Pity poor GlaxoSmithKline. The reputation of the multinational pharmaceutical firm, according to a March 14 News & Observer article, is getting "sliced and diced" by "developing" nations in their long-running dispute with GSK and other drug companies over the pricing of AIDS drugs. GSK and four other firms have taken the South African government to court in Pretoria to prevent that country from producing its own, cheaper versions of drugs that could potentially save millions of lives.
GSK, which employs over 5,000 locally, is justified in doing so, it says, because once the company loses patent protection for these drugs it "wouldn't be able to make the huge investments in research and development necessary to create the next generation of AIDS drugs," according to the N&O article.
Not mentioned in the story is that one of the principle patents GSK is defending is the AIDS drug Combivir, which the company didn't even develop in its own labs.
One of the two components of Combivir, AZT, was developed by a professor named Jerome Horowitz in 1964 working under a grant from the National Institutes of Health, where HIV, the virus that causes AIDS, was discovered 20 years later. According to Gregory Palast of the British newspaper The Guardian, Glaxo, a GSK predecessor, bought the formula to use on cats, presumably at a bargain price, and only years later learned--again, from the NIH--that the drug had AIDS applications. The second component of Combivir, 3TC, was developed by a Canadian firm, Chem Pharma, and licensed to Glaxo in 1990.
Also not mentioned in the story is the context in which the lawsuit, which has been delayed until April 18, is being heard.
South Africa and other countries want to employ a practice called compulsory licensing, which is permitted by the World Trade Organization--the same WTO that is reviled by leftists and supported by most multinational corporations. Under certain conditions and for important public purposes, compulsory licensing allows countries to set terms and conditions for the domestic use of a company's patent. Reasonable compensation must be provided to the patent holder.
Compulsory licensing is widely used in this country, and U.S. pharmaceutical companies themselves have benefited from such licenses on key patents, according to James Love, an economist with the Consumer Project on Technology, a group started by Ralph Nader.
Under the WTO's TRIPS policy (Trade-Related Aspects of Intellectual Property Rights), in an emergency--and millions dead from an incurable disease would seem to qualify--a patent can be used for noncommercial purposes without giving notice or negotiating with the patent holder.
GSK also fears another WTO-approved policy called parallel importing. This allows countries to trade in drugs produced under compulsory licenses. The purpose is to allow countries to buy and sell such drugs on the so-called "grey market," further lowering prices through competition.
Ultimately at risk for GSK is the revolutionary notion that if you can sell a drug for two bucks in Africa, you can sell it in the U.S. for the same price. That would threaten the company's policy of maximizing profits at the expense of well-to-do Western consumers. But there are plenty of sick, low-income Americans who can't afford the thousands of dollars a year price tag that GSK has put on their lives.
These battles are not taking place only in foreign court rooms. Last October, the U.S. Congress passed a law allowing a variation of parallel importing called reimportation. It would allow drugs that have been shipped abroad for sale at lower prices in other countries to be reimported for sale to U.S. consumers at a considerable savings. The idea was to take advantage of the drug industry's own double standard. Under current law, only the manufacturer itself has the right to reimport its own drugs.
In December, under pressure from the pharmaceutical lobby, the law was prevented from going into effect by Donna Shalala, President Clinton's secretary of health and human services, on the theory that the law was unworkable in practice.
GSK and the other Big Pharm companies have had years to get religion on this issue. According to a Dec. 27, 2000, Washington Post article by Barton Gellman, GSK concluded as early as 1997 that it could lower the cost of Combivir to $2 per daily dose (a year ago it was still charging $16 per day) and still make a profit on the drug. Considering the circumstances under which it acquired the patent, this is not surprising.
Meanwhile, other countries, notably Argentina and Brazil, pressed ahead with government-approved programs under WTO rules to produce lifesaving copies of these drugs in defiance of Big Pharm.
Last May, again under pressure from the pharmaceutical industry, a U.S. Senate/House conference committee dropped an amendment from a bill known as the Africa Growth and Opportunity Act. The amendment would have incorporated WTO rules on compulsory licensing and parallel importing into U.S. law.
This time taking sides against the industry, the Clinton administration responded to the congressional action with an executive order saying that the U.S. government would not seek to overturn laws in sub-Saharan Africa that might provide greater access to AIDS drugs.
Only then did Glaxo-Wellcome (which merged last December with SmithKline Beecham to form GSK) and four other major pharmaceutical firms announce their price cuts.
The action came just two days after the administration's action, but three years after GSK had independently concluded it could afford to cut prices. Also, the lower prices merely matched the prices offered by the renegade drug programs in Argentina and elsewhere, and came with strings attached that did not resolve the legal dispute with South Africa.
Without the threats of compulsory licensing and parallel importing, the pharmaceutical giants may never have offered to reduce prices, yet having done so, they continue their legal challenges of those same practices in order to protect their patents. It's small wonder: GSK revealed last month, as reported in The N&O, a 14 percent jump in annual profits for 2000. Sales of Combivir alone jumped 21 percent to $854 million.
Most experts agree that concerns over the need for a pool of research funding should not be downplayed. And even at the lower prices, it will be difficult to get enough of the drug to people that need them. Prices remain high relative to incomes in sub-Saharan Africa, and few governments have the budget and delivery system to meet the need.
But many others feel that these problems are fixable, given the crisis, and that the debate over price and health care delivery systems mask more troubling racial questions. Of the 36 million worldwide infected with HIV, as estimated by the U.S. Centers for Disease Control, 25 million are in sub-Saharan Africa--and only one in a thousand is getting the life-sustaining drugs that GSK and other firms have to offer. One in 10 South Africans is infected. How would the American government react if one in 10 Americans--more than 28 million--were now infected with HIV, instead of the 800,000 to 900,000 (3 percent as many) currently estimated by the CDC?
In the absence of action by the drug companies themselves, it's a safe bet the U.S. government would have taken the very action under WTO rules that South Africa has taken.
The delay is reminiscent of the early 1980s in this country, when prejudice against gays delayed the kind of public health emergency reaction that could have saved many lives.
Why, then, does GSK act so taken aback at the mauling of its reputation? The pharmaceutical firms fiddled while Rome burned, resulting in millions of deaths. Concerned for their shareholders, they have defended their profits for years when the only motive that should have mattered was the humanitarian concern for saving lives--even in poor, developing black Africa.
Countries around the world are watching what happens in that Pretoria courtroom. The drug industry lawsuit against South Africa has, according to some reports, paralyzed an already weak health care system--and, ironically, interrupted AIDS care in ways similar to the effect of high drug prices themselves. If GSK is really interested in positive PR, it could withdraw from the lawsuit and demonstrate that it is truly interested in saving lives by providing the drugs at lower prices without strings attached. Until then, it should not be surprised at being vilified.