Whether or not the giant drug makers deserved the backlash a decade ago over HIV treatments, the controversy made them change their ways


Whether or not the giant drug makers deserved the backlash a decade ago over HIV treatments, the controversy made them change their waysThe human immunodeficiency virus that lies at the root of the Aids disease is indiscriminate. Rich or poor, developing world or developed, HIV ruthlessly eats away at the immune system.

The pharmaceutical trade, in contrast, is heavily discriminate. Drug companies understandably go after customers who can pay. But should that be at the exclusion of those who cannot?

This complex ethical debate hit the headlines in 2001 when a new law in South Africa theoretically opened the door to the import of the cheap generic antiretrovirals.

Activists and HIV/Aids sufferers saw the move as a lifeline. The pharmaceutical industry saw it as the thick end of a deadly wedge. Amassing their collective weight, 39 international drug companies clubbed together to sue the South African government.

The global reaction was immediate. And it was not in the companies’ favour. Big Pharma quickly, albeit reluctantly, backed down.

“They reacted in horrified shock at suddenly becoming vilified as an industry that was actively trying to withhold medicines from the poorest people on the planet,” says Sophia Tickell, director of Pharma Futures, a UK-based investor-led forum on drug availability.

Industry insiders see things slightly differently. Big Pharma’s public response was undoubtedly “arrogant”, concedes Jon Pender, vice-president of government affairs at UK drug manufacturer GSK. But the issues were far less black-and-white than campaign groups and in the media purported, he maintains.

The industry’s legal and PR teams tried to make the case for patent protection and competition rules. They also pointed to product donation programmes already under way.

“The whole debate became completely polarised … whatever we said was negated by someone showing a picture of a dying baby,” Pender admits.


The South Africa debacle was more than a straightforward communications crisis. It highlighted a massive shift in global public opinion, not only in the south but in the northern hemisphere too.

Big Pharma had to be seen to be changing its approach. It acted fast. In November 2001, it leant its public support for the Doha declaration. In doing so, it effectively consented to the right of governments to circumvent patent rights in cases of public health emergencies.

In terms of power play, the governments of poor countries won the day. Rohit Malpani, senior campaigns adviser at Oxfam America, points out: “The main area of significance of the South Africa case is what it did for governments vis-à-vis the pharmaceutical industry.”

More or less immediately, drug companies sought to avert the threat of compulsory licences to generic manufacturers by voluntarily increasing access to medicines themselves.

The most immediate and arguably most direct way to do this was via price. Within months of the South Africa case, most large manufacturers of antiretrovirals had announced “no-profit” or “access price” arrangements for the world’s least developed countries.

And the past decade has seen several pharmaceutical companies extend their tiered pricing model to other drugs, especially vaccines for tropical diseases.

Some are even experimenting with preferential pricing for poor patients in mid-income countries. Regulatory frameworks and anti-trust laws hamper such pilot initiatives, however.

Opening up the lab

Investment in research and development marks another critical step taken by the industry. Historically, Big Pharma has not invested heavily in developing drugs for tropical diseases. The reason is simple: the rich in the north had no demand for such drugs, and the poor in the south had no means of paying for them.

Today, however, a dozen or more public-private partnerships exist to pool efforts and finances for the development of new drugs. Companies such as GSK and Novartis have gone one stage further, establishing specific laboratories dedicated to this research.

In terms of intellectual property, drug companies remain cautious. There is evidence of change, however. The starkest example comes in the field of HIV/Aids. Several first-line antiretrovirals are now licensed out voluntarily to generic manufacturers – a phenomenon for which the South Africa case can be directly credited.

In July 2010, for example, ViiV Healthcare – a joint venture between Pfizer and GSK – made the dramatic step of licensing its entire portfolio of antiretroviral medicines to generic companies royalty-free. It has also expanded its no-profit pricing to more poor countries, including all of sub-Saharan Africa.

Voluntary licences in other medicines have been slower. A large number of one-off examples exist. A case in point would be Merck’s non-exclusive agreement with the Drugs for Neglected Diseases Initiative. The move aims to promote early research into treatments for diseases such as visceral leishmaniasis and Chagas disease.

The current big debate in intellectual property centres on so-called “patent pools”. GSK laid down the gauntlet in 2009 when it pledged to share some of its scientific data for neglected diseases.

The move to greater knowledge sharing is significant. Paul Herrling, head of corporate research at Swiss pharmaceutical giant Novartis, says: “It would have been unthinkable years ago that pharma companies would have pooled their resources in areas like neglected diseases.”

Such moves are gradually bearing results. The Institute of OneWord Health (IOWH), a US-based non-profit pharmaceutical company, for example, recently developed a low-cost version of Artemisinin, a front-line anti-malaria drug.

“We used to get sent to the PR groups. Now we get sent to the scientists”, says Richard Chin, chief executive of IOWH, which was granted full access to the chemical libraries of Roche and Novartis.

Even so, industry support for proposed patent pools has been slow. Drug companies have legitimate legal, administrative and regulatory questions. Yet at the heart of the debate is Big Pharma’s entrenched desire to protect the intellectual property of its most lucrative medicines.

The lessons

The South Africa case has taught the pharmaceutical industry much. Many of these lessons are instructive to other sectors too.

The fact that critics and other stakeholders have a legitimate voice comes high on the list. A willingness to work in partnership on complex issues is another. Today, drug companies boast some of the largest and most serious cross-sectoral initiatives of any industry.

“The recognition that no one – not the private sector, not governments, not any organisation in particular – can tackle these huge health issues on their own has been a huge lesson,” argues Brenda Colatrella, executive director of the office of corporate responsibility at US drug company Merck.

