The HIV/AIDS medicine price war that transpired following the Cipla Limited’s, a medium-drug company based in India, introduction and offering of a cocktail of three anti-AIDS medicines (lamivudine, stavudine and nevirapine) for an annual price of $350 to Medecins Sans Frontieres was disturbing rendition of the price gauging entertained by Western pharmaceutical companies. Cipla, a leading generic medicine maker in India, made this special offer to Medecins Sans Frontieres through a three-tier pricing system that would allow the same combination medicines to be offered at $600 per patient per year to governments and $1,200 to distributors. Similar medicines sell at prices more than ten times that price in the United States and other developed countries. To be more precise, the same combination medicines in the US and other developed countries range between $10,000 and $15,000 per patient per year. Thus, tension within the international drug market pursued.
As previously mentioned, approximately 62 million people in the world are HIV infected. As indicated previously, a majority of the infected population is poor and as a result, has little access to these extremely high prices. And lastly, South Africa is not any different but rather—for lack of better words—an ideal model of the failures within the system. Concerned by the low prices being offered by Cipla and possibly intense and volatile competition over medicine prices that would follow, many trans-national corporations (TNCs) unleashed an intense offensive against the offer by Cipla.
According to the arguments put forth by the medicine TNCs, Cipla was acting “unethical” in its offering of low drug prices for poor patients and was, at the same time, breaching Glaxo’s exclusive patent rights on Combivir in Ghana. Cipla immediately terminated its supply of its generic version of Combivir to Ghana only to have Glaxo admit later that it had no valid patent in Ghana and an “‘overzealous’ company official made the mistake.” To further complicate the situation, Cipla was mainly concerning itself with Indian patent laws that differ from other national patent laws. In India, current patent laws only recognize process patent laws, very distinctly discerning process patents from product patents. Arguably, the Patents Act of 1970 in India has resulted in the significantly reduced costs of medicine prices in India and furthermore, the sustaining competition between drug companies. Through what has been termed “reverse engineering,” Cipla has managed to reduce its prices of HIV/AIDS medicines by over 30% within the Indian market, let alone in the international market, all while still particularly easily maintaining good profits. And for what may be the most important thing to patent advocates, competition has survived, arguably thrived, within Indian market.
In South Africa, the Patents Act of 1978 dictates that the procedures for and the protections afforded patent laws. South African courts are generally regarded as having placed a tough burden of proof on challenges to patentee’s rights, and have typically refused to approve compulsory licenses for alleged patent rights abuses, even though the law allows for such under certain circumstances. The Medicine Act of 1997, also known as the Medicines and Related Substances Control Amendment Act, was introduced particularly to rectify some of the inequities left over from apartheid, where, as previously mentioned, the drug expenditures of the private sector health care astronomically exceeded those of the public sector despite serving only 1/5 of the population. The Act included several provisions with two particular provisions aimed at driving down prices.
The first – termed generic substitution – allowed for the introduction of a generic drug after the patent on the brand name drug has expired as long as price on the generic drug was cheaper. The second provision – termed parallel importation – was created to override the exhaustion of rights problem by providing the Minister of Health new overriding administrative prudence. The TNCs stalwartly opposed these provisions on the basis that parallel importation was a violation of the Patents Act, which does not provide for exhaustion of rights once a product is sold for the first time. It must be made clear the government chose to not to amend the previous Patents Act but rather add Section 15C of the Medicines Act to afford this new power to the Minister of Health.
The text of 15C is written as follows:
Section 15C
The minister may prescribe conditions for the supply of more affordable medicines in certain circumstances so as to protect the health of the public, and in particular may-
(a) notwithstanding anything to the contrary contained in the Patents Act, 1978 (Act No. 57 of 1978), determine that the rights with regard to any medicine under a patent granted in the Republic shall not extend to acts in respect of such medicine which has been put onto the market by the owner of the medicine, or with his or her consent;
(b) prescribe the conditions on which any medicine which is identical in composition, meets the same quality standard and is intended to have the same proprietary name as that of another medicine already registered in the Republic, but which is imported by a person other than the person who is the holder of the registration certificate of the medicine already registered and which originates from any site of manufacture of the original manufacturer as approved by the council in the prescribed manner, may be imported:
(c) prescribe the registration procedure for, as well as the use of, the medicine referred to in paragraph (b).
As it was widely reported, it was the phrase, “The Minister may prescribe…” and the underlining dissipation of patent power previously afforded pharmaceutical companies that fueled the anger of the Pharmaceutical Manufacturers’ Association of South Africa (PMA). The PMA strongly felt this section provided the justification and sanctioning of both parallel importation and compulsory licensing of certain medicines.
