E-DRUG: Big Pharma's new Africa plan
[Copied as fair use from The Telegraph, UK]
Big Pharma's new Africa plan
By Katherine Griffiths
5 July 2007
Drugs companies believe that helping poor countries in times of need can
reap rewards later. Katherine Griffiths looks at the changes in the
Unless delegates to a high-profile summit on diabetes in Kenya last week
knew it had been paid for by the world's biggest maker of insulin, they
would have been none the wiser when they left.
Novo Nordisk's Lars Rebien Sorensen in Kenya: Big Pharma's new Africa
plan Novo Nordisk?s chief executive, Lars Rebien Sorensen [left], talks
to a doctor about one of her patients
The conference, in the lush surroundings of a four-star hotel outside
Nairobi and attended by ministers from three African governments,
eminent scientists and health policy specialists, was organised by the
World Diabetes Foundation, a private fund set up in 2002 by Denmark's
Novo established the Foundation with $100m (£50m) to tackle the emerging
crisis of diabetes in poor countries, which is growing because of
changes in diet and lifestyle.
Yet at the conference the company's logo was nowhere to be seen. Lars
Rebien Sorensen, Novo's chief executive and one of Denmark's most
dynamic company leaders, merely listened to the speakers as a guest.
"When we set the foundation up people were suspicious it was just a
marketing tool. We have to be very low-profile," he said.
That is changing now, partly because the Foundation is trying to put
pressure on the World Health Organisation and private funders, such as
Bill Clinton's Foundation to co-ordinate fighting Aids with tackling the
rapid growth of diabetes in developing countries.
Big Pharma also increasingly believes that after years of being tarred
by the controversial practices of some - such as using Africa and Asia
to test experimental drugs - there could be an economic benefit to
engaging constructively with the world's poorest countries.
Mr Rebien Sorensen was quick off the mark because of his involvement in
one of the drugs industry's biggest public relations disasters in recent
years: the 1997 lawsuit against the South African government which was
over patent rights, but which grew into an international row over the
country's need for HIV drugs.
"I was heavily criticised in Denmark for being part of the lawsuit. I
felt we were obliged to do something on diabetes and that we had a
vested interest," Mr Rebien Sorensen said.
He is confident Novo's involvement with the diabetes foundation gives it
a competitive advantage, including attracting and retaining top talent.
He also believes it marks Novo out among the community of scientists and
doctors working on diabetes worldwide.
The big hope is that by helping the poorest countries in their time of
need, Novo will be well-placed to make profits when their economies
improve and they can afford to pay higher prices.
"I couldn't say what the net present value is. But in 20, 30, or 40
years, we will be seen as an early investor in the emerging economies of
Asia and Africa," said Mr Rebien Sorensen. "I believe people feel a
sense of loyalty to those who have helped them get off the ground."
Another company which has built a bigger presence than most in the
developing world is Britain's GlaxoSmithKline.
GSK, the world's largest supplier of Aids drugs, was a high-profile
target in the outcry over the South African lawsuit. Since then, it has
transformed many of its policies, including taking one of the most
difficult decisions for a drugs company, relaxing its intellectual
property rights under certain circumstances.
GSK is the only major drugs company which manufactures products in East
Africa, which means it has more leverage with the government because of
the jobs it has created, according to John Musunga, GSK's general
manager in the region.
Mr Musunga, a native of Kenya, said GSK could easily pack its bags in
Africa and there would be almost no difference to its bottom line.
"Sub-Saharan Africa accounts for less than 1pc of turnover. We sell to
the government at preferential prices - sometimes with 30 or 40pc off -
but most people cannot afford even the reduced price," he said.
However, he believes the value of doing business there now is "social
responsibility", and the fact that sales are slowly growing.
Mr Musunga, who is also chairman of the Kenyan Association of the
Pharmaceutical Industry, noted that other international drugs makers,
including some American giants, were starting to open offices locally.
While Africa might be many years from offering the prospect of profits,
GSK's businesses in other developing countries are doing quite well.
GSK India is producing an earnings margin of about 30pc, despite it
selling drugs at the equivalent of a fraction of a penny per pill.
GSK has developed different models in developing countries, including
forming joint ventures with local manufacturers, striking voluntary
licensing agreements with generics companies, and setting tiered-pricing
schemes, under which the same drug is sold in a poor country at a
fraction of its price in places such as America and Britain.
Observers believe these types of initiatives have not come too soon for
the pharmaceuticals industry, which has been in a downward spiral of
regulatory crackdowns and mounting attacks on its ethics.
The industry also faces a crisis of several blockbuster drugs losing
their patents in the next few years with little in the pipeline to
replace them. Many believe the gloom is a backlash against the excesses
of the 1990s.
Stewart Adkins, a former pharmaceuticals analyst at Lehman Brothers,
said: "There was an almost invincible sense of self-belief among drugs
companies in the mid to late 1990s because of the failure of the Clinton
administration to reform healthcare and because other checks and
balances weren't working.
"Drugs companies were aggressively marketing, raising prices and pushing
up volumes by driving people into their doctors' offices. This led to
top-line growth of 10, 12 or even 15pc in some years."
The industry was now scrambling to recover its reputation, he added, and
one way was by becoming better corporate citizens in emerging markets.
As well as GSK, Switzerland's Novartis has made its malaria drug,
Coartem, available in many countries at cost. Meanwhile, Roche, also
Swiss, has sacrificed some profits on Tamiflu to make it available to
Critics say companies could do far more. They also point out that drugs
companies are still bringing controversial cases against developing
countries over patents. Novartis has been criticised by Oxfam for a
continuing case against the Indian government over its cancer medicine,
Yet, analysts believe, in the absence of their pipeline of new drugs
picking up, searching out new markets in rapidly growing parts of the
world is in drugs companies' best interests.