From: Michael Pugliese 
Subject: SNET: Evil triumphs in a sick society
Date: 13 Feb 2001 00:40:12 -0500
To: snetnews@topica.com

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Evil triumphs in a sick society

Special report: World Trade Organisation
Special report: Aids

Larry Elliott
Monday February 12, 2001
The Guardian

Let me tell you a story about life, death and profit. It involves some of
the
poorest countries in the world and some of the richest companies. It goes to
the
heart of how the modern world is to be run and whether the institutions set
up
to police the global economy are up to the job.
Eleven million people in poor countries will die from infectious diseases
this
year. Put a different way, it means that by the time you finish reading this
column 100 people will have died. Half of them will be children aged under
five.
Just over a quarter - 2.6m - will die from HIV/Aids.

It is easy to work out why the death toll is so high. Poverty breeds
ill-health
and encourages the spread of infection, and the world is awash with poor
countries. Just as a starving man knows there is food at the Ritz,
governments
in Africa, Asia and Latin America know there are medicines to treat these
illnesses if only they could afford them.

But the bigger developing countries have found a way round this problem by
making cheap copies of western drugs. India, for example, makes 70% of its
own
drugs, while Egypt, Thailand, Argentina and Brazil have also taken steps to
become more self-reliant in pharmaceuticals. Poorer developing countries
also
benefit because they can import cheap generic drugs even if they cannot
manufacture them.

This should mean our story has a happy ending. It means more people get
treated
because the health budgets of poor countries go further. It means that
developing countries have a chance to move into industries that have a
higher
technological component. And it means increased competition, putting
downward
pressure on prices. This final point - that the freer markets are the
better -
is usually the clincher when it comes to the economics of globalisation. But
not
this time.

Enter the two other characters in our story - the world's largest
pharmaceutical
companies and the World Trade Organisation. Four companies dominate the
pharmaceutical industry - Merck, Pfizer, Glaxo SmithKline, and Eli Lilly,
and
they wield enormous financial clout.

The Big Four operate like a cartel, and like all cartels seek to wield
monopoly
power. It is basic economics that monopolies lead to higher prices, which is
why
many governments use anti-trust legislation to break them up. To say that
the
Big Four do not like the idea of cheap drugs coming onto the market from
developing countries is something of an understatement. More competition
equals
lower share price.

But the financial muscle of the pharmaceutical companies also gives them
enormous political leverage. So, during the Uruguay round of trade talks
they
lobbied hard for tougher rules protecting intellectual property, which
provided
patent protection for a minimum of 20 years for "new and inventive"
products.

Where previously around 50 developing countries and several developed
countries
had excluded medicines from being patented, the Trade Related Intellectual
Property Rights (Trips) deal made both pharmaceuticals and biotechnology
part of
the global regime. Infringements of the Trips agreement are heard by a WTO
disputes panel, and unlike in a criminal trial, the burden of proof put on
the
defendant country.

In itself, the Trips - a protectionist clause in what was supposed a free
trade
agreement roused suspicions about the way in which the rules were being
skewed
to suit powerful interest groups in rich countries. However, some safeguards
were included. Countries could cite a national emergency as a reason to
infringe
the Trips agreement.

Effectively, this provided two loopholes. Countries could either manufacture
cheap drugs themselves using what are known as compulsory licences to
override
patents, which is what Brazil is trying to do, or they could import a
patented
drug from wherever it was sold cheapest, the method favoured by South
Africa.

All quite simple, you might think. If the HIV/Aids pandemic does not
constitute
an emergency it is hard to know what would. The developing countries win,
the
drugs companies admit defeat, more people live happily ever after. If only.
What
is happening now is that the US is using every available means to close the
WTO
loopholes.

In part this has involved armies of lawyers crawling all over the 73
articles
making up the Trips agreement, in part it has involved legal action. But it
also
involved 21st century gunboat diplomacy. For example, the US offers a
special
deal to the Dominican Republic for exports of textiles. It is now
threatening to
withdraw this privilege unless the country scraps plans for compulsory
licensing
and parallel importing. Brazil and India have been warned that they could
face
sanctions under America's bilateral Super 301 legislation.

The dirty work for the drugs' companies is being done by the US government,
although there is little doubt who is really behind it all. But gunboat
diplomacy is still a dangerous game, because there is a risk that public
opinion
will turn against Merck and Glaxo SmithKline in the way that they have
turned
against Phillip Morris and the other tobacco companies. Becoming an
international pariah is not good for the share price either.

The Big Four have a defence. They say patent protection is vital if
companies
are to plough vast sums into developing new cures for the diseases affecting
poor people. In addition, they argue that the incomes of the world's poor
are so
low that they would not be able to afford even generic copies of patented
drugs,
and that the answer is some form of public-private partnership. Several of
the
big companies back global initiatives either by donating drugs or by
subsidising
drugs provision.

But the arguments of the pharmaceutical industry do not really stack up. For
a
start, their profit margins were already fat even before the Trips deal came
into force. Secondly, R&D costs are dwarfed by money spent on marketing
drugs.
Thirdly, only 10% of R&D goes on drugs that account for 90% of global
disease,
with the bulk spent on first-world afflictions such as obesity. Finally, the
drugs made available at lower prices are limited in supply and are still
more
expensive than generic substitutes.

As Brazil has shown it is possible for a relatively poor country to treat
HIV/Aids if they can manufacture the necessary drugs themselves. The price
of
triple therapy treatment is $4,000 in Rio, compared to $15,000 in New York.
Almost 90,000 Brazilians who are HIV positive receive free treatment, four
times
as many as would receive the care if the country were paying full patent
price.

The US has started proceedings at the WTO seeking to force Brazil to amend
its
patent law. Brazil, to its great credit, is standing up to the US bully boys
in
what is clearly a test case for multilateralism. Ever since the riots in
Seattle, the WTO and the other global institutions have been under
relentless
scrutiny and attack, the main charge being that they put profit before
people.
If the WTO backs the drugs companies, it will be case proved. What should
happen
is that the WTO should clarify its rules to give developing countries the
right
to produce or import medicines at affordable prices. If a country says that
it
is infringing a patent to cope with a national emergency, the burden of
proof
should be on the patent holder to prove that the country is wrong.

The WTO is not a law unto itself. Governments should write the rules, not
multinational corporations. And if they fail to back Brazil, India and Egypt
they will have blood on their hands. It was once said that all that is
needed
for evil needs to triumph is for good men to do nothing. And what is
happening
here is evil. I have tried to think of another word for it. But there isn't
one.



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