Point: Generics and the Pharmaceutical Industry

In this very brief presentation, I hope to illustrate some of the pressing issues confronting the
developing world and discuss how these problems can be mitigated by giving people affected by
AIDS, malaria and other diseases access to generic versions of drugs they so desperately need.

The facts are rather harrowing. While about a tenth of one-percent of North Americans and less
than a third of a percent of Europeans are infected with HIV-AIDS1, the story is markedly
different in sub-Saharan Africa where over 26% of the population is infected in Swaziland, 23%
is infected in Botswana, 28% in Lesotho and 24% in Zimbabwe and the list goes on. Even in
South Africa, one of the wealthiest and most developed African nations, over ten percent of the
population has HIV2 and the pandemic could cause life expectancy to decrease to from 59 to 40
within ten years.3
Malaria--and many of the 5000 other orphan diseases—which, in the Untied States are diseases
that affect fewer than 200,000 Americans--are eminently curable with modern medicine--also
ravage the developing word, namely the African continent4. Over 90% of the world’s one million
malaria deaths occur in Africa, deaths which could be easily prevented with access to affordable
anti-malarial drugs. 5 However, laws such as America’s Orphan Drug Act of 1983, and their
European, Japanese, and Australian equivalents, give orphan drug manufactures 7 year periods of
market exclusivity in addition to any patent protection the drugs might ultimately enjoy.6 If a
pharmaceutical company discovers that an existing drug can treat an orphan disease, say, for
example, that Viagra could treat a strain of anemia, generic versions of Viagra could not be used
to treat anemia even after the twenty-year patent protection on the drug had ended and generic
versions were available to treat erectile dysfunction.
Going back to HIV-AIDS, a disease which is ravaging the developing world, particularly the
African continent---destroying communities, creating social instability and undermining the
region’s prospects for economic development and normalcy, the adverse effect of this deadly
plague can be slowed or even reversed with anti-retroviral drugs. To demonstrate just how
effective antiretroviral drugs can be, “death rates for people with HIV/AIDS in developed
countries had dropped by 84%” four years after a treatment known as HAART became available
in 1996.3 However, with pharmaceutical companies charging as much as $20,000 per person per
year for the most effective triple therapy cocktails7, the drugs remain far out of reach for the
overwhelming majority of people in the parts of the world that need them most. According to a
2005 study by the World Health Organization, only 15% of the 6.5 million people who need
antiretroviral treatment in the developing world received treatment they need as 2005.8 This is
not surprising considering an article in the Journal of the American Medical Association states,
1
http://en.wikipedia.org/wiki/AIDS_in_Africa
2
http://en.wikipedia.org/wiki/List_of_countries_by_HIV/AIDS_adult_prevalence_rate
3
http://www.avert.org/generic.htm
4
http://www.medterms.com/script/main/art.asp?articlekey=11418
5
http://news.nationalgeographic.com/news/2003/06/0612_030612_malaria.html
6
http://www.medterms.com/script/main/art.asp?articlekey=11418
7
http://www.inmotionmagazine.com/global/vshiva4_int.html
8
http://www.journaids.org/treatment.php#treatingaidsrel
“the impossibility of poor countries paying for antiretroviral treatment themselves cannot be
overemphasized; countries such as Ghana, Nigeria, and Tanzania have annual national health
budgets of $8 or less per capita”9 in Sub-Saharian Africa, the figure drops to a whopping $.3 per
capita.10
Generic drugs have been a godsend. According to Avert, an NGO, “generics are exactly the same
as their branded counterparts in dosage form, safety, strength, route of administration, quality,
performance characteristics and intended use. The notable difference between the two is the
price.”11 Led by Cipla, an Indian company which has become the biggest supplier of generic
antiretroviral drugs12, the brand-name triple therapy antiretroviral that sold for $10,439 per
person per year was available for $350. By the end of 2007, generics could be purchased for as
low as $87! At these prices, governments, philanthropic foundations and other NGOs can
realistically purchase drugs for people in need—something not remotely feasible at the
exponentially higher rates.
Unfortunately, the situation has become markedly less auspicious. While Cameroon once paid
$200 per person per year for HIV-AIDS treatment, new changes in the international patent
landscape as a result of The Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS) has impeded access to affordable treatment. The 1995 treaty, which all members of the
World Trade Organization agree to uphold, mandates that each country confer 20 years of patent
protection to pharmaceutical products-regardless of their country of origin—and states that
countries cannot produce generic versions of patented drugs in the interim.13 There are two
exceptions provided for “public health emergencies.” First, countries can pursue voluntary
licenses in which a pharmaceutical company grants permission for a generic version of a drug to
be manufactured—usually for some sort of royalty. During the Avian influenza scare, for
instance, Roche, which enjoys patent protection on Tamiflu through 2016, granted countries
voluntary licenses so stockpiles could be made quickly and cheaply14. In practice, voluntary
licenses are not a common practice since they “depend on the goodwill of the patent holder, and
can be lengthy to negotiate.”15
The second option is compulsory licensing in which governments coerce drug companies to
grant licenses for the production of generic versions of their patented drugs. This provision of
TRIPS initially only permitted domestic production only, but most developing countries—hit
hardest by HIV-AIDS and orphan diseases do not have the capability to produce drugs at home.
Therefore, an amendment was added allowing countries facing a “serious health crisis” to import
generic drugs produced abroad. Compulsory licensing arrangements are also fraught with risk.
After Thailand issued compulsory licenses for antiretroviral drugs produced by Abbott
Laboratories, Abbott decided quite simply not to sell seven of its newest drugs in Thailand

