The Gates Foundation and the Anatomy of Philanthrocapitalism

Without adequate safeguards and greater debate about private aid, organisations like the Gates Foundation can provide only partial solutions and can even entrench the very systems whose symptoms they seek to address.


Bill Gates. Credit: Bill Gates Foundation

Price is one of the main barriers to medicine access in rich and poor countries alike. Solvadi, a drug that has revolutionised the treatment of Hepatitis C, costs $84,000 for a standard 84-day course. Ibane, a hugely effective breast cancer drug, is priced at $9850 per month. Oxfam estimates that more than 2 billion people across the developing world are unable to access life-saving drugs, despite their availability in the market.

India has long been considered the pharmacy of the world – its domestic intellectual property regime has allowed Indian pharmaceutical companies to create generic versions of existing drugs and supply them at a fraction of the cost to millions around the world. Not for much longer, however. The Narendra Modi government has been under sustained pressure from the US and European Union to amend its framework. Last week, India assured the United States Trade Representative that it would not issue compulsory licenses for commercial purposes. But this comes as no surprise given Modi’s eagerness to attract foreign investment, promote the Make in India program and strengthen ties with Washington. It is also not surprising in the context of the low priority given to healthcare by successive Indian governments – India’s spending on healthcare is among the lowest in the world, with just over 1% of GDP allocated to healthcare.

The question of patents

In much of the developing world, states have routinely under-invested in healthcare. The gap in healthcare provision is typically filled by informal health workers, non-governmental organisations and the private sector. The Bill and Melinda Gates Foundation (BMGF) has in recent years emerged as the largest player in global health. BMGF has disbursed approximately $32.9bn in grants to health programs around the world. To put these figures in perspective, the World Health Organization’s budget for 2014-15 was under $4 billion. Only the US and UK governments give more to global health today. It is necessary therefore to ask where BMGF stands on the issue of medical patents and what this might suggest for emerging global health paradigms.

Bill Gates has long stood for a strong and robust intellectual property regime, going even so far as to say that restricting intellectual property is tantamount to communism: “.. [O]f the world’s economies, there’s more that believe in intellectual property today than ever. There are fewer communists in the world today than there were. There are some new modern-day sort of communists who want to get rid of the incentive for musicians and moviemakers and software makers under various guises. They don’t think that those incentives should exist.” The Microsoft empire was in fact built on strongly protected patents – as recently as 2007, Microsoft was lobbying the G8 to tighten intellectual property protection. BMGF takes a similar stand. As Erik Iverson, Associate General Counsel of BMGF, clarifies: “[A] fundamental premise at the foundation is that we absolutely respect intellectual property rights.  We recognise their importance and we certainly recognize the importance of companies and their involvement in developing products and having them commercialised both in developed and developing countries.”

The irony should be obvious: on the one hand, BMGF is now the largest health agency in the world and on the other hand, it supports the very rules that prevent access to low cost health care. Health is both a fundamental right and a public good and it makes no sense that the same intellectual property rules that apply to Microsoft or the entertainment industry should be applied to the health sector.

Big Pharma maintains that the cost of medicines reflects their R&D investments; without adequate rewards and protection for medical invention, innovation in the sector will be stifled and even more people will be without access to necessary medication. However, numerous recent studies suggest otherwise. A 2013 article in The Caravan argues, for example, that Novartis spent under $100 million to develop cancer drug Gleevec – less than what Novartis makes from worldwide Gleevec sales every 13 days. Recently, The Wall Street Journal journalist Jonathan Rockoff reported that the price of Pfizer’s cancer drug Ibane – $9850 per month – was not a reflection of R&D costs but what the competition – Novartis – was charging for its own breast cancer drug and at what price point doctors and health insurance companies would stop supporting the drug. Anything more than $10,000 a month would be prohibitive.

The argument that patents fuel innovation is also problematic, for patents can only motivate innovation if the potential patent holders anticipate the developed drug can be sold at high prices. This explains why only 10% of global healthcare resources are spent on diseases that account for 90% of the global disease burden, affecting people mostly in the developing world; conversely, 90% of global health resources are spent on diseases affecting 10% of the population. There are numerous new drugs for acne and hair loss every year, but few for tuberculosis and sleeping sickness.

Gates contradictory stance

Leading thinkers around the world have thus called for a change to the medical patent regime, supporting alternatives such as the Health Impact Fund and Medical Innovation Prizes. Social justice must trump private profit in the case of health. What then explains Gates’ position – how is it that the new self-appointed guardian of global health supports an intellectual property regime that undermines his own stated objectives?

A recent study by Global Justice reports that as of 2014, the BMