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Profit, Drugs, and International Markets

Drug Companies’ Expansion Into Emerging Markets

by DR. CESAR CHELALA

Faced with declining prescription drug sales in the U.S., and having lost patent protection for many profitable drugs, the drug industry is relying increasingly in new markets such as China and other fast developing countries, such as those in Africa. That expansion, however, is oftentimes tainted by unsavory commercial practices.

The Economist Intelligence Unit estimates in $166 billion drug sales by 2017 in China, making of this country a natural market for companies looking for further growth. In Africa, although the size of the market is still small, the rapid growth of many big cities offers interesting opportunities for development. Pharmaceutical spending in Africa may reach $30 billion by 2016, from approximately $18 billion now. According to the World Health Organization (WHO,) Africa has 11 percent of the world’s population, yet it accounts for 24 percent of the global disease burden.

The rebound of the economies in several Latin American countries has made of the region an attractive market for drug companies. The Latin American market is estimated at $70 bn in sales. Brazil, which is the largest market in the region, grew by 10 percent in 2010, and is now worth $26 bn, according to IMS Health, a company that provides information services and technology to the drug industry.

In China, relationships between doctors and patients are under stress. One of the reasons is the unethical relations between many doctors and several drug companies. Although the practice of bribing doctors is not new in China, new allegations have surfaced recently against some well known drug companies that demand new and more effective measures against this practice. According to some estimates, up to 30 percent of the cost of drugs is kicked back to doctors to increase sales.

There are several ways in which doctors are bribed by drug companies: they go from making cash payments and all-expenses-paid trips, to presents for their families and even “sexual favors.” Drug companies also bribe hospitals to stock their drugs so that doctors can prescribe them.

Among the latest allegations is against GlaxoSmithKline (GSK), accused that its staff had improperly used cash and other incentives to boost the prescription of Botox in China, which the British group sells under agreement with the patent-holder Allergan.
Although China now accounts for only a portion of the company’s total earnings (about $1.2 billion in 2012 compared to $40 billion in worldwide sales) the country is one of the company’s fastest growing markets.

Allegations against GSK are not limited to China. Last summer, the company agreed to pay a $3 billion fine to settle criminal and civil charges with US federal and state governments resulting from illegal activities carried for over 10 years. The British pharmaceutical group was accused of selling antidepressant medications in the US for unapproved uses on children, concealing critical evidence from the US Food and Drug Administration.

In addition to GSK, several other companies have been accused of rampant bribery, among them Eli Lilly, Pfizer, AstraZeneca, Sanofi, Novartis, Novo Nordisk and UCB. A former employee of Eli Lilly has accused the company of spending more than $490,000 to bribe doctors in China. Over the last year, both Eli Lilly and Pfizer have been accused of making illegal payments in China. The Swiss drug maker Novartis was also accused of bribing doctors to prescribe its anticancer drug Sandostatin LAR.

In Africa, drug companies have been accused of testing dangerous drugs in children or conducting drug tests without obtaining informed consent. In Nigeria, a panel of medical experts accused Pfizer Inc. of having violated international law during a 1996 meningitis epidemic by testing an unapproved drug for use in children. According to Nigerian officials, Pfizer’s illegal actions killed 11 children and left dozens of children disabled.

Pfizer never obtained authorization from the Nigerian government to give the untested drug to nearly 100 children and infants. Nigerian medical experts stated that an oral form of Trovan, the drug used in the test, had apparently never been given to children with meningitis.

Thirty Nigerian families whose children participated in the Trovan trial filed suit against Pfizer in 2001 under the Alien Tort Claims Act, to have the case heard in the US instead of in Nigeria. On July 30, 2010, Pfizer agreed to pay $75 million in a settlement to have the charges dropped. According to Wiki leaks, however, Pfizer allegedly conspired to have Nigeria’s attorney general drop the charges instead of having to pay up.

According to a report by the Public Citizen’s Health Research Group in Washington, D.C., four companies (GlaxoSmithKline, Pfizer, Eli Lilly and Schering-Plough) accounted for more than half of all financial penalties imposed over drug companies in the last two decades.

In Latin America, drug companies have pursued an aggressive policy to the market. Such policy has been harshly criticized because it translates into increasing prescription drug prices for the consumers. Those that oppose these policies are bound to pay a high political price for it.

Argentina is a paradigmatic case in that regard. Dr. Arturo Umberto Illía, who was elected President of Argentina in 1963, was overthrown in 1966 among other reasons because of the limits he tried to put to the drug companies in Argentina. In 1964 the “Medicine Law” was passed, tightening regulations to the pharmaceutical industry. That law also granted the Ministry of Health the authority to control prices of basic medicines.

This law also forced pharmaceutical companies to present to a judge an analysis of the costs of their drugs and to formalize all existing contracts. Impartial observers and people along the political spectrum believe that these restrictions alienated business interests and were decisive in Dr. Illía’s overthrow by a military coup.

Emerging markets offer exceptional opportunities for prescription drug companies’ development. That development, however, should be done according to international norms and practices and not only with the companies’ profit in mind.

Dr. Cesar Chelala is an international public health consultant and a co-winner of an Overseas Press Club of America award.