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Western Drug Companies And Aids In South Africa Case Study

''Obviously, this is a victory for all of us,'' Dr. Manto Tshabalala-Msimang, the South African health minister, said at a news conference this morning. ''We hope our experience has contributed in some way to the larger debate on access to affordable health care for developing countries and for the poor in wealthier nations.''

The settlement was expected to help repair the image of South Africa, which was pilloried last year when its president, Thabo Mbeki, questioned the safety of anti-AIDS drugs and whether the virus H.I.V. actually caused AIDS. And it also reflected the unexpected strength of an unlikely coalition of American advocates for AIDS patients, European doctors, African officials and lawyers. In recent weeks, they had marched, protested and highlighted the images of poor Africans who were dying because they lacked AIDS drugs that were readily available in the West.

Still, the most sweeping aspects of the South African law will not take effect for several months and it seems unlikely that they will dramatically improve access to AIDS drugs in this country, which has more people infected with H.I.V. than anywhere else.

In December, the United Nations reported that 25.3 million people in sub-Saharan Africa -- the bulk of all cases in the world -- had AIDS or H.I.V, the virus that causes AIDS. Last year, 2.4 million in the region died of AIDS. Some 250,000 died here in South Africa.

The government says brand-name AIDS cocktails are still too expensive, even those that are sold more cheaply outside of South Africa, and advocates for AIDS patients fear that President Mbeki's misgivings about the safety of drug cocktails routinely prescribed in the West may slow the way forward.

''It's a huge symbolic victory,'' said James Love of the Consumer Project on Technology, an advocacy group that works to push down the price of drugs. ''But it's probably much less of a substantive victory than people realize.''

In February, as pressure built on the pharmaceutical industry, the United States, once the industry's staunchest ally in the case, reiterated that it would not seek sanctions against poor countries ravaged by AIDS, even if American patent laws were broken, so long as the countries abided by international treaties governing intellectual property.

In March, as thousands of people demonstrated here in support of South Africa's law, several drug companies slashed the prices of their AIDS medicines to levels unimaginable even two months earlier.

And this month, when the criticism of the companies continued unabated, the chief executive officers of five of the world's biggest drug makers called Mr. Annan of the United Nations and asked him to contact President Mbeki to help broker a deal, one of the executives said.

The writing was on the wall: The European Union, the World Health Organization and France's National AIDS Council, among many others, had all publicly lined up to support South Africa's position in the lawsuit.

''We don't exist in a vacuum,'' J. P. Garnier, chief executive of GlaxoSmithKlein, said in a telephone interview from Philadelphia. ''We're a very major corporation. We're not insensitive to public opinion. That is a factor in our decision-making.

''We don't want the public to misunderstand the issues,'' said Mr. Garnier, who was the executive nominated to call Mr. Annan two weeks ago. ''We have never been opposed to wider access. We have discounted our drugs. We've done everything we could. Frankly, the legislation was the worst distraction. It did not allow us to communicate our message effectively.''

The South African law that the drug companies were fighting -- known as the Medicines and Related Substances Control Act -- was passed in an effort to reduce the prices of most medicines by eliminating price mark-ups and encouraging the use of generic drugs. (South Africa cannot currently import generic AIDS drugs, although an Indian drug maker is seeking special permission from a patent commission to do so.)

The law forbids drug companies from offering cash, vacations or other incentives to doctors who prescribe their drugs. It requires pharmacists to tell customers when a cheaper generic exists and requires them to sell that medicine unless the doctor or patient forbids it.

The law has been closely associated with AIDS drugs, but in practice, it will likely achieve far less on that front than many had hoped.

Only about 10,000 people are currently believed to have access to anti-AIDS drugs here. But with companies reducing prices and the new law opening the door to new markets, that number is expected to jump to as many as 100,000 by next year.

But the United Nations estimates that some 400,000 people are currently in need of antiretrovirals and most of them will still die without the life-sustaining pills.

During the past two years, the price of anti-AIDS drugs in Africa have plummeted to $1,000 a year per patient for patented drug cocktails ($600 for generic copies) from $10,000, according to officials at the World Health Organization.

