At a conference last week in Penang organized by Medecins Sans Frontieres (MSF) and the Drugs for Neglected Diseases Initiative (DNDi), John Sulston, the 2002 Nobel laureate in medicine or physiology declared that the problem of neglected diseases was not so much a market failure, as the absence of a market which could bring into existence the required medical armamentarium.

This remark captured quite succinctly the two strategic postures which lay dormant throughout much of the conference (in truth, a continuum rather than two polar opposites), but occasionally erupted in robust exchanges between such personalities as US-based James Love (Consumer Project on Technology) and representatives of big Pharma (most notably Novartis).

The tension, of course, was between non-market approaches vs reforms to 'make the market work better'.

Alex Matter, founding director of the Novartis Institute for Tropical Diseases in Singapore (established 2002) revealed that Novartis had committed an establishment and operational budget of US$122 million for the first five years to carry out research on neglected tropical diseases, and that "in those developing countries where these diseases are endemic, Novartis AG intends to make treatments readily available and without profit".

After some inconclusive discussion on the meaning of "non-profit" in relation to the accounting details of variable and fixed costs (most importantly, R&D) in the production and marketing of drugs, some participants were left wondering as to whether this was an expensive PR exercise for Novartis.

The less cynical however drew attention to the potential markets which could be created by the Global Fund for Aids, TB and Malaria, the Bill & Melinda Gates Foundation, UK-DFID, and Advance Purchase Commitments (APC). The latter is an incentive mechanism for drug or vaccine R&D where success is uncertain and effective demand does not otherwise exist.

This APC approach, which guarantees a purchase at specified price and volume in the event that an acceptable product emerges, is currently much in vogue at the World Bank, UK-DFID and other international development and academic circles. It was also the subject of a lengthy paper and critique by Oxford economist Andrew Farlow at another session.

In the same panel, Dr Ee-Chee Ren, deputy director of the Genome Institute of Singapore (GIS) described a joint-venture between GIS and Roche Pharmaceuticals in developing a diagnostic test that could detect the Sars coronavirus before the onset of symptoms and furthermore provide results within one hour.

Ren however declined to provide details on the benefit sharing agreement between the GIS and Roche, although he did allow that the diagnostic kit to be marketed by Roche would be priced at about US$20 per kit.

Suerie Moon of MSF quite correctly pointed out that Sars would not count as a "neglected disease".

With 10% of Singapore's GDP at stake (tourism) not to mention the more distal economic effects extending as well to China and other Sars-sensitive East Asian economies, the market for Sars diagnostic kits, vaccines, and therapies is assured in East Asia.

(The politically influential tourism sector in Malaysia accounts for 7% of GDP and foreign exchange earnings second only to manufactured exports).

Neglected diseases

This is in contrast to the neglected diseases highlighted by MSF. Of the 1,393 new drugs approved between 1975 and 1999, only 16 (or just over 1 percent) were specifically developed for tropical diseases (such as malaria, sleeping sickness, Chagas' disease, kala azar) and tuberculosis - diseases that account for 11.4 percent of the global disease burden.

For 13 out of those 16 drugs, two were modifications of existing medicines, two were produced for the US military, and five came from veterinary research. Only four were developed by commercial pharmaceutical companies specifically for tropical diseases in humans.

These neglected diseases mainly affect poorer communities in countries of the South, which do not constitute a valuable enough market to stimulate adequate R&D by the multinational pharmaceutical companies.

In the event that 'philanthropic' Keynesianism doesn't deliver adequate returns to the multinational pharmaceutical companies, we can anticipate that companies like Novartis will turn to the more marketable R&D in its tropical diseases research agenda.

This could be much along the lines of the publicly-funded, market-oriented GIS, which currently focuses on Sars, and perhaps avian flu, and Nipah among its tropical disease research priorities.

In short, we would be back to an intractable, fundamental dilemma: need vs. demand, in its neglected diseases-orphan drugs incarnation.

CHAN CHEE KHOON is co-ordinator of Citizens' Health Initiative, a coalition of non-governmental organisations and special interest groups working on public health issues.