Won the battle, lost the war

By Marcus Low & Lotti Rutter

In the early days of the AIDS epidemic, the high price of antiretroviral medicines meant many lives were unnecessarily lost. While the global AIDS movement managed to force lower prices for key ARVs, the wider battle has not yet been won. Today, many people with hepatitis C, various cancers, drug-resistant tuberculosis and other conditions still cannot get the medicines they need to survive. This article explains the how inequality extends to drug development.

There are two broad problems with the way society currently pays for medicines.

The first, the innovation problem, is that we are not investing enough money and energy into finding treatments for diseases mostly affecting poor people. This is why most of our tuberculosis (TB) treatments today are more than fifty years old and not very good.

The second, the price problem, is that many of the medicines that are developed are sold at such high prices that people cannot afford them. This is why many people with hepatitis C cannot afford the highly effective new hepatitis C cures on the market. For these people the new cures might as well not exist.

The innovation problem

Last year, tuberculosis killed more people than any other infectious disease on the planet, including HIV. At 1.5 million deaths, it far outstripped headline-making outbreaks like Ebola (11,315 deaths in 21 months). Yet, in 2014 humanity invested less than US$700 million in TB research – only about a third of the two billion a year that the World Health Organisation estimates is required to bring an end to TB. Of this US$700 million, less than US$100 million was invested by the pharmaceutical industry. In fact, a number of large pharmaceutical companies have stopped doing TB research altogether.

The first part of this problem is simple. Since most people needing TB treatment are poor, pharmaceutical companies see little potential profit in developing new TB treatments. Companies choose rather to invest in researching medicines that will sell in rich countries – medicines for diabetes, heart disease, or erectile dysfunction.

The second part of the problem is more puzzling: given that industry does not invest, one would expect governments to step in to fill the gap. However, with the exception of the United States, governments do not. While the BRICS countries (Brazil, Russia, India, China and South Africa) have over 40% of the global TB burden, they contribute less than 4% of global investment in TB research.

The price problem

When the patent system does deliver important new medicines, as it sometimes does, those medicines are often priced out of reach for many of the people who need it. So, for example, the breakthrough hepatitis C drug sofosbuvir is priced at US$84 000 for an 84-day course. Similarly, high prices mean that women in South Africa who need the breast cancer drug trastuzumab often can’t afford its R500 000 price tag.

Companies argue that they have to ask these high prices to recoup their investment in developing the drugs and to fund their investment in developing new medicines. In recent years this argument has begun to wear very thin.

Companies argue that they have to ask these high prices to recoup their investment in developing the drugs and to fund their investment in developing new medicines
Companies argue that they have to ask these high prices to recoup their investment in developing the drugs and to fund their investment in developing new medicines

A United States senate investigation in 2014 found that the pricing of sofosbuvir had nothing to do with how much it costs to develop the drug. Rather than basing prices on the investments made into a drug, companies are typically setting prices at levels that maximise profits – even if that means many people can’t access the drug in question.

At a more fundamental level, high prices charged by pharmaceutical companies have brought into question the basic social contract between the public and the pharmaceutical industry.

The thinking is that the people, through our governments, grant patent monopolies to companies in return for investment in new medicines. However, enforcement of this social contract is very one-sided. While companies almost always get and maintain their patent monopolies, there is no enforcement of the expectation on companies to invest in research. Typically, companies invest only between 8 and 18% of revenue in research and development (R&D), while they typically spend double on marketing and advertising. In addition, the way in which companies spend their R&D funds is completely non-transparent.

All the available evidence suggests that we are not getting much bang for our buck in the current system where there is no obligation on industry to reciprocate high prices with high investment in R&D.

We have other options

Various solutions to these problems have been under discussion at the World Health Organisation (WHO) over the last decade – with very little progress to show for it. In addition, in 2015 the Secretary General of the United Nations, Ban Ki-moon, convened a High Level Panel to look at exactly these problems. Even if the HLP comes up with strong recommendations, it will be up to governments to make those recommendations a reality.

Some possible solutions include:

An R&D agreement or treaty

Given that industry is failing to invest in diseases that have an impact on poor people, governments have a responsibility to step in and fill that investment gap. One solution is an R&D treaty or agreement. Countries would all contribute to a central fund. Money in this fund would then be used to fund research in neglected areas like TB. This is a simple and workable solution. The only thing that is lacking is political will. Even if rich countries like the United States and Germany oppose such a treaty or agreement, there is nothing preventing other countries from going ahead without them.


When governments invest in research, they often do so in a way that allows companies to patent the products of that research. In this way, governments end up paying twice – once through research grants and again when paying high prices for patented medicines. If governments invest in a delinked way, they will not allow this double-payment to happen. In such a case, governments will fund research through grants and prizes and then ensure that all the research is paid for up front and that the research cost is “delinked” from the sale price of the eventual product. The so-called 3P Project (see our previous issue) is an example of a delinked model.

Bring balance to the system

International law allows for steps to be taken to balance the worst excesses or exploitation of patent monopolies. These balancing measures are commonly referred to as TRIPS flexibilities (Trade-Related Aspects of Intellectual Property Rights) and they include allowances for: compulsory licenses (overriding patents); only granting patents for truly innovative products and not for reformulations or new uses of old drugs; and for the public to file oppositions to the granting of specific patents.

The problem is that due to trade pressure from the United States Trade Representative, many countries have not written these TRIPS flexibilities into their national law – and if they have, they are often afraid to use them.

Doing away with pharmaceutical patents altogether

One of the remarkable things about the history of patents and medicines is that there is no evidence that providing increased patent protection around the world has led to greater medical advances. In fact, in the golden age of medical discovery from the 1940s to 1970s, much of the world did not offer any patent protection on medicines. There was also no increase in innovation following the TRIPS agreement in 1995, which compelled all World Trade Organisation member countries to provide for at least 20 years of patent protection.

It would of course not make sense to simply remove the patent system and not replace it with anything else. The world, after all, is in desperate need of new medicines. Governments would have to redirect the money they would have spent on purchasing patented medicines to providing research grants and sponsoring prize funds for the development of new medicines. All indications are that such a transition would in fact see R&D spending increase dramatically – given how little industry currently spends on R&D as a percentage of revenue.

Lotti Rutter is a Senior Researcher for Treatment Action Campaign

Marcus Low is an editor of Spotlight



You are aware of the exploding prevalence of cancer around the world and in our own country. We have just moved in a circle. Just as the price of ARVs were unaffordable then, cancer drugs are devilishly unaffordable today. If no drastic action is taken today, we are going to be counting body bags like we are at war.”

Dr Aaron Motsoaledi, Health Minister of South Africa, 2016 budget vote speech.
“Rationing is the ultimate consequence of high drug prices. Unsurprisingly, this is unpopular and is causing a backlash. In a number of US states, politicians are seeking to pass legislation forcing drug companies to disclose more information about the cost of producing their high-priced remedies. There is even talk of capping prices. The industry argues that such caps would drive capital out of the industry, cutting innovation and ultimately harming patients. But that is a hard argument to sustain when companies such as Gilead and Vertex are earning gross margins of 90 per cent and share prices are sky high. Pharmaceutical innovation has been one of the great successes of the past century, improving the lives of people immeasurably round the globe. But if the current dispensation is to continue, the industry must learn to price with greater restraint.”

Financial Times, August 16, 2016.


The patent system is expensive. A decade-old study reckons that in 2005, without the temporary monopoly patents bestow, America might have saved three-quarters of its $210-billion bill for prescription drugs. The expense would be worth it if patents brought innovation and prosperity. They don’t.”

The Economist, August 8, 2015.


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