On February 18, 1998, less than three months after President Nelson Mandela signed the Medicine’s Act into law, thirty-nine pharmaceutical companies filed lawsuit against the South African government. The companies included in the lawsuit are as followed:
the Pharmaceutical Manufacturers’ Association of South Africa, Alcon Laboratories (S.A.) (Proprietary) Limited, Bayer (Proprietary) Limited, Bristol-Myers Squibb (Proprietary) Limited, Byk Madaus (Proprietary) Limited, Eli Lilly (South Africa) (Proprietary) Limited, Glaxo Wellcome (South Africa) (Proprietary) Limited, Hoechst Marion Roussel Limited, Ingelheim Pharmaceuticals (Proprietary) Limited, Janssen-Cilag Pharmaceutica (Proprietary) Limited, Knoll Pharmaceuticals South Africa (Proprietary) Limited, Lundbeck South Africa (Proprietary) Limited, Merck (Proprietary) Limited, MSD (Proprietary) Limited, Novartis South Africa (Proprietary) Limited, Novo Nordisk (Proprietary) Limited, Pharmacia & Upjohn (Proprietary) Limited, Rhone-Poulenc Rorer, South Africa (Proprietary) Limited, Roche Products (Proprietary) Limited, Schering (Proprietary) Limited, Schering-Plough (Proprietary) Limited, S.A. Scientific Pharmaceuticals (Proprietary) Limited, SmithKline Beecham Pharmaceuticals (Proprietary) Limited, Universal Pharmaceuticals (Proprietary) Limited Wyeth (Proprietary) Limited, Xixia Pharmaceuticals (Proprietary) Limited, Zeneca South Africa (Proprietary) Limited, Bayer AG, Boehringer-Ingelheim International GmbH, Boehringer-Ingelheim KG, Bristol-Myers Squibb Company, Byk Gulden Lomberg, Chemische Fabrik GmbH, Dr. Karl Thomae GmbH, Eli Lilly and Company, F. Hoffman, La Roche AG, Merck KGaA, Merck & Co., Inc., Rhone-Poulenc Rorer S.A., SmithKline Beecham.
Later that year and throughout the next year, the Pharmaceutical Manufacturers’ Association of South Africa received the backing of the US government and the European Union, who both adopted the PMA’s argument that the Medicine Act violated the World Trade Organization’s agreement on the intellectual property rights (the TRIPS Agreement). After placing heavy pressure on the South African government to amend or withdraw the Medicine Act of 1997, the US and the European Union later, arguably due to international pressure, back peddled from their position on the Act, acknowledging that the two highly contentious sections of the Act through which countries were afforded power to improve access to medicines—compulsory licensing and parallel importing—stay within the guidelines of the TRIPS Agreement.
Nevertheless, the PMA, the allied companies in South Africa, and the United States continued the fight. But what had been and privately remained a case highly framed around the discussion of the wording of the Medicine Act of 1997 and the dissolution of powers previously afforded TNCs became a extensive discussion of high prices and the inaccessibility of medicines to South Africans, which, as previously mentioned, was the preliminary concern that initially fueled the passing of the Act. As a result, TNCs constantly had to defend their products and high prices in the media. Their initial response to the media backlash focused on costly investments required for research, which was contentious particularly because statistics consistently show that a more than half of the funding and subsequent research comes from publicly funded universities and research institutions. The tension is furthered fueled by the fact that costs of making certain drugs hardly ever is disclosed and that the government provides extremely liberal grants and tax breaks for research and development to the drug industry.
Even more questionable was the pharmaceutical industry’s argument that “patents are instrumental in stimulating investments in research and development of drugs.” A mere 10% of the global research and development of drugs is aimed at diseases of the poor. Between 1975 and 1997, a mere 13 out of 1,233 (only 1 percent) new drugs that were introduced into the medicine market were approved particularly to fight tropical diseases. Ultimately, the pharmaceutical companies were introducing a majority of their drugs to the monetarily rich but small market. Still, the PMA wanted to claim “unfair discrimination on their right to trade,” even though the Act’s section on generic substitution is “in fact a promotion of competition to reduce the price of medicines: as long as the branded product is as cheap as the generic, then there are no restrictions on its sale.”
Over a four year period, the debate over accessibility and pricing continued to fuel the media frenzy while legal language consumed the courtroom debate over patent laws. When the case actually made it to court in March 2001, the discussion had proceeded for four intense years. During this same month on March 6, the Court welcomed South Africa’s Treatment Action Campaign (TAC), the country’s leading advocacy group for more accessible anti-retrovirals, as amicus curiae (friend of the court), hoping that the organization could monitor the legal discussion and facilitate the case. On April 19, 2001, PMA and the 38 other companies dropped their lawsuit against the South African government after what had been a public relations debacle.
