Case Study 1 - Aids Epidemic in Africa

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In-Depth Integrative Case 1.2
Pharmaceutical Companies, Intellectual Property, and the Global AIDS Epidemic

In-Depth Case 1.2

1. Do pharmaceutical companies have the responsibility to distribute drugs for a low cost in developing countries? What are the main arguments for and against such an approach? What are the advantages and the disadvantages of giving drugs for free versus offering them at low no-profit prices?

The Aids epidemic is responsible for taking millions of lives worldwide, but through years of medical advances in science the possibility of extending the lives of those affected with the AIDS Virus is now possible. Sadly, in underdeveloped countries where the AIDS death rates are at its highest inefficient funds prevent citizens from obtaining these medications that could save their lives. This situation has been the cause of countless debates and conflicts over the last few decades of how pharmaceutical companies should distribute their drugs. Today most pharmaceutical companies are run as businesses that need to turn a profit. Countless hours of research and spending go into the creation of these drugs, pushing the prices higher and higher so that the companies can stay afloat. But is it morally responsible to let millions of people die every year when we have the technology to prevent it?

Most pharmaceutical sales come from developed countries such as North America, Japan and Western Europe. Drug discovery is a long, expensive, and uncertain process. Only 30% of drugs marketed are reported to earn revenues that average R&D cost. Because of this, the average cost of the AIDs treatment is about $11,000 which is way out of reach of most residents in underdeveloped countries. If pharmaceutical companies dropped prices to a level that was obtainable by everyone, they argue that they would not be able to maintain their companies and it would stall further R&D into new products.

Because of this, people are dying at alarmingly high rates. Government officials and activist groups in support of the fight against AIDs, argue that it is morally responsible to treat any person inflicted by AIDs no matter what their financial situation is. These groups seek to find alternative ways of getting these drugs to the poor, such as using generic drugs that can be 5% of the cost of the original. This is met with opposition because of the hundreds of patents that the pharmaceutical companies hold on their products. Another solution would be to offer these drugs for free, but pharmaceutical companies argue that that is just not an option because doing this would kill their businesses. If the pharmaceutical companies go down, there will not be any medication at all. Right now the best solution seems to be finding a low no-profit price that underdeveloped countries can pay and pharmaceutical companies can use to stay afloat.

2. What is the principle augments of pharmaceutical companies that oppose making exceptions to IPR laws for developing countries? What are the arguments by NGOs and the others for relaxing the laws?

The Intellectual property rights (IPR) grant investors rights for their original creations. The main objective of the IPR is to protect the inventions of pharmaceutical companies financially, giving incentive to be creative and innovative. The IPR gives out intellectual property rights such as patents, which in theory prevent other people around the world from creating similar products. Pharmaceutical companies are in favor of strong IPR laws because they fear of losing profits. With the creation of generic brands, pharmaceutical companies will have no choice but to lower their prices. If they allow just one country to create these generic products, they face the possibility of a domino effect that would cause more and more countries to demand the right to imitate their products. They also argue that an attempt to imitate their drugs could be harmful because wrong measurements or...
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