Only two years ago the idea of the world’s major pharmaceutical companies being ready to charge poor countries lower prices for essential drugs looked like an unrealistic idealist’s dream.
Global multinationals do not get much bigger than major drug companies. They look invincible. The big players have turnovers far in excess of the gross domestic products of developing states. They operate in a highly competitive market, but were totally united on one front: the need to stop even developing countries from access to cheaper medicine.
Two years ago 39 of the biggest companies were still embroiled in a civil trial seeking to prevent the South African government from importing cheaper generic drugs to fight HIV/Aids. But much has changed since their climbdown in April 2001, in the wake of worldwide protests against their action. Now they are under pressure from an equally potent force: major pension fund investors in the City, London’s financial centre.
The institutions, with more than R12,6-trillion of investments under their control, urged the drug industry to allow developing states to sidestep patents on life-saving treatments. The investors expressed concern over the damage to the industry’s reputation that was being caused by its intransigence on pricing policy.
Under the Doha trade deal struck 15 months ago developing states were to be given exemptions to buy cheaper generics, but pharmaceutical lobbying has blocked its implementation. The industry is heading towards a similar public relations disaster that the South African lawsuit generated.
This week’s message from investors had a crucial theme: relaxing patents for developing states should not be regarded as an altruistic act, but in the industry’s self-interest. International opinion played an important role in commercial success.
The investors have drawn up a framework of good practice for judging individual company performance: setting different prices for rich and poor states was one of the essential criteria.
The aim now should be to internationalise this exercise of shareholder power. United Kingdom-based drug firms have plenty of room for improvement, but they are far ahead of most United States companies on fair pricing. What the UK investors should do now is to enrol the big US pension funds in their campaign. Recruiting US partners would ensure real momentum. — Â