holder does get some royalty to recognize their contribution.
  • This is a very effective tool to get the price down. For example, the drug in question here had been offered in Brazil at 8 dollars per pill by Novartis themselves because of the threat of generic versions that would threaten competition.

In June, 2001, in Korea, leukemia patients turned to a lawyer who delivered a compulsory license application to the Korean authorities.

  • As the documentary detailed, the Korean government got a swift response
  • But it was from the U.S. Secretary of Commerce, warning Korea’s Minister of Health and Welfare not to meddle with the price of drugs. “We are concerned about the discriminatory effect the proposed changes to the pharmaceutical pricing system would have upon our products,” the Secretary said in a letter to the minister, “If not addressed properly, this issue is likely to develop into a serious trade dispute.”
  • Despite these threats, the Korean minister went on to campaign for lower drug prices.
    • He was sacked.
    • He went on to speak out about what he believed was behind the sacking—the power and influence of the pharmaceutical industry.
  • Also commenting on this, Jamie Love touched upon the pervasive concentrated power, “How is it that companies can terrify the governments of an Asian countries so they won’t import cheap medicines? Its because they not only can threaten not to make medicines available, but they can credibly threaten that the U.S. and Europe will impose trade sanctions on those countries and the financial markets will punish them for overriding the patent protection and hurt the rest of the economy. They can actually make the credible threat that if they don’t pay their price for their medicine you won’t be able to sell your products. You won’t be able to have jobs in the manufacturing sector. Your whole economy will suffer.”
  • In another example of how this power was used, in 1990, the Thai government was making a number of generic drugs. They also wanted to make a generic AIDS drug. But the U.S. Trade Representative threatened them with export tariffs on wood and jewelry exports, which made up some 30% of Thailand’s total exports. The Thai trade representative was very frightened and they stopped making the generic drugs.
  • Yet, these were not isolated cases. As also mentioned above on this page, and mentioned in the documentary, hard fought changes to WTO rules that would have allowed poorer nations easier access to generic drugs was agreed to by virtually every country in the world, but was resisted by the U.S. Their veto killed the agreement.

A major source of cheaper generic drugs in Asia is India, which has a strong, established generics sector. Under Indian patent law, big pharmaceuticals have only been able to patent the production process, not the final product. That is, only the way the product is made. This allows other companies to produce generic versions of the same product, using different processes. One such company is CIPLA, also mentioned above. CIPLA has been famous for offering AID drugs for a dollar a day, when the bigger ones were offering nearer to 30 dollars per day. Because CIPLA has been competing with other generic manufacturing companies this has also contributed to keeping prices down.

At the request of some Korean patients, CIPLA said they were able to make generic version of Novartis’ drug, at some 80 cents to 1 dollar per capsule they said. This was less than one twentieth the Novartis price. But the compulsory license on which the deal depended to have these generic drugs available in Korea, was thrown out by the Korean authorities. Novartis still insisting on that 19 dollar price.

Big pharmaceutical companies consider the generics companies as pirates, because of the threat to profits, and because they create the same end product without the amount of research and development effort that the big pharmaceuticals supposedly invest. Yet, as detailed above, often, a lot of initial research and development has come from the public sector, and so some have considered the big pharmaceuticals to also be guilty of the accusations that they levy against generics companies.

Under pressure from the large pharmaceutical companies, the WTO has decided that from end of next year, India must bring in full patent protection. India is one of the world’s main sources of cheap drugs, and this is now under threat. By destroying such competition, big pharmaceuticals, Dr. Rennie adds, will be able to charge anything. After 30 years of having drug prices undercut by India, they will once again have total control of supply. Just a handful of manufacturers will have a lot of control. “What worries me is the monolithic, overuse of power to push pills. That’s terribly worrying to me. That is not a future we should encourage. It is the worst possible future.”

The documentary then moved on to show how these prices directly caused the death of a child in Honduras, suffering from AIDS, while activists resorted to breaking the law and attempted to smuggle cheaper drugs from across the border, where generic ones were being sold.

