Investing for Life: If you believe Oxfam it means making slaves of the best amongst us

Some products are so critical to life and living that their absence would cause tremendous harm to society. One such line of products are pharmaceutical medications aimed at combating the diseases that fall predominantly on the poor.

Oxfam – a non-governmental organisation dedicated to “finding lasting solutions to poverty and injustice” – has released a report, “Investing for Life” in which they claim to have identified the source of injustice and illness amongst the world’s poor. It is the world’s large pharmaceutical firms.

Oxfam claims that, by enforcing their intellectual property rights and charging high prices for their products, Big Pharma is undermining everyone’s universal “right” to health.

Error of logic # 1: Forcing businesses to give away their IP for expensive R&D is a great way to encourage them to do research

The industry’s responses to flagging financial performance – hiking up prices, aggressively defending patents and prolonging existing ones through ‘ever-greening’ rather than investing in research and development of new medicines – have undermined needs for lower prices, flexible approaches to patenting, and R&D investment into diseases relevant to the developing world,” states Oxfam.

There is a contradiction: Oxfam demands that businesses spend investors’ money (usually from pension funds and the like) on searching for cures to diseases for which – should they find a cure – they must then give away and choose not to earn money from their research. In other words, Oxfam demands that those research companies with ability should be the slaves of those who are unable to help themselves.

Thailand and Brazil, two medium-income countries, have chosen to issue compulsory licenses for a range of drugs (including Merck’s Efavirenz anti-retroviral HIV drug). These are hardly poor countries and their government’s can certainly afford the medication.

In the short-term the poor may very well receive treatment for HIV. Generics firms will gain from avoiding others’ patents. In the long-term pharmaceutical firms have no incentive whatsoever to conduct research into other diseases that afflict the poor. AIDS is not the end of disease.

Companies which don’t look to staying profitable tend to go bankrupt. If pharmaceuticals firms are not to improve their profitability then they will never be able to produce anything, let alone cutting-edge new drugs.

Error of logic # 2: When a business identifies a problem and sells the solution to that problem, should they be treated as if they caused that problem?

The industry’s failure to comprehend access to medicines as a fundamental human right enshrined in international law, and to recognise that pharmaceutical companies have responsibilities in this context, has prevented the adoption of appropriate strategies,” states Oxfam.

Pharmaceuticals companies do not cause people to get sick. Their products can, however, cause people to get well. It is fair comment to demand that those who are responsible for causing an illness take responsibility for fixing the ill they cause, it is quite another matter to demand of a company making a product to fix the illness they did not cause to be held responsible for causing that illness.

Pharmaceuticals companies profit from people’s illness the way motor companies profit from people’s inability to run at 120 kilometres per hour or Apple profits from people’s inability to read sheet-music, carry a piano and sing for themselves while out on the road.

It could be argued that telecommunications is also a fundamental human right. Africa has a rapidly growing telecommunications sector. State-owned telecoms companies are being pushed aside from the ravenous profit-driven products of cellular phone companies. Poor people across the world are spending money on cell phones and driving astonishing profits for communications firms. They do this of their own free will and clearly feel that they’re scoring on the deal as well.

Yet pharmaceutical’s companies are being singled out to subsidise their own clients. No-one has complained that Apple iPods are too expensive for the destitute in rural Rwanda and that Apple should reduce the price so that everyone can listen to their favourite music in a democratic way.

Error of logic # 3: When a politician or aid agency promises to do good they can hold others responsible for failure to deliver on those promises

Without a solution to the problem of access to medicines, they cannot meet their goals and obligations to their populations,” says Oxfam, in referring to the promises that aid agencies and governments have made to the poor.

These obligations are not the obligations of private companies. Private companies are not the slaves of politicians. If a politician makes a promise then it is his to deliver, not declare that private companies are now responsible for delivery.

Robert Mugabe, in Zimbabwe, has presided over the complete collapse of his country’s economy. He regularly demands that businesses deliver on his promises to create jobs and wealth for everyone there. When business owners were unable to comply he arrested many and nationalised others.

