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Access to medicines: a vested interest for investors and companies

Further index launches planned for June and July.

For nearly three years investors have been pre-occupied with the credit crunch and the global financial crisis, which have bequeathed to taxpayers a mountain of debt. In 2009, the US deficit soared to $1.4 trillion, in the UK, government support for the banking system reached £850 billion. At its height the crisis saw the Dow Jones fall below 7000 and the FTSE dip below 4000. At the Access to Medicine Foundation we believe that investors should also be concerned with another crisis that has been running for far longer; the global health burden. Like the economic crisis the numbers are also staggering. Over two billion people worldwide lack access to essential medicines, and illness and disease when left untreated harm both individuals and economies. Statistics show that in 30 developing countries alone availability of selected medicines at health facilities was a dismal 35% in the public sector and only 63% in the private sector. For people on the ground, lack of medicines means patients have to purchase them privately or worse still, do without treatment. From a country perspective, struggling to combat public health issues with inadequate budgets means stable and attractive investments are difficult or impossible to attract. Addressing the crisis means human beings benefit and companies and investors will see a positive return. While eliminating diseases was once the sole responsibility of governments andinter-governmental agencies, charities and NGOs, today, it is also investors and companies that play an important role in the long-term health of societies worldwide. Improving access to medicines in emerging markets creates healthier workers, savers and consumers, benefiting not just the local but the global economy. Recognising the scale of the challenge, The Access to Medicine Foundation, will this summer publish the 2010 Access to Medicine Index, the only index of its kind to rank pharmaceutical company policies and performance on access to medicines. Two years ago, when the first index was published, it received worldwide attention from media, the pharmaceutical industry, NGOs and institutional investors, who saw it as an innovative tool for capturing the industry’s efforts in this area, as well as providing a detailed benchmarking system for highlighting corporate social responsibility activities within the pharma sector. Key to the index’s success is that it is built on a foundation of collaboration. By fostering multi-stakeholder partnerships the index captures and represents the combined inputs, interests, voices and expertise of a diverse group of stakeholders, including institutional investors, academia, governments, NGOs and the pharmaceutical industry itself. While it does hold companies to account for their efforts in areas such as drug donations, philanthropy, management and capacity building, the index’s real goal is to

provide a much needed incentive to the pharmaceutical industry to fully embrace its role and responsibilities in the access to medicine challenge, highlight good performance and areas for improvement, and raise awareness of the potential value add for investors. So what does this mean for the global pharmaceuticals sector? In the future it will be driven by expiries in patent protection, which in 2005-2008 led to a decline of four percent in the industry’s sales growth rate. While the recession provided a short term fillip for the sector – as a defensive stock ‘big pharma’ has performed relatively well – negative growth rates are forecast. The upside is that two significant trends are emerging. Firstly, developing markets have stronger growth prospects than OECD markets. AstraZeneca, for example, has seen 10% annual growth rates in emerging markets, compared to only 2% in developed ones. Secondly, success in developing countries will be linked to demonstrating an ability to provide access to affordable medicines. The Gates Foundation has reported interesting statistics. In Kenya, it found that de-worming could raise per capita earnings by over 30%. In India, controlling Lymphatic Filariasis could add US$1.5 billion to the country’s GNP. Many emerging market countries that are attractive to investors and experiencing high growth rates, such as Brazil, China, India and Mexico, owe much of their success to years of development assistance. The Access to Medicine Index is proving to be highly relevant to the business community. There is growing evidence that some large pharmaceutical companies have begun to align their corporate responsibility programs with the measurement criteria used in the construction of the Access to Medicine Index. Collaborative dynamics andprocesses can be far more effective at producing innovation and change than competition. Needless to say there is some way to go before this global health crisis is addressed and living standards are improved at the global level. The Access to Medicine Index is one part of the solution. Leading companies in the pharmaceutical industry – together with 18 major institutional investors worldwide – governments, global health organisations, NGOs and philanthropists support the Access to Medicine Index. The Index has proven to be a multi-stakeholder alliance with the expertise, motivation, technology and power to create value, change behaviour and most importantly help to improve the lives of the most at risk members of society. The publication of the 2010 Index should help to stimulate further investor interest in this topic, with a series of index launches being planned for June and July. The Access to Medicine Foundation is an international, nonprofit organization based in the Netherlands. The foundation publishes the Access to Medicine Index, the first Index of its kind to provide standardized information on pharmaceutical companies with regard to their efforts to improve global access to medicine. The Foundation is funded by several governmental and non-governmental organizations including Oxfam Novib, Cordaid, Icco, Hivos, the Bill and Melinda Gates Foundation, the UK Department of International Development (DFID) and the Dutch Ministry of Foreign Affairs. The Foundation’s research partner is RiskMetrics Group (NYSE:RISK), a leading global provider of risk management and corporate governance products and services. For more information you can visit the website at: www.atmindex.org

E-mail link for Andrew White