Killer prices and breaking the law to save lives

Even before rule changes, mentioned above, the power of big pharmaceuticals is already pervasive. The documentary followed a woman in Honduras forced to break the law by smuggling cheaper generic drugs across the Guatemalan border, in order to try and save lives. This just highlights how inequality and injustice is structured into law itself, to have to break it.

In Honduras, there is some degree of free health care. However, there are some 14,000 AIDS orphans and 60,000 people with HIV infection. A poor country, it desperately needs cheap AIDS drugs, like those made by CIPLA.

The documentary followed an activist trying to help a child dying of AIDS because the price of drugs was beyond the reach of the family. The child, a 12 year old by, was called Jairo. The pictures were quite disturbing, showing the child near the end of his life. The situation was so urgent that the documentary crew offered to pay for some of the medicine that was needed and got a local specialist doctor in quickly.

The doctor pointed out that the child was suffering from various illnesses that could be addressed using readily available (though expensive) drugs. The few drugs that the family could afford was having distressing side-effects.

One drug that the doctor suggested was owned by Pfizer and cost 27 dollars for just one tablet. Jairo’s uncle earned just 19 dollars a week.

The doctor highlighted that many of his patients are dying because of the high price of the drugs from Pfizer and others. For over two years, he and others had been campaigning to get prices lowered, but to no avail.

The documentary crew accompanied the activist to Guatemala, to smuggle in affordable drugs, even though this goes against trade laws.

The generic version of that drug was just 30 cents, just over 1 percent of the Pfizer version. But the company making this in Guatemala has no license to make or sell it in Honduras.

By the time it took to get the drug, Jairo was getting a lot weaker. The crew was told to continue filming as they rushed him to hospital. On the way, Jairo died.

As the documentary concluded, “If Jairo’s family had been able to buy generic AIDS drugs at Indian prices, he would never have needed dyflocam [the drug from Pfizer] because he would never have succumbed to the infection in his throat. Its not only Pfizer that has played a part in his illness but every big pharma company that has AIDS drugs but refuses to sell them at affordable prices.”

The documentary thus hinted at the use of political and economic power and how it has a direct bearing on people’s lives with little accountability.

The documentary’s transcript or video is not available on line, but accompanying material45 can be seen at Channel 4’s web site.

Perhaps almost predictably, Pfizer issued a statement soon after the documentary aired saying that the documentary was biased and that it was intending to sue. Jeremy Brecher, in a foreword to the book Panic Rules: Everything you want to know about the Global Economy, by Robin Hahnel (South End Press, 1999) pointed out that “Oxfam International Estimates that, in the Philippines alone, IMF-imposed cuts in preventative medicine will result in 29,000 deaths from malaria and an increase of 90,000 in the number of untreated tuberculosis cases. Tribunals investigating ‘crimes against humanity’ take note!” Yet, this would be unlikely to happen, unless it was clearly war and physical brutality that caused mass deaths. Economic and political causes of death, especially when coming from the dominant ideology are not registered in mainstream discourse as mass deaths.

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Distorting drug trials to highlight positive outcomes

In the book, Bad Science, award-winning writer, Dr. Ben Goldacre goes to lengths to show how pharmaceutical companies may intentionally or unwittingly distort research into drug trials.

Drug trials are expensive. So much so, 90% of clinical drug trials, and 70% of trials reported in major medical journals, are conducted or commissioned by the pharmaceutical industry, Goldacre notes (p.204). He adds that a key feature of science is being able to replicate findings, but adds a concern that when only one organization is doing the funding, this feature is lost.

Whatever the reason, he says, “the upshot is that drug companies have a huge influence over what gets researched, how it is researched, how the results are reported, how they are analyzed, and how they are interpreted.”

Although here is a brief summary, it is worth reading chapter 11 from Goldacre’s book to get a detailed idea of how all the above can happen and how distorted drug trials can become.

