This writeup is part of my effort to create a series of nodes on the 'access to medicines' debate. I have already dealt with the role of Pfizer. This node deals with the efforts of Treatment Access Campaign also known as TAC to smuggle fluconazole into South Africa.
What is fluconazole?
Fluconazole sold under the brand name of Diflucan is widely available in the United States as an anti-fungal drug. In South Africa, the pill is sold by Pfizer at $8.92 but in Thailand a generic version of the drug is produced at $0.29. This discrepancy in the cost price of drugs and the price at which they are sold is not uncommon. (See the 'access to medicines' debate node for the relevant figures). These prices are particularly perverse in the case of South Africa where the average wage is $7.00 and about 4.2 million people are affected by AIDS.
Pressure on Pfizer:
In March, 2000, TAC and its U.S. ally, the Health GAP coalition challenged Pfizer to lower the price of fluconazole, or to release the patent on the drug, which would allow South Africa to legally produce a generic version of the drug, or to import a low-cost, generic version from another country. In April 2000, Pfizer offered to provide fluconazole to HIV-infected individuals with cryptococcal meningitis who could not afford the drug. There was no mention of how long donations would last, or how much would be donated, increasing suspicions that it was a public relations exercise.
Response by activists:
In October 2000, the South African AIDS activist group, Treatment Action Campaign (TAC) launched a Defiance Campaign Against Patent Abuse by smuggling fluconazole, an otherwise unaffordable drug, into the country. Fluconazole is used to treat cryptococcal meningitis, a painful brain infection that infects 50% percent of people with HIV and thrush, or candidiasis, an extremely common AIDS-related illness. The Defiance Campaign is an important, precedent-setting challenge to the pharmaceutical industry and the intellectual property laws used to protect its profits.
This is the letter sent by TAC in March 2000 to the then CEO of Pfizer:
WILLIAM C. STEERE, JR.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
235 42ND STREET, 23RD FLOOR
NEW YORK, NY 10017
March 13 2000
Dear Mr. Steere,
As you are well aware, AIDS in South Africa has
become an acute crisis with more than 100 000 deaths yearly. As the patent
holder for Fluconazole, you currently have monopoly rights to sell
Fluconazole in South Africa. With this right comes responsibilities.
Everyday, South Africans are dying from cryptococcal meningitis and systemic
thrush, opportunistic infections that can be effectively treated with
Fluconazole. Why are patients dying from an easily diagnosed and easily
treatable disease? Many of them are dying because Pfizer prices the drug
beyond the reach of South Africans. The Treatment Action Campaign (TAC)
demands that Pfizer take one of the following two actions:
Lower the retail price of Fluconazole (tablet of 200 mg.) to less than R4 --
the price at which the drug can be purchased in generic form in countries
where Pfizer does not have patent protection.
If your management decides that you are not willing to sell this drug at
this price, we demand that you grant a voluntary license to TAC so that we
would be authorised to legally register imported or locally manufactured
generic versions of the drug.
Why must Pfizer agree to these demands?
There is clear evidence that it is possible to manufacture and sell
fluconazole at a price which would make it affordable to a significant
number of South Africans. It is only Pfizer's pricing policy which keeps the
drug out of patients' reach. The current price of fluconazole in South
Africa's public sector is R58.00 per 200 mg capsule. In the private sector,
the price ranges between R150.00 and R200.00 per 200 mg capsule. These
prices are not acceptable in South Africa, where the majority of employed
people earn less than R50.00 per day. Generic versions of fluconazole
are available from India at R7.50 and from Thailand at R2.98. Rather than
the production cost, it is Pfizer's pricing policy that seeks to maximise
profit that is causing the needless deaths of South Africans.
CONDITIONS OF VOLUNTARY LICENCE
A voluntary licence could be granted to TAC on the following conditions:
a. TAC would work with local generic companies and foreign
Companies to register quality, low cost generic versions of fluconazole.
b. TAC would ensure that Pfizer receive a 5% royalty on prices set on the
The matter is urgent. We request that Pfizer respond within 7 days of the
date of this letter. The Treatment Action Campaign (TAC) is a
national,non-profit, non- governmental voluntary association of people with
HIV/AIDS, their families, friends, care-givers and physicians. TAC is
supported by trade unions, religious bodies, small businesses, women's
organisations, AIDS service organisations, human rights organisations and
grassroots community organisations in South Africa and abroad.
TAC announcement on January 2001
Morne Visser, a TAC supporter and actor will arrive at Cape Town
International at 8:50am on Saturday 13 January 2001. He will be bringing in
a legal shipment of generic fluconazole and declaring it at customs. TAC is
continuing its Defiance Campaign Against Unjust Patent Laws. The generic
fluconazole, Biozole, has been declared safe for use and Brooklyn Medical
Centre has fulfilled all its requirements for a section 21 exemption.
