TCS Daily

The Real Health Care Robbers

By Duane D. Freese - May 25, 2004 12:00 AM

The medical diagnostic representative told me, "No, the story isn't true."

The "story" was one I'd overheard at an American Enterprise Institute forum in the capital on access to AIDS drugs in developing countries the week before. It had seemed incredible. An African country had demanded exorbitant duties -- equal to 30 times the actual price -- for low-cost kits that diagnose a particularly virulent disease in the country and were being donated for free.

After 30 years in journalism, if something seems too incredible, you always go to check the original source. And from the initial response, it seemed another anecdotal horror story seemed to hit the dust.

But not quite.

"They didn't ask for that much," he said. My ears perked up. "And we ended up not paying a thing."

"We're a small company, and we simply can't afford to pay that amount of money. So we threatened to take the kits back." And with intervention U.S. State Department officials, the African government relented.

Incredible, I told him. Could I mention his company's name and business? No, he responded, he'd prefer we didn't, as his company still had to do business in the country. What about the name of the country? I asked. He wouldn't say, it would make his company too identifiable, "but it was supposedly one of the more enlightened."

"If you write about this, you'll get a big reaction," he said. His company has faced such things only a handful of times, he said, but the same thing has happened to dozens of other pharmaceutical and medical supply companies.

You hear about the poor nations of the world and their suffering and the numbers are so huge they become a numerical abstraction. A million children die every year from malaria. Three million in the developing world died last year of AIDS, and 5 million more became infected with the HIV virus.

So, what to do?

Some activist organizations -- by them, I mean mostly those not delivering actual aid but involved in protesting those that do -- have their own solution. It is to condemn the Bush administration for not doing enough to combat the epidemic, get more U.S. money funneled into international venues such as the Global Fund and generally bash pharmaceutical companies for doing anything that upholds their patent rights to drugs.

In the AIDS sphere, they have been particularly vocal about getting so-called fixed dosed combination drugs made by Indian generic manufacturers into Africans hands. When the Bush administration moved to expedite U.S. Food and Drug Administration reviews of such drugs, they disparaged its action as just foot dragging.

''It looks to us like an elaborate ruse to protect the interests of the patent-holding U.S. drug companies while, at the same time, undermining the World Health Organization's own approval process,'' Salih Booker, executive director of Africa Action, a Washington-based critic of the administration's anti-AIDS plan, intoned.

Paul Zeitz, director of the Global AIDS Alliance argued that the move was backward step. "Instead of reinforcing the WHO's pre-qualification process," he said, "they are slowing things down by creating a redundant and parallel U.S.-led review process. It's an oxymoron to call this a fast-track initiative when the WHO has already approved these drugs for use.''

Approved the drugs? Yes. But examined their efficacy, and their effects? No. In fact, WHO has included this disclaimer for the FDCs: "Inclusion in the list [of pre-qualified drugs] does not constitute an endorsement, or warranty of the fitness, of any product for a particular purpose, including in regard of its safety and/or efficacy in the treatment of HIV/AIDS."

It needs it.

Scott Gottlieb, who soon will leave the FDA, noted at the AEI forum that putting the drugs together poses dangers to those getting them. They all have side effects. They all have interactions that can differ from patient to patient, between men and women. They can be very toxic to some people. Regarding one of the ingredients in the FDCs Novaripine, he pointed out, 7 percent of recipients will suffer a rash and 1 percent may die as a result of liver disease.

"And we know nothing about failure rates," he said. "How many fail on the regimen?" Failure rates are important because they can lead to more resistant strains of the disease -- making its spread more difficult to control.

It is just because of such things that FDCs aren't approved for use in the United States and Europe, and few AIDS sufferers in those places are clamoring for them. They want drugs tailored to them as individuals. The Indian pharmacies that make them can't sell them in their own land -- despite it have perhaps the highest number of AIDS sufferers of any country.

Yet, they've been approved by the World Health Organization for Africa, and it's a step backward if the Bush administration would do anything to determine their effectiveness and safety.

As Niger Innis of the Congress of Racial Equality said at the WHO conference in Geneva this week, "Africans are being used as guinea pigs in the largest untested global clinical trial in history. "They are being given new AIDS drugs that are untested and unproven, and could well be dangerous."

The advocates will say that the gains are worth the risks, that otherwise drugs to fight AIDS would be too expensive. That is their excuse for seeking generics and attacking patents for essential medicines as well.

But even there they've got it all wrong.

At the AEI conference, Amir Attaran, a member of the Royal Institute of International Affairs and a consultant to Doctors without Borders, pointed out that the arguments about patents for pharmaceuticals are overblown by both sides.

Attaran in a peer-reviewed study found only about 1.4 percent of the essential medicines on the WHO list are patented in the first place. And their imported cost, at least, contributes only a miniscule amount to the overall cost of treatment.

"Patents cannot cause essential medicines to be inaccessible in 'many' developing countries because they do not exist 98.6 percent of the time," he said.

Carol Adelman, senior fellow at the Hudson Institute specializing in international health care, foreign trade and economic development, meanwhile, found in her own study of prices that the costs of patented drugs was well within in the range of generic drugs, once transportation costs for drugs were included.

The real barriers to effective AIDS, malarial and other treatment are more a matter of structure -- poor health infrastructure and poor economic infrastructure -- as AEI fellow and Tech Central Station Host James Glassman has pointed out.

From what the diagnostic device spokesman, another structural problem is the attitude of governments in Third World countries. How can countries with millions of AIDS sufferers and thousands dying monthly from other diseases justify customs duties, tariffs and taxes on the very products their people need desperately to get well?

Yet, they do tax and duty them exorbitantly.

Adelman, in her study, found tariffs, duties and other charges that raised prices on some of them by as much as 70 percent. South Africa, for example, charges a 14 percent value added tax on essential medicines.

And hers was not the first. The European Union instituted a study of tariffs, duties and taxation of pharmaceuticals on the WHO's essential medicines list in 57 countries and found that they represent 9 percent of the total public health expenditures of all the countries and a whopping 17 percent of the least developed countries.

In all, the EU study estimated that the developing countries raised about $3 billion through such duties and taxes.

The result, as the WHO, itself, noted in March of this year is that "in Developing Countries, the final price of a medicine may be two to five times the producer or importer price. This reflects the effects of multiple middlemen, taxes of over 20 percent in some countries, pharmaceutical duties of up to 65%, high distribution costs, and pharmacy and drug seller charges."

Charles Adams in For Good and Evil: The Impact of Taxes quoted St. Thomas Aquinas as writing in Summa Theologica that it is no robbery if princes exact from their subjects that which is justly due for safe-guarding the common good. "But if they tax excessively, it is robbery even as burglary is.

What greater excess is there than governments exacting from sick people tribute for the medicines they need?

And where is that outrage from activists at that theft of life?


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