Goldacre describes numerous ways in which drug trials can be conducted that will distort results from the start. Examples include:

  • Study the drug on winners. That is, choose people who are likely to show improvements. This, Goldacre says, will make the research less applicable to the people doctors would intend it for, but he adds sarcastically, “hopefully they won’t notice.” Worryingly, this is so commonplace, that it’s hardly worth giving an example, he adds. (But Goldacre also points readers to a book now available online, for free, called Testing Treatments; Better Research for Better Healthcare46 which details this and many of the other issues in more detail).
  • Compare the drug against a useless control. For example, rather than comparing against the best drugs currently available, comparing a new drug to a placebo is almost always guaranteed positive results that can be talked about.
  • If comparing against a competitor’s drug, try to use the other drug unfavorably. For example, give a smaller dose of the alternative drug (so patients don’t do very well), or a higher dose (so that there are more side effects). Or, give the drug in an inappropriate way (e.g. orally when it should be intravenous).
  • Use a surrogate outcome rather than a real outcome to measure against. Goldacre’s example: “if your drug is supposed to reduce cholesterol and so prevent cardiac deaths … don’t measure cardiac deaths, measure reduced cholesterol instead. That’s much easier to achieve than a reduction in cardiac deaths, and the trial will be cheaper and quicker to do, so your result will be cheaper and more positive.”

Once the trial is done, how can the results be dealt with? Goldacre continues:

  • If generally good results, don’t draw attention to negative aspects in the graphs. Maybe mention in the text briefly.
  • If results are negative, don’t publish them, or publish after a long delay.
  • Even manipulate the statistics (which Goldacre details from p. 209 to 211).

Some positive tests, but under conditions of unfair trials, may even be recorded with obscure journals. Hopefully only the abstract will be read.

This is of course scandalous and hard to believe. Yet, Goldacre describes at length how this can come about through various factors.

For example, “publication bias” means that mostly positive results get published, and so it is in the interest of researchers to highlight and push those. Constantly getting negative results can be quite demotivating for researchers, even though it is actually important to know when something does not work. Other times, there can be pressure to not publish negative results (as also discussed in more detail further below).

It may seem as not harmful, but as Goldacre adds, “Doctors need reliable information if they are to make helpful and safe decisions about prescribing drugs to their patients. Depriving them of this information, and deceiving them, is a major moral crime.” (pp. 215 – 216)

“Duplication bias” is another problem: the same positive result gets republished in many places, in different forms, so it looks as if there are lots of different positive trials.

Addressing many of these concerns is conceptually simple, according to Goldacre:

Almost all of these problems — the suppression of negative results, data dredging, hiding unhelpful data, and more — could largely be solved with one very simple intervention that would cost almost nothing: a clinical trials register, public, open, and properly enforced. This is how it would work. You’re a drug company. Before you even start your study, you publish the “protocol” for it, the methods section of the paper, somewhere public. This means that everyone can see what you’re going to do in your trial, what you’re going to measure, how, in how many people, and so on, before you start.

The problems of publication bias, duplicate publication and hidden data on side-effects — which all cause unnecessary death and suffering — would be eradicated overnight, in one fell swoop.… There are trial registers at present, but they are a mess.

Ben Goldacre, Bad Science, (Harper Perennial, 2009), pp.220 – 221 (emphasis is original)

Finally, Goldacre describes how Pharmaceuticals ultimately distort things: through advertising. In some countries, such as UK, advertising directly to patients is not allowed. In others, such as the US, it is:

Patients are so much more easily led than doctors by drug company advertising that the budget for direct-to-consumer advertising in America has risen twice as fast as the budget for addressing doctors directly. These adverts have been closely studied by medical academic researchers, and have been repeatedly shown to increase patients’ requests for the advertised drugs, as well as doctors’ prescriptions for them.

… This is why drug companies are keen to sponsor patient groups, or to exploit the media for their campaigns.

Ben Goldacre, Bad Science, (Harper Perennial, 2009), p. 222

He goes on to describe a case where Britain’s NHS was pressured to approve a drug for Alzheimer’s even though the evidence for its efficacy was weak and because drug companies had “failed to subject their medications to sufficiently rigorous testing on real-world outcomes … that would be much less guaranteed to produce a positive result.”

Media headlines then make it look like the “death panels” that have been conjured up by some in recent US health reform debates, ignoring these more, seemingly boring, details.

