October 28, 2004  ·  William Fisher

The fact that Americans pay more for prescription drugs than do Canadians or most Europeans has been prominent in the news lately. Both Kerry and Bush now promise to do something to reduce the gap. Virtually absent from the public discussion of the issue has been an even more troubling aspect of the way in which prescription drugs are currently distributed: the inability of the residents of developing countries to obtain life-saving drugs at prices they can afford. This post provides a few details concerning the seriousness of that problem. The next post will outline � and solicit reactions to � a few ways in which the problem might be solved or at least mitigated.

The phrase, �healthy life expectancy� (HALE) is used by the World Health Organization to denote �the number of years in full health that a newborn can expect to live based on current rates of ill-health and mortality.� The HALE of the residents of Japan is currently 75 years. The HALE of the residents of Canada and most countries in Western Europe is between 70 and 75. That of residents of the United States and the remainder of the countries in Western Europe is between 65 and 70. By contrast, the HALE of the residents of most countries in sub-Saharan Africa is between 28 and 45. (Click here to see a map of the world, showing the HALEs of all countries.)

Why the huge disparity? Why do people living in developing countries die so much younger than people living in the developed countries? As one might expect, many factors are at work. The most important are: poor nutrition, sanitation, and water; climates amenable to mosquitoes and other sources of disease; inadequate education concerning methods for preventing and treating diseases; poor health-care services; and, last but not least; lack of access to appropriate medicines.

It�s the last of these factors that we�ll focus on here � partly because, as Michael Kremer has shown, it represents an ever increasing source of the problem and partly because it may be the easiest of the factors to remedy through adjustments in the relevant legal rules.

The inaccessibility of appropriate medicines in developing countries has two causes or facets. First, second, existing drugs are priced at levels that place them out of the reach of most residents of those countries. The most dramatic example involves AIDS drugs. 93% of the residents of Southeast Asian countries who are infected with HIV cannot afford the anti-retroviral drugs that would save their lives. 99% of the 25,000,000 residents of sub-Saharan Africa who are infected with HIV cannot afford the anti-retroviral drugs. The figures for other diseases are not quite so appalling, but are still very grim.

Second, too little effort and money is being devoted by American, European, and Japanese pharmaceutical companies into the development of vaccines or treatments for the kinds of diseases that disproportionately affect developing countries � e.g., malaria, measles, pertussis, and diarrhoel diseases. One especially dramatic indicator: Between 1975 and 1997, 1233 new drugs were licensed in the world for the treatment of human diseases. Of that number, only 13 addressed the aforementioned �tropical diseases.� Of the 13, five were byproducts of veterinary research. (Sources: Pecoul; Kremer) Why this bias? The primary explanation is that the pharmaceutical companies derive the overwhelming majority of their revenue from countries where tropical diseases are not common. (For example, 94% of the 2003 revenues of American pharmaceutical companies came from North America, Western Europe, Australia, and Japan. Only 6% came from the rest of the world, which bore over 99% of the burdens of the tropical diseases mentioned above.) It�s neither surprising nor immoral that the companies would focus their research and development on diseases prevalent in regions where they make money and neglect diseases prevalent elsewhere. But the net effect is tragic: millions of people are needlessly suffering and dying.

So that�s a very brief sketch of the essential features of the problem. In the next post, I�ll identify a few potential solutions.

  • James Robertson

    There’s a reason pharma companies don’t invest in tropical disease vaccines – no profit. Same reason there’s a shortage of flu vaccine – no profit.

    Government stepped in to “help” by buying up doses each year at fixed cost. There were over 2 dozen companies making flue vaccines in the early 70′s, and there are 2 now.

    Centralizing the process is a recipe for disaster.

  • pagoff

    Bush in his famous State of the Union in which he was sure WMD were in Iraq, touted generic drugs for HIV that cost $300/year. His HIV treatment program however insists on using only patented drugs costing over $600/year. Meanwhile generics now cost $100/year.

