Bitter Pills:Medicines & The Third World Poor | Page 58

cover general costs." "'" However, the price discrepancies we have described
make it clear that this 'contribution margin' cannot be distributed evenly. l3"
This system of adding a premium to the actual production cost of all drugs has
the advantage that a few of the best-selling drugs effectively subsidise the cost
of drugs for rarer diseases. (Commonly 50% of a company's sales are made up
by only about 5% of their product range.)1321
Third World patients do of course benefit, because rich world purchasers are
helping to pay for drugs for tropical diseases that might otherwise be even more
prohibitively expensive as their sales volume is low.
But drugs for specifically 'tropical' diseases are only one aspect of a poor country's
needs. Most of the medicines urgently needed by the Third World poor are for
common infections and are decades old. Hardly 5% of the WHO selection of
essential drugs are covered by valid patents, so they could be obtained as generics
at competitive prices.(33) Furthermore, as the British industry-funded Office of
Health Economics points out, the research and development costs for these drugs
"have largely been paid for". (34)

SHOULD THE POOR SUBSIDISE NEW DRUGS
FOR THE RICH?
Without doubt, new drug research is vital. It offers the only hope to many suffering
from incurable diseases. Research and development is, of course, a high-risk and
costly business. This is beyond dispute. The question is, should the Third World
poor have to help pay for it and how relevant is the research to their needs?<35>
On average it takes about a decade and costs around £35 million to develop a
new drug. It can cost as much as £50 million.(36) When a company makes a major
breakthrough its huge investment in time and money is usually amply rewarded,
although not of course immediately. It was reported that Smith Kline & French's
record-breaking new drug Tagamet, for gastric ulcers, should bring in
£2,000 million in sales over ten years on an investment of about £17 million. After
its launch the company reported a 45% rise in turnover and a 90% rise
in profit.(37) It has recently been forecast that the British company Glaxo, which
spent about £45 million on research and development in 1980/81 may make profits
of between £30 and £40 million a year averaged out over the next five years from
the launch of its rival anti-ulcer drug, Zantac. (3S|
But these major breakthroughs are obviously relatively few and far between.
Profitability depends on bringing out new products, irrespective of whether they
offer any major advantage over existing drugs. A 1981 report by the British
licensing authorities reveals that of the 604 new product licences approved in 1980,
only 23 were for new chemical entities as opposed to new formulations of existing
molecules and active compounds. Over the period from September 1971 to 1980
less than 6% of licences granted in Britain were for new chemical entities.(39)
Some new formulations of existing compounds are of course extremely valuable.
But figures from the United States Food and Drugs Administration (FDA) reveal
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