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Pricing

Grim lottery for people living with AIDS in Guatemala

The Luis Angel Garcia Clinic in the San Juan de Dios hospital does not have the resources to supply medicine to the 90 people living with AIDS it cares for. The medicines bank of the clinic has anti-retroviral medications for only four people. These four were selected through a lottery. On 29 June 1999, in the waiting area of the clinic, 90 people living with AIDS gathered to see who would be the winners. The prize: a year’s supply of life-saving anti-retroviral medications. “It was the most depressing lottery I have ever seen”, commented Richard Stein, Director of the Associacion Agua Buena in San Jose, Costa Rica.

Ellen’t Hoen, Globalisation and equitable access to essential drugs47, Third World Network, Aug-Sep 2000

Another concerning trend is the extortionately high prices for prescription drugs48 that people have to pay in the United States, home of most of the pharmaceutical companies. Just across the border in Canada, people can pay up to 80 percent less for prescription drugs. In some European countries, people can pay even less. As a result, Vermont Congressman Sanders organized bus trips for people to buy drugs across the border. The pharmaceutical companies’ reaction? They claimed that in Canada this reeked of government interference. For whom? It is perhaps interference on corporate profits. What if the word used instead is something like government “support” for its people?

If in the wealthiest nation on earth there are pricing issues and corporations are able to push forth policies that will benefit them, imagine the impact on poorer countries, where most would not be even able to afford drugs for easily curable problems.

Few have challenged or even recognized the unfair tax upon the unfortunate created by vastly overpriced products and services. There is a consistent pattern; the greater the need, the greater the overcharge. Though the need of those with physical disabilities is great, they have limited power to defend themselves. The first efforts to develop mechanical aids for people with physical problems were undoubtedly undertaken with noble intentions. Typically no profit was involved and much labor and time was donated as generous people tried to help the unfortunate. However, those who knew the value of these aids when monopolized claimed patent rights, and those with disabilities now must pay those monopolists. Witness the hearing aids… Each is only a tiny amplifier, yet costs ten to twenty times as much as a radio, which is hundreds of times larger and much more complicated.

J.W. Smith, The World’s Wasted Wealth 2, (Institute for Economic Democracy49, 1994), p. 78.

The British Medical Journal reported in November 2005 (Volume 331, p.1103), that a fictional book about terrorists, and poisoned Canadian pills “was commissioned as part of an effort to cause US citizens to worry about the safety of Canadian drugs.” Apparently, the Vice President of PhRMA and a consultant for that pharmaceutical lobby group had been involved in the deal for the book. The BMJ did not report that the VP denied her own own involvement, only that PhRMA did not “directly” commission the book. The US ban on importing Canadian drugs combined with the exorbitant prices of US drugs means that many patients resort to Internet purchases from Canada and elsewhere, the BMJ also noted.

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Paying hefty fines for unapproved drug use as part of profit strategy

Despite the enormous influence and power that pharmaceutical companies have, even in their home countries, they are not able to get away with everything. The US government, for example, has levied large fines on such companies after finding some have engaged in extremely dangerous — and fraudulent — practices such as using drugs for reasons other than what they were approved for.

However, as large as some of these fines are, they are not dissuading these companies from carrying on with corrupt practices, it seems.

The British Medical Journal and the Bureau of Investigative Journalism, City University, London, describe a few cases and issues in a BMJ article as well as a short documentary film.

Documentary reveals the unhealthy profits of the pharmaceutical industry50, Melanie Newman, August 11, 2010

The documentary claims that most of the leading pharmaceutical companies in the US have been fined for fraud against the US government, often for “off-label marketing” (advising doctors to prescribe drugs for unapproved uses).

US legal incentives have encouraged whistle-blowing and identifying any fraud against the US government.

These cases have also resulted in more information coming to light, such as the extent to which drug companies will go to and the enormous number of, and amounts of, kickbacks. (Some of the top companies have persuaded doctors to sell drugs by entertaining them in strip clubs, and/or paying them to endorse their drug. Something like $200 million has been paid in recent years as kickbacks to many doctors. And this is a small sum to pay given the billions in profit that are possible each year.)

Pharmaceutical fraud is one of the US’s top 3 “threats” says Sharon Ormsby from the FBI Financial Crimes Unit, because everyone is touched by these frauds (of the billions going into US healthcare, 3 - 10% is believed to be siphoned off into fraud — a large amount that could go to needy patients).

