Last updated: September 27, 2019
Topic: BusinessMarketing
Sample donated:

What comes to mind when you hear the words “pharmaceutical company”? There are many ways to define a pharmaceutical company. According to the Princeton review, a pharmaceutical company is a drug company that makes and sells pharmaceuticals. Another definition for a pharmaceutical company is an industry that develops, produces, and markets drugs licensed for use as generic and/or brand medications. These companies are subject to a variety of laws and regulations regarding the patenting, testing and marketing of drugs. One of the largest pharmaceutical companies in the world today is GlaxoSmithKline PLC (GSK).

GlaxoSmithKline PLC (GSK) was formed in December 2000 through a merger of the British firm Glaxo Wellcome and the American firm SmithKline Beecham. The merger created the largest pharmaceutical company in the world with over $25 billion in annual sales and a 7 percent global market share. With dominance in four of the five largest therapeutic areas, GSK became the sales leader in pharmaceuticals in both Europe and the United States. With its corporate headquarters in London and its operational headquarters in the United States, GSK was known to be the “kings of science”.

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Historically, Glaxo Wellcome had been a leader in the development of drug therapies for AIDS by introducing the first antiretroviral medication Retrovir that was designed to inhibit the replication of HIV, the virus that causes AIDS. Other drugs that GSK developed and introduced for AIDS were called Epivir, Combivir, Ziagen, Agenerase, protease inhibitors, and Trizvir. These drugs were moneymakers. In 2000, the company sold $1. 74 billion of AIDS drugs, an increase of 14 percent over the prior year. In the United States, for the year ending February 2000, the company earned revenues of $478 million on the sale of Combivir alone.

Glaxo’s sales of AIDS drugs were concentrated in developed countries. Of the company’s $1. 74 billion in sales of AIDS drugs in the year 2000, 60 percent were in the United States, 30 percent in Europe, and 10 percent in the rest of the world combined. GSK developed a billion dollar sales industry from developing countries, particularly countries where AIDS was the leading cause of death. In particular was the continent of Africa, in which 25 million Africans were estimated to be infected with HIV. In 2001, sub-Saharan Africa was the epicenter of the global pandemic, with some 70 percent of cases worldwide.

Nine percent of all adult Africans were believed to be HIV-positive by which many never even knew they had the disease, and death certificates typically did not record AIDS as the cause of death. By these numbers, the United Nations estimated 25 million people were infected with HIV, 3 million people were newly sick, and 2 million died of the disease. Unlike the developed world, where AIDS had been largely confined to homosexuals and IV drug users, the disease in Africa was mainly transmitted through heterosexual contact, which affected both men and women equally in the prime of their life.

Very few Africans afflicted by the pandemic had access to the most recent medicines and treatments. In the early 2000s, the standard therapy for AIDS consisted of a combination drug that suppressed the HIV virus that caused the disease. Such a drug “cocktail” was very expensive, typically costing between $10,000 and $15,000 a year in the United States. Most individuals in the sub-Saharan Africa did not carry public or private health insurance and households paid two-thirds of the cost of medicine.

Needless to say the cost of these drugs was way out of reach for most of those infected with HIV. For example, living in Zambia where 60 percent of the population had AIDS and lived on less than $18 a month. The high incidence of AIDS and high death rates from the disease in Africa were only partially due to the high cost of medicine. Other factors that also played a part in the high death rate consisted of poor nutrition, lack of clean water and sanitation, measles, lack of medical infrastructure to distribute or monitor demanding drug treatments, lack of education, and culture.

With the AIDS epidemic in Africa, and GSK being the world’s leading maker of medicines for the treatment of AIDS, GSK had been criticized by public health, human rights, and shareholder activists for not doing enough to ensure access to these drugs being that GSK owned the intellectual property rights, which were drawn up by the World Trade Organization (WTO). The WTO’s main function was to negotiate multilateral agreements on issues related to international trade, which had a profound impact on the distribution and pricing of AIDS drugs in Africa.

In 1997, the WTO adopted an agreement on trade-related aspects of intellectual property rights, known as TRIPS. Under this agreement, all WTO member nations would be required to adopt national legislation giving patent holders marketing rights for a period of 20 years. However, the TRIPS agreement did permit some exceptions to protect public health by giving developing countries an extension until 2006 to be able to override patent protections in certain situations such as compulsory licensing and parallel importing.

In early 2001, several events combined to escalate pressure on GSK and other pharmaceutical companies to ease up on enforcing WTO rules, as well as slash prices of their AIDS drugs in Africa. In February 2001, a surprise offer was made by a generic drugmaker Chemical, Industrial, and Pharmaceutical Laboratories, known as CIPLA, the largest manufacturer of generic drugs in India, to sell AIDS drugs at a deep discount. CIPLA, which was run by Yusuf Hameid, an organic chemist, had developed an expertise in reverse engineering, a process in which chemists analyze a medicine to manufacture it.

By using this method, CIPLA was able to produce copies of drugs developed and patented in the West such as Duovir, which was a copy of GSK Combivir at the ultra cheap price of $350 for a year’s supply. CIPLA also offered the drug to African governments at the company’s cost of production at a price of $600 per year. Why did CIPLA offer the drug for a cheap price? The reason was due to the company view of having an “obligation to society”.

By GSK being the largest pharmaceutical company that was known as the leader in the development of drug therapies for AIDS and CIPLA being known as one of the world’s largest drug makers of generic drugs and selling at a discounted price, the issue of AIDS in Africa continued. Major pharmaceutical companies pursued lawsuits against the African government in regards to the intellectual property rights and patent laws. Unfortunately, the lawsuits were dropped due to activist campaigns against the pharmaceutical companies demanding the industry cut the cost of AIDS drugs for Africa and other developing countries.