The Ethical Discussion Underlining the Lawsuit
The court case that involved heavily scrutinized US-based company, Merck & Company, the Pharmaceutical Manufacturers’ Association of South Africa and the South African government, ended approximately four years ago. However, the residue left from the discussion has yet to be addressed. This section provides an ethical analysis, using the theories of thinkers—Robert Nozick, John Rawls, and Immanuel Kant—of the discourse over pricing and accessibility that underlined the entire case.
A. Robert Nozick’s Entitlement Theory
In a book—titled Anarchy, State and Utopia and published in 1974—Robert Nozick developed his theory on justice in the market system, best known as Nozick’s Entitlement Theory. Nozick’s theory is a historical based principle because it works to account for what happened in the past and the circumstances that brought forth the present. Furthermore, the theory discourages any patterned distribution because Nozick believes that any requirement to distribute justice by certain pattern—test scores, quotas, monetary need, etc.—destroys a society’s capacity for liberty. These two distinctions will be what differentiate Nozick from specifically from Rawls and from Kant, as will be depicted later. The entitlement theory holds that a distribution is just, Nozick writes, “if everyone is entitled to the holdings they possess.”
Nozick’s theory requires three basic principles: a principle of just transfer, a principle of just original acquisition, and intermittingly-used principle of rectification. The principle of just transfer infers that transfers of anything, property or commodities, can exist without outside interference, particularly government intervention. The second principle requires that the original acquisition was justly acquired—a very contentious point as I will show. The third principle requires that avenues for rectification of unjust transfers exist to restore “holdings to the rightful owners.” Essential, Nozick presents the most modern version of a strictly libertarian system.
The applicability of Nozick’s theory to the discourse put forth by the pharmaceutical companies becomes evident when re-examining the companies’ claim that Cipla’s attempt to lower prices to benefit the poor was unethical in itself. In turn, the companies were insinuating that the prices were just because the market had garnered these prices through fair and just transactions. This insinuation—fairly libertarian—fails in a couple aspects.
First, the entitlement theory requires just original acquisition. Investigating the history of Africa and its interaction with the West poses the biggest challenge to this theory. Nozick requires a blank slate, but as history shows, the slate is neither blank nor clean. Africa was stripped of its natural resources during colonialism and after, in what is best described as neo-colonialism, which only featured native heads instead of colonial heads maintaining the same abuse of power. In addition, the structures of government and tribal interaction were flipped on their head and abused to pose particular groups against one another. As should have been expected following colonialism, Africa has been a continent left depleted of resources with a devastated social structure that has essentially hampered its economic development. To complicate the matter, Africa’s liberty has actually existed for less than three decades for most countries. Therefore, the idea of a blank or clean slate is questionable. One doesn’t have to look far to observe that rectification has not been provided.
Nozick would very likely require that any critic of the theory go back to the first man. However, this obviously is impossible due to our inability to capture and compile every artifact, document and so on of history. Therefore, we must address the question of rectification, which when applying Nozick’s theory to Africa should be on order. Governments violently stole resources from Africa and left little recourse for the African governments. Even if prices can be reasonably justified—though I doubt it—the system within which they exist cannot be ethically justified by the libertarian theory that these pharmaceutical companies grasp hold of. In essence, Cipla was pursuing its own version of rectification by trying to rectify the unjust situations provided the poor in Africa, particularly South Africa.
Nozick’s theory does speak to an underlining theme in the arguments of the pharmaceutical companies. It requires the absence of government intervention. Sadly, Adam Smith’s invisible hand received broken fingers with the wrong dealings of traders in the 1940’s and very likely prior to that. It was the unjust doings of traders and businessmen in the 1940’s that brought about institutions such as the Security Exchange Commission. It is the unjust system that brought about the Medicine Act of 1997.
B. John Rawls’ Egalitarian Theory
Contemporary American philosopher John Rawls originally presented his egalitarian theory in a 1958 article, “Justice as Fairness.” Encompassing a Kantian conception of equality and at the same time, working to relieve utilitarianism of its inefficiencies, John Rawls successfully works to depict a system that concerns itself with the poor of society as well as respects the liberty of the rich. Initially, it must be understood that Rawls sought to write a theoretic interpretation of justice solely for a democratic society—arguably only a liberal democratic society. But with a system fraught by globalization and international dependency, the international system, in essence, becomes the democratic society that we must address beyond the parameters of the state.
