- Open Access
Medicines and vaccines for the world's poorest: Is there any prospect for public-private cooperation?
© Scheffler and Pathania; licensee BioMed Central Ltd. 2005
- Received: 22 February 2005
- Accepted: 21 July 2005
- Published: 21 July 2005
This paper reviews the current status of the global pharmaceutical industry and its research and development focus in the context of the health care needs of the developing world. It will consider the attempts to improve access to critical drugs and vaccines, and increase the research effort directed at key public health priorities in the developing world. In particular, it will consider prospects for public-private collaboration. The challenges and opportunities in such public-private partnerships will be discussed briefly along with a look at factors that may be key to success. Much of the focus is on HIV/AIDS where the debate on the optimal balance between intellectual property rights (IPR) and human rights to life and health has been very public and emotive.
- Intellectual Property Right
- Pharmaceutical Firm
- Branded Drug
- Patented Drug
- Patent Life
Infectious diseases continue to place a great burden on the people in the developing world . These diseases are for the most part controlled in developed countries. Since the global pharmaceutical industry is mostly grounded in developed countries, infectious diseases are not the prime focus of research and development (R&D). An important exception is HIV/AIDS therapy. This is a pressing matter for both developed and developing countries. But even in this case, the drug cocktails and disease management protocols are designed and priced to suit customers in the developed world. Pharmaceutical firms like all corporations aim to maximize shareholder value – their R&D and pricing decisions reflect this imperative. However, the needs and the paying capacity of the rich markets in the developed world are very different from those in the developing world. Consequently, the R&D agenda does not reflect most public health priorities in developing countries. Further, innovations in drugs and vaccines that are of potentially great benefit to developing countries are priced such that they are out of reach for most people in these countries . Many find this situation deeply immoral and not in the best long-term interests of the world as a whole.
This paper reviews the current status of the global pharmaceutical industry and its R&D focus in the context of the health care needs of the developing world. It will consider the attempts to improve access to critical drugs and vaccines, and increase the research effort directed at key public health priorities in the developing world. In particular, it will consider prospects for public-private collaboration. The challenges and opportunities in such public-private partnerships will be discussed briefly along with a look at factors that may be key to success. Much of the focus is on HIV/AIDS where the debate on the optimal balance between intellectual property rights (IPR) and human rights to life and health has been very public and emotive.
Among the developed countries, the US dominates. It accounts for 38% of all global spending. The US market is huge and very important, and not just because it is the most populous of developed countries. Due to a relative absence of price controls, the unit realizations of pharmaceutical companies are higher in the US.
This skew in R&D focus is exacerbated by the nature of the R&D process. It is a long and uncertain road from the laboratory to the marketplace. Only 1 in 5000 promising molecules makes it to the product stage. On average, each new drug costs US$800 million in R&D costs . It takes almost 12 years on average to get through all the stages of drug development. Most drugs do not contribute to profits; the industry depends on a handful of the so-called 'blockbuster' drugs. Examples of these drugs include the cholesterol lowering Lipitor by Pfizer and the anti-diabetic drug Glucophage by Bristols-Myers-Squibb. Blockbuster drugs have a rising share of the total market – from 6% in 1991 to 45% in 2001.
The rising uncertainty of payoffs from R&D is partly compensated by an increase in the effective patent life. Patent life has increased from about 8 years for drugs discovered in 1980 to as much as 13–15 years for recent discoveries . Patent life is increased by: reducing the time spent in the approval process and testing, and extensions of patents. On the other hand, breakthrough drugs attract competition in form of slightly differentiated products even during the patent period; so pure monopoly is restricted effectively to 1–5 years. Post-patent, generics offer stiff competition and prices are marked down sharply.
