Bitter Pills:Medicines & The Third World Poor | Page 69

locally-owned manufacturers have found themselves paying high prices for raw
materials when they are bound by licensing agreements. The local manufacturer,
Therapeutics, a licensee of American Cyanamid, paid Cyanamid over 2 Vi times
more for its initial consignment of dimethyl carbamazine citrate than the price
paid by BP1 for the same raw material. After Government pressure the price was
reduced. ""5|
According to Dr. Hye, then Director of Drug Administration in Bangladesh,' 'One
reason for high prices of drugs is due to practices of price transfer by the
multinational companies through procurement of raw materials from chosen single
sources."" 061 A 1979 report on the viability of local production, commissioned
by the World Bank, confirmed that local manufacturers were charging strikingly
high prices for some finished drugs, compared with the cost at which they could
be produced. |ll)71
The study team compared actual finished drug prices with their assessments of
production costs (on a no profit, no loss basis) using raw materials purchased
from the cheapest reliable sources. On this basis they calculated that tetracycline
capsules could be produced for only one-fifth of the average commercial prices.
Prices charged locally for penicillin tablets were estimated to be three-and-a-half
times higher, for chloroquine phosphate one-and-a-half times more, and for
vitamin C over ten times more than their production costs. On the study team's
calculations, all but one of the 31 essential drugs selected for primary health care
could have been imported at much lower cost than the local manufacturers' prices.
Furthermore, the team came to the conclusion that local production of 23 of the
31 drugs would be even more economical than importing them from the cheapest
reliable sources."I)SI

CHOICES CONFINED TO THE RICH?
In rich developed countries there is growing concern about the escalating cost
of drugs to the health services. Just over 90% of drugs prescribed by GPs in Britain
are brand-name products. The British Government has considered the possibility
of cutting costs by reducing consumption of expensive brand-name products,
through generic substitution. ll09' This is already happening in some developed
countries. In the view of the British industry-funded Office of Health Economics,
rich countries have a choice to make. "Europe faces an impor tant economic
question. It has an option of a cheap drug policy to keep health service costs low
. . . " But, if Europe opts for generics "it will at the same time drive out its
innovative pharmaceutical industry. The alternative is to pay the price of the new
wave of innovation . .. by supporting a research-based pharmaceutical industry
through paying relatively higher prices for medicines . . . " """ The promised
rewards are new drugs for Europe's problem diseases and, of course, a flourishing
drug industry improving the trade balance.
What choice can there be for the Third World poor? As long as unnecessarily
high prices are paid, many of the poor must go without vital medicines.

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