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Mail & Guardian (Johannesburg)

April 24, 2003

When disease becomes profitable

 

It is the biggest and most powerful drug company on the planet. Its famous

blue diamond-shaped Viagra pills have made it a fortune beyond the dreams of

small nation states and the butt of smutty jokes worldwide. But Pfizer's

global reach has not turned the world's third largest business into a

benevolent giant, according to its critics.

 

Quite the contrary. The vast multinational stands accused of blocking

reforms to global drug pricing that would help lift impoverished countries

out of disease and spur their development.

 

As shareholders gather for the annual general meeting in Michigan this

morning, their investments snugly coining profits at the rate of $1-million

an hour, critics are asking increasingly urgent questions about Pfizer's

attitude to those who need medicines in poor countries.

 

The takeover last week of Pfizer with Pharmacia, which took the New

York-based giant past its British rival GlaxoSmithKline to become the

largest company of the most profitable industry on the planet, makes it all

the more important, they say, that Pfizer takes a lead in conceding a system

of low prices in the 90% of the world worst hit by disease.

 

The battle for low prices for the poor pits the basic instinct of huge

American corporations to make money against a growing public belief that

pharmaceutical companies have a special humanitarian duty to help the sick,

wherever they are in the world and however little they can afford to pay.

 

Already the major drug companies have slashed the prices of Aids drugs,

albeit as a result of a public outcry combined with competition from generic

companies making cheap copies of their drugs in countries that do not yet

acknowledge their patents.

 

But now the stakes have risen higher still. The drug companies have

recognised that they must be seen to help in the Aids crisis, but Pfizer and

the rest want to draw a line in the sand, separating Aids, malaria and

tuberculosis and similar infectious pandemics from the insidious and

profitable diseases that affect millions in rich countries as well as poor,

such as cancer. Cheap Aids drugs - yes. Cheap cancer drugs? Well, says

Pfizer, poor countries haven't asked for them. They've got far too many

other problems.

 

" I've got to tell you, I don't know very many health ministers in very many

poor countries that are approaching pharmaceutical companies, generic or

non-generic, asking for cancer drugs, " says Robert Mallett, Pfizer's

combative vice-president for corporate affairs.

 

But Rafael Bengoa, director of management of non-communicable disease at the

World Health Organisation, says they had better look out. The struggle over

Aids drugs will inevitably become a struggle over insulin and cancer drugs

too. While Aids and Sars hit headlines, he warns, " the invisible epidemics

are killing more people than those " .

 

Pfizer says talk of cancer drugs is irrelevant. This is a massive but in

many ways old-style American corporation, making megabuck profits that to US

eyes look more impressive the higher they climb. For over 150 years, since

young Charles Pfizer left Germany with $2 500 borrowed from his father and

set up in Brooklyn with his cousin Charles Erhart, the company has prided

itself on its entrepreneurial spirit and the quality of its products.

 

Their first big hit was santonin, a bitter and unpopular medicine used to

treat intestinal worms. The pair, inspired by Erhart's confectionery

background, mixed it with almond-toffee flavouring, moulded it into a cone

shape, and never looked back.

 

A smart line in painkillers, preservatives and disinfectants during the

civil war confirmed Pfizer as a runaway success story. In 1955, it began

selling antibiotics in the UK. By 1972 it had crossed the billion-dollar

sales threshold. By 1980, it had its first billion-dollar single drug -- the

anti-inflammatory medicine piroxicam, brand-name Feldene.

 

It's a classic American success story. Pfizer has made its own luck, called

all the shots and has now reached the top of the pinnacle. But the pressure

is on to introduce the kind of tiered pricing system -- different rates for

different states -- that runs counter to its philosophy.

 

Campaigners who took to the streets and lambasted the drug giants over the

appalling spectacle of young men, women and children in Africa dying of

Aids, which is treatable although not curable in rich countries, have now

widened the grounds for complaint. They want a transparent system which will

allow poor countries to waive the multinational giants' patents and buy or

make whatever cheap drugs they need to safeguard the health of their people.

That means cancer, asthma, diabetes as well as Aids, TB and malaria.

 

In Geneva, negotiations that were supposed to endorse the right of poor

countries to obtain cheap medicines when they need them have ploughed into a

quagmire. Developing countries want the so-called Doha declaration of the

World Trade Organisation talks to specify that they can have drugs for any

illness. Just before the end of the year the US, whose interests appear

indistinguishable from those of the pharmaceutical industry, blocked a deal.

