The case of praziquantel demonstrates that the discovery of an innovative and effective new drug does not necessarily result in access to the drug for persons who suffer from the now-treatable disease-especially if those sufferers are poor people in the world’s poorest countries. The case raises questions about the international systems that affect the availability of new drugs in poor countries and how those systems could be improved for each of the four major actors considered in this report.
Pharmaceutical Producers: Multinational pharmaceutical companies are the major developers of important new drugs, and they view rich countries as their core markets. These companies tend to disregard the “needs” of poor countries (particularly countries with small markets and poor growth prospects), because private firms are primarily demand-oriented and profit-driven. For example, Bayer has significantly reduced its research efforts on tropical diseases, and has focused its research on developing products for chronic diseases (such as cardiovascular products, antihypertensives, cancer drugs, and products for Alzheimer’s disease). Indeed, praziquantel is Bayer’s only major drug left for tropical diseases. Similarly, other companies are focusing on the more lucrative and more certain markets of rich countries or middle-class patients in poor countries. When companies discover a new drug that can benefit poor people in poor countries, they confront a series of problems, illustrated by the praziquantel case.
The first problem is pricing. Many multinational companies are seeking to set single global prices for new products-at least as much as national regulatory authorities will allow the firms to do so. This pricing strategy would effectively deny many new products to poor people in poor countries, since the governments lack the necessary foreign exchange resources to pay the full price, and poor patients cannot pay the private market prices. When Bayer launched praziquantel, it set a concessionary price for WHO, but this lower price did not have a significant impact on availability, because few countries obtained the product through WHO.
A second problem is purchasers. The private market in many developing countries at the initial launch price is very limited, and even the market at the concessionary price is limited. Donor agencies are often unwilling to provide grants for procuring new drugs on a continuing basis. Some bilateral aid agencies may be willing to provide project grants that include procurement funds for several years, as a form of indirect support for their nation’s firms (as the German aid agency, GTZ, did for a number of years for Bayer’s praziquantel), but this approach does not always work. For example, Merck & Co. was unable to persuade USAID to purchase ivermectin for treatment of onchocerciasis (Weiss, 1991).
One possible strategy (to resolve the pricing and purchasing problems) is for the producer to donate the new drug. Although Merck decided to donate ivermectin indefinitely for treatment of onchocerciasis, no other company has followed Merck’s lead. Bayer has steadfastly resisted efforts to persuade the firm to donate praziquantel, pointing to the potentially far greater patient population and treatment costs of schistosomiasis compared to onchocerciasis. If full donation is too much to ask for a profit-driven organization, then cross-subsidization could be another possible strategy (especially for products with significant veterinary sales, which Merck receives for ivermectin and Bayer for praziquantel).
A third problem is patents. Multinational drug companies strongly supported the efforts to strengthen intellectual property protection in the Uruguay round of the GATT international trade negotiations. These companies have argued that all countries, including poor countries, should enforce product patents, and not allow the weaker protection of process patents. The companies generally consider the development of alternative manufacturing processes to be free-riding on their development costs, an infringement on their intellectual property rights, and a form of patent piracy, while many developing countries have considered this practice a fair strategy in their national efforts to catch up in the race for technology development.
A system of product patents is intended to protect the returns to inventors of products and thereby create incentives for innovation. A number of analysts have argued that tighter patent protection in poor countries will create economic growth and benefits for these countries (by creating incentives for innovation and technological progress), and that the benefits will significantly exceed the costs (Rapp and Rozek, 1990). But these arguments tend to ignore the lumpiness and non-tangible nature of certain costs associated with greater intellectual property protection. A strict product patent regime in Egypt and the Republic of Korea would have prevented Shin Poong from developing its own version of praziquantel, would have significantly delayed the price competition in the Republic of Korea and other countries, would have prevented EIPICO from producing the drug and selling it at lower prices, and would have delayed access to the drug for many people in many countries-until after the product patent expired in various countries in the early 1990s. A tighter international patent regime may enhance economic growth in some countries (and will enhance profits for certain companies), but it will also create burdens for some vulnerable populations who have depended on reduced prices of “copies.”
The experience with praziquantel suggests that pharmaceutical producers need to find ways to make some new products available to poor people in poor countries, without undermining their core business interests. Companies need to explore innovative strategies on pricing, purchasers, and patents, in order to achieve their social welfare mission, especially for highly effective products that have significant revenues from other major markets, such as the veterinary sales of antiparasitic drugs and many antibiotics.