Pfizer promised to deliver medicines and not a single pill has reached
people with HIV/AIDS.
Please let's try to get as many people to greet him at the airport as
possible and to stop any further bureaucratic obstacles from denying people
Spread the news.
This is a very well written article from the MIT magazine 'The Thistle' about the smuggling of fluconazole:
Punting Patents: Drug Smuggling and the War over Generic Medicines
by Sanjay Basu
The orange gourd that presided on Christopher Moraka’s nightstand stretched its dried feelers, curling them around imaginary placeholders as if searching for something that floated midair in the hot atmosphere of his Cape Town home. Christopher’s wasted arms, awkwardly folded across his sweaty chest, appeared to mimic the twists of his bedside vegetable. In this exhausted state, he his chalky meal in chunks, wincing twice for each spoonful. The pain, physicians had told him, came from a fungus that would grow out of his tongue and spread downwards to consume his chest and pelvis.
After Christopher died of systemic thrush, the infection that conquered him because of acute HIV disease, his colleagues held his departure as perverse, unanswerable. Thrush was by all means a treatable infection, suppressed by the drug fluconazole. But after obtaining his prescription for the drug, Christopher had reached the disturbing awareness that he would be unable to afford the treatment.
His friends, many of whom were members of the South African Treatment Action Campaign (TAC), decided to construct a memorial. They held a proper funeral for Christopher. They organized a spontaneous march in his honor. And then they led a drug-smuggling operation.
Members of TAC, unified in mutual bitterness over their friend’s death, decided to smuggle generic fluconazole into South Africa and distribute it to the country’s poor. Importation of generics had been banned after their country’s entrance into the World Trade Organization (WTO), under the premise that these cheap alternative drugs violated the intellectual property rights of pharmaceutical companies.
Profit before treatment
Fluconazole had been sold in South Africa for years, through Pfizer, a U.S. pharmaceutical company that priced its patented pill at R28.57 (about USD$4) per 200mg capsule in South Africa’s public sector and R80.24 (USD$11) in private clinics. In Thailand, where WTO rules had not yet been enforced, equivalent pills were selling for R1.78 (USD$0.28) each.
“There is clear evidence that it is possible to manufacture and sell fluconazole at a price which would make it affordable to a significant number of South Africans,” said Mazibuko Jara, a member of TAC. “It is only Pfizer’s pricing policy which keeps the drug out of patients’ reach.”
Jara and two TAC colleagues had already asked Pfizer to either lower the price of fluconazole to R4.00 (twice the price of generic equivalents), or grant a voluntary license to TAC to register generic versions of the drug from local and foreign producers. In exchange, TAC would ensure that Pfizer received a 5% royalty on the generic product.
But in rejecting TAC’s conditions, Pfizer announced that it would make a free short-term trial-offer of the drug to a few South Africans who were described as “indigent patients.” No further price-reduction negotiations would take place.
In his anger, TAC member Zackie Achmat changed the TAC effort from a price negotiation strategy to a campaign with all the resonant themes of guerilla warfare. He named the effort the “Christopher Moraka Defiance Campaign Against Patent Abuse and AIDS Profiteering by Drug Companies.” Weeks later, TAC printed a press release declaring that Achmat had illegally smuggled 5000 Biozole (generic fluconazole) capsules from Thailand and would distribute it to a network of colluding doctors and pharmacists.
“The choice is clear,” said Achmat, awaiting arrest after herding himself through a crowd and into a Cape Town police station. “The right to life and access to health care are non-negotiable. Profiteering, at the expense of life, even when protected by law, is not a right.”
It was only shortly after the announcement that mixed statements of praise and condemnation came from all sectors of the Cape Town community. Ironically, Pfizer didn’t appear as an outspoken critic Achmat’s smuggling. Instead, a group of local generic drug manufacturers assumed that role.
“Emotions aside, when anyone illegally imports generic drugs without the go-ahead of the Medicines Controls Council, the consequences can be tragic,” said Generix International CEO Iqbal Moosa. Moosa’s company distributed generic medicines, not including fluconazole, under license. “These actions are illegal. How could any doctor in good faith use drugs which have entered a country illegally? The potential for breaking the Hippocratic Oath and ignoring the proviso to ‘first do no harm’ is enormous.”
His colleague, Raymond Mallach of Generix, told reporters that “challenging a company with a turnover in excess of the GDP of South Africa that relies almost solely on research and patents for its livelihood means that either you’re searching for ongoing publicity, or that you honestly believe Pfizer will ignore the issue, which is extremely unlikely.”
Patents inflate prices
After hearing Mallach’s criticism, one wonders whether eliminating a patent really threatens the livelihood of a company like Pfizer. Are patents a necessity to drug manufacturers—their existence crucial to producing “profit incentive” for drug research and development (R&D)?
