Leading policy-makers and scholars explain how market forces, deregulation, and consumer choice can work to improve health care for all Americans.


A New Mood of Co–operation
Andrew Jack, Financial Times, 12-1-06

This article surveys industry programs that make low cost AIDS medicines available in developing countries, and finds much to praise in their operation. Jack also notes that AIDS activists who criticize drug patents and drug prices are often shooting at the wrong target: the relative paucity of AIDS drugs in many developing nations is far from the only bar to effective AIDS treatment. In fact, the lack of health care infrastructure in those same countries is a major impediment.

Rather than demonizing the drug companies, Jack argues for a broad based AIDS strategy that makes liberal use of differential pricing, voluntary generic licensing, and safeguards to ensure that cheap anti–retroviral drugs are not re–sold in wealthy nations.

The drug companies are sometimes disingenuous in their insistence that their own drugs access programmes alone are sufficient; in quoting the "value" of their medicines provided in the developing world at meaningless US retail prices; and in highlighting the threat from copycat poor quality generic drugs.

The activists are frequently too muted on non–drug price related issues that are increasingly recognised as a brake on increased treatment: most notably the absence of adequate funding to build the staff, infrastructure and equipment necessary in the developing world; and the tariff, tax and regulatory barriers on drug imports. Even more than in rich countries, drugs make up a small proportion of total medical costs.

The reality lies between the extremes. Patent–waivers alone are not a panacea, as the sluggish reaction of the South African government after the pharmaceutical industry backed away from litigation demonstrated. India, which hosts the most important manufacturers exporting cheap generic Aids medicines to Africa, has scarcely used them at home. However, there remain wide variations in the conditions applied and the extent to which the access programmes operated by pharmaceutical groups are used. Many of their drugs are available cheaply in theory but in practice are more difficult or expensive to obtain than claimed.

As to concerns over quality, even the US government's Pepfar programme has begun purchasing generic Aids drugs once they have been subjected to the regulatory scrutiny of the Food and Drug Administration, suggesting that copycat products need not be inferior. There is little doubt that activist pressure, generic products and the continued threat of compulsory licensing have all helped push the pharmaceutical companies to offer more generous terms in their access programmes. Furthermore, the advent of tougher patent rules in India and political pressure for stricter intellectual property rights elsewhere is squeezing generic producers even as demand grows for newer and more costly medicines.

Industry best practice seems to be differential pricing in different countries based on ability to pay, with technology transfer and voluntary licences issued to a range of generic suppliers to make their medicines in bulk at the lowest cost. That must be balanced by safeguards to ensure no "diversion" of these generic versions into higher priced markets, which would undermine the revenues required for future innovation. However, pushing down the cost of drugs is only the first challenge in scaling up treatment to the estimated 10m HIV–positive people who will need it by the end of the decade.

Project FDA.
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