Rawls specifically emphasizes the “veil of ignorance” that he describes as pertinent to the theories of Mill and Locke. The veil of ignorance holds that “individuals who are asked to agree on the principles of justice must do so without knowing many facts about themselves and their situation.” Rawls presents this idea of a “bargaining game” that attempts to construct a situation where individuals must agree on principles without having an opportunity to view the potential ends. In essence, he works to eliminate the opportunity for individuals to choose a situation that primarily benefits them at the obvious expense of others; thus he wants blind negotiation.
Rawls quintessentially poses the question: behind a veil of ignorance, what principles of justice and equality would “rational, self-interested” individuals freely agree to? Rawls present two principles—principle of equal liberty and the difference principle—which are read as follow:
- Each person has same infeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all; and
- Social and economic inequalities are to satisfy two conditions: first, they are to be attached to offices and positions open to all under conditions of fair equality of opportunity; and second, they are to be to the greatest benefit of the least-advantaged members of society (the difference principle).
Listing the two principles by a lexical prioritization, Rawls initially works to divide the reasonably available goods into equal shares. With second principle, the underlining notion is that many individuals would not accept the first principle and would pursue situations that entail some inequalities, even arguing that such conditions may be more favorable for all. Understanding this idea, Rawls flushes out the potentially ever-growing disparity, inducing that the poor in the society should proportionally grow with the middle and upper class. His argument thus “employs a rule of rational choice drawn from game theory known as “maximin,” which holds that it is rational to maximize the minimum outcome in choosing between different alternatives.
Rawls’ theory poses one primary challenge to the defense of the pharmaceutical companies. In South Africa, the first principle, as expected, attempts to provide the basic liberties of the society, but cannot address the distribution of rarer goods. Thus, the second principle becomes the lexical following to the first principle. In maximizing the growth of medicine throughout the world, pharmaceutical companies have failed to maximize the minimum. As previously mentioned, only 10% of the global research and development is directed towards diseases of the poor. In addition, of the 1,233 new drugs that reached the market between 1975 and 1997, only 13 were approved specifically to treat tropical diseases, which primarily affect the poor. Therefore, the statistics explicitly display the inequalities pursued by following this method of maximization.
Furthermore, the distribution of medical expenditures between the public and private health sectors has done little to address the threat of HIV/AIDS. This assertion is easily deduced from the alarming spread of the disease. As Rawls presumingly would explain it, the pharmaceutical companies in South Africa and throughout the world are actively targeting the small but most monetarily lucrative market for its own maximization at the increasing minimization—or expense—of the large but ultimately monetarily barren poor.
C. Immanuel Kant’s Categorical Imperative
Immanuel Kant sets forth his theory of morals in the Groundwork. He is primarily concerned with the “ordinary moral judgment” of the human being. What he concludes to be the first principle of this judgment is the moral law. The moral law essentially is encompassed in the categorical imperative.
The categorical imperative, in one line, holds that you “act only on that maxim through which you can at the same time will that it should become [or be] a universal law.” I purposely include this simple but direct principle for one reason. If pharmaceutical companies are willing to solely provide medicine to the rich of South Africa and world as a whole, then they should be willing to respect a potential situation that would place their family members on the lower end of the economical scale, receiving little medicine and attention. In other words, can a person who advocates the current situation sit idle when he or she is placed in the situation of the poor person who suffers under the current structure? This type of understanding seems to escape the minds of such professionals.
Conclusion
As we have seen with the case and the aftermath, the decision to drop the case was not an altruistic decision but rather a response to the media scrutiny and the public. Furthermore, the absence of ethical discretion can more easily be applied to the pharmaceutical companies involved in the lawsuit than it can to Cipla. Robert Nozick would probably have sided with the pharmaceutical companies, but as seen, this theory fails with the blank slate. The disregard for the poor put forth by the methods of the pharmaceutical companies completely abolishes the principles of John Rawls and Immanuel Kant.
Talking about the disregard for the poor ignores what should be the underlining concern of all pharmaceutical companies and people in general: the life of humans. With the profits and income of pharmaceuticals companies and CEOs growing respectively, the high gross profit that these companies maintain should not be the primary concern. Simply put, South Africans that cannot gain access to HIV/AIDS medicine will die and more disturbingly at a quicker rate. The lives of human beings exceed the concerns of smaller profits, patent laws, and medicine acts. Sadly, South Africa has been far more cautious about “knocking off patented drugs,” particularly to maintain foreign investment. Also, it should be fairly noted that South Africa has been extremely reserved about spending its money to buy drugs or subsidized the drugs. Still, the government should take its previous stance against the TNCs, or it may see its population quickly dissipate under its watch.
In the words of Tamara Straus of AlterNet:
"Solving the world AIDS crisis will require something that governments, international lending institutions and multinational companies -- the other flank of international governance -- often lack: compassion and the ability to see beyond profit. Racism also will have to be factored into such moral calculus."
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