Global Health, Inc. - Role of the Private Sector

Hi Everybody,

This week John spoke about the role of the private sector in global health, drawing upon his >20 yrs of experience working for the pharmaceutical giant Pfizer.  In this context, it would be helpful here to define our terms, so I've tapped these Wikipedia resources to describe the private for-profit sector, private not-for-profit sector (also called non-governmental organizations (NGOs)), the philanthropies, and the public/government sector, which seem accurate from my perspective, though your mileage may vary.

The fundamental distinction between the private sector and the nonprofit sector is the former has shareholders who have invested their money in a company and expect a return on that investment or ROI.  An example of a for-profit company is Pfizer, which has publicly traded stocks which were selling for $32.34 per share, as I write this, and had annual revenues of $59 billion in 2012.

Examples of nonprofits include the International Committee of the Red Cross (annual budget $1.3 billion) and Médecins Sans Frontières (annual budget $400 million). The nonprofit entity may have one or more benefactors or donors who fuel the entity's bank account so it can do business, and/or it may generate revenue from the sale of its products.  Indeed, any surplus revenue the nonprofit earns from its business is returned to the entity to further the mission of the nonprofit, as it has no shareholders.

Lastly, well known examples of philanthropies include the Bill and Melinda Gates Foundation, the United Nations Foundation (started by CNN mogul Ted Turner), the Hewlett Foundation and the Packard Foundation.  Each of these groups is funded initially by an individual who was passionate about a particular issue or cause, including global health, support for the United Nations, environmental issues, and advancing reproductive health, respectively for the foundations listed above.

Azithromycin molecule

John used the example of global eye diseases in his discussion. Trachoma is a disease of poverty, as you saw in the film clip from last week.  This bacterial infection can be treated successfully with the antibiotic azithromycin, which is made by Pfizer and one of the most widely prescribed antibiotics in the world.  Thus, the morbidity and mortality from this disease and others are reduced, sometimes even eradicated, e.g., smallpox, because of the genius of scientists, and the investors who fund them, at  Pfizer or the other major pharmaceutical manufacturers. They are absolutely essential to the success of any global health effort.

That being said, the question of fairness in pricing arises.  The Togolese suffering from trachoma cannot afford to buy azithromycin, so the Carter Center is making it available free.  Is this a sustainable approach?

What about HIV/AIDS treatment?   Recall in the early 1990s azidothymidine (AZT) was proven to successfully treat AIDS, but the cost per patient was an astronomical $10,000 per year.  ACT-Up protested in front of the NIH Director's Office against this discrimination.  Brazil stated it could not afford the high cost of AZT, so they broke the patent held by the Burroughs Wellcome drug company and made a generic version of AZT.

Finally, in the early 2000s, President Clinton, through the Clinton Health Access Initiative (CHAI) was able to negotiate with the pharmaceutical companies to lower the cost for life saving AIDS treatments to $365 per year ($1 per day) for first line drugs.   CHAI with others have also done the same for other drugs that low-income countries and individuals could not otherwise afford.

Ultimately, the private sector companies are necessary to produce the antibiotics, vaccines, diagnostics, etc., needed to reduce disease morbidity and mortality that afflict populations across the globe. Of concern though is the question of "fairness" in the costs of these drugs.  The Rx company will argue that R&D costs to develop a compound are costly, exceeding $20 billion, and the Rx company needs to deliver ROI for their shareholders.  Lower prices are not justifiable to the shareholders who essentially "own" the company.

What do you think should or could be done to address this conundrum?  What is fair in drug pricing and for whom?   Do subsidies make a difference and, if so, by whom, how, and for how long?

I hope you find that this discussion has been helpful.

Jim