A corollary lesson is the comprehensive approach that complex social issues require. Quick-fix solutions would have been easy. Price reductions and drug donations, to an extent, fit that category. Harder to address are systemic problems – namely weak health infrastructure and poor local capacity.

“There’s a growing recognition that affordable drugs don’t necessarily ensure access. You need all the other environmental factors that will help get those available drugs to those who need them,” says Merck’s Colatrella.

That insight has led industry leaders to invest huge amounts in training community health workers, educating youth on disease prevention and similar programmes. As all good medics know, remedies will only work in the long term if they address the root of a problem, not the symptoms.

The most significant lesson of all derives from Big Pharma’s bumpy transition into emerging markets. A decade on, the industry’s many bruises have taught it one thing: industrialised business models cannot just be picked up, tweaked a little and dumped on the developing world.

Pharma Futures’ Tickell says: “Companies must rethink assumptions made in industrialised markets … It requires a level of flexibility, of understanding, of commitment from management, and a knowledge base about how these countries work and what people need within them.”

Second-round scrap

An emerging debate on access to second-tier antiretrovirals will demonstrate just how much the industry has learned. Unlike first-tier medicines, the manufacture of these latest generation anti-HIV drugs is generally closed to generic competition.

Lowering prices is one option. Civil society groups, however, are pushing for drug companies to share their intellectual capital. Unitaid, an international facility funded through air ticket taxes to the tune of about $600m per year, has set up a patent pool to that end.

Such a pool would open the door to greater volume and cheaper prices, its advocates maintain, as well as to fixed-dose combinations that are currently prohibited under patent laws.

If drug companies don’t buy in, “we’re not going to arrive at a sustainable solution”, argues Oxfam America’s Malpani. It’s Big Pharma’s chance to respond proactively and “get ahead of the curve”, he says.

Fail to act and the agenda could well fall into the hands of the lawyers. Just as it did a decade ago.

Big Pharma and access to antiretrovirals


Since 2002, Abbott’s HIV medicines have been available in all 69 African and least developed countries at prices that are “among the lowest” for branded or generic protease inhibitors. Access to its Lopinavir/Ritonavir tablet is also improved as the drug is formulated not to require refrigeration and can be taken without food. The company has also filed a heat-stable tablet formulation of the drug, as well as a version suitable for paediatric use.

Boehringer Ingelheim

Since 2000, Boehringer Ingelheim has donated its antiretroviral product Viramune for single-dose use in the prevention of mother-to-child transmission. For chronic treatment, the company charges a “substantially reduced price” for 74 low-income countries. All middle-income countries qualify for a lowered price.

Bristol-Myers Squibb

Since 2001, Bristol-Myers Squibb has provided all its HIV medicines at no-profit prices in sub-Saharan Africa. The company also has a differential pricing policy for other low-income countries. In 2001, Bristol-Myers Squibb stopped enforcing its patents for HIV products in sub-Saharan Africa. In 2006, it concluded technology transfer agreements with two generic companies for its newest antiretroviral, Atazanavir.

Gilead Sciences

Gilead offers “substantial” price reductions for its HIV medicines to 130 countries. It has also developed an international network of distributors to accelerate country-level regulatory approval and to help on-the-ground logistics medicine distribution.


GSK has offered preferential pricing for its antiretrovirals since 1997 and formal not-for-profit pricing since 2001. Combivir, the company’s leading combination ARV, is available at $0.54 a day. Not-for-profit prices are available to all the least developed countries and sub-Saharan Africa (64 countries in total).


Since 2001, Merck has provided its ARVs at “access prices” in least developed countries and those hardest hit by the Aids pandemic. It also offers discounted prices in other countries depending on their degree of economic development and prevalence rates, among other factors.


Through ViiV Healthcare, a joint venture with GSK, Pfizer issues voluntary licences for all its ARVs for use in developing world countries. In addition, Pfizer recently decreased the cost of its combination treatment for HIV/Aids by 60% for TB patients taking second-line HIV/Aids medications.


In 2002, Roche began offering its supplying its HIV protease inhibitors, Invirase and Viracept, at “no profit prices” for people living in least developed countries and in sub-Saharan Africa. In addition, the company offers “significantly reduced” prices for the two products in low and lower middle-income countries.

Still a long way short: the UN’s verdict

“Large gaps” continue in the availability of medicines, according to the United Nations’ 2010 report, Strengthening the Global Partnership for Development in a Time of Crisis. In addition, the report maintains that a wide variation in prices renders essential medicines “unaffordable” to poor people.

The report highlights the shortfall faced by the global health community towards meeting the UN Millennium Development Goals (MDGs) on access to medicine. Under Target 8E of the MDGs, governments commit to cooperating with pharmaceutical companies to provide access to affordable essential medicines in developing countries.

The report finds that in the public sector, generic medicines are only available in 38% of facilities. On average, these medicines cost 250% more than the international reference price. Availability in the private sector is better (63% of facilities), but the cost is far higher (610% more than the international reference price).

“High prices often render medicines unaffordable, with common treatment regimens costing a low-paid government worker several days’ wages,” the report concludes. The cost of treatment for chronic diseases is particularly unaffordable for low-income patients given its lifelong nature.

The exception is HIV/Aids. Much of the credit for this falls to large donors, such as the Global Fund to Fight Aids, Tuberculosis and Malaria, which have provided treatments free of charge to poor patients.

This is the latest in our series of classic responsible business case studies. The complete series is available as a single volume: go to www.ethicalcorp.com/classicCRdisasters.

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