AIDS and the profit factor
PHILADELPHIA (CNN) - CNN's Charles Hodson interviewed the CEO of GlaxoSmithKline, Jean Pierre Garnier.
Q: Here's the scenario, you have tens of millions of HIV/AIDS sufferers that are dependent on anti-retroviral drugs to stay alive, on the other hand you've got yourselves and your competitors, large profitable companies. How do you decide the price, the terms at which you make the drugs available in developing countries like Uganda and Brazil?
A: In the least developed countries we have to make sure we will provide these supplies for a long, long time because of the number of people suffering from the disease and the length of time it will take to treat them. So we need to have a sustainable factor here and at the same time we are not looking for a profit-making intervention for those countries because they don't have the means to buy our medicines so we have to lower the price to cost price.
Q: So the price at which you sell those drugs in developing countries is the cost of making and distributing the drugs?
A: For the least developed nations, that is right and that's why we have been very transparent about prices because they correspond to the cost of making the product. We are hoping to pass on further cost savings although we have already discounted the drugs by 90 percent on what we charge in the U.S. or in Europe but we can go even further if the demand for the product increases because we would have economies of scale and we are committed to passing on the extra savings to the people who are buying the drugs and need them badly.
Q: You say they need them badly. There is a huge humanitarian dimension here. You are providing drugs that make the difference between life and death. Are you willing not only to sacrifice profit but actually to eat into profit to recognise the role you play globally?
A: The problem is that without profit there will be no new drugs. We have to be very responsible. The reason we are in this predicament, in the first place, is that we invented the drugs. They are very important. We need to sustain the enterprise. We are not going to be able to sustain the enterprise and invest in research if we make no profits.
Q: But you have huge profits in the United States. The drug companies typically make about 60 percent of all their profits in the U.S. Why do you need to recover any of your profits in developing countries?
A: We don't. In the least developed nations we make no profits with the AIDS drugs. We are selling them at cost, but somebody has to pay for R&D and that's why we charge higher prices in Europe and the U.S. In a sense we are asking the rich countries to pay for R&D and we are providing drugs basically at the lowest possible cost to the least developed nations.
That is not all we are doing. We have massive donation programmes for other drugs in malaria in LF. We have committed to a donation programme that will cost $1 billion over 20 years for LF so we are making substantial efforts.
We are one of the most philanthropic companies in the UK and at the same time we are investing to find a cure. It's not good enough to treat AIDS patients. We need a cure. We are one of two major pharmaceutical companies with a vaccine for AIDS in the clinic. We are also the only company with a vaccine for malaria in the clinic. We are looking for the real solution to the problem and for that we need money. We need to continue to discover new drugs and new vaccines.
Q: Concentrating on HIV, at what price will you make that available?
A: Because we are doing this work in collaboration with the Gates Foundation and other interested parties, we will be able to sell the vaccines in the least developed nations at cost. We are conscious of the fact that when you deal with an epidemic of that proportion we have to go all out to help with the problem and profit is a secondary consideration. But we are not giving those products away free of charge forever because it is not sustainable.
Q: What I don't understand is that you, along with other drug companies, sued the South African government over their decision, if necessary, to import generic drugs or create their own generics in effect to ride rough shot over your intellectual property. Why did you bring that case?
A: This is a distraction compared to the crisis of AIDS in Africa, but let me deal with it very quickly. We exist because we benefit from the intellectual patent system. If there was no protection of intellectual property there would be no R&D, there would be no discovery of new drugs.
We have to make sure the system is maintained. When a country attacks directly the international patent system, we have to defend ourselves and this is exactly what happened a few years ago. The legislation proposed by the South African government was basically denying the existence of an intellectual patent system and we had to step in. In fact the settlement was reached on the basis that the South African government recognised the validity of the international agreement TRIPS.
Q: This is the agreement under the WTO?
A: The agreement that was signed by poor countries with the rich countries a few years ago. It provided the poor countries with major tariff advantages but there was one counter part in that they had to start to recognise the value of intellectual property, of patents.
The patents are not that important but if South Africa can beat the system then a lot of other countries, including much richer countries will do the same. The generic companies operating in India want to beat the system and continue to pirate our drugs.
Q: But that's your real agenda isn't it? The change of heart was because Cipla of India and others, presumably, can offer anti-retroviral drugs for something like $300-$350 per patient per year, which is a fraction of what you are charging in the U.S?
A: Oh it is clearly a fraction of what we are charging in the United States but then again Cipla doesn't have to do any R&D and never did. So I think we have to be careful. There is a role to play for the generic companies. All we are asking is respect of patents. Many generic producers respect the patents. The problem with Cipla is that they don't.
Q: So what you are saying is that you don't want the commercial pressures of the generic makers but you are quite happy to be philanthropic?
A: We do not have the monopoly on philanthropy and we don't look for that monopoly. We will do our part but what we want is a fair and level playing field. It is not normal that in India we cannot introduce our own drugs, discovered by our own scientists, ahead of the generics and today that's what Cipla does. They will launch our products before we do because they are able to capitalise on our efforts. This is not good for the industry and we have to defend ourselves.
Q: Nevertheless, do you accept that you looked bad bringing that case?
A: We did because there were a lot of facts in there that were not brought to the surface. The press portrayed it in a sort of confusing way. Patents have nothing to do with access. That's why, for instance in Africa, millions of people will die because they can't get access to malaria drugs which are all generics. The lack of medicine in Africa has much more to do with a lack of infrastructure, with a lack of means and that's why I've been calling for partnership to not only provide cheap drugs but also to start to build an infrastructure, to start to provide access to the millions of people who need it. But of course companies such as Cipla have an interest in confusing access and patents. It is their chance to sabotage TRIPS and therefore in this economic war there are different interests at play.
Q: In the countries where you recover your profits and your R&D costs, in North America and Europe, you are under pressure from governments and health management organisations who presumably are not going to be happy if you reveal that it actually only costs you a few hundred dollars to provide drugs when you are charging people in New York or San Francisco $10,000 or more. That's the real issue, isn't it?
A: We have been very transparent about our costs with this tier pricing practice. Both the EC and, at the time, the Clinton administration backed the practice. They committed themselves not to take advantage of low prices in Africa to win price cuts or concessions. Even management care organisations said the pharmaceutical companies were doing the right thing in providing medicines at cost to people who otherwise couldn't get them.
Q: The United Nations Secretary General, Kofi Annan, has launched a fund to tackle the problem of HIV/AIDS worldwide, particularly in the developing countries. The Bush administration has said it will provide at least $200 million. What will be your part?
A: We have to fulfill our mission, first and foremost, to discover the vaccines that will stop AIDS spreading throughout the world. This is the best thing we can do for society.
Q: How far away are we from that point?
A: I think the vaccines that are going into the clinic this year have a chance of success. Of course, we cannot tell ahead of time whether those vaccines will succeed, but the pre-clinical data we have has been far more encouraging than anything I have seen in many years.
In-depth: AIDS -- 20 years of an epidemic
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