1960s economics and modern medicines: a fatal combination

Sometimes it’s hard to keep a bad idea in its grave. Throughout the 60s and 70s, under-developed countries attempted to kick-start their economies by shielding domestic industries from international competition. This quickly resulted in inefficiency, shoddy products (like India’s ubiquitous Ambassador car) and a host of economic headaches. This doctrine has been abandoned by many but now has a surprising new champion--the World Health Organization. This time, however, it concerns a matter of life or death: medicine. This week, negotiators at the WHO in Geneva are looking at ways of improving access to medicines in Africa. After several years of discussions, they have come to the conclusion this will only happen if Africa manufactures drugs itself, instead of importing them. The WHO is only a few weeks from finalising an international agreement that will see wealthy countries subsidising local drug production in Africa. While this plan seems beautifully simple, the WHO seems to have forgotten the lessons of the 1960s: primarily, if there is no sound economic reason for an industry to exist in a particular region, a government will only create problems by trying to force it into existence. There are good reasons why an internationally competitive pharmaceutical industry has not emerged spontaneously in Africa. Plants require large amounts of capital and expertise to build to the highest standards of safety and hygiene. Many of the components have to be imported from Europe and the USA and then maintained by foreign contractors. This all requires hard foreign exchange, in short supply in Africa. The ingredients usually incur import taxes, raising the final cost. One pharmaceutical company I visited recently in Lagos, Nigeria, told me of the extra costs imposed by the city’s highly erratic power supply, vital not only for manufacturing but also refrigerating the finished product: generators and fuel add to the price. So even if the WHO does manage to increase local manufacturing capacity, it may not necessarily result in cheaper drugs, something even the World Bank has admitted. For instance, in May 2007 the Clinton Foundation negotiated a procurement contract with the Indian company Cipla for a copy version of a patented AIDS drug at US$695 per person per year. However, the company that invented it and owned the patent, Abbott, had been selling it to 69 poor countries (including every country in Africa) for only US$500 for five years. In this case, the locally-produced drug was 39% more expensive and came with no proof of efficacy. It would make more sense to save money by importing drugs from where they can be manufactured more efficiently. After all, Britain does not waste money attempting to grow pineapples. The WHO’s experiments with local production could also seriously harm people’s health. The plan rests on the ability of African companies to manufacture precise copies of brand-name drugs. This is not as simple as knocking off a copy DVD: unless the copies are exact molecular replicas of the originals (“bioequivalent”), there is no guarantee they will work on the patient in exactly the same way. If the levels of active ingredient in the copy are too low in AIDS drugs, for instance, it will encourage mutations of the virus and create drug resistance, as demonstrated by Thailand’s knock-off called GPO-Vir. Patients will then have to be moved on to expensive and complex “salvage therapies”. The same happens with malaria--with 35% of the world’s population at risk from the disease. Imprecise copies of other drugs will certainly result in an increased risk of clinical failure--otherwise known as death.According to the WHO, less than 70% of countries have a properly functioning drug regulatory system. In West Africa, there are no laboratories capable of testing for bioequivalence. There is not a snowflake’s chance in hell that a Western doctor would risk such drugs on his patients, so it shows deplorable double standards that the WHO should recommend them to Africans. Member states should show leadership by pushing the WHO to focus on the issues that really matter--like how to build African health infrastructure and recruit doctors and nurses. Without these things, even unlimited free drugs would be wasted on patients. Philip Stevens is Director of Policy at International Policy Network, a development think-tank based in London. Contact: philip@policynetwork.net