- guardian.co.uk, Sunday April 22 2001 00.29 BST
- The Observer, Sunday April 22 2001
Jeremy Paxman abandoned all pretence to impartiality on last Thursday's Newsnight . 'Congratulations, minister' he gushed to the South African health secretary on the court victory over the drugs companies, with a smile almost as big as the minister's. You almost expected Paxman to start dancing round his desk singing 'Nkosi sikelel' iAfrika'.
Many viewers will have shared his joy, because on the face of it South Africa's win was a triumph of good over evil. The drugs barons have been obstructing a poor country's efforts to tackle its horrendous Aids problem by pricing it out of the market, and then trying to block, via the courts, Its attempt to get hold of cheap drugs. There seems to be no clearer case of heartless exploitation by a profit-crazed multinational.
But nothing is that simple, and, while applauding the fact that South Africans and others will have greater access to life-saving drugs, it is increasingly apparent that the verdict will have some horrible side-effects, both for the pharmaceutical industry and for consumers in wealthier parts of the world.
The drug companies' stock defence of their pricing and patent system is that they need the profits to re-invest in research and development of new cures. That has become a clichéd mantra from the pharmaceuticals, but it is true nonetheless. Without present profits, the stream of future drugs dries up, plain and simple. The only assets drugs companies have are their patents, which ensure this revenue stream.
Drugs come 'off patent' in the normal course of events anyway, but the Pretoria decision will accelerate the process, potentially throwing the economics of the drugs business into chaos. This is to nobody's benefit. One possible result of this upheaval, as Paul Farrelly describes below, is that big drugs firms will want to get bigger in order to preserve margins and market share. Again, it is difficult to see who benefits from this, especially not Third World countries, which would have to deal with bigger monopolists.
The South Africa verdict paves the way for a flood of cheap, and potentially dangerous, drugs from countries such as India and Thailand, the main non-patent manufacturing centres. Despite their best efforts, these will inevitably be less well regulated than those produced by European and American manufacturers.
It is true that the drugs companies were their own worst enemies in South Africa. Bringing the case in a country with 4.7 million HIV-infected people was insensitive; naming President Mandela, perhaps the world's most respected politician, in the action was crass; and it was a PR disaster to pursue the case to the point where the only way out was 'shame and humiliation', as their climb-down was interpreted.
But it should be noted that some companies had already begun selling drugs cheaper in developing countries. Merck and Bristol Meyers Squibb had offered to sell anti-Aids drugs at manufacturers' cost price ahead of the Pretoria verdict.
And finally, there is a viable alternative being proposed at next weekend's meeting of the IMF by our very own Chancellor. Gordon Brown wants rich nations to set up a fund to encourage the drugs giants to supply cheaper drugs to poorer countries. That makes sense. In a commercial world, there is no reason the drugs giants should not be offered a financial incentive to develop a social conscience.
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