Hemant K. Shah, another industry analyst, said he doubted that given the drug industry's experience in South Africa that it was unlikely that drug companies would attempt a similar lawsuit in the future.

''This has been a public relations disaster for the companies,'' Mr. Shah said. ''The probability of any drug company suing a developing country on a life-saving medicine is now extremely low based on what they learned in South Africa.''

With the court case resolved, AIDS experts are hoping that the government, drug companies and activists will focus on raising money for antiretrovirals and upgrading the health care system.

Under the settlement, government and pharmaceutical industry will collaborate in the writing of regulations for the most contested sections of the Medicines Act. The health minister, Dr. Tshabalala-Msimang, talked of ''starting on a very clean slate.'' She promised to work closely and constructively with the drug companies.

As the courtroom cleared, the health minister's comments were cheered by Prudence Mabele, 29 and H.I.V. positive, though she confessed that she still had doubts about whether she or any infected people would actually benefit from the settlement.

''I would like to trust,'' she said, after she had finished dancing with the celebrators this morning. ''But we must see. I want to see the drugs.''

Continue reading the main story

In 2001, the debacle of Acquired Immune Deficiency Syndrome (AIDS) outbreak in South Africa has hardly dealt with by GlaxoSmithKline (GSK) in the middle of controversies involving the GSK’s corporate management, South African government, civil society groups, media organizations and practitioners, stakeholders of the pharmaceutical industry and the public. GSK’s worst case-scenario management was how to maintain a viable venture of its medicines amidst controversial selling and distribution of drugs to Africa.

This case study paper will discuss and analyze the results of settling down the controversial issue of GSK in South Africa, relating how the issue has been settled and GSK alternately deployed its product-market. The paper will be discussed in four parts. Part 1: Case Summary Since the outbreak of the dreadful AIDS disease in sub-Saharan Africa in the mid-90s, many international pharmaceutical companies have found the opportunity for drug distribution, expecting substantial surge of profit.

In 1997, the implementation of the Trade-Related Intellectual Property Rights (TRIPS) by the World Trade Organization (WTO) has granted GSK with a 20-year marketing exclusivity to South Africa as a member country to WTO. Consequently, the granting of the exclusive market distributorship of WTO-TRIPS to GSK has been the center of controversial issue, criticizing that GSK could have total control or monopolize the distribution of therapeutic drugs for AIDS since its medicine brand patents and pricing are the only ones approved by WTO-TRIPS.

As cited, the lobbying of several non-governmental organizations spearheaded by a cause-oriented group of Oxfam and interacted by leading industry competitors of GSK have campaigned for price-cuts of AIDS-drug distribution to South Africa (Lawrence, 2002). The public resistance over GSK’s sole distributorship has even more intense since it found out that a similar drugs for AIDS has been formulated with the same efficacy and of cheaper price. Accordingly, the Chemical Industrial and Pharmaceutical Laboratories (CIPLA Ltd.

) from India has formulated “Douvir” to compete with GSK’s “Combivir” brand of AIDS-drug which was offered to South African government at a cheaper and discounted price. Thus, the inclusion of CIPLA’s Douvir to South African government’s hospitals and distribution throughout the local pharmaceutical outlets has claimed by GSK to violate the compliance to “global intellectual property rights” under the WTO-TRIPS having South Africa as a member country. A lawsuit against South African government was filed by GSK and its stakeholder companies on claim of violating its market distribution exclusivity for AIDS-drug under the WTO-TRIPS.

However, it was ruled out by the South African Legislative body that “having GSK’s sole distributorship for a high-cost AIDS-drug to Africa defeats the requirement of the state to providing affordable and necessary available medicines to immediately eradicate the virulent disease that plague every African lives”, wherein CIPLA’s distributorship was a cost-beneficial offer to South Africa. On April 19th 2001, GSK withdrew its case followed by the court’s interpellation upholding the counterclaim of the South African government.

Part II: GSK’s market positioning Based on the year 2009 industry update, GSK’s global market positioning is outlined in its year 2008 Corporate Responsibility Report, earmarking the venture in significantly emerging markets which are considerably poor and unable to access quality medicines. To cite, GSK’s corporate-social responsibility aims to reaching out the commitment to making available the quality medicines at a reduced pricing of about 45 percent in lesser developed countries effective on April 1st 2009 (GSK.

