Andy Gustafson
Creighton University

• 1 .Power/Force of Multinationals
• 2. Fair Trade: Lack of Laws and Regulations in LDCs
• 3. Lack of Infrastructure and Competition
• 4. Colonial-Style Practices
• 5 Workers rights .
• 6. Cultural Variations
• 7. Butterfly Effects of Consumer Demands
• 8. Cultural Transformation of Consumer
Culture Invasion
• 9. Copyright Infringement

#1 Power/Force of Multinationals
• Of the world's largest 150 economic entities, 95 are corporations (63.3%) according to a report in Fortune Magazine by the World Bank (2005).

Multinationals Trump Nation GDPs
• Wal-Mart, BP, Exxon Mobil, and Royal
Dutch/Shell Group all rank in the 25 largest entities in the world, above countries like Indonesia, Saudi Arabia,
Norway, Denmark, Poland, South Africa, and Greece.

Country/Corporation GDP/Revenue
$ millions
• 1US
• 2 Japan
• 3Germany
• 4UK
• 5France
• 6Italy
• 7China
• 8Spain
• 9Canada
• 10India
11,667,515
4,623,398
2,714,418
2,140,898
2,002,582
1,672,302
1,649,329
991,442
979,764
691,876 •
• 11Korea,Rep. 679,674
• 12Mexico 676,497
• 13Australia 631,256
• 14Brazil
• 15Russia
• 16Netherlands 577,260
• 17Switzerland 359,465
• 18Belgium
• 19Sweden
20Turkey
604,855
582,395
349,830
346,404
301,950
• 21Austria 290,109

Country/Corporation GDP/Revenue
$ millions
• 22Wal-Mart
• 23 BP
287,989
285,059
• 24ExxonMobil 270,772
• 25RD/Shell Group 268,690
• 26Indonesia
• 27SaudiArabia
• 28Norway
• 29Denmark
257,641
250,557
250,168
243,043
• 30Poland
• 31South Africa
241,833
212,777
• 32Greece 203,401
• 33General Motors 193,517
• 34Finland
• 35Ireland
186,597
183,560
• 36DaimlerChrysler 176,688
• 37Toyota Motor 172,616
• 38Ford Motor
• 39Portugal
172,233
168,281
• 40Thailand
• 41Hong Kong
163,491
163,005
• 42Iran 162,709
• 43General Electric 152,866
• 44Total
• 45Argentina
• 48AXA
152,610
151,501
• 46Chevron 147,967
• 47ConocoPhillips 121,663
121,606

• In top 75:
• Volkswagen, Hitachi, IBM, Honda, HP
• Top 75-100:
• Nissan, Fortis, Berkshire Hathaway, Home
Depot, HSBC, Verizon, Samsung,
Peugeot, Nestle, US Postal Service, China
National Petroleum, Sony

Lack of Consumer Power in Face of Huge Corporate Power in LDCs
• Very little transparency demanded by consumers
• Consumers often have no means of accessing information
• Most companies are foreign owned
• Domestic companies already at competitive disadvantage

#2 Fair Trade: Lack of Laws and
Regulations in LDCs
• Lack of Domestic Laws
• Lack of transnational laws or guidelines
•
• Lack of enforcement (of UN guidelines)

Example: Pharmaceutical
Companies

In 2004, the World Health Organization established that less than one-sixth of countries had a well-developed system of drug regulation, and one-third had little to no regulatory capacity.

Consequences of Poor Marketing
Information:
It is estimated that up to 50% of medicines in developing countries are inappropriately prescribed, dispensed or sold.

• In 2005, the Indian National Commission on Macroeconomics and Health labeled 10 out of 25 top selling brands of medicines in the country as being either “irrational or nonessential or hazardous.”27

• A breakdown of more than 1,000 new drugs approved by the US Food and Drug
Administration between 1989 and 2000 revealed that more than three-quarters had no therapeutic benefit over existing products.30

• A stark example comes from a leading industry report that attributed China’s considerably slowed growth rate in the sector (from 20.5% in 2005 to 12.3% in
2006) to a government anti-corruption campaign. The campaign was introduced during the second quarter of 2006 to set limits on physician directed promotion, and according to the report, served to dampen sales in the region.

• The pharmaceutical industry in 2006 was worth US$ 643 billion.
• Total pharmaceutical sales from the top 10 companies accounted for more than 40% of the total market (see table).

Top corporations by global pharma sales: 2006

Industry growth rate 1999-2006

Pressures on Pharm Companies
It is estimated that:
• 90% of current profitable drugs are over 5 yrs old.
• In 2009 patents on 1/3 of top 35 branded drugs expire
• Exposing an estimated $157 billion worth of sales to generic erosion.
• Leading pharmaceutical companies will lose between
14% and 41% of their existing revenues as a result.
• The industry’s growth rate is now at 7% compared to
14.5% in 1999 (see table).