    The Bush program serves drug companies rather than patients. His funding will treat 1/6th the number of people than could be service if generics were used.

  • Max Lybbert

    Drug companies are in an unusual industry. It is, apparently, possible to lead a “productive” career as a researcher for them without ever coming up with a usuable drug. The whole thing is hit and miss — even with science. I think some of it has to do with the chance of stumbling across somebody else’s alread-patented drug.

    OTOH, drug companies are among the most profitable in the world, and I believe that patents have much to do with it. I believe it is necessary to take another look at the system. We need a fair system in place.

  • http://www.glome.org/ Trevor Hill

    You’re basically characterizing capitalism as a problem. You also seem to be saying that drug companies should allocate their resources to pursuits that don’t benefit their customers or stockholders. Doesn’t make much sense to me.

    Not to mention, patents only last 20 years. All medicines whose patents have expired are available as generics. Simply saying that they deserve it now because they need it doesn’t make much sense to me. I guess I’m not a communist.

    The real problem is the lack of real property rights and a reliable legal and governmental system in 3rd world countries. Once they have those, they will be able to work for value, and buy the medicines they can afford.

  • http://bigfaceworm.blogspot.com/ Trey Jackson

    I agree that the drug companies could use some reform and that they are focusing on drugs that make them profitable, as opposed to drugs that help cope with disease.

    However, the most cost effective and economically viable ways of helping developing countries is to fix the problems of “poor nutrition, sanitation, and water; [...] inadequate education concerning methods for preventing and treating diseases.”

    Which makes more sense, treat everyone with AIDS with expensive drugs? Or to educate them to either abstain or use condoms?

    Do you want to stop the disease, or simply treat the symptoms?

  • Max Lybbert

    I don’t know if Trevor was responding to me, another poster, or to Lessig. I’ll respond to him.

    /* You�re basically characterizing capitalism as a problem. You also seem to be saying that drug companies should allocate their resources to pursuits that don�t benefit their customers or stockholders. Doesn�t make much sense to me.
    */

    I, for one, would like to keep the “shareholder maximization” rule in place.

    However, I also recognize that patents don’t exist in nature. Patents have an interesting history, and often involved a form of royal cronyism (the king granting a particular tea company exclusive rights to sell tea in the American Colonies, for instance). The Constitution recognizes that patents aren’t a bad idea, per se, and grants Congress the authority to grant patents and similar rights “for limited times” to encourage the “progress of science and useful arts.”

    I don’t want to abolish patents, but I do think we ought to review patent law every so often to determine if they actually promote the progress of science.

    /* Not to mention, patents only last 20 years. All medicines whose patents have expired are available as generics. Simply saying that they deserve it now because they need it doesn�t make much sense to me. I guess I�m not a communist.
    */

    It is possible for non-communists to have issues with the current patent system. In fact, patents are a definite government incursion on the free market — they set up an artificial monopoly specifically as a way to prop up prices.

    The question, to me, is how much does each patent affect the market. I don’t want to abolish drug patents because I know companies can’t be profitable if they don’t recoup sunk research costs. In fact, they must also use the sucessful drugs to pay for all the research that doesn’t go anywhere.

    And the current system does that pretty well. The drug companies are among the most profitable in the world. Much of that profit comes from the patent system, and I believe it is bad public policy to run a one-sided system. I’m not saying that the current system is one-sided, either. I’m saying that we ought to look and determine if it is.

    /* The real problem is the lack of real property rights and a reliable legal and governmental system in 3rd world countries. Once they have those, they will be able to work for value, and buy the medicines they can afford.
    */

    I would also like to see the Third World countries (and even countries doing a little better than Third World) come out of poverty. Many companies can even make a profit making this happen (think about it, how much more work can somebody do with a lawn mower engine than with a donkey — Briggs & Stratton is among the companies that will make a profit boosting somebody else’s standard of living). That won’t make the patent system any more fair.

    ***

    I did find Trey’s comment very insightful.