Even Pills Link Back to Events in the Big Countries

I’m kicking off this week with the conflicting claims over the big drug companies withdrawing flagship medical research funding supposedly because of the success of Pharmac in reducing general drug costs in NZ.
Pfizer recently cancelled $70m funding for Auckland Cancer Society University based research here and followed with stern warnings delivered to NZ government representatives at a recent Pfizer funded US conference where it spelled out the link between low pill prices here and continued drug company funding of medical research in NZ. At much the same time various medical professionals chorused that research here was being put at risk by Pharmac, whose crime is to dramatically cut drug costs for Kiwis by very effective bulk buying. The public could well be wondering if this is all as bad as it sounded. Pfizer did not call attention to its $715million of recent fines in the USA for a subsidiary misbranding medicines, nor whether this fine payment caused the limit to their research budget. As Pfizer pays for many clinicians to attend various conferences in Hawaii and Florida there are doubts to the independence of some clinician statements of support.
It’s not that simple folks.
USA’s phenomenal capital growth since the late 80s has resulted in quite a change in the list of top companies. They used to be the big telecos and oil companies like AT&T and Exxon, but not any more. That list of big hitters is now dominated by fortunes built on patents and copyright. We all know that Bill Gates and Larry Ellison are super rich, but so are the drug companies. Software programs and pills and potions share one thing – both are characterised by selling prices many, many times the cost of production. These high prices (that create the massive wealth of these corporations) are justified by the costs of developing the software and the pills. Fair enough, but these sale prices also cover enormous marketing and lobbying campaigns often backed by a US government determined not to put this patent backed wealth at risk. George W has just prohibited his own US government from doing a Pharmac bulk buy to drive down domestic US drug costs!
Such huge gaps between sales price and unit production cost has its risks for the companies involved. Pirating versions of both pills and programs is very appealing and countries such as Indonesia and to a lesser extent Russia and China have been quick to fill the commercial gap. For example a program selling for $299 at retail can be bought in these markets for perhaps $5 and still return very high margins to the pirate producer. Pills which often sell for over $20 each, (but as subsidised medicines you don’t see this cost) can be produced for cents if you strip out the research and marketing components.
In order to protect these huge values USA mandates that countries enjoying favourable trading rights with them must recognise these patents and copyrights. Countries like Russia and Indonesia then have to value the additional costs and lost revenues against other benefits of trade agreements. This pressure to come into the fold slowly leads China to more Western trading behaviour. For those products where the patents have expired (and Pharmac has been very good at shifting to generics) other pressures are brought to bear, and this is where the research funding is offered or withdrawn. It influences the market in the receiving country.
Do we really have NZ based research unavailable elsewhere or is it just good marketing for Pfizer and others to be seen to invest here to support the notion of huge drug development costs? Do we save more with cheaper drugs than what we would gain from the research funds? Are those supporting the big drug companies free of their influence? And lastly look at what the pressure from Africa has done to drop HIV drug costs to save the drug barons from looking heartless.
We need to be very cautious in responding to upset University researchers and defensive US drug lobbyists. It’s possible that a free trade agreement like Australia’s could actually reduce our range of pills and price them off our shelves. Next week the real risks in Free Trade Agreements during the war on terrorism.
Wayne Brown
By the way, why do judges get honours for just doing their job?