Top 5 by Drug Sales, 2002
Pharma. Revenue* ($ bn)
Net Profit ($ bn)
R&D ($ bn)
Johnson & Johnson
Prices of Drugs in Selected Countries. Average Price in US$ of One year treatment with Anti Retro Viral (ARV: 3TC+AZT+EFV)
Price Variation in Select AIDS Drugs
250 mg (in vial)
100 mg (tablet)
200 mg (capsule)
150 mg (tablet)
100 mg (capsule)
Why are prices falling so fast? There are a number of reasons. First, there has been powerful advocacy by civil society, international development agencies, and many developing countries. While much of the push has been to lower prices on branded drugs and permit use of cheaper generics, there is also a growing effort to increase R&D in vaccines and drugs suited to needs in developing countries. Public-private partnerships to promote such research are an interesting new development and are covered in greater detail below. Second, there is active use of compulsory licensing by many developing countries. The World Trade Organization permits low-income countries to grant licenses for low-cost manufacture of patented drugs if these are deemed as essential to respond to serious public health threats. Third, there is also increasing use of parallel importation wherein countries import from the cheapest international source including generic manufacturers. Finally, countries have taken steps to reduce or eliminate import duties on drugs and pool procurement orders to gain bargaining leverage through higher volumes .
Estimates of the Cost-Effectiveness of HIV Interventions
Intervention in Africa, 2000
Cost per life year saved
STD control & management for sex workers
Voluntary Counseling & Testing
Short-course ARV treatment for pregnant women (proposed)
Generic Drugs (proposed)
Full price in 2000
The brief discussion above shows that there is significant progress in reducing prices of ARV in developing countries. Pressure from advocacy groups and competition from cheap generics appear to have 'coerced' major pharmaceutical firms into marking down the prices of branded drugs in low income countries. But there are mounting industry concerns in this regard. Property Rights are considered the bedrock of a capitalist system and key to economic growth. Intellectual Property Rights (IPRs) are viewed as reward to innovation, and central to recouping R&D costs. Without such protection, firms warn that the incentive to invest in R&D is much attenuated with future generations around the world being the major losers .
The industry also has other major concerns. It fears that there will be legal or illegal re-importation of drugs into the rich markets given the huge price differential. This process can be seen unfolding in the fast growing volume of drug imports from Canada by US consumers. Further, the industry fears public pressure for price controls in key markets as consumers in developed countries become aware of low prices elsewhere. There is also fear of a domino effect: developing countries could demand lower prices for all patented drugs, not just for AIDS drugs. Finally, firms fear that without a deepening commitment to IPR, cheap generics will continue to dominate these potentially large and lucrative markets of the future.
The pharmaceutical firms' primary mission is to maximize shareholder value. They are partially justified in saying that they should not be made to pay for remedying the problem of inequitable access to drugs, a problem that is fundamentally driven by global economic inequity.
On the other hand, it can be argued that the right to life trumps the right to property. While the two rights are not mutually exclusive, they can be in immediate conflict as in the case of expensive life saving HIV/AIDS drugs and millions of impoverished AIDS patients around the world. Further, manufacturing and selling medicine is not quite the same as selling cars. Part of the mission of a pharmaceutical firm is to cure people. Also, exclusivity in the rights to ideas is questionable: new ideas build on existing knowledge. Often, private R&D uses freely available input in academic journals and conference proceedings; inputs that come from publicly funded universities and government laboratories. As a practical matter, continued foot dragging on the issue of global access to medicines may be poor corporate strategy. It generates adverse publicity, and animosity in developing countries that are destined to grow into the large markets of the future.
Thus far it seems that increasing access to drugs through lower prices has come largely through coercion of drug companies. However, there are recent systematic efforts to bring companies on board in public-private partnerships.
There are numerous partnerships that have sprung up in recent years. Among the notable ones are the Alliance for Microbicide Development, the Clinton Foundation HIV/AIDS Initiative, the Global Alliance for TB Drug Development, the International AIDS Vaccine Initiative, the Malaria Vaccine Initiative and the Medicines for Malaria Venture .
Main Characteristics of the Partnerships
The partnerships share many structural characteristics . They are usually constituted as independent legal entities. This aids in transparency and accountability. Further they may be viewed as relatively nonpartisan since they do not come encumbered with historical baggage. They have multiple partners from academia, industry, civil society, rich and poor countries, governments, and international agencies. The seed funding and some or much of the administrative costs is provided by public and philanthropic agencies. The pharmaceutical industry furnishes valuable in-kind contributions such as laboratory space, scientists' time, and access to databases. A key feature is that most of the partnerships recognize the basic validity of Intellectual Property Rights with some caveats. Indeed, this is crucial to gaining cooperation from the pharmaceutical companies.
