In-Depth Case 1. 2 1. Do pharmaceutical companies have the responsibility to distribute drugs for a low cost in developing countries? What are the main arguments for and against such an approach? What are the advantages and the disadvantages of giving drugs for free versus offering them at low no-profit prices? The Aids epidemic is responsible for taking millions of lives worldwide, but through years of medical advances in science the possibility of extending the lives of those affected with the AIDS Virus is now possible.
Sadly, in underdeveloped countries where the AIDS death rates are at its highest inefficient funds prevent citizens from obtaining these medications that could save their lives. This situation has been the cause of countless debates and conflicts over the last few decades of how pharmaceutical companies should distribute their drugs. Today most pharmaceutical companies are run as businesses that need to turn a profit. Countless hours of research and spending go into the creation of these drugs, pushing the prices higher and higher so that the companies can stay afloat.
But is it morally responsible to let millions of people die every year when we have the technology to prevent it? Most pharmaceutical sales come from developed countries such as North America, Japan and Western Europe. Drug discovery is a long, expensive, and uncertain process. Only 30% of drugs marketed are reported to earn revenues that average R&D cost. Because of this, the average cost of the AIDs treatment is about $11,000 which is way out of reach of most residents in underdeveloped countries.
If pharmaceutical companies dropped prices to a level that was obtainable by everyone, they argue that they would not be able to maintain their companies and it would stall further R&D into new products. Because of this, people are dying at alarmingly high rates. Government officials and activist groups in support of the fight against AIDs, argue that it is morally responsible to treat any person inflicted by AIDs no matter what their financial situation is.
These groups seek to find alternative ways of getting these drugs to the poor, such as using generic drugs that can be 5% of the cost of the original. This is met with opposition because of the hundreds of patents that the pharmaceutical companies hold on their products. Another solution would be to offer these drugs for free, but pharmaceutical companies argue that that is just not an option because doing this would kill their businesses. If the pharmaceutical companies go down, there will not be any medication at all.
Right now the best solution seems to be finding a low no-profit price that underdeveloped countries can pay and pharmaceutical companies can use to stay afloat. 2. What is the principle augments of pharmaceutical companies that oppose making exceptions to IPR laws for developing countries? What are the arguments by NGOs and the others for relaxing the laws? The Intellectual property rights (IPR) grant investors rights for their original creations. The main objective of the IPR is to protect the inventions of pharmaceutical companies financially, giving incentive to be creative and innovative.
The IPR gives out intellectual property rights such as patents, which in theory prevent other people around the world from creating similar products. Pharmaceutical companies are in favor of strong IPR laws because they fear of losing profits. With the creation of generic brands, pharmaceutical companies will have no choice but to lower their prices. If they allow just one country to create these generic products, they face the possibility of a domino effect that would cause more and more countries to demand the right to imitate their products.
They also argue that an attempt to imitate their drugs could be harmful because wrong measurements or ingredients could turn poisonous or even create new strains of drug-resistance in people. On the other side NGOs and others argue on what is morally responsible. If Pharmaceutical companies will not lower their prices, then what other choice do the governments of these underdeveloped countries have but to create the drugs themselves? Counties like Brazil are deeming the IPR’s laws unethical, and just ignoring them for what they believe is better for their people.
Other organizations, like the Bill Clinton foundation, look to resolve these problems legally so that some of the patens can be removed and small organizations can make the generic drugs without fear of legal persecution. 3. What impact would you expect South Africa’s decision to levy duties on drug imports from Western nations to have on the international distribution of drugs to South Africa? If South Africa made the decision to levy duties on drug imports from Western Nations, I believe the pharmaceutical companies would crumble.
This is because South Africa would be manufacturing their own generic form of the drugs, decreasing the need for the pharmaceutical companies. For years the pharmaceutical companies refused to compromise, but when South Africa made this decision and was backed by many activist groups, they had no choice but to compromise. Almost immediately they started making out of court settlements with the country. Also, they allowed the country to use some of their patents and all they asked for in return were some small royalties.
I do not feel that the Pharmaceutical companies would ever allow themselves to lose a market. When pushed, I feel the pharmaceutical companies will compromise, even if they agree to make less than what they wanted. They won’t take the chance to lose the market altogether. 4. In June 2002, the WTO extended the transition period during which least developed countries (LDCs) had to provide patent protection for pharmaceuticals. In your opinion, was this an appropriate change in policy or a dangerous precedent? What could be some of the negative ramifications of the resolution?
What about the effects on other industries? In my opinion this was an appropriate action to take given the situation. If pharmaceutical companies and the governments of underdeveloped countries couldn’t find a price where they both could benefit, then I feel that the only other solution is allotting the countries to make their own generic medications. I do not feel like this is the best solution, but given the situation I feel it needed to be done. One problem that arises with this is that the country needs the most up to date medications, but is not getting them.
Every day, the pharmaceutical companies make advances in their medication. One thing I observed in the case was that it seemed that they were letting the generic companies use their out of date medications, and keeping the latest breakthroughs for the countries that could afford them. I also feel that this solution has a huge negative effect on the industries. When the generic companies make the medications and low ball the price, it is very hard for the pharmaceutical companies to make any profit. If the pharmaceutical companies are not making enough money, very little money is spent in R&D.
Although this may have been the best immediate solution, I do not feel it will be best in the long run. In my opinion, the best solution would be for a price to be negotiated between the pharmaceutical companies and the underdeveloped countries for the price of the newest drugs. 5. Given the initiative announced by the global development and aid organizations and among the pharmaceutical companies themselves, was it necessary to relax IPR rules in order to ensure that adequate supplies of AIDs medications would be available for distribution in the developing world?
I believe it was necessary to relax the IPR rules but this still wasn’t the best solution. By relaxing the rules, it proved helpful to make sure that more AIDs victims were getting help in underdeveloped countries. All this movement will do is allow independent companies to start producing generic brands of the more expensive versions offered by the pharmaceutical companies. Generic brands are a lot cheaper so more people will be able to obtain medication; therefore, bettering their chances of survival.
These countries and the pharmaceutical companies will eventually have to deal with the problems I mentioned in question 4. Mainly the fact that there is no guarantee about the quality of the drugs, and most importantly it is not yet known how the loss of profit will affect the pharmaceutical companies in the long run. 6. What role do MNCs have in providing funding or other assistance to international organizations such as the Global Fund, UN, and WHO? MNC’s are currently one of the best resources in the fight against AIDs.
When pharmaceutical companies and governments have failed to negotiate prices and legal problems, NCA’s have put millions of dollars into an immediate solution. One of the biggest NCA’s that supports the fight against AIDs is the Global Fund. It was created to directly front the AIDS epidemic in underdeveloped countries. The Global Fund has gotten millions of people in Africa, Asia and South America the medicine they needed. Backed financially by countries like the United States, Japan and the EU, The Global Fund has given $5. 7 billion towards the fight against AID’s.