Cheap vaccines make business sense

Global pharmaceutical companies don’t often get a great press. They are known for their huge profits and their desire to direct research dollars into solving potentially profitable western medical issues.

But this week, Glaxo Smith Kline, gave us a different picture... 

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June 2011

Goal 8 of the Millennium Development Goals has a target to provide access to affordable essential drugs in developing countries.

Cheap vaccines make business sense

Global pharmaceutical companies don’t often get a great press. They are known for their huge profits and their desire to direct research dollars into solving potentially profitable western medical issues.

But this week, Andrew Witty, the head of the third largest pharmaceutical company in the world, Glaxo Smith Kline, gave us a different picture. He announced that GSK will cut 95 percent off the price of a diarrhoea vaccine for the world's poorest nations, potentially saving hundreds of thousands of lives.

Witty said the rotavirus vaccine price cut was an effort to be “in step with society” and he encouraged other drug companies to do the same. Under the new pricing arrangement, the poorest nations will be able to buy a dose of GSK’s vaccine for US$2.50 (£1.50), five percent of the $50 (£30) western price. The company is guaranteed sales of its drug at cost price under the deal. It aims to use profits generated in wealthier countries to subsidise the provision of drugs to poorer countries at a price which will just cover the cost of goods and production.

Chronic diarrhoea is the second biggest cause of death for under 5s and is estimated to kill 1.5 million children each year, mainly in Africa and Asia.

The giant drug company worked with UNICEF, the Gates Foundation and GAVI to work out this new deal but Andrew Witty makes it clear in interviews that this is not an act of charity, “a gimmick or one-off philanthropic gesture (but) part of a concerted strategy to change our business model" (interview on BBC Radio 4’s Today programme, June 6).

One of the targets of Goal 8 of the Millennium Development Goals is to provide access to affordable essential drugs in developing countries. The reality for many poor communities is that drugs are either not available  or their price puts them out of the reach of many.

The Guardian reported earlier this year that Mr Witty sees GSK's future in emerging markets and in developing vaccines; the company is the world's largest vaccine supplier with a 29% market share. The company has already capped the cost of its drugs in the world's least developed nations at 25% of UK prices, with HIV drugs at cost price. GSK has also pledged to hand 20% of its profits from sales in developing countries to charities for the development of healthcare infrastructure.

These initiatives have won praise, although campaigners like Mohga Kamal Yanni, senior health policy adviser at Oxfam, would like GSK to go further, "If a drug is US$165 (£100) here, it could be $41 (£25) in Malawi – £25 in Malawi is still out of any discussion." (The Times, June 6, 2011)

And before we get too carried away in praise of GSK, it did announce in April that net profit rose 14 percent to US$2.5billion (£1.52billion) in the first quarter of 2011, despite a slump in product sales.

We also need to remember that affordable drugs are only part of the answer to solving the diarrhoea crisis. An article in the Lancet medical journal last year stressed simple measures like clean water and basic sanitation, and that needs government action.

An interesting aspect of the GSK story is to think about how good development and good business can go hand in hand. How has this come about? A committed and visionary leader? Influence of good policy work in UNICEF and GAVI? Pressure from shareholders? Clever insight into the future of drugs?

Maybe all the above.

This story, which is good news for millions of children and adults who suffer the debilitating effects of diarrhoea, shows how targeted advocacy that goes beyond prejudiced views about drug companies has certainly paid off.