Drug companies are depriving themselves of massive profits in the developing world by "refusing to change the way they do business" with the poor, says a new report on the international pharmaceutical trade.
Overseas aid agency Oxfam claims the world's top 12 pharmaceutical firms are guilty of denying medicines to millions of poor people through restrictive pricing policies and strict controls on intellectual property rights. It adds, in a report published today, that such companies should be concerned about this scenario if only out of self-interest.
A consultancy firm quoted in the report estimates that the pharmaceutical industry has lost up to $1 trillion (€674 billion) in potential revenue as a result of its alleged intransigence.
"The industry is burying its head in the sand," said Jeremy Hobbs, Oxfam International executive director. "More than 85 per cent of world consumers are under-served or have no access to its medicines. The industry must recognise that charging high prices, quashing generic competition, developing medicines only for those rich enough to pay and fighting for harsher patent laws is an ineffective business strategy for new markets, as much as it is a moral outrage."
The report, Investing for Life, cites a "lack of transparency" on pricing policies, "inflexibility" on intellectual property rights, and the "neglect" of research into diseases that predominantly affect poor people in developing countries. Of the latter, Oxfam points out that 163 new medicines were brought to the global market in 1999-2004 but only three of them targeted diseases of relevance to the developing world.
The report says progress has been made in the area of charity work but says the industry must go "beyond philanthropy" in order to make a make a real impact on developing countries and to safeguard its own future.
"The time is ripe for a bold new approach," it says. "The industry must put access to medicines at the heart of its decision-making and practices. This is both a more sustainable long-term business strategy and would allow the industry to better play its role in achieving the universal right to health."
Oxfam says some companies offer differentiated prices but this is "extremely limited" and mainly for high-profile diseases such as HIV/Aids. It adds that drug companies often adapt pricing in developing countries "solely as a reflection of the publicity that surrounds the disease or the country". It cites the example of Abbott Laboratories which reduced the price of its anti-retroviral medicine Kaletra after the Thai government protested about its price.
Another company taken to task in the report is Pfizer, which is quoted as having a "zero tolerance" approach to breaches of intellectual property rights.
The other 10 companies analysed are AstraZeneca, Bristol-Myers Squibb, GlaxoSmithKline, Eli Lilly, Johnson & Johnson, Merck, Novartis, Roche, Sanofi-Aventis and Wyeth.
Mr Hobbs said: "The industry is operating in a short-sighted way because it could gain enormous benefits from emerging markets, including lower research and development costs and cheaper manufacturing. Yet instead it continues to blindly use its same strategies in poor countries. Even today, the richest 15 per cent of the world consumes over 90 per cent of its pharmaceuticals. At this rate, both the industry and millions of sick patients are losing out."
The report says pharmaceutical companies will become more dependant on emerging markets in the future, with Brazil, Russia, India, China, South Africa, Mexico and Indonesia together expected to account for up to one-fifth of global sales by 2020.