Keys to Successful Partnerships
Most partnerships are only a few years old and it is premature to pronounce a verdict on their effectiveness. However, even in this short time frame many have started to make major strides. Three select examples are discussed below. It is already possible to identify key success factors. Most partnerships share a mix of these factors although each may bring a unique proposition to the table to entice partners. First, many partnerships have charismatic leaders and spokespersons, e.g. the Clinton Foundation that is backed by former US president Bill Clinton and the icon of the anti-apartheid struggle, Nelson. Mandela. Second, the partnerships do not merely have strong advocacy skills but also display a keen business sense. An example is the business savvy Medicines for Malaria Venture (MMV.) This is very useful in dealing credibly with the large pharmaceutical firms. Third, the partnerships, perhaps by definition have to be adept at relationship management. They have to accommodate and influence the disparate agendas of multiple partners. For instance, the International AIDS Vaccine Initiative (IAVI) has 25 partners and operations in 22 countries. Fourth, partnerships often have technical expertise. They either employ clinical, epidemiological and laboratory experts or more likely have access to their services. Fifth, most partnerships have a sharp focus on one disease in their mission and operations. This in turn allows them to build up in-depth knowledge of the disease, epidemiological trends, the current status of R&D, and the market size and trends.
The Clinton Foundation: Leveraging Charismatic Leadership
The foundation's HIV/AIDS Initiative is focused on supporting large-scale prevention & treatment in Caribbean & African countries. It develops country-level 'business' plans; and then presents these to donors and partners to mobilize resources. It has been very successful in reducing drug prices. It has been able to procure WHO-endorsed generics for ARV for as low as US$140 per year. Such low prices are now available to over 100 countries. In return, countries have to guarantee payment & secure drug distribution.
Medicines for Malaria Venture: Demonstrating Business Savvy
Widespread drug resistance to older drugs has hampered malaria control in developing countries. Until recently, there was little R&D in new drugs or vaccines, as the disease had been all but eradicated in the developed world. MMV is a global public-private partnership of academia, government research groups, and pharmaceutical firms . It develops and manages "virtual" R&D i.e. it does not own the physical infrastructure or employ many scientists but it leases these resources from companies. Clearly, this calls for considerable business skills. MMV aims for 1 new drug every 5 years at a cost of about US$150 million. This is significantly lower than the average cost of US$800 million for a new drug. The reduced costs are due to effective use of in-kind contributions from companies, simpler animal models and clinical trials, and pro bono governance and management.
International AIDS Vaccine Initiative: Managing Relationships
The IAVI is focused on developing a vaccine to prevent HIV/AIDS in developing countries. It is involved in the entire gamut of operations to develop and test a vaccine – ranging from basic laboratory research to clinical tests. Its partners range from private laboratories to community-based organizations in developing countries that help recruit volunteers for clinical trials. In all, the IAVI has 25 partners and operations in 22 countries. It is the second largest supporter of AIDS vaccine R&D; it has committed US$100 million as of end-2003. The IAVI has five candidate vaccines under trial . The IAVI retains the property rights to any future vaccine.
What Is in it for Pharmaceutical Companies?
Why are pharmaceutical companies willing to participate in these partnerships? There are many reasons. First, in some cases they can retain the property rights to new medicines or vaccines developed. This is subject to their commitment to sell these products at marginal cost in developing countries. But they are free to make large profits in rich markets. Second. there are spin-off benefits from R&D. For instance, new knowledge gleaned from malaria R&D is potentially applicable in other products. Third, companies gain understanding of, and access to new markets. Fourth, smaller biotech firms can get into the spotlight, with higher visibility leading to more funding, and potentially big orders. Finally, companies can project themselves as good corporate citizens. Cooperation is usually a better option than legal confrontation and adverse publicity, and losing markets to generic manufacturers.
