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Medical Socialism

What is more important — life or profits?

July 10, 2000

What is more important — life or profits?

One of the most heart-wrenching problems in international relations these days is the de facto denial of access to AIDS drugs for people in Africa. The large pharmaceutical companies, particularly the U.S. manufacturers, have developed drugs capable of slowing down the spread of the AIDS virus in the body. And yet, these drugs are so expensive that they are almost completely beyond the reach of sufferers in poorer nations.

Sub-Saharan Africa is particularly hard hit by the AID crisis. Home to about 10% of the world’s population, sub-Saharan Africa is burdened with 70% of the world’s known AIDS cases. Furthermore, the region accounts for only 1.1% of world GDP. If world drug prices were based on income levels, then a typical course of drugs costing $10,000 per year in the United States, where the average per capita income of $29,240, would cost only $174 in Africa, where the per capita income is only $510.

The case for such an enlightened sense of global economic equality has been made by various African governments. But the African governments’ pleas have failed to convince the pharmaceutical industry, which argues that it needs to recoup drug development costs regardless of the purchasing power of the people who need the drugs.

These companies, which in the United States average 18% profit margins, or three times the overall average for U.S. companies, argue that allowing poor countries to use their intellectual property will weaken their incentive to invest in future research and development.

This “anti-discrimination doctrine,” is, of course, a blatant contradiction of the differentiated pricing policies used all the time by leading global companies — even in the industrialized world where per-capita incomes do not vary much from country to country. (Just consider the fact that, within the European Union, car manufacturers get away with a 35% price differential for identical car models, depending on whether the vehicle is sold in Germany, the UK or Italy.)

This pricing issue for AIDS drugs is one of the great moral questions of our time. No wonder, then, that this subject was high on the agenda of the most recent World Economic Forum, an annual gathering of global business and political leaders held each January in Davos, Switzerland.

In the United States, the humanitarian impulses of the Clinton administration frequently runs afoul of the countries trade and intellectual property laws. The U.S. Trade Representative, for one, seems determined to take action against the African nations which, in their despair, have announced their willingness to produce generic label versions of drugs still protected by U.S. patents.

Locally produced drugs would, of course, be much less expensive than those produced in the United States. But to U.S. trade authorities and drug companies, this represents a gross abuse of U.S. intellectual property rights.

How to do justice while upholding the law internationally? The Clinton administration is seeking to offer the drug companies a significant tax credit for selling drugs to low-income countries with a high incidence of AIDS. In essence, a tax credit would allow those companies to get a price rebate from the U.S. government to offset their revenues losses.

It remains to be seen whether the Republican-dominated Congress will allow this provision become law. But at least to those who gathered in the hallowed halls of the Davos Conference Center at the World Economic Forum, there was an inspiring message.

Assume you fell slightly ill during the meeting. Say you caught the flu or cut your hand. Your first course of treatment would be to go to the conference’s infirmary, located just around the corner from Plenary Hall. The infirmary is staffed with full-time physicians ready to diagnose your ailment, dash off to the in-house pharmacy and promptly dispense the appropriate medication.

This being Switzerland — one of the world’s most expensive service economies — you would instinctively pull out your wallet. Then you remember that this event is described by some as the annual summit of global capitalism. All the more reason to pay up. In such a world, you would surely never receive the equivalent of a handout.

And yet, and yet, and yet. Standing there with credit card in hand, the kind doctor’s face turns disdainful. There is no way, he seems to be saying, that we would ask you to pay for this help to get you well again. We know what real service is. Take your medicine, get well, be happy. Enjoy the remainder of the conference.

Surely the irony of this medical handout was not lost on the attendees of the World Economic Forum. Or was it?