The Wall Street Journal - Thursday, May 6, 1999
Michael Waldholz, Staff Reporter of The Wall Street Journal

So far, most companies have tried to deal with the problem through limited drug giveaways or discounting programs. But many international health officials and AIDS activists view those efforts as grossly inadequate. Already, several governments, including South Africa's, are threatening to hand over drug patents to local manufacturers, potentially flooding markets with cheap copycat versions of the industry's hugely profitable anti-AIDS medicines.

Now, Bristol-Myers Squibb Co., maker of three AIDS drugs, is trying another approach. Thursday it is expected to announce that it will spend $100 million in five southern African nations over the next five years to fund extensive research trials, train more than 200 physicians and help nongovernmental organizations bolster community AIDS-prevention and treatment programs. The program won't include drug discounts or handouts.

A Drop in the Bucket?

The effort is designed to help provide the sort of in-depth, long-term care and research that is common in the West, where the death toll from AIDS has plunged by two-thirds in recent years, largely as a result of the widespread use of the new "cocktails" of AIDS medicines.

No one, not even Bristol-Myers, with $18.3 billion in annual sales, believes $100 million will come close to solving the problem, even though the company calls the effort the largest AIDS grant ever by a corporation. The infection rate in sub-Saharan Africa is growing by 20% a year, and in South Africa alone the number of HIV-infected people has almost doubled to close to four million in the past two years. World-wide, 34 million people are believed to be infected with HIV, the virus that causes AIDS.

Bristol-Myers Chairman Charles Heimbold, in an interview Wednesday, said his company's action, while perhaps slow in coming two decades into the epidemic, is a sincere effort to get other companies to join with it or to begin similar undertakings of their own. The 65-year-old executive says the company acted quietly and on its own "because that's the way to get things done quickly ... and given the numbers we were seeing, speed seemed to be critical."

While Bristol-Myers says altruism is driving its efforts, there are other factors at work. The program will allow it to develop longer-term business interests in developing nations for its AIDS drugs and other therapies.

And in a move certain to rouse ethical questions in the U.S., Bristol-Myers hopes to support South African studies involving 20,000 AIDS patients, mostly women and children, taking drug cocktails that in some cases consist solely of Bristol-Myers's three AIDS products: its antiviral drugs Videx, Zerit and hydroxyurea. Some of the trials will involve only two drugs, perhaps even in intermittent therapy, an approach considered suboptimal in the U.S. If proved effective, however, this lower-cost therapy could be a boon in the developing world.

Bristol-Myers was prodded into action when Mr. Heimbold happened to sit next to United Nations Secretary-General Kofi Annan late last year at a dinner party, and the U.N. official urged him to do something for AIDS in Africa.

Officials with the U.N.'s AIDS program, UNAIDS, have been pounding the doors of U.S. and European drug companies for several years. Led by a Lebanese-born, Paris-trained physician named Joseph Saba, UNAIDS staffers in early 1997 began urging AIDS drug makers to join a pilot effort to get lower-priced medicines into four countries, including two in Africa: Uganda and the Ivory Coast.

But while sympathetic to the problem, the companies were uncomfortable with setting a precedent for a two-tier pricing system -- one for the West and one for poor nations. Their main concerns: that activists in Western nations would demand similar discounts, and that the low-priced medicines would find their way onto the black market and end up in the U.S. and Europe.

Moreover, Merck & Co. argued that even if it halved the price of its big-selling protease inhibitor Crixivan, which costs about $600 a month in the U.S., few Africans could afford it or use it properly because of a lack of the necessary medical infrastructure. Protease inhibitors are an essential ingredient in the multidrug cocktail that must be taken several times a day, without interruption, to be effective in reducing virus levels in the blood. Even in the U.S., many patients have difficulty adhering to the complex daily regimen. Merck's concern was that if patients in the pilot countries went on and off the cocktails, they would develop drug-resistant strains of the virus that could spread throughout Africa, and even imperil countries elsewhere, including the U.S.

But from the perspective of UNAIDS's Dr. Saba, a courtly man who gave up a lucrative practice to work on HIV-vaccine development in Rwanda, it appeared that the world drug industry was principally concerned about protecting huge AIDS drug profits in the U.S. and Europe.

For months, he and Brian Elliot, a gregarious Irish consultant to UNAIDS, pitched their plan to company after company. Their proposal called on the companies to put up just $25,000 in each pilot country to help fund an independent body that would buy AIDS drugs at steep discounts and closely monitor their administration to avoid misuse and theft.

Deep Cut

The unlikely duo was largely met with skepticism, with one exception: Peter Young, a top executive based at Glaxo Wellcome PLC's North Carolina operations, whose AZT is a mainstay in treating AIDS. Mr. Young was the first drug-industry official to agree to slash prices, last June cutting AZT's monthly cost to patients in Uganda and the Ivory Coast by more than two-thirds to about $60 a month. The company also is providing short-term AZT dosages free to pregnant women to block the transmission of the virus to their newborns.

Mr. Young understood that this wasn't a solution, but he says Glaxo Wellcome felt it had to do something. "When we look back in 20 years or so, I wanted us to be seen as on the side of those who tried, who tried to do something, even in the face of insurmountable odds," Mr. Young says.

Critics in Africa were quick to point out that Glaxo Wellcome's patent on AZT was about to expire, and said that the company was merely motivated by a desire to sustain sales. In Uganda, Peter Mugenyi, an eminent AIDS physician and researcher, says, "I'm glad Glaxo cut its price, but if they didn't, we would have gone elsewhere" for AZT -- namely to generic-drug makers.

Pharmaceuticals executives say Glaxo's willingness to slash AZT prices in Africa forced several other reluctant AIDS-drug makers, including Bristol-Myers and Roche Holding Ltd.'s Hoffmann-La Roche unit to join the UNAIDS pilot project.