Com, 2009). As outlined in the 2008 GSK Corporate Responsibility Report, key corporate strategies will be implemented in 2009, such as (1) exploring flexibility on “intellectual property rights” to grant about 500 patents (with 300 pending application) to consolidate for developing substantial therapeutic drugs, (2) price reduction of “patented medicines” in lesser developed countries, and (3) invest GSK’s 20 percent of net sales revenues to help strengthen the establishment of healthcare infrastructure (GSK. Com, 2009).

In summary, the GSK’s market repositioning and targets for 2009 has been initiated by its CEO Jean-Pierre Garner who strategized product marketing by merging or acquiring international and local pharmaceutical companies to venture in therapeutic drug distribution worldwide, retracting the marketing position of GSK that the merging and acquisition of GSK for significant numbers of patenting pharmaceutical companies would ensure the delivery, availability and affordability of quality medicines throughout the global population, specifically in developing and lesser developed countries.

Part III: Linkages of the case to global business and societies The case of GSK can be linked to the development of global business and societies. The San Jose State University (SJSU) College of Business has found the empirical evidence that traces how transnational enterprises (like GSK) diversify into globalization of business.

As cited, the empirical study pointed out the indicators for globalization, such as (1) developing of “global market channels” when a locally-established venture succeed, (2) setting up business operations globally through establishing production plant or partnership abroad, and (3) developing and establishing “global supply chain” in the acquisition of raw materials and overseas labor force (SJSU College of Business, 2009).

Reflective of the empirical findings of SJSU College of Business on globalization or diversification of business in a global scope of operation, it is evident that GSK patterns the global venture through its key strategic approach to mergers and acquisition of pharmaceutical companies abroad.

It may be also perceived that the “drop-off-point” of the case in South Africa, pertaining to the withdrawal of the case, has opted GSK’s global operation with same “operational component” of product-market deployment which is equated to continual distribution of therapeutic drugs at a broadest marketing pipelines of merging local pharmaceutical industries to be established in lesser developing countries. Part IV: Analysis and conclusion on corporate management involvement

The case study depicted in this paper briefly analyzes that GSK has been into global market positioning as indicated by obtaining WTO-TRIPS grants on global intellectual property rights that has succeeded market distribution exclusivity in South Africa as a WTO-member country. In effect, it may be further analyzed that every member country of the WTO from lesser developing economies which are suffering from any pandemic diseases [like of South Africa] can be the potential market targets of GSK in product deployment.

Moreover, as indicated in the GSK’s key corporate strategies for global diversification of business, the merging and acquisition of small yet significant local pharmaceutical companies abroad could surely mobilize the capital investments of GSK to acquire global partnership. In which case, what the SJSU College of Business has been pointing into indicates GSK’s setting up of global business operation, relating the character or business culture of a transnational corporation’s globalization from production to marketing, joint-venture operation (merging and acquisition) and relatively the possible controlling of product-pricing.

On the other hand, CEO Jean-Pierre Garner’s corporate-social responsibility in the share of “social investments” from profitable revenues can merely “sugarcoat” the diversified global capitalization at the “least share” to communities. In conclusion, the case study has found that globalization of industries makes vulnerable the lesser developing countries as always a potential market of transnational companies, like the GSK in South Africa. Thus, globalization patterns the liberal market amidst the plunder of war, famine, hunger and poverty in the so-called third world economies.

References GSK. Com (2009). ‘2008 Corporate Responsibility Report’. Retrieved 02 April 2009 from http://www. gsk. com/media/pressreleases/2009/2009_pressrelease_10036. htm. Lawrence, A. T. (2002). ‘GlaxoSmithKline and AIDS Drug for Africa’. Western Case Writers Association. Retrieved 02 April 2009. San Jose State University College of Business (2009). ‘BUS 166 Power Point Slides: Chapters 7 and 8’. Retrieved 02 April 2009 from http://www. cob. sjsu. edu/doty_l/166sp09ppt. asp.

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