TCS Daily

The Business of AIDS Treatment

By Roger Bate - September 2, 2003 12:00 AM

LUSAKA, Zambia -- As the World Trade Organisation legal experts come to an agreement on drug patents in Geneva, many politicians, media commentators and health professionals are already expecting that this agreement will promote generic AIDS drugs. They claim this is vital since they only cost $350 a year per person, compared with the much higher figure ($2,000 upwards) of drugs from companies that hold the patents.  This creates a scenario of a gutsy David against the Goliath of the western drugs industry; but this is a myth.


The reality is that most publicly-treated patients are given AIDS drugs for free from donations by the major drug companies like Pfizer, GSK or Merck. Where drugs are sold, the mark-ups on generics are very high because generic manufacturers do not have reputations to defend and do not maintain pressure on prices through the supply chain. Western companies like GSK do stop major mark-ups by wholesalers, which makes their drugs apparently more competitively priced, and often of higher quality. Stopping price gouging on medicines is admirable but, ironically, their attempts to stop middlemen from making large profits actually reduce the likelihood that their products will be sold. Wholesalers and retailers make more money from selling generic drugs, and therefore promote them more. In surveys of pharmacies in Lusaka, Zambia, only generics drugs were widely sold.


While the western drug companies are trying hard to do what they think is right, they are actually undermining market processes in Africa. AIDS treatment is a business, not a charitable endeavor but by treating it as such, profit-making in Africa is frowned upon, furthering western and African conceptions that Africa is a hopeless lost cause. Consistent media reports of mythical drug pricing is harmful because it encourages anti-patent activists to demand the impossible, making AIDS victims, courageous enough to go public and overcome stigmatisation, feel that not only are they suffering from an incurable disease but are being ripped-off as well.


Generic Drugs in Africa


A key demand from activists is that generic drugs must be made available to the poor. And since at least 2001 generic products, especially from India, have been sold in Africa. But while this delights the activists, they could at least correctly acknowledge how much patients pay for generic drugs. Many people, including President Bush in his State of the Union speech in January, quote the price at  $300 per person per year. Actually, the lowest quote came from Cipla, the Indian generics company, which said in 2002 that it could provide a year's supply of triple drug therapy for AIDS patients for $350 per person.  But this price is misleading.  Cipla may provide the drugs at their factory in Bombay for that price, but the drugs do not sell for that price in poor countries.


Pharmacies in Zambia sell various drug combinations at considerably higher prices. In a small sample of pharmacies in the capital, we found the prices of Cipla's cocktail range from $588 to $840 a year, a 60% to 140% increase over the quoted price. Incidentally, patented drugs from GSK (the Combivir cocktail) sells for between $1740 and $2250 a year, a mark-up of approximately 8% to 30%.


At one of the best pharmacies we visited, Link Pharmacy in Lusaka's Manda Hill shopping centre, the pharmacist Ms. Ann Zulu said that she encourages people to buy the patented version of GSK's drug first, and then perhaps the generic alternative. Why? GSK drugs are better and of more reliable quality, and it is more likely that the GSK drugs are genuine, rather than the increasingly prevalent counterfeit copies.  If a patient starts on the GSK drug and then switches to a generic, the pharmacist can note whether the generic is effective. If it's not, the patient can switch back to GSK's drug. 


But many pharmacists do not have the same kind of medical training or ethics as Ms. Zulu. They will sell whatever is available at the best mark-ups, usually the generics. Many pharmacists got their fingers burned when drugs became available in 2001. They were told that AIDS was a massive problem and they would sell lots of drugs. But those who sought treatment went to the clinics; the more politically-connected were treated for free. The pharmacists saw their stockpiles expire since of those who were rejected by the clinics few had money to buy the drugs. Now pharmacies don't stockpile.  Instead, they order from distributors on demand when a prescription comes in. Most pharmacies sell a couple of courses a month; the most we encountered was 30 per month.   


We estimate that on average the Zambian wholesalers sell generic drugs at a significant premium to the announced prices from Cipla and Ranbaxy, another Indian generics company. Patients pay about 50% more than the frequently quoted price.


AIDS in Zambia


Malaria is still Zambia's biggest killer, but about 20% of Zambia's adult population has HIV/AIDS. Out of Lukasa's estimated 2 million people perhaps 400,000 have AIDS. Of that perhaps 15-20% -- 60,000 to 80,000 people -- require treatment.  But its few pharmacies were not selling many courses and the clinics don't have enough doctors to treat many people. It is likely that less than 1,000 Zambians receive treatment. But at least the situation is better in Zambia than in Burundi or Zimbabwe. Nationals from these countries cross the border, prescriptions in hand, to buy significant amounts of drugs from Zambian pharmacies.


The Broader Pricing Issue


Last year activist Richard Stern noted that the price of a course of generic drugs in Latin America was about $1,400 a year, even higher than in Zambia. Given that Latin America is relatively richer than Southern Africa, this higher price is not surprising.  In Africa too a pattern is emerging as pharmacies in Mozambique, South Africa, and elsewhere sell generics at Zambian prices or higher.


This is to be expected. Generic drug manufacturers, wholesalers and retailers need to make money to stay in business. They are currently being out-competed by clinics with free drug supply. As one western trade expert put it to me, 'this aid for drugs is like western agricultural dumping, it perverts local markets, and stops many markets from developing'. Of course many pharmacists may be excessively marking up generic drugs, but with such distortions in the market it is hard to blame them.


This situation is not helped by the western media, which portrays generics firms almost as charitable do-gooders, allowing the generics industry to dump its drugs at the docks and not worry about price mark-ups at pharmacies. The research-based industry also harms the situation by delivering its drugs for free, making it appear that since the people are so poor, one should make no money in Africa.


However, making Africa a no-profit zone is folly that will keep the continent in poverty. Until AIDS drugs distribution is seen by politicians and the media as a business, we will continue to see Africa as a no profit center. Aid will flood in to no long run benefit.


Roger Bate and Richard Tren are Directors of health advocacy group Africa Fighting Malaria based in Washington DC and Johannesburg (

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