HIV/AIDS
Unlike most other global industries, pharmaceutial corporations are already in the health business. So you would think they would be in an advantageous position to help the sick and poor of Africa. Yes and no. Unlike the oil, mining, and agriculture companies that come to Africa to extract resources, drug companies find little of value on the continent-certainly not technical innovation or a market in which to sell drugs. Africa contributes only about 1 percent of the pharmaceutical industry’s global revenues (and even that amount comes from the wealthy elites, many of whom can fly to the West for surgery and sophisticated drug therpies).
Meanwhile, the cost of registering new drugs is often high, and corruption and tariffs discourage companies from filing patents in most African nations. GlaxoSmithKline is the only multinational company that has systematically sought patents for its drugs in Africa, and, for its efforts, GSK has been consistently and aggressively attacked by AIDS activists. These activists-and allies at nongovernmental organizations like Médecins Sans Frontières-want pharmaceutical companies simply to give their drugs away. Many firms have done so, some well before there was pressure from critics. Probably the most successful is the Merck Mectizan Donation program, established in 1987 to combat river blindÂness, a virulent disease transmitted by black flies. In partnership with the World Bank, WHO, and other international organizations, Merck has donated Mectizan, its treatment for the disease, to 34 counÂtries in Africa, Latin America, and the Middle East. The air-express company DHL provides transport of the medicines at cost. More than 40 million peoÂple receive free Mectizan annually.
With the Gates Foundation, Merck has also worked to establish a partnership that provides 60,000 HIV-positive people in Botswana with antiretroviral therapy. Gates and Merck have each contributed $50 million to the program. Similarly, Bristol Myers Squibb has established the Secure the Future Program, operating in nine countries to provide small-scale but sustainable drug treatment that prevents HIV from developing into full-blown AIDS. Both these admirable programs have filled an immediate humanitarian need, but-considering the widespread suffering in Africa-it's doubtful that charity is the only long-term solution to the continent's deeper health problems, or even the best solution.
Another approach would be to recognize that trying to make a profit in Africa is not a bad thing. What corporations should do is price their products efficiently, according to market forces, and leave most of the charity to others. It makes good economic sense for companies to discriminate on price-that is, to charge lower prices to people who don't have the means to pay what Europeans or Americans can (in these politically correct times, "discrimination" is being replaced as the word of economic choice with the less inflammatory "tiering").
Consider antiretroviral therapies. They cost hundreds of millions of dollars to develop, and Western companies must recoup the cost or leave the business. A daily dose of such drugs may cost 60 cents to produce at the margin, and, after distribution costs and wholesaler and retailer markups and tariffs, the price might rise to about 95 cents before the medicine can reach a patient. Such drugs may sell for $15 to $20 per daily dose in the West, providing a good return to the comÂpany; however, in an African clinic, the price can be set at $1, allowing a small bit of profit, not just for the drug company but more importantly for the local firms along the supply chain. Even at $1, Western companies and their African cohorts have an encouragement to keep copious supplies flowing-a better spur than direct charity. What about patients who can't afford $1 a day? That's where donors come in, giving sick people money for the purchase.
The most exciting developments in price discrimÂination are occurring in wealthier non-Western countries-middle-income nations like Brazil, Argentina, China, and India, which are seen as the most attractive markets of the future. Companies taking this approach include Abbott, Gilead, and Merck. In India, Gilead is licensing its drugs to local companies to produce. Those firms then compete on price-which is set by market forces of supply and demand at far lower levels than in Europe and the United States-and everyone gains.
For businesses in a resource industry based in a poor country, it makes sense to help workers and communities directly. That's the way to build a strong workforce. But if a company is merely selling into a market, its responsibility should primarily be to ensure efficient pricing-based on an area's standard of living-which maximizes profit. Distributing products for free in Africa (especially high-cost drugs) is not sustainable as demand inevitably increases. This kind of charity also gives the damaging impression that Africa is a no-profit zone, which is not true.
Finally, giving drugs away to clinics undermines local pharmacies and distribution markets. My own experience in Zimbabwe and Zambia is that local clinics often do not stock brand-name antiretroviral. They choose instead to stock inferior copies, because these are the products that allow the pharmacies actually to make money. Providing drugs commercially helps build a strong local supply chain.
