Monday, April 11, 2011

'Counterfeiting' is a Problem That Can Only Be Solved By Big Pharma

If a business produces something and sells it for a price that covers costs and also gives a decent profit, that's a good model. Others may make the same thing, so a business needs to make the best and work hard to make sure they are not undercut. But most people will pay for something good rather than something that isn't up to scratch, if they can afford it.

However, if a business produces something and sells it for a price that is a complete distortion of the above business model, it is worthwhile for someone else to produce the same thing and charge a lot less. They don't even have to cut costs, they can just accept a lower profit. And those who have no chance of affording the expensive product may well be able to afford the cheaper one.

This is an oversimplification, but it is roughly what the pharmaceutical industry does, charges an outrageous price for something because they can. In addition, the industry depends on a form of protectionism called 'intellectual property rights'. Arguably, this has its uses, even that it is vital, but it is still a form of protectionism.

Often, the research that pharmaceutical companies claim to spend so much on is done by publicly funded, or partially publically funded, institutions. But there is little or no return to the public. And the amount spent on PR and marketing far exceeds what is actually spent on research.

So when someone else makes the same product but demands less for it, the industry reacts by resorting to all sorts of tricks to make sure the competition is destroyed. Competition, when you don't have a high level of trade protection, is not appreciated by the pharmaceutical industry.

The word 'counterfeit', therefore, can mean all sorts of things. It can mean a generic version of a branded drug, a fake version of a branded drug, a substandard version of a branded drug and probably other things. But a generic version of a branded drug is not a counterfeit and claiming that it is one threatens to deny  lifesaving treatments to many people in developing countries.

If drug companies don't want generic versions of their drugs to be produced, they should produce affordable versions themselves. There is clearly a huge market for them and a very good profit to be made. Dropping the price to affordable levels would also make the production of substandard and fake drugs a lot less tempting, perhaps not even worth the effort.

But instead of encouraging the production of generic drugs, the EU and, of course, the entire pharmaceutical industry, want to make sure affordable versions of drugs are not produced. They are currently trying to rope India into signing a 'trade agreement' whereby it will no longer be possible for the country to produce cheap drugs. Yet another form of protectionism.

India is one of the main sources of affordable drugs for developing countries. Some drugs will cost many times, perhaps even tens or hundreds of times more, just because they are protected by the sort of regulation that big industry claims to detest.

There is no doubt that some drugs are fake, made of materials that have no effect or are harmless, and this is unacceptable. But as long as ridiculous profits are made from drug pricing models, people will always find ways of selling their versions, no matter how useless or dangerous. It's not as if copyrighted drugs are always effective, or that they are never dangerous, either.

The pharmaceutical industry, already protected and subsidised in so many ways, wants more public money to be used to 'regulate' drug supplies in developing countries. Multinationals refuse regulation for themselves, but they seem to love the idea of regulating any competition.

Big Pharma have effectively created counterfeiting and many other related problems themselves, it's how they keep their profits so inordnately high. So they should sort it out themselves. If people object to the danger to the health and lives of so many people, they should aim their objections at the industry, the problem, not the mere symptoms of the problem.

The Science and Development Network have a selection of articles on the subject of 'counterfeit' drugs and some of the many issues involved. But the article doesn't really point out that Big Pharma don't lose out from counterfeiting because most of those who buy cheap drugs will never be able to afford the expensive versions.


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