Politics & Policy

The Cost of a Cure

Anti-patent AIDS activists are hurting AIDS sufferers.

As India overtakes South Africa as the country with probably the most HIV patients (estimates put it at over five million), clamorous calls for treating more of those patients with anti-retroviral drugs are taking hold. Seven months ago, the Clinton Foundation announced that the drugs could be purchased for $140 per person per year. But as a recent study by the Hudson Institute has pointed out, the actual figure ranges from about $285 to $450.

Why the disparity? The reason is that drugs in Africa are often sold at the higher price, and that is because much AIDS treatment is a business, not a charitable endeavor. Artificially low pricing is harmful because it encourages anti-patent activists to demand the impossible, which hurts AIDS victims and the drug companies alike.

These activists attack the Bush administration for its AIDS policy even though, unlike the Clinton administration and European governments, Bush has committed two billion dollars of new money per year to combat the disease. People may be annoyed at the slow appropriations process, but Bush has made the commitment and he will not backslide on it, especially in an election year.

A key demand from activists is that Bush must buy generic drugs. They insist that increased competition from generic-drug companies will lower the price of drugs in poor countries, so producing a net benefit for AIDS patients. If generic companies can sell patented AIDS medicines, the price of existing drugs will fall, but what they forget is that this will be a long-term disincentive for the companies that invent new drugs to engage in future research.

Of course, many activists focus on current AIDS sufferers. Understandably, then, they want drugs immediately available for these people and don’t consider the cost of undermining future research. They could, however, at least correctly acknowledge how much patients pay for generic drugs.

Pharmacies in Zambia, for instance, sell various drug combinations at considerably higher prices than those quoted by the media. 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 percent to 140 percent increase over the quoted price. Incidentally, patented drugs from GSK (the Combivir cocktail) sell for between $1,740 and $2,250 a year.

At one of the best pharmacies we visited, Link Pharmacy in Lusaka’s Manda Hill shopping center, Ann Zulu, the pharmacist, said she encourages people to buy the patented version of GSK’s drug first, and then perhaps the generic alternative. Why? Because 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.

When the drugs became more readily available in 2001, many of the pharmacies assumed they would sell lots of drugs and stockpiled them. However, the drugs didn’t sell, and most of them expired. So 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 percent more than the frequently quoted price.

Malaria is still Zambia’s biggest killer, but about 20 percent of Zambia’s adult population has HIV/AIDS. Out of Lukasa’s estimated two million people perhaps 400,000 have AIDS. Of that perhaps 15-20 percent–60,000 to 80,000 people–require treatment. But its few pharmacies were not selling many courses and most clinics have few drugs. The drugs in the clinics tend to come free from companies like GSK and Merck, and not from the generic manufacturers. It is likely that fewer than 1,400 Zambians receive treatment through clinics.

The price of drugs, therefore, is a minor factor in the failure of Zambians to receive treatment. But at least the situation is better in Zambia than in Burundi or Zimbabwe. Nationals from these countries must cross the border, prescriptions in hand, to buy significant amounts of drugs from Zambian pharmacies.

In 2002, 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. Drug manufacturers, wholesalers, and retailers need to make money to stay in business. But the media, portraying generics firms almost as charitable do-gooders, creates the myth that AIDS drugs delivery is not a business. The research-based industry perversely supports this myth 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 languish, drug companies reducing their research and their considerable local logistical support, and more people will die.

Roger Bate is a visiting fellow of the American Enterprise Institute and Richard Tren is a director of Johannesburg-based health-advocacy group, Africa Fighting Malaria.


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