In the last 2 years alone, 6 of the top 10 pharmaceutical companies have been fined for fraud in the US with a further 3 undergoing investigations. The total paid out has been $5bn in fines. (Of the top 10, only Roche remains untouched by US government).

One example is what was the biggest fine ever imposed in America, the largest healthcare fraud settlement in Department of Justice history, and the largest civil fraud settlement ever paid by a drug company:

Pfizer had just agreed to be fined a record $2.3bn (£1.5bn; €1.8bn) for illegally promoting four drugs — valdecoxib, ziprasidone, linezolid, and pregabalin — for uses that the US Food and Drug Administration had not approved. The company was also accused of paying incentives or “kickbacks” to doctors to prescribe the drugs, a charge that was also resolved under the terms of the settlement. Both practices are considered fraudulent in the US, because they mean government healthcare programs are paying for drugs that may not work effectively or are unnecessary.

On the day after the fine was announced, the New York Times pointed out that $2.3bn amounted to less than three weeks of Pfizer’s sales. And US authorities admitted that Pfizer was illegally marketing its drugs at the same time as it was negotiating settlement terms for a similar, previous offense.

Melanie Newman, Drug Regulation; Bitter pills for drug companies51, British Medical Journal, September 17, 2010 (BMJ 2010; 341:c5095)

Unfortunately, this is not a one-off incident, nor does the enormous fine seem to have been a deterrent to such practices.

In the next paragraph, Newman adds that “In 2004 Pfizer agreed to pay $420m to settle charges that its newly acquired subsidiary, Warner-Lambert, had marketed an epilepsy drug, gabapentin, for unapproved purposes.” Despite assurances by Pfizer that it all its subsidiaries would cease this practice immediately, “at the same time its sales representatives were marketing the anti-inflammatory drug valdecoxib, which was approved for arthritis and menstrual pain, for other, unapproved conditions.”

Pfizer is not alone in this, as Newman noted: “AstraZeneca paid out $520m in 2010 to settle civil charges of illegally marketing its anti-psychotic drug quetiapine. Seven years earlier it had been fined $355m for criminal and civil charges relating to the same offense—this time involving the prostate cancer drug gosarelin.”

So why are these large fines not working? It seems to be part of doing business. In the documentary, Patrick Burns, from the Taxpayers Against Fraud organization says that Pfizer made about $180bn selling 12 drugs. Paying just $2.3bn in fines for that seems like a “good business plan” from Pfizer’s perspective.

Newman notices perhaps the most bitter irony: “as the companies make up their lost profits by hiking future drug prices, it is actually the public that ends up paying for them.”

Also, loopholes in otherwise strict government policy to punish such behavior (by denying them the chance to work on government and state programs) has allowed business as usual: Pfizer’s “lawyers managed to wriggle free of these commercially damaging restrictions. A Pfizer subsidiary was permitted to plead guilty to the criminal charges, leaving the parent company free to continue working for the government.”

The US government is now considering a few different approaches such as sanctions and personal accountability of executives if these fines are not going to work. For example:

  • Requiring a subsidiary, and all its assets, to be sold off to a third party
  • Confiscation of the company’s patents, but allowed the company to keep the drug but having it compete as a generic (which would be an enormous financial blow)
  • A stricter liability rule to hold executives to account (“regime change”) where any executives found guilty would be banned from working and would have to be sacked as part of any negotiated settlement.
  • Pursuing doctors receiving kickbacks from industry

What about jail time for such executives? Lewis Morris, chief lawyer at the US Department of Health and Human Services, explains to Newman: “the criminal burden of proof is hard to meet. In white collar crime responsibility for illegal acts is usually spread across many individuals at all levels in the organization: there is rarely one person who has made a critical decision on which the prosecutors can hang their case.”

It is of course too early, as of writing, to know what shape the measures will eventually take, and whether they will be effective or not. However, it requires a strong government and set of systems in place to do something like this. This is something the US would have to its advantage. For many other countries, poor or emerging, corruption attempts like this is more likely succeed, unfortunately (often accompanied by any found-out companies claiming this is how they must do business in foreign countries to stave off competition!).

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Its all in the genes, stupid!