International Agencies: For praziquantel, the World Health Organization facilitated the drug development process through its assistance with clinical trials, but then did not effectively promote access in developing countries. UNICEF and the World Bank adopted their own independent approaches. The three agencies lacked a coordinated strategy on praziquantel, and thus perhaps missed opportunities to improve availability in schistosomiasis-endemic countries. None of the agencies, for example, developed a database on consumption or procurement of praziquantel in endemic countries-not even for countries with national schistosomiasis control programmes. This instance reflects broader problems of fragmentation and competition within the UN system. Similar kinds of organizational obstacles among UN agencies may exist for other new drugs that are needed by poor people in poor countries.
Nongovernmental Organizations: NGOs seem to hold a potential for addressing both government failures and market failures (Drabek, 1987; Reich, 1994)-what Charles Wolf (1988) called the problem of “choosing between imperfect alternatives.” The case of praziquantel suggests that NGOs can help provide new drugs (and other drugs) to vulnerable populations in poor countries, and thereby alleviate some of the inequities and problems discussed above.
But the case of praziquantel also suggests that NGOs are unable to affect the basic rules that shape drug development and drug distribution for tropical diseases. Some NGO supplier organizations responded to opportunities created by the availability of Shin Poong’s product on the international market and by the subsequent availability of raw materials from other sources (such as China), and thereby contributed to price reductions through their competition. But these organizations had little direct impact on the decisions taken by the major producers or the international agencies. For off-patent products, non-profit supplier organizations may be able to expand distribution in markets that multinational corporations and international agencies do not reach. Problems seem likely to remain, however, for the distribution of new (and high-priced) drugs for poor people in poor countries.
National Governments: According to the World Bank’s 1993 World Development Report, national governments can significantly improve the efficiency of their procurement procedures for pharmaceuticals through global purchases from low-cost suppliers (World Bank, 1993). The report’s discussion of efficient purchasing strategies, however, made no mention of whether countries should respect product patents. Indeed, buying drugs from sources that do not observe patent laws can be highly cost-effective (as long as the products are of good quality), as the praziquantel case demonstrates.
While the World Bank’s report on health maintained silence on the question of patents, the government of the United States of America has been increasingly vocal about protecting intellectual property rights in poor countries that are growing economically, especially China. Of course, rich countries have a long history of seeking to impose their intellectual property laws on the world’s poorer nations (Alford, 1995). Some countries (such as Egypt and the Republic of Korea) were able to adopt national policies that protected domestic industries and disregarded international patent regimes. These countries are now being pressured to comply with the new international order on product patents (WHO, 1995). But even The Economist recognized the one-sided nature of intellectual property (with rights held almost entirely by rich countries) and raised questions about the fairness of expecting poor countries to honor these rights in all instances (The Economist, 1994).
The world’s poorest countries, with the worst prospects for growth, face the most difficult outlooks. They have little leverage on donor agencies. Their domestic markets give them little leverage on multinational companies. They have extremely limited foreign exchange reserves. They face external pressures to adjust their economic policies (e.g., through structural adjustment programmes) and reduce government expenditures, which often restrict funds available for purchasing medicines. And their government organizations often lack adequate infrastructure for carrying out effective international tenders for purchasing.
In conclusion, the case of praziquantel highlights the dilemmas that result from the discovery of new drugs for diseases of public health importance in poor countries. Some new drugs, such as praziquantel, hold the potential for significantly improving human welfare in poor countries. But those welfare gains are not often achieved, due to the policies of producers, international agencies, NGOs, and governments. This study identified specific measures that could raise the probability of achieving those welfare gains.
Our analysis shows that the greatest gaps between need and supply for praziquantel have occurred in the poorest countries of the world, especially in Africa. In these countries, the private markets for praziquantel are very limited, and the governments cannot afford to spend major portions of their drugs budget on new products. Even when price problems are addressed, non-price problems (such as inadequate distribution systems) prevent good drugs from reaching poor people in poor countries.
The praziquantel case illustrates that, for poor people in poor countries, the benefits of new drugs are achieved only after great delay, if at all. To reduce those delays significantly, simultaneous implementation of several measures discussed above may be necessary. When that happens (as shown by the cases of Egypt, the Republic of Korea, and China for praziquantel), substantial gains in public welfare can be realized.