Bitter Pills:Medicines & The Third World Poor | Page 57

Dr. von Grebmer of Ciba-Geigy exlains the position of the market leaders: "The
innovator is compelled to develop new innovations if he is not to fall behind in
the competitive race. Theoretically, the research-based company could defend
its market share, even after expiry of the patent, by effecting price reductions.
Such a strategy, however, involves the danger of its tying down a growing
proportion of its resources as a company to this generics market and thus
weakening its capacity for research and development." (: ''

BRAND PROLIFERATION
The results of this "race" are that the world market is flooded with what Senator
Edward Kennedy has described as "a myriad of competing drug products".(241
There are about 1,000 different active ingredients or drugs but of these little more
than 200 are considered as essential to priority needs by WHO. Moreover, these
active ingredients are sold under thousands more trademarks and dosage forms.
In Britain alone there are an estimated 17,000 different drugs on the market,
including all brands and formulations, but excluding homeopathic and herbal
medicines.(25) In India there are about 15,000 products on the market, and a
similar number in Brazil. In Nepal alone there are 67 different brands of
chloramphenicol, 79 antacids, 63 cough syrups, 63 brands of phenobarbitone and
42 of aspirin.(261
Although there are only seven combination drugs on the WHO Selection of
Essential Drugs, there are over 10,000 in the Mexican prescribing guide. Many
are more expensive than single-ingredient drugs. Arguably they have more to offer
manufacturers in securing new patents than in any clear therapeutic advantages
to doctors.(27) The proliferation of different brands of similar, if not identical
drugs, all on sale at different prices, can easily present headaches for doctors.
For prescribers in developing countries the choice of the most cost-effective
treatment is even more fraught with difficulty than it is for their counterparts
in developed countries. The Third World doctor rarely receives any objective drug
information from any non-company source.
The inevitable consequence of this variety of competing brands is that
manufacturers must spend large sums of money on promotion to convince doctors
that their products are superior to their competitors'. These marketing costs can
add up to as much as 20% of sales turnover.(28)
Inevitably the costs of innovation and advertising have to be paid for in higher
drug prices. As a result actual production costs can account for as little as 20-30%
of the research-based companies' prices. Dr. von Grebmer explains that "Between
70% and 80% of the sales figure goes towards general costs and profit".129'The
Third World's heavy reliance on the market leaders means that the poor are helping
to foot the hefty bill for research and promotion. According to Dr. von Grebmer:
"Owing to the special nature of the costs structure in the research-based
pharmaceutical industry, the only economically reasonable accounting procedure
to adopt is to calculate for each product a so-called 'contribution margin'
(= price minus directly chargeable costs) which includes an extra percentage to
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