 

Pfizer was one of the companies lobbying energetically against concessions

over Doha. " Well I think we are comfortable with the position that the US

government has taken as a whole, " says Mallett, who used to work in the

office of the US Trade Representative -- the government department in charge

of the negotiations.

 

In fact, Pfizer is happy to have no deal at all. Existing trade agreements

give the very poorest countries the option to waive patents if they need to,

he insists. But Paul Zeitz, of the Global Aids Alliance, says they are not

enough. " Developing countries are highly intimidated by the US Government

and Pharma and the Doha Declaration provides them some protection, " he says.

The issue could scupper the trade round, fire the anger of developing

countries and protesters and turn the WTO meeting in Cancun in September

into another Seattle.

 

Pfizer knows how to flex its lobbying muscles. Three years ago it was among

pharmaceutical companies who targeted a statutory committee of the

Australian government responsible for recommending whether medicines should

be paid for by the state, and at what price. (Drug prices in Australia were

among the lowest in OECD countries.) Critics claim industry pressure led to

the dissolution of the pharmaceutical benefits advisory committee and the

re-appointment of some but not all members, together with an industry

representative.

 

Pfizer also sued two members of the committee over their refusal to

recommend Viagra, the impotence pill, to the government for state subsidy,

but lost their court action.

 

Pfizer rejects any suggestion that it is not doing its bit for the poor

although it won't participate in tiered pricing schemes administered by

outside independent bodies, as recommended by Clare Short's Department for

International Development working group last year.

 

" The notion that some body out of Europe or the US should come up and start

dictating what prices ought to be somewhere else strikes us as a rather

radical notion, " says Mallett. " We do pricing by markets. "

 

In Aids-hit Africa, in response to international pressure, Pfizer donates

its drug fluconazole (brand name Diflucan) to nations where it is

desperately needed to treat cryptococcal meningitis and oral thrush, which

commonly infect and can kill those with weakened immune systems.

 

But donations are not good enough, says the Nobel Peace prize-winning

organisation of volunteer doctors, Medecins sans Frontieres. " We're talking

about systematic long-term medicines provision for about 90% of the world's

population, " says Ellen t'Hoen of MSF. " You can't possibly deal with that on

a donations basis. It is not realistic. The solutions need to be found in

the trade area. "

 

" Whatever companies like Pfizer say in their glossy annual reports, the

really big issue is how to make medicines affordable for poor people, " says

Sophia Tickell, Oxfam policy adviser.

 

" This is not a question of philanthropy and donations; it is about giving

the 40 million people who die every year from preventable diseases access to

medicines. It is scandalous that the likes of Pfizer refuses to budge on

changing the rules of trade so that life -- saving drugs are available to

the poor, not just the rich. "

 

" Drug donations programmes are definitely not the right answer, " says Paul

Zeitz of the US-based Global Aids Alliance. " They (the drug companies) have

been extremely slow to offer them, they implement cumbersome enrolment and

eligibility criteria, they protect the patent system, and they allow the

company tax write-offs and good public relations, but they do not solve the

problem. "

 

In fact there have been major problems with the implementation of Pfizer's

flagship fluconazole donations programme. On paper, the Diflucan Partnership

looked the very model of responsible and generous corporate giving. The

world's largest drugs company would offer Diflucan, which can be a

life-saver for HIV/Aids patients, at no charge in 50 of the world's poorest

countries and fund medical training to go with the donations.

 

There would be " no dollar or time limits " , said Hank McKinnell, Pfizer's

chief executive, and the director general of the World Health Organisation

hailed it as evidence that " the private sector is showing it is willing to

do its part to fight the HIV/Aids epidemic " .

 

The reality on the ground was very different, according to some of those

trying to distribute the free supplies of Diflucan. A year after the launch

of the Diflucan Partnership, Pfizer effectively admitted that supplies were

not reaching the intended recipients in great enough numbers.

 

Instead of running the scheme in-house, it sub-contracted administration to

Axios International, a Paris-based company which performs a similar role

with other pharmaceutical company's donation programmes. Even now, however,

the intended target of 50 countries is not even close -- free supplies have

reached just 15, in some cases in very small quantities.