His “need” and bullying tactics have resulted in a decimation of opportunity and widespread poverty and disease in his country. Companies did not cause this. Politics did.

New products might be “needed” but it isn’t the duty of drugs companies to provide them. Adam Smith stated in the 18th century that, “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.”

A drugs company knows how to make medicines; they make these – not because they seek your health – but because they want to earn a living. They choose to do so honourably, by exchanging a product a sick person will value, for their money. It is only governments (and NGOs) that offer weapons and their “need” in exchange for other’s labour.

Oxfam demands that pharmaceutical companies honour the “social contract”. What social contract? A contract is written to verify the exchange of value between two willing participants. This “social contract” – as Oxfam states it – appears to require that pharmaceutical companies give away their products in exchange for society’s “need” for those products. What happens if pharmaceuticals companies decide to concentrate their energies on products that are of interest only to rich people? What happens to the poor then?

The most talented and able in the world do not become slaves to those who are unable to help themselves. Since when was “need” a reasonable exchange for “value”?

Error of logic # 4: Donations and charity should be spent on intangible feel-good things but to really get things done requires companies to give away their property

There is nothing to stop drugs being given away. But why should individual, privately owned, companies foot the bill? If Oxfam is so convinced that cheap drugs are essential to the poor why doesn’t Oxfam invest its, not inconsiderable, resources into its own drugs company?

Oxfam, according to their 2006 annual report, spent a grand total of US$ 683.25 million last year. This would buy an astonishing amount of life-saving drugs. If Oxfam does not do so it can only mean that it does not want to. Instead they spent US$ 78.88 million on a project entitled “Right to be heard”, and another US$ 46.19 million on “Identity”.

It is unclear from this report what tangible benefit Oxfam has delivered. Perhaps they are unable to? Demanding that others – who can – be slaves to Oxfam’s “need” is noxious.

If Oxfam regards as contemptible slave workers who are locked inside a sweat-shop and demanded to produce cheap clothing, why do they demand that chemists, biologists and scientists should be enslaved in a similar fashion?

11 replies »

  1. I’d have more sympathy for the pharmaceutical companies if they didn’t have a history of sitting on effective drugs for things like malaria because they couldn’t make any money off the drugs, of they were still legally prevented from marketing their drugs to the public directly via media outlets.

    Be careful, though – some of your points are wrong. There have recently been a number of examples where drug companies’ products have made people sick, so your blanket “Pharmaceuticals companies do not cause people to get sick.” is patently inaccurate.

    I can’t fault your conclusion that Oxfam could probably do a lot more good buying and distributing medicines directly than bitching about pharmaceutical companies.

  2. Brian, my central premise isn’t changed because some drugs companies have products that have dreadful side-effects. If anything, it is strengthened.

    As I said: “It is fair comment to demand that those who are responsible for causing an illness take responsibility for fixing the ill they cause.” At least you can sue a company that profits from a product that causes harm.

    The “harm” by the by, is caused by some very unusual properties of chemicals. Partly it is the result of chirality (the “handedness” or twist of a chemical where a subtle difference, not in it’s chemical makeup but in its twist can produce terrible effects – thalidamide is a good example of this). The other is now being realised as the genetic makeup of the person receiving the drug. Quite a few of the recent drugs that have been recalled have had this problem. The drugs work perfectly, but only on a specific genetic family.

    With all this try and imagine what happens when you “give” the IP to some generics manufacturer?

    A new contradiction gets introduced. You don’t trust the drug majors, but you do trust the generics manufacturers? At least the person who introduces and patents a drug has to go through the FDA for approval.

    Generics manufacturers don’t have to as long as they can prove that their compound is chemically similar to the original. But – as I point out above – chemically similar doesn’t mean identical, and doesn’t even mean the same action in all cases.

    Picking up on the side-effects is as much an R&D function as the original research. Who is going to do it if the drug majors can’t afford to after having been forced to give their original IP away?

