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. Initiatives in which BVGH has played a role include:

Advance Market Commitments: These call for donors to subsidize the cost of creating vaccines for developing countries so drug makers can sell the medicines at affordable prices. Currently under way is a five-nation pilot program to produce a pneumococcal vaccine against childhood pneumonia.

Priority Review Vouchers: In this model, companies that win U.S. Food and Drug Administration (FDA) approval for treatments for neglected diseases receive vouchers for priority reviews of drugs that would not otherwise be eligible for such consideration. The accelerated process could save up to a year of review time and be worth up to $500 million for drug makers that receive it, according to BVGH. The first voucher went to Novartis in 2009 after it won FDA approval for the anti-malarial drug Coartem.

Some drug giants are sponsoring their own initiatives. GlaxoSmithKline is sharing more than 800 of its patents with other companies working to find treatments for neglected tropical diseases. The company has also cut prices for more than a dozen drugs sold in the least developed countries — such as Rwanda, Ethiopia and Cambodia — to no more than 25% of the developed-world price. The treatments cover conditions that include asthma, malaria and hepatitis B.

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 compulsorylicensing. 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.

Testing drugs in poor countries can raise ethical concerns, according to Big Pharma critics. For example, companies that have failed to focus on cures for the developing world may nonetheless test drugs there that are intended for wealthy nations. Some drug makers “go into developing countries under the banner of doing good, but really the experiments are risky enough that their best sources of people are those in countries where people earn $1 a day,” says Arnold J. Rosoff, Wharton professor of health care systems.

Such risks have led to some high-profile incidents. In one widely reported case, 49 babies died at the All India Institute of Medical Sciences in New Delhi during clinical trials conducted between 2006 and 2008. In Poland, 20 residents of a homeless shelter who were paid $2 a day to participate in clinical trials of a flu vaccine died in 2007, leading to the prosecution of the doctors and nurses who ran the trials.

Researchers frequently turn to Indonesia for strains of the flu virus that are used to manufacture annual flu vaccines. But Indonesia has blocked exports of the virus unless the country is guaranteed a share of the resulting vaccine, says Robert I. Field, a Wharton lecturer in health care management.

Also at issue in developing countries is what happens to patients who have received high levels of care during clinical trials. “Is that level of care sustained beyond the end of the trial?” asks Sammut. “Depending on the country, that could be an open question.”

Improving Big Pharma’s Image

Recent moves by Big Pharma have helped to improve relations with countries that host clinical trials. For example, Novartis and Sanofi-Aventis are providing malaria drugs to eight African nations at sharply reduced prices under a pilot program sponsored by the Swiss-based Global Fund to Fight Aids, Tuberculosis and Malaria. “Over the years, [drug companies] have grown to understand the importance of providing access [to drugs] but also resolving the gaps in providing care in developing countries,” says Anna Thompson-Quaye of the Global Business Coalition on HIV/AIDS, TB and Malaria, a partner of the fund. “It makes good business sense to invest in these communities.”

Meanwhile, rising affluence in developing nations creates new incentives for drug makers to produce treatments for disease there. “I think the feeling is more positive these days that a drug that is intrinsically attractive to an Asian market — even if it is not attractive in the West — is still going to be a very big seller given the population,” says David U’Prichard, former director of research at Smithkline Beecham (now part of GlaxoSmithKline)and owner of Druid Consulting, a biotech advisory firm in Philadelphia.

Rising wealth also creates developing-world markets for drugs for so-called lifestyle diseases such as diabetes, heart ailments and stroke that beset industrial nations. “We have obesity and diabetes, which is becoming even more severe in some parts of the developing world,” says Sammut. “Heart disease and cancers are increasing as well. It’s kind of a reverse epidemic,” he notes, as ailments linked to affluent lifestyles spread across the globe.

But the main task for drug makers that operate in developing countries is to fight neglected diseases and provide affordable access to health care, say advocates for social responsibility in global health. This calls for making medicines available through programs that put meeting public health needs ahead of short-term profits. Such programs can smooth relations with host countries and promote the long-term growth of markets. “Even though it seems inconsistent with market forces, corporate social responsibility is very consistent with them,” says Caplan of the Center for Bioethics.

Addressing the health needs of poor countries is becoming a permanent part of Big Pharma’s agenda, says Wharton’s Rosoff. 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.”