SOCIAL TOPICS (Archive): EMERGING ISSUES

Published, Fall 2001

       By Stefanie Haug

       The global pharmaceutical trade association recently led a lawsuit against the government of South Africa to protest infringement of HIV/AIDS drug patents. This was among the most public collisions between pharmaceutical (pharma) companies’ drug pricing efforts and the desperate need of developing countries to sustain public health. The pharma group later settled, but the lawsuit presents a dilemma for social investors trying to determine the balance between protecting profits and ensuring quality of life. Walden is engaged in dialogue with a number of major industry players to understand how they work to achieve this balance globally. We understand that this struggle involves many other infectious diseases afflicting many other developing nations.

       The United Nations AIDS program (UNAIDS) estimates that 70 percent of all HIV/AIDS cases worldwide are found in sub-Saharan Africa. And a U.S. General Accounting Office (GAO) report states that 90 percent of malaria cases occur there. Developing countries also have the highest rates of tuberculosis (TB), which is easily transmitted when infected individuals cough, sneeze, or even talk. The GAO estimates that TB kills 2 million people a year, and it’s on the rise globally.

       Infectious diseases are a substantial obstacle to economic and social advancement in developing countries. The World Health Organization has concluded that Africa’s gross domestic product would be nearly one-third higher than it is today if malaria had been eliminated 35 years ago. Experts believe that the HIV/AIDS pandemic will have a similar impact on African economies.

       Pharma companies continue to defend patent rights as vital to their profits and continued research and development. Multinational agreements like the World Trade Organization’s Trade-related Aspects of Intellectual Property Rights (TRIPS) facilitate their efforts to prevent countries from manufacturing or buying generics. Some countries, most notably Brazil, threatening to break patents, prompted companies like Merck and Roche to reduce their prices drastically. Pricing disputes are often exacerbated by a failure to have a common understanding about the nature and causes of diseases, untrained medical technicians, cultural traditions, weak health care systems, poor communication infrastructure, and lack of political will.

       In response to our queries, PharmaciaUpjohn and Eli Lilly provided no details on their involvement in global assistance programs like the Global Fund for AIDS. In contrast, we discussed with GlaxoSmithKline their price cuts on a wide range of medicines and their humanitarian programs, including a malaria donation program. Also, we have arranged a meeting with Pfizer in the coming weeks to learn about their efforts. Merck has been the most forthcoming of the companies Walden contacted. Merck helped form the Botswana Comprehensive HIV/AIDS Partnership that will educate communities and train medics in drug administration. It gave $50 million and will also donate its antiretroviral medicines (Crixivan and Stocrin) for the next five years. Also, Merck is now using the United Nations’ globally-recognized Human Development Index as a major factor in determining price discounts for countries. While the significance of the discounts is being debated, the transparency of Merck’s pricing policy could become an industry model in dealing with drugs for other infectious diseases.

       Other stakeholders engaged in this issue have joined our company meetings, most notably the Interfaith Center on Corporate Responsibility and Oxfam America. Together, we continue to encourage companies to apply drug access guidelines reflective of the economic and social realities in developing countries and to make those guidelines public. Concurrently , as part of their global stewardship, companies must support educational programs to help countries become healthier both physically and economically. The effort toward disease prevention is less painful than the efforts toward remediation once the damage is done. The price of disengagement is something no one can afford to pay.

Stefanie Haug is a socially responsive investment officer and participates in shareholder activism initiatives. Her work focuses on child labor, gender, and international issues.