However, since the project's start last summer, only 650 of the two million infected Ugandans have been able to afford the discounted drug cocktail. Even at $200 to $400 a month for the cocktail, it wasn't affordable for most AIDS patients in Uganda, where there is virtually no health insurance and the cash-starved government doesn't pay for drugs.

Creating a Marketplace

Beyond price, it was becoming clear to UNAIDS that much more than cheap drugs was needed. Mr. Elliot, who formerly ran a Johnson & Johnson unit's drug-marketing operations in Africa in the early 1990s, had come to realize that a pharmaceuticals marketplace needed to be created. In this forum, drug makers would compete with each other for patients, help train doctors and support clinics and hospitals -- much as occurs in the U.S. and in Europe.

Even Dr. Saba had to be convinced of this necessity, however. One January night at an Italian restaurant in Chicago, where they were attending an AIDS conference and lobbying drug makers, tempers flared. The normally even-keeled Dr. Saba raised his voice in frustration and said he was certain the drug companies would reduce their prices even more, "because it's right." Mr. Elliot countered sharply, "Joseph, the drug makers are run by businessmen, and they respond to the market and to profits. Our job is to show them it's in their interest to lower prices and help build a medical infrastructure in Africa."

Mr. Elliot had been hammering away at this theme in dozens of meetings with drug-company executives, including several at Bristol-Myers, which had discounted its AIDS drugs by 33% to 46% under the pilot program. So when Mr. Annan, the U.N. secretary general, turned to Bristol-Myers's Mr. Heimbold and asked him to take drastic action against African AIDS, top management had a fairly clear understanding of what was needed.

Getting Involved

That was underscored when Kenneth Weg, the company's vice chairman, and several other managers visited Botswana, Swaziland and South Africa over the winter, accompanied by former Congressman Ron Dellums, a consultant and frequent go-between for American companies and African governments.

"You can't help but become involved when you go out and see people," says the normally strait-laced Mr. Weg, 60, who, during an interview in his plush Manhattan office, becomes emotional when describing his encounters with HIV-infected women and children in Africa. At one hospital, he says quietly, he was introduced to a mother and her four-year-old child, both infected, and on the spot decided to pay for their future medical care.

Provided with data by UNAIDS, including a map illustrating the disease's rapid incursion, Mr. Weg and others at Bristol-Myers say they were stunned by the magnitude of the problem. "Of the 2.9 million children who have died due to AIDS, 2.5 million of them live in sub-Saharan Africa," he says. In addition, up to 40% of women in Swaziland and one-third of their children are also infected. In South Africa, there are 200,000 children orphaned by the disease.

The Bristol executives weren't always warmly embraced in southern Africa -- especially in South Africa. In one instance, the South Africans bristled at the company's suggestion to train African physicians in the U.S., under a fellowship program run by Baylor College of Medicine in Houston, rather than in Africa; it also didn't seem to make sense to teach doctors how to use drug regimens, methods and equipment that wouldn't be available in South Africa. William Malegapuru Magkoba, director of the Medical Research Council in South Africa, says he and other black South Africans, given the recent history of apartheid, are sensitive about being dictated to by white Westerners. In the end, the two sides reached a compromise: 50 South African doctors will be trained in Texas, 50 in Africa.

Naive Approach

Bristol-Myers staffers also concede they were "embarrassingly" naive about what could be accomplished. "We thought there'd be easy answers once we got involved," says Mark Ahn, the company's project leader, who hadn't been to Africa until a weeks-long fact-finding trip in early February.

"Our assumption was that what people needed most were drugs; maybe we could make a large drug donation," Mr. Ahn says. That was before he dropped in on a support group in Soweto for 11 HIV-infected mothers. The women, who survived by making peanut butter, told him they would probably best be helped with funds to pay for more equipment rather than drugs. "These women were primarily worried about how they were going to support themselves today and tomorrow, not about whether they would be alive in five or 10 years," he says.

A large chunk of Bristol-Myers's money will go to train community workers in public health, and to provide existing programs like the African Red Cross "with the ability to greatly expand what they are already trying to do, such as caring for the orphans," Mr. Ahn says.

He adds that in recent weeks, there was a "raucous" debate inside the company over exactly how much to spend, especially since the funds will come off Bristol-Myers's bottom line. (The company says the tax-deductible grant could reduce earnings by a bit less than one cent a share in each of the five years.) Only last week, Messrs. Heimbold and Weg decided on the $100 million figure, topping lesser amounts proposed by Mr. Ahn and others.

Patent Threat

Although Bristol-Myers says there isn't any connection between its effort and recent drug-licensing moves in Africa, some observers tie the two together. Last year, South Africa passed a law saying it will license local manufacturers to make the anti-AIDS medicines unless big drug companies voluntarily reduce prices. This so upset the U.S. pharmaceutical industry that it lobbied Congress to place a rider in a foreign appropriations bill to temporarily cut off foreign aid to South Africa. That threat postponed the South African action.

Nonetheless, later this month in Geneva, the World Health Assembly of health ministers will vote at its annual meeting on a proposal to open access to the medicines through so-called compulsory licensing that would encourage poorer nations to pass laws similar to the one in South Africa.

"What Bristol is doing is sure to be seen as a mix of good citizenship and commercial interest," says UNAIDS's Mr. Elliot. "It can't help but be seen that way."

Allen Herman, dean of the National School of Public Health at the Pretoria-based Medical University of Southern Africa, readily acknowledges that Bristol-Myers's effort is only a tiny piece of what's needed. But, paraphrasing an African proverb, he says, "How do you eat an elephant? One bite at a time." Then he adds, "What Bristol is doing is only a bite, but it's a big bite."
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