An analysis of GlaxoSmithKline and AIDS Drugs in South Africa

Maker of AIDS drugs, GlaxoSmithKline (GSK), is confronted with a question of ethics. Do they go the humanitarian route and provide drugs for AIDS victims in poor countries, or do they maintain that they’re a business and they’re here to make money? South Africa has the highest population of AIDS patients in the world. In the year 2000 roughly five million people (or 20%) of the population were infected with the disease. At this time some drugs to attack the virus had been developed. The problem was the cost of this treatment method (HAART) cost an estimated $10,000 to $15,000 a year. The average annual income in South Africa was approximately $2,000. What is a nation to do when a disease is spreading rapidly, killing off your people? The South African government decided to take matters into their own hands. If companies such as GSK wouldn’t make AIDS drugs affordable for their people they would get the drugs another way. In 1997 Nelson Mandela introduced the Medicines and Related Substances Control Amendment. With this amendment the South African government could import generic drugs. They saw this as the only way to get affordable AIDS drugs to help infected victims of the disease. In 1998 GSK and 41 other pharmaceutical companies filed a lawsuit against the South African government, brought on by the South African Medicines and Related Substances Control Amendment. The lawsuit argued that the amendment would allow the health minister to arbitrarily ignore patents on medications. And they were right. But is it a battle worth fighting? The merger that would become GlaxoSmithKline resulted in the largest pharmaceutical company in the world. They were also the largest AIDS drug producer in the world. AIDS drugs alone generated $2 billion in sales in 2000. South Africa represented only 1% of global sales for the company. GSK was a huge, profitable company, but with a pending lawsuit involving a question of ethics it made them a target for attacks from all angles. Many non-governmental organizations launched attacks and campaigns against GSK, demanding they remove the lawsuit against the South African government. Sixteen members from Globalise Resistance protested outside of GSK’s plant in Brentford, London. Oxfam International launched their “Cut the Cost” campaign to protest all pharmaceutical companies charging excessive prices in developing countries. Because it appeared that GSK was willing to sacrifice lives to make money NGO’s such as these and several others took a stand against the pharmaceutical powerhouse.
So was the 1% market worth the black eye it was given for claiming what they were entitled to? I don’t think so. While GSK had every right to be upset with the amendment introduced in 1997 which infringed upon their patents fighting it only proved to hinder more than help. It is my opinion that they would have been wise to recognize that a country such as South Africa won’t be able to pay the premium price for the drugs they so desperately need. By discounting them substantially or donating them all together they would be looked upon differently by the world, not as a pharmaceutical superpower that cares about nothing but the bottom line, but as a company that is genuinely concerned about the welfare of the world. Don’t get me wrong, I’m all for capitalism, but in a situation such as this one could do a lot of good for a company by giving a little and getting a lot back in return. I believe to be successful long term you have to look to the future, not just the “now.” The positive publicity and positive results from this type of action are immeasurable. The business generated could be tenfold the business they would have received selling drugs at a premium to South Africa.
In the end GSK ended up doing just that, they discounted their AIDS drugs to make them affordable to the people of South Africa and other underdeveloped nations. It could have been from the pressure of the NGO’s. It could be they felt they had more to gain in the long run by doing so. One thing is for certain, the damage had been done to GSK’s image. Had they not filed the lawsuit against the South African government, had they discounted the drugs initially, GlaxoSmithKline could have emerged as the humanitarian pharmaceutical superpower.