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Issue 56, May 2001

Drugs monopolies tactical retreat

'CAPITALISM IS sick' read one placard outside Pretoria's High Court on Thursday 19 April. 'Lives before profit' read another. Demonstrators were protesting against the legal action brought by 39 pharmaceuticals companies against the South African government over a law which allows it to import cheaper versions of brand-name Aids medicines.

Only five of the 39 companies actually manufacture the drugs. For the others, including AstraZeneca and Pharmacia, the trial was an act of 'solidarity' against what they saw as a threat to their patent rights. 'The danger is that loss of patents in HIV alone could destroy the global HIV market', said a spokesman for Bayer, one of the companies. This shows the real attitude of the drug barons controlling one of the world's most profitable industries. For them, HIV is first and foremost a market! In the whole of Africa, where there are 25 million people infected with the HIV virus which causes Aids, only 25,000 have access to Aids medicines - 0.001% of those infected.

The crowd was celebrating within minutes of the decision. A spokesman for the ANC government called the outcome an 'unconditional surrender'. It seemed as if David had slain Goliath - the income of the five biggest drug companies is double the combined value of sub-Saharan GDP.

In reality, the pharmaceuticals industry beat a tactical retreat in the face of what the Guardian newspaper described as 'one of the great corporate PR disasters of all time'. Had the trial gone ahead the industry would have been forced to reveal damaging secrets about its pricing policy and where its money goes. No one should believe that the drugs companies suddenly had a fit of compassion. One lawyer against the drugs firms commented: 'They might have thought all this shit was worth taking if they were going to win, but they knew they weren't'. The whole of Africa accounts for just 1% of worldwide drug sales.


While this was a big defeat for the pharmaceutical companies the tragedy of HIV in South Africa remains. The country's provision for HIV-positive people has been paralysed by the legal battle. There are 4.7 million South Africans infected with the virus, more than in any other country. Life expectancy among black males is now 36 years, lower than at the time of the Boer War. An intense debate has raged over the ANC government's refusal to finance treatment of HIV-infected pregnant mothers with the drug AZT. This would prevent 70,000 children every year being infected by their mothers.

Many believe that president Thabo Mbeki's controversial defence of 'Aids dissidents' (scientists who dispute the link between HIV and Aids) was motivated by his reluctance to challenge the multi-national drugs companies over their extortionate prices. After the trial, the health minister outraged Aids campaigners with the comment that it 'isn't a government priority' to provide people with Aids medicines.

A year ago a 'cocktail' of Aids drugs cost $10,000 per patient a year. Since then, prices have been cut for poor countries following massive public criticism and protests from the scientific community (for example, by staff and students at Yale University where a key ingredient in two Aids drugs was discovered). Nonetheless, a month's supply of Aids medicine in South Africa costs $420, more than a nurse's monthly salary of $370. According to Doctors Without Borders, the actual production cost of a year's supply of the drugs is about $200 per patient.


In Brazil, where cheaper copies of branded medicines are produced, the fatality rate from HIV-related diseases has been halved in recent years. This programme is now threatened by a World Trade Organisation (WTO) action.

When the WTO was set up in 1995 it established a range of trade rules which favour the rich countries and major corporations. The WTO regime is based on the General Agreement on Tariffs and Trade (Gatt), the General Agreement on Trade in Services (Gats), and the agreement on trade-related aspects of intellectual property rights (Trips). This forces countries to respect the patent rights of a product, giving multi-national companies a monopoly, usually for a period of 20 years. Trips is binding on all WTO members although poor countries have been given until 2006 to comply with all its aspects. Despite this transition period, Trips is a nightmare for third world countries which comprise 80% of WTO members. World Bank economist, Michael Finger, estimates that a typical developing country must spend $150 million to implement the rules. This is equal to a year's development budget for many of them.

Because South Africa is not among the poorest countries it was obliged to comply with Trips from the outset. The South African government passed legislation in 1997 allowing it to circumvent these rules in an 'emergency' and import lower price generic (non-brand name) drugs from India or Brazil. This prompted the pharmaceuticals industry to take action.

A bigger battle looms in Brazil, where its generic drugs production has enabled 100,000 patients to receive free medication for HIV. The country is accused of violating patent rules and is being investigated by a Trips disputes panel. Behind this action are the US government and pharmaceuticals companies like Roche, Merck and Pfizer.


Africa needs not only cheap access to Aids drugs but massive investment in health and social services. South Africa, which is rich by comparison with the rest of the continent, spends just $70 per person in its health budget. These policies are a result of imperialism's control of Africa through the debt trap and agencies like the International Monetary Fund (IMF) and WTO. The trial cast a spotlight on an industry and a system which is rotten to the core. But for those wanting to fight capitalist globalisation and exploitation, price cuts are not enough. The issue is who owns and controls the industry.

The drugs companies claim that patent rights are essential to cover the cost of developing new drugs. Yet only a fraction of company profits goes on research and development. The world's biggest pharmaceutical company, Glaxo SmithKline, employs 10,000 scientists but 40,000 salesmen. While 300 million Africans live on less than 65 cents a day, Pharmacia's boss, Fred Hassan, took home $3.6m last year and AstraZeneca's Tom McKillop $1.7m. The industry's research is heavily weighted towards health problems in the rich countries where the big money is to be made. As an official of the World Health Organisation pointed out, what the world needs most is mosquito nets, cheap rehydrating drugs and condoms to combat the three main killers - malaria, diarrhoeal illnesses and Aids - not hi-tech drugs to alleviate the symptoms of old age.

Socialists stand for the nationalisation of the drugs industry under democratic workers' control and management. This would make it possible for an international plan of production to be drawn up harnessing the talents and expertise of employees, consumer groups and aid organisations. This would also guarantee that the resources needed for vital research are not frittered away on advertising, share dividends and fat executive pay cheques.


Laurence Coates

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