• For example, India was one of the fastest growing markets in 2006, with pharmaceutical sales increasing 17.5 percent to $7.3 billion.

1.
Increasing the perceived frequency and/or severity of the indications.
2. Widening the indications to include more people.
3. Increasing the perceived likelihood and magnitude of benefits .
4. Decreasing the perceived likelihood and magnitude of harms .
5. Increasing the use of the drug for longer durations .

Pharmaceutical Gifts in Pakistan
• Low cost: pens/pads/diaries/calendars.
• Medium cost: stethoscope/books/briefcases.
• High cost: air conditioners/laptops/desktop computers/club membership.
• The latest practice is : For writing 200 prescriptions of the company’s high priced drug, a doctor is rewarded with the down payment on a brand new car.

Advertising with Incomplete
Information
• 2005 study of Psychobiology of the Paulista Medical
School of the Federal University of São Paulo Brazil
• Analysed 24 Brazilian advertisements for the same psychoactive drugs as advertised in American and/or
British publications from the same period.
• Observed that “Brazilian advertisements omitted information on usage restrictions, such as contraindications, adverse reactions, interactions, warnings and precautions, and that such information was present in American and British advertisements.”

Evidence shows that biased doctors are more likely to:
• Prescribe a drug if they had recently attended a sponsored event by the manufacturer.
• Prescribe a drug that is not clinically indicated.
• Have a drug placed on a hospital formulary.

Health expenditure in developing countries

*Governments’ Key Recommendations:
1. Implement, improve and monitor legislation in line with the WHO Resolution on the Rational Use of
Medicines and the WHO Ethical Criteria for Medicinal
Drug Promotion.
2. Support the provision of independent information on drugs for consumers and health professionals.
3. Implement and enforce a ban on gifts to doctors .
4. Enforce strict sanctions that will deter poor corporate practice in drug promotion.
5. Take measures to improve the transparency of drug companies’ marketing activities and seriously address the conflict of interest encountered in drug companies’ funding of medical education.

**Key Recommendations at the
Company Level:
1. Stop the practice of gifts to doctors
2. Implement rigorous policies on vetting of drug promotion materials and adherence to existing codes of conduct
3. Provide transparent and verifiable information on the precise nature of relationships and associated funding for all stakeholder groups, including health professionals, pharmacists, students, journalists, clinical research organisations and patient groups.

1. Ensure codes of conduct on drug promotion extend to interactions with health professionals AND consumers.
2. Invest in innovative partnerships with government and civil society organisations so that corporate funding of disease awareness campaigns, and CME may be channelled via blind trusts in line with specific health priorities of consumers at a community or national level.

• Drugs, Doctors and Dinners: How drug companies influence health in the developing world
• Managed Care and the Morality of the
Marketplace
(NEJM, 333:50-52, 7/6, 1995)

#3 Lack of Infrastructure and
Competition

• Companies convert land from food crops to cash-crops for export

Goods can be produced at much lower cost in developing countries
• Higher unemployement
• Lower wage rates
• Fewer effective unions
• Less effective labor laws
• Fewer producer constraints
• Lower environmental standards

• Increased exports
• Jobs
• Hard currency
• Economy improves
• Standard of living increases

# 6 Cultural Variations

• Bribery vs Gift
• Friendship vs Old Boys Network
• Proper relationships of women to men
• Rights: Right to kidney dialysis, CAT scan
• Norms of expectations

#7 Butterfly Effects of Consumer
Demands
• Example 1: Ethanol and the Amazon

• 1. Desire for alternate fuel (Ethanol)
• 2. US demand drives Corn price to $7
• 3. Supply of Corn is strained
• 4. LDCs convert more land to Corn-
Farming
• 5. An area the size of Rhode Island in
Amazon was converted from rainforest to corn in 1 year.

Our Demands have long-distance effects
• Consumer demand for cheap goods = pressure for cheap labor in LDCs
• Negative Externalities of
– Oil Production
– Toxic Waste Production

#8 Cultural Transformation of
Consumer Culture Invasion
• As markets invade LDCs, there is a transformation of culture which occurs.
Sometimes this is good. Sometimes it may not be.

Example 1: Consumer Market
Change: Iran’s Paykan

• After 27-years of market reforms, China has undergone a profound transformation that has given people more freedom of choice over their personal lives.

• Walmart Effect – good and bad
• Internet spread – freedom of information
• Entrepreneurial innovation
• Increased Competition
• Matured market demands regulation (i.e., copyright controls)

2 Key Foundations Lacking in
Developing Countries