The merger that has created what has been termed "the Microsoft of the pharmaceuticals industry" has investors enthusing at the potential for cost-saving and profit-making. But the real test of the new giant will be whether it delivers cheaper, more appropriate drugs to millions of people who cannot at present afford them, writes John Madeley

a.r g ^HE managements of drug I giants SmithKline A Beecham and Glaxo Well-®come are pleased with their J* mega-merger. but bigger may ^not mean better for people who bicannot afford essential n medicines.

Lt The merger will make the 'll offspring of the two Britaln-

: ’ based companies. Glaxo '(Je SmithKline. the biggest global jic player, with a 7.3 per cent share Kjof the world market for ;lo medicines. And it will greatly Increase their power over the L, setting of prices as well as over U national drugs policies.

1 (jc In the past two decades, large drug companies, often backed p by the government of the coun-pCtry in which they are based. jrc have used their clout to try to dissuade governments from in-;u, troduclng national drugs poll-LJcles aimed at Improving health :s£ rather than profits.

. ‘ J Bangladesh, the first devel-

; * oping country to Introduce such a policy almost 20 years ago.

, tin was *ent 0,1 heavily by pharma-:L.Jceutlcal companies. They ( Lc wanted the Dhaka government ; LJto abandon its proposed slrat-f egy of manufacturing a retail tlvely small number of generic ,n( medicines (which do not carry L . a trademark) and restricting some of the more expensive

I brand-name patented products | made by the pharmaceutical gi-

The government persisted and the policy proved to be a life-saver for millions who were able to buy essential medicines previously beyond their reach. Bangladeshi companies Increased their share of local production from 35 per cent to 60 per cent, and the country saved around $600 million in foreign exchange on imported drugs in the first 10 years of the policy.

The concern now Is that the new mega-sized companies will have more power to persuade governments to drop policies that the companies do not see as in their Interests.

Three years ago. the then South African president Nelson Mandela was sued by drugs companies after his government announced that It would buy essential drugs as cheaply as possible as part of the fight against HIV/AIDS.

"The companies Involved in this mega-merger, along with many of the other drugs companies. have been shamelessly trying to prevent South Africa from dealing with Its own problems. They've done that because they're worried about their profits." claims Andrew Simms of the London-based New Economics Foundation.

South Africa's 'crime' was to pass a law allowing domestic companies to make generic

drugs to treat emergency illnesses. Even though the law still allowed for royalty payments to the patent-holders, the pharmaceutical companies argued that it threatened their intellectual property. The lawsuit has been suspended, but not lifted.

Patents on new drugs can be taken out for 20 years, "which makes the production of generic equivalents very difficult." says Mohga Smith of the international development charity. Oxfam.

Mohga Smith is concerned that the current round of megamergers will boost the ability of the new conglomerates to raise rather than lower prices, and put essential medicines further out of the reach of the poor.

"We are worried about this." warns Mohga Smith. "In some countries, and over certain

products, the new company could have a monopoly. On the other hand, it will have lots of money for lots of research. The question is whether it will develop low-cost drugs to treat tropical illnesses."

Glaxo SmithKllne's research and development budget will be around $4 billion a year — more, for example, than Britain's entire development aid budget last year. Pharmaceutical companies argue that profits and prices need to rise in line with the rising expense of bringing new products onto the market.

In the United States, prices of essential drugs have been rising by 12 per cent a year, with many companies getting extensions on the patents for their

Glaxo Wellcome chairman

Sir Richard Sykes dismisses fears that the company will be able to charge what it likes.

"In the European Community, the price of a medicine is decided by the government not by the company. Companies like ours have been driving big programmes to make sure that the Third World can get access to medicines," he says.

But governments of developing countries are In a weaker position to fix prices than their European counterparts. "If companies don't like the terms of an agreement a government offers. It can threaten to pull out altogether," notes Mohga Smith.

As for the "big programmes", the facts hardly bear out Sykes' claim.

"Out of 1,233 new drugs brought onto the market worldwide between 1975 and 1997. only 13 were for tropical diseases," points out Bernard Pecoul of the Nobel Prize-winning organisation, M^decins Sans Frontidres (Doctors without Borders).

It is true that some companies donate drugs. SmithKline Beecham has donated several billion doses of a drug to treat elephantiasis (a swelling of limbs and genitals).

Such donations give the companies good publicity, but the health of people in developing countries might be better served if they lowered the prices of the drugs, and put more money into developing more effective, more affordable treatments.

Outside a narrow definition of shareholders' interests, that is how the new company will be Judged — on Its willingness to lower prices in developing countries, to research and develop drugs to treat tropical diseases, and bring essential medicines within reach of the people who need them most. — Gemini News

John Madeley Is the author of Big Business. Poor Peoples: The Impact of Transnational Corporations on the World's Poor'.