Moosa, despite his condemnation of TAC’s smuggling operation, agreed with Achmat’s declaration that the patents preserve “obscenely high” prices, which offer more than a simple retribution for research and development costs. “There are some interesting statistics indicating that the prices charged for these drugs are in fact artificially high,” he said. “South African drug sales contribute one percent towards the turnover of the multinational drug manufacturers, but a far higher percentage of profit... This is evidence of where the priorities of the multinationals lie.”
In a recent Pfizer company newsletter, MIT Professor Rebecca Henderson concurred, explaining that R&D costs are rarely paid for by private corporate profits. “Research has been, in general, largely funded by the American taxpayer, and in the past has resulted in products that have revolutionized medicine,” she said.
Henderson noted that most drugs are developed using public tax money distributed through grants to university labs that conduct research and publish their work in academic journals. Pharmaceutical companies then take the published research and mass-produce drugs that result from it. Professor Richard Laing of Boston University also pointed out that for most drugs, and in particular for high priced drugs, price reductions in Africa’s market wouldn’t generate much profit loss for drug companies.
“1.4% of the global market is going to the whole of Africa,” said Laing. “The whole of South-East Asia and China is only 5%. So these countries are only a very small part of the global pharmaceutical market. Western markets are so large that they could easily accept to cure Africa and South-East Asia” by reducing prices in needy markets and allowing higher prices in larger markets to compensate for marginal profit losses.
But companies are far from waiting in line to dispose of their patent rights or slash their prices. And with this acknowledgement comes the question of whether alternative strategies for drug procurement are available, apart from illegal smuggling.
Alternatives to death and profit
Laing and others have pointed to two alternatives. The first is “parallel importing”, a strategy not altogether different from that originally suggested by TAC activists. Parallel importing calls for a government to grant someone other than the authorized distributor permission to import a product because of differences in national prices. An American organization, for example, might be given rights to import cheap drugs from Canada into the United States. Alan Holmer, CEO of the Pharmaceutical Research and Manufacturers of America(PhRMA), an industry lobby group, argued that such strategies would violate international trade obligations. “Despite the progress, our industry continues to face serious intellectual property challenges in many parts of the world - hindering our ability to bring to patients the benefits of innovative medicines,” he said. “We hope the U.S. Trade Representative will increase the pressure on countries that fail to live up to their international trade obligations.”
Economist James Love of the Center for Study of Responsible Law in Washington, D.C., disagreed, saying that parallel importing would be permissible under current WTO laws, particularly the Trade-Related Aspects of Intellectual Property Rights agreement, or TRIPS. Several European countries have, in fact, instituted parallel importing strategies for their citizenry. A less contentious alternative, however, has been proposed by those who support a “compulsory licensing” strategy, under which governments permit third parties to manufacture products without the permission of patent owners. Even these agreements are allowed by TRIPS and the WTO, as long as the participating country abides by “safeguards” that call for a small royalty of sales revenue to be paid to the patent holder. Compulsory licensing might reduce prices of some drugs by as much as 95 percent.
Laing explained that “if there was compulsory licensing affecting these (impoverished) parts (of the world), it would probably not affect the profitability of the pharmaceutical industry in any way.” Poorer countries hardly offer any profit to companies to begin with, given that few people there can purchase expensive drugs.
A recent PhRMA report on the topic argued otherwise, claiming that “although some have advocated the use of compulsory licensing or parallel trade as a solution to the AIDS crisis in the developing world, these mechanisms would do little to improve access to health care services or HIV medicines…The absence of infrastructure remains the major obstacle to treatment.”
The argument, said Love, is an often-heard rebuttal from the pharmaceutical industry. “Drug companies are quick to point out that drug prices are not the only barrier for HIV/AIDS patients,” he commented. “Certain treatment regimes require significant medical infrastructurebut in any event, HIV/AIDS patients will die without access to drugs.”
“Compulsory licensing is ultimately a compromise on the issue of R&D,” he argued. “Patents are recognized and patent owners are paid, giving rise to incentives for R&D. But the amount of the incentive is limited by the government, in order to ensure that the public health needs are met.” South African ministers have attempted to create policies to bring generics to the country, through laws like the South African Medicines Act. But such measures were, until very recently, blocked by U.S. trade ministers and others representing pharmaceutical interests. A new series of laws, the Medicines and Related Substances Control Act Amendments, have passed and will allow for parallel importing if implemented.
For Zackie Achmat and others who remember Christopher Moraka, laws that allow compulsory licensing or parallel imports may be the only purveyors of hope. Until then, TAC defiance campaigns and illegal importing from Thailand may continue, sending pleas for help to those capable of bringing relief to Africa’s AIDS crisis.
Don't worry about copyright here, the letters are there for public viewing on the TAC website. The article is by a friend of mine and the copyright belongs to him. He's more than glad to have people find out about the access to medicines debate.