What are the major conclusions? It appears that the resource gap that is perceived as the main obstacle to access to drugs is shrinking. In part, this is due to an increased flow of resources from bilateral and multilateral agencies and private donors. But it is the rapidly falling price of drugs that has really helped reduce the resource gap. Providing ARV to millions of AIDS patients in developing countries at market prices is near impossible but becomes much more feasible at US$140 per year. Another key development is the emergence of focused public-private partnerships. The industry is being brought on board gradually. There are huge potential benefits if even a fraction of the industry's vast resources – laboratories, scientists, and databases can be harnessed to look for solutions to developing country health needs. As the partnerships strive to make the drug companies allies in the war on disease in developing countries, coordination across multiple partners will be a key challenge.
Coverage is still low – only a small fraction of patients are receiving drugs. Further, too little resources are devoted to R&D designed to address developing country needs that account for a huge portion of the global burden of disease. Advocacy groups should maintain pressure for lower prices. In this context, it is worth noting again that the industry is in robust financial health. The advocacy groups should also keep up pressure for increased funding from public and private donors. As the resource gap shrinks, strengthening public health infrastructure in developing countries will become a key priority. It is crucial to develop and put in place robust care delivery mechanisms that ensure smooth and secure flow of drugs, and maximize adherence to treatment protocols. Finally in the case of HIV/AIDS prevention should not be neglected. It is still the most cost-effective intervention, and therefore the most sustainable one in the long run.
- For instance, 98% of the 10.5 million deaths among children under the age of 5 in 2002 were in developing countries. For details of the geographical distribution of the morbidity and mortality, see the World Health Report. 2003, http://www.who.int/whr/2003/en/Annex3-en.pdf
- Only 5% of those who require anti-retroviral therapy in the developing world have access to it. Less than 50, 000 of 4 million AIDS patients in Sub-Saharan Africa are benefiting from ARV. See the World Health Report. 2003, http://www.who.int/whr/2003/en/overview_en.pdf
- Patented Medicine Review Board of Canada, Annual Report. 1999Google Scholar
- Economist. Trouble with Cheap Drugs. Jan 29, 2004Google Scholar
- Ibid.Google Scholar
- See the joint report by Drugs for Neglected Diseases and Medicins Sans Frontieres, "A Survey of Private Sector Drug Research and Development". http://www.accessmed-msf.org/upload/reportsandpublications/20920021753354/4-1.pdfGoogle Scholar
- Prusoff , William : "One Scientist's Story". The New York Times. March 19, 2001Google Scholar
- Hunt , Michie : "Prescription Drugs and Intellectual Property Protection". National Institute for Health Care Management Issues Brief. 2000, http://www.nihcm.org/pharm.htmlGoogle Scholar
- Scherer FM: "Pricing, Profits and Technological Progress in the Pharmaceutical Industry". The Journal of Economic Perspectives. 1993, 7 (3): 97-115.View ArticleGoogle Scholar
- World Health Report. 2003Google Scholar
- Price data from PAHO. http://www.paho.org/English/HCP/HCA/antiretrovirals_HP.htmGoogle Scholar
- Drug prices are computed from a NY Times report "Clinton Plan to Provide AIDS Drugs to Poor Countries'. October 23, 2003Google Scholar
- See joint report by WHO/UNICEF/UNAIDS/MSF, "Sources and Prices of Selected Drugs and Diagnostics for People Living with HIV/AIDS". 2003Google Scholar
- For a good discussion of strategies to reduce prices see, "Surmounting Challenges: Procurement of Antiretroviral Medicines in Low- and Middle-Income Countries: The Experience of Medicins Sans Frontieres, " a joint report by Access in Essential Medicines, WHO, and UNAIDS. http://www.who.int/medicines/library/par/Google Scholar
- Masaki E: "Cost-effectiveness of HIV Interventions for Resource Poor Countries: Setting Priorities for HIV/AIDS Management". http://repositories.cdlib.org/big/hiv_prev/Google Scholar
- For a summary of industry concerns, see the FAQ. http://world.phrma.org
- Global Forum for Health Research, Initiative on Public-Private Partnerships for Health. 2003Google Scholar
- Wheeler , Craig , Berkley , Seth : "Initial lessons from public-private partnerships in drug and vaccine development". Bulletin of the World Health Organization. 2001, 79 (8): 728-734.PubMed CentralPubMedGoogle Scholar
This article is published under license to BioMed Central Ltd. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.