 

Joseph Saba, chief executive of Axios, says: " What Pfizer was trying to do

was go country by country, but with 50 countries it was taking a long time

so they came to us to open it up. I hope that if you ask us in six months'

time, it will not be 15 countries, but 20-25. Setting up the programme took

a long time. It's important to acknowledge that. But it was not because

Pfizer was dragging its feet - it's because they were figuring out the best

way to do it. "

 

Even so, the fluconazole donation programme is not a model that campaigners

want to see copied. Charity, at the whim of a multinational corporation,

they say, is not a sustainable response to pandemics not only of Aids, TB

and malaria, but increasingly also the diseases that are stealthily creeping

across the developing nations as the rich countries of the US and Europe

export the unhealthy diet and lifestyles of the affluent.

 

Pfizer says it's only really about the expensive drugs needed for the Aids

pandemic. " We cannot as an industry solve the healthcare problems of the

entire poor world, nor should we be held accountable to do that. What we

should be held accountable to is to the extent we can to make our products

available on affordable terms to many of the poor countries, " says Mallett.

 

Shareholders may not agree. A recent report from investment houses in the

City of London sent a warning to the pharmaceutical companies that they must

pay more heed to the needs of the poor in developing countries if they are

not to damage their share values. At Pfizer's AGM today, there is everything

to play for.

 

$10bn-a-year empire built on Viagra

 

There has never been a drug company quite like Pfizer. Last week it

completed the $60bn takeover of its rival Pharmacia, allowing it to reclaim

top ranking among pharmaceutical companies with an 11% share of the world

market; it is now 50% bigger than its nearest challenger, GlaxoSmithKline.

 

It has 120 000 employees and a stock market value of $180-billion, making it

the world's fifth-largest quoted company -- only Microsoft, General

Electric, Exxon Mobil and Wal-Mart are bigger .

 

Last year, 10 of its drugs recorded individual sales of more than

$1-billion - the industry definition of a blockbuster -- and the group

boasts that on any given day, 40 million people around the world are treated

with a Pfizer medicine; the range runs from Viagra for impotence through to

consumer brands such as Nicorette, Listerine and Sudafed. The profits from

this enterprise are astonishing: Wall Street analysts predict Pfizer will

make close to $10-billion this year -- about $27-million a day, including

weekends, or over $1-million an hour, every hour.

 

Perhaps the most astonishing aspect is that a decade ago Pfizer was among

the also-rans of the global drugs league. In 1990, it ranked only 14th and

looked more like prey than predator. Its big leap forward came with the

discovery of three blockbusters in the early 1990s -- Zoloft, an

antidepressant, Zithromax, an antibiotic, and Norvasc for hypertension.

 

By 1997, profits had doubled in five years to $2,2-billion and Pfizer then

hit the jackpot with Lipitor, a cholesterol-lowering drug.

 

By 1999, Lipitor was the world's biggest-selling prescription drug, with

sales that year of almost $4-billion, a figure that has since doubled. After

the biggest-selling drug came the most famous. Viagra, developed by Pfizer's

British laboratories in Kent and a marketing triumph in an area of medicine

that most pharmaceutical companies had written off as too seedy or too

obscure.

 

The critics complained that Pfizer's sales force -- with a reputation for

employing former militarypersonnel -- had turned the business of selling

prescription pharmaceuticals into something akin to selling soap powder, but

Wall Street loved it. The brash New York company was clearly a winner.

 

Then came last year's bid for Pharmacia, which initially gave Wall Street

the jitters and sent Pfizer's shares to their lowest level for four years.

Nine months of sweet-talking by chief executive Hank McKinnell, however,

seems to have done the trick.

 

This time he is promising cost savings of $2,5-billion over the next three

years as surplus jobs are shed, although the sceptics argue that the company

is now just too big for its own good.

 

To keep earnings growing at 10%-plus a year, it needs a steady supply of new

blockbusters. Its big sellers, such as Lipitor, Zithromax and Zoloft, are

now ageing, and the group's labs have not produced a blockbuster since

Viagra, even though Pfizer is already the industry's top spender on original

research.

 

Until it can rediscover its scientific touch, it is open to the charge that

it is just a highly skilled practitioner of the corporate arts of selling

products and buying rivals. - Guardian Unlimited © Guardian Newspapers

Limited 2003

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