  3. Side effects often don’t manifest in the original research because of insufficient breadth of exposure, or long-term effects that aren’t tracked before approval. Yes, they’re R&D in some sense, but it’s usually not the pharmaceutical companies that are doing the long-term effects studies, it’s doctors at hospitals and universities who are concerned about side effects. Sometimes the companies pay for the studies, sometimes they don’t.

    I’m actually not suggesting that all the big pharmaceutical companies should be forced to give away their IP – I consider that an illegal “taking” of property by the government, something that’s unconstitutional here in the US. But I am suggesting that drug companies should be forced to make available, at nominal prices, drugs that they’re keeping off the market because the drug’s not a Viagra(TM) or a Lipitor(TM). Drugs for diseases that primarily affect the poor aren’t marketed or developed because the profit margin isn’t big enough.

    Letting millions of people die from malaria when there’s a cheap but not-profitable drug sitting on the shelf is immoral. If someone else can manufacture the drug cheaper than the drug’s developer can, then that someone else should have the opportunity to do so, and before the 20 year patent expiration.

    I’m not saying that the discoverer of the drug should give that drug away, but they shouldn’t sit on it either. There has to be a way to license that drug from it’s developer in a way that enables them to meet their development costs (or at least defray them) and still saves lives before the patent runs out. A lot of what’s going on with the Gates Foundation is exactly this model, and it seems to be working reasonably well.

  4. Thanks for the post and comments. This isn’t my area, so I’m learning quite a bit here. I appreciate that.

  5. Brian,
    In this case I have to side with Whythawk, at least primarily. The pharmaceutical companies don’t produce drugs that they can’t make profitable, nor should they be forced to. This means that drug research is going to primarily be focused on finding “cures” for “illnesses” most commonly afflicting those who can afford to pay for them. This then gives us stuff like “cures” for E.D. Now saying that not all Pharm companies are the devil driven solely by profit. Take Amgen for example. They make a drug to help offset the detrimental effects of Chemo-Therapy. This is a very expensive drug that they spent years and millions of dollars developing. They charge people with health insurance full price because the insurance pays the vast majority of the costs. Then they turn around and donate a portion to hospitals and clinics that treat the less advantaged and to hospitals in third world companies. The last year I worked there they donated over $120 million dollars in medications this way. Ya they took the tax break for it but why shouldn’t they. They were still giving somewhere between 5 and 8 percent of their yearly profit. Can you say that about many companies from other industries such as maybe GM from the automobile industry or Phillip/Morris from the Tabacco industry?

  6. And I want to respond to that “sitting on” jab about medication supposedly on the shelf and not being used. All that happens is that, prior to phase 2 trials, companies evaluate the cost and benefit and don’t proceed.

    The cost of going through phase 2, then to human trials, FDA approval, etc. is extremely expensive and extremely technical. They could “give” this IP away, but generics firms don’t have the technical capacity or financial ability to cover the costs. You’d still be left with high costs.

    In addition, who gets held responsible if things go wrong?

    There was a suggestion a few years back of creating a UN fund that would guarantee a fixed price for the treatments to specialised illnesses (to some extent what the Gate Foundation is up to). It doesn’t seem to have amounted to much, but it is a damn site better idea that “forcing” pharmaceuticals firms to work for free.

  7. Myth 1: Pharmaceutical industry invest profit into R& D

    Several studies have shown that this is not the case. On the contrary, investment in R&D has never been so low, whilst billions are invested in marketing. Pharma live on evergreening and repackaging.

    Myth 2: Middle income country like Thailand and Brazil can afford to pay for life-saving medicine

    So why is the US the first country in the world when it comes to the number of compulsory license issued ranging from auto and aircraft par to the Blackberry which are far from being life saving?

    Myth 3: The public and tax-payer benefit from the profit made by the Pharma

    Most Pharma escape high level taxation they should be submitted to by registering office offshore.

    Truth number one: Pharma are no the slave of politician.

    True. Politicians are on the payroll of Pharma!

    For a different point of view on this subject read:

    Wealth versus health – the Thai frontier