9
http://www.iipi.org/articles/antiretroviral_article.pdf
10
http://books.google.com/books?id=kg63qTfE7owC&pg=PT10&lpg=PT10&dq=per+capita+aids+%248&source=bl&ots=2CV
MP7OSEu&sig=Pp0wgk5k98GZz50yYZ0K0JAFeiU&hl=en&ei=jT_9SZX1PJ6ltgfo7a3FCg&sa=X&oi=book_result&ct=result
&resnum=4
11
http://www.avert.org/generic.htm
12
http://en.wikipedia.org/wiki/Cipla
13
http://www.iipi.org/articles/antiretroviral_article.pdf p.1891
14
http://ipbiz.blogspot.com/2005/10/tamiflu-patent-to-gilead-licensed-to.html
15
http://www.avert.org/generic.htm
including a heat-resistant form of an antiretroviral that would suit the country’s tropical climate.16
Pharmaceutical companies are not happy with this provision since a health emergency is a very
ambiguous term and the United States government “uses considerable bilateral pressure to stop
developing countries from using compulsory licensing for pharmaceuticals”17
In 2005, when developing countries became bound by TRIPS, countries such India—the generic
powerhouse—enacted national law banning the production of generic versions of patented drugs
by Indian companies18. This is particularly problematic because in recent years, second-line
drugs have been developed which are “generally less toxic, easier to take and more effective at
fighting HIV” and might be the only option for people who have become resistant to their
existing treatments as is the case with 10-15% of antiretroviral users within 4-5 years.19
According to Fatima Hassan of South Africa’s Treatment Action Campaign, “The latest drugs are
only supplied by western multinationals and they cost $4,800 a year. We cannot afford those
prices."20 South Africa is not an anomaly: “the median cost of the most commonly used second-
line regime was US$1214 in low-income and US$3306 in middle-income countries.”
While the United States and other Western countries would call this behavior piracy, I believe
that it is an essential move to save the people of the developing world from the scourge of
pandemic disease. As Vandana Shiva so eloquently phrased it, generics are “are not piracy
drugs, which is the way the U.S. pharmaceutical industry talks about them. They are generic in
the sense that different processes have been used. The same medicine, the same retroviral, costs
$20,000 in the United States because of patenting -- that is the only difference… We want to
define monopoly as monopoly and recognize that … things like medicine should be accessible to
those who are dying of AIDS, and no regime in the world can put profits above people’s lives.”21
While the other side will inevitably tout tiered or differentiated pricing as better solution, this has
not proven viable. Already, with tiered pricing on a Tuberculosis drug, the medicine still costs
500 times the average Tanzanian’s hourly wage, while costing less than an hour-and-a-half’s
wage for the average Swiss person. 22 Further more, drug companies are reluctant to publish
cheaper prices for their product because if an “identical product [is] being sold in poor countries
for just one-tenth-or one-hundredth- the price in Europe or the United States…such discounting
could lead to a demand for lower prices in rich countries as well.” 23 There is also a fear of
parallel importation, meaning that wealthy countries would import substantially cheaper versions
of drugs from developing countries. The reality remains that the world has not to date seen an
effective tiered pricing system. Otherwise, if one existed that it would furnish drugs to
developing countries at appropriate prices, this debate would be moot.

16
http://www.avert.org/generic.htm
17
http://www.cptech.org/ip/health/cl/faq.html
18
http://yaleglobal.yale.edu/display.article?id=5459
19
http://www.avert.org/generic.htm
20
http://yaleglobal.yale.edu/display.article?id=5459
21
http://www.inmotionmagazine.com/global/vshiva4_int.html
22
http://samvak.tripod.com/pp151.html
23
http://samvak.tripod.com/pp151.html
The international patent system, as it currently exists, is keeping essential drugs out of the hands
of those who need them most. Generic drugs provide a way for the people of the developing
world to get the drugs they need so badly but could never afford. If pharmaceutical companies
would develop fair, tiered pricing regimes or agree to voluntary licensing they could gain
additional revenue streams they never would have otherwise had. Baring this, however,
governments in developing countries should live up to their end of the social contract and serve
their people by making cheap generic drugs readily available. As the University of
Pennsylvania’s motto says, “Leges sine moribus vanae” or “Laws without morals are useless.”
There is a moral imperative to violate patent laws as millions of lives are at stake.