Finance and Investment

Profits and Social Responsibility: Chastened Drug Makers Step Up Efforts to Bring Affordable Medicines to Poor Countries

A decade ago, drug makers came under fire for not making HIV/AIDS treatments widely available to poor nations in Sub-Saharan Africa, where more than two-thirds of all cases are found. Fast forward to 2011, when the industry has made broad accommodations on pricing and access to the drugs.

But creating new medicines for patients in poor countries who cannot pay prices linked to the hefty cost of creating cures remains a daunting challenge. At issue is how global companies decide which treatments to work on, and how they manage operations and clinical trials in the developing world.

For drug makers, serving poor nations in Africa, Asia and Latin America calls for striking a balance between meeting public health needs and maximizing profits. Guiding the companies are codes of ethics and corporate responsibility for doing business. "There is a special duty when you are selling medicine as opposed to pantyhose or hubcaps," says Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania. When drug companies put short-term gains ahead of social responsibility, he adds, they often pay a price in bad publicity and a backlash from regulators.

Put differently, "The issue of who gets drugs developed for them is a very important ethical issue and cuts to the heart of the strength and weakness of markets," says Michael A. Santoro, a Rutgers Business School professor and co-editor of the 2005 book, Ethics and the Pharmaceutical Industry: Business, Government, Professional and Advocacy Perspectives. "On the one hand, we don't like it that markets are harsh and unjust," Santoro says. "But on the other hand, it's the power of the market that creates the therapies in the first place."

Efforts to deliver cures to the world's poorest regions range from new research initiatives to Big Pharma donations of medicine. Last November, the World Health Organization unveiled an alliance with six firms that pledged to donate drugs for neglected tropical diseases -- the term for sicknesses such as leprosy and dengue fever found in countries afflicted with poverty, overcrowding and a lack of good diets and hygiene. Among the contributions was an unlimited supply of leprosy treatments from Novartis, and up to 200 million tablets a year from Johnson & Johnson to combat intestinal worms in children.

Many such programs are modeled after alliances between drug companies, governments and non-profit organizations that have expanded affordable access to HIV/AIDS treatments in poor countries. Perhaps the most ambitious effort has been in Botswana, which in 2001 joined forces with Merck and the Bill & Melinda Gates Foundation to bring drugs to the impoverished African nation. Now 90% of Botswana's HIV/AIDS patients receive treatment, says Merck, compared with just 5% when the program began.

Such public-private partnerships promote corporate social responsibility in developing countries burdened with political and economic barriers to strong pharmaceutical markets, says Guy David, a Wharton professor of health care management. But charitable donations do not eliminate the need for companies to produce innovative new drugs for diseases that afflict the developing world, David notes. "The biggest role for pharmaceutical companies in terms of society is the discovery of new drugs and vaccines," he says.

Those spearheading efforts to combine drug discovery and social responsibility include nonprofits like BIO Ventures for Global Health (BVGH), a San Francisco-based group backed by the Bill & Melinda Gates Foundation.

Yet even if drug companies pool their efforts to cure tropical and neglected diseases, patients could be waiting 10 to 15 years for the drugs to emerge, says Stephen M. Sammut, a Wharton senior fellow in health care management and partner in the San Francisco-based venture capital firm Burrill & Co. "These are not trivial biological problems," Sammut says about the challenge of developing treatments. "There is a reason why there are not good vaccines or cures for some of these diseases. It goes beyond the fact that the clients are poor."

Low-Cost Alternatives

Still other moves to bring drugs to the developing world permit poor countries to produce low-cost generic alternatives to patented treatments through a process called compulsory licensing. Terms of such deals keep the generics out of the patent-holders' own major markets.

Countries that have gained access to drugs in this way include Brazil and Thailand, which have licensed the production of low-cost versions of Merck's Stocrin treatment for HIV/AIDS. Thailand also has licensed versions of Sanofi-Aventis's blockbuster blood thinner Plavix, and cancer drugs from Sanofi-Aventis, Novartis and Roche.

Meanwhile, drug companies are beginning to turn to new production and research operations in emerging countries such as China and India, which offer low costs and other advantages. Scientists can quickly gather patients for clinical trials in densely populated parts of China and India, says Sammut, and save substantial time in the drug development process. Moreover, some trials call for patients who have not used other medications that might interfere with the results, and such subjects are more likely to be found in developing countries.

Addressing the health needs of poor countries is becoming a permanent part of Big Pharma's agenda, says Arnold J. Rosoff, Wharton professor of health care systems. Whether companies "do it for window-dressing or defensively," these efforts will continue, he says. "And once you get enough right-minded people motivated properly, they can create an environment where the right motivation prevails and it's not just window-dressing."

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