The excitement at the possibility to tackle many diseases, and even the prevention of certain diseases through the correction of genetic disorders, by gene therapy has resulted in a lot of investment into genetics and biotechnology.

However, there is concern that this could lead to ignoring root causes of problems and just dealing with symptoms, allowing root causes of problems to continue.

And there is a lot of money in it as well, while public sector research is mixed with private research (which can also be seen as a type of subsidy for private companies with public research, if private companies manage to control the future direction as they do today with many other aspects of medicinal research and development).

It is clearly in the interests of the genomics industry to argue that genes are the most important cause of disease, given the commercial pressure to develop and retain investor confidence in a promise of drugs and treatments for the future. The multinational pharmaceutical companies Aventis and Novartis in particular have made large investments in this research field.

... Against a backdrop of genetic “hype”, secrecy, the privatization of basic knowledge and profit-driven motives, the benefits of gene therapy may not only be more elusive than predicted, they may also be restricted to the few who can afford them. In the meantime, corners are likely to be cut in safety testing. Evidence of such trends is already emerging.

... The profit motive also means that the interests of the rich may drive the exploitation of the technology. There are already fears that gene therapy may be misused in sport. Desirable “improvements” to people’s appearance, skills and personality could become the target of gene therapists and herald the prospect of designer babies.

... Placing too much emphasis on genes … may also give rise to new insidious practices of genetic discrimination in areas such as employment, insurance and health care. Avoiding the pitfalls whilst reaping the benefits of gene therapy is the challenge for politicians and regulators. Crucially, society must not be overcome by “genetic determinism” or “genetic thinking” and the hype of the biotechnology companies if health care issues are to be addressed effectively.

Joe Cummins, Human gene therapy: A cure for all ills? 52, GeneWatch, October 2000

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More information

  • Democratizing Access to Essential Medicines53 from Foreign Policy in Focus, (August 1999) looks at Washington’s actions and makes the important point that “compulsory licensing and parallel importing policies could help developing country governments make essential medicines more affordable to their citizens” and yet the policies of Washington are almost the opposite.
  • Millions for Viagra. Pennies for Diseases of the Poor54, by Ken Silverstein, the Nation, July 19, 1999.
  • Apartheid of Pharmacology55, by Martine Bulard, Le Monde Diplomatique, January 2000.
  • A Bitter Pill For The World’s Poor56 by Isabel Hilton, the Guardian, January 5, 2000.
  • See the drugs section of the Guardian’s special report on AIDS57 for more articles.
  • These statistics58 on issues around the pharmaceutical industry, from Public Campaign.
  • From the Third World Network:
    • Health Policies59 section provides many articles.
    • From their section on Pharmaceuticals, Patents & Profits: South deprived of life-saving drugs60.
      • TRIPS and pharmaceuticals: A case of corporate profits over public health61 (Cecilia Oh/TWN)
        With the obligations it imposes on member countries of the trade body to recognise and strengthen patent protection on pharmaceuticals, the World Trade Organisation’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is denying patients in the developing world access to life-saving essential medicines. The countries of the South now find themselves ranged against Northern governments and powerful pharmaceutical lobbies in their fight, at the WTO and beyond, to ensure public health takes precedence over corporate profits.
      • Geneva 2000: The battle of patents vs affordable medicines62 (Cecilia Oh/TWN)
        One key issue at the 26 June-1 July Special Session of the UN General Assembly (UNGASS) on Social Development was the right of people to essential medicines at affordable prices, and how this right is being undermined by patents and the intellectual property rights regime established by the WTO’s TRIPS Agreement. Cecilia Oh reports on the debate on this issue at UNGASS and at an NGO event organised in the week of the Special Session.
      • Globalisation and equitable access to essential drugs63 (Ellen ’t Hoen)
        While there are a number of factors, such as high cost, insufficient production, and lack of research and development, which have contributed to denying equitable access to drugs to millions in the Third World, it is the international trade regulations arising from globalisation that may prove to be the biggest obstacle to such access. Ellen ’t Hoen considers these impediments to access and suggests some new global approaches to overcome them.
      • Open letter to the WTO member countries on TRIPS and access to health care technology64
        On the eve of last year’s WTO Ministerial Conference in Seattle, Médicins Sans Frontiéres, Health Action International and Consumer Project on Technology issued the following open letter to members of the multilateral trade body urging the latter to consider initiating moves, both within and beyond the framework of the TRIPS Agreement, to promote equitable access to health care.
      • Patent rights vs patient rights65
        Academics, social activists, public health advocates, government officials and politicians from Africa, Asia, South and North America, Australia and Europe met in Oslo on 22-24 May 2000 at a workshop entitled “Patent Rights vs. Patient Rights” to discuss access to essential drugs, including treatment for AIDS. They issued the following call for access to basic technologies and essential drugs.
      • Africa shuns US move allowing access to cheaper AIDS drugs66 (Gumisai Mutume)
        Developing countries are not exactly queuing up at the US Trade Department to take advantage of flexible patent regulations allowing them to access cheaper AIDS drugs. The reason may be due to mixed signals coming out of Washington, says Gumisai Mutume.
      • Killing Africa with kindness67 (R. Mokhiber & R. Weissman)
        Russell Mokhiber and Robert Weissman uncover the perils and pitfalls behind a US government move to provide loans to African countries for the purchase of AIDS drugs.
      • How WTO/TRIPS threatens the Indian pharmaceutical industry68 (R.Gerster)
        The Indian pharmaceutical industry is a success story providing employment for millions and ensuring that essential drugs at affordable prices are available to the vast population of this sub-continent. However, the new “trade” rules of the World Trade Organisation now pose a serious threat to the industry and to the millions who are dependent on it for their health and livelihood.
      • Keep taking our tablets (no one else’s)69 (Gregory Palast)
        The WTO’s response to Africa’s AIDS crisis is a chilling reminder of where power lies in the global economy.
  • Campaign for Access to Essential Medicines70 from Médecins Sans Frontiéres (MSF), or Doctors Without Borders, as they are also known is a site with news information and publications on the issue of increasing access to essential medicines.
  • The Global Treatment Access Campaign71 works for affordable AIDS drugs and essential medicines.
  • Oxfam’s Cut The Cost campaign72 raises issues about expensive medicines that deny the poor a chance to live.
  • Health Care and Intellectual Property73 part of the Consumer Project on Technology web site has a vast collection of articles on these issues.
  • See the various related issues and articles on this web site’s navigation area.

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Where next?

Online Sources:

(Note that listed here are only those hyperlinks to other articles from other web sites or elsewhere on this web site. Other sources such as journal, books and magazines, are mentioned above in the original text. Please also note that links to external sites are beyond my control. They might become unavailable temporarily or permanently since you read this, depending on the policies of those sites, which I cannot unfortunately do anything about.)

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  19. Stephen Leahy, 'Health: Southern Researchers Fill Gap on Neglected Diseases', Inter Press Service, November 3, 2009, http://www.ipsnews.net/news.asp?idnews=49115
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Author and Page Information

  • by Anup Shah
  • Created: Friday, May 12, 2000
  • Last Updated: Saturday, October 02, 2010

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Document Revision History

DateReason
October 2, 2010Added notes about how despite enormous fines in the US, pharmaceutical companies seem to still be continuing fraudulent practices such as pushing drugs for unapproved uses.
November 4, 2009Added some notes about how drug companies are still often dumping old or unsuitable drugs onto developing countries under the guise of aid and charity, on how the EU has been seizing shipments of medicines for developing countries, on some aspects of intellectual property rights, and on how drug trials can be distorted to make them seem more positive overall
January 25, 2007Note about how pharmaceutical companies have gone to lengths to create diseases out of common ailments and problems, and highlighted obscure problems as common diseases
December 25, 2006Small additional note on intellectual property rights’ effects on developing medicines
March 26, 2006Small update on the rush of pharmaceutical companies wanting to test on India’s poor, even though the drugs are for markets in industrialized countries.
January 27, 2006A fictional book was apparently commissioned to scare US citizens about buying Canadian drugs which are often cheaper than US drugs.
June 22, 2005Small addition on how pharmaceutical companies need to feed fear and anxiety to rich and healthy people as this is typically the market that can afford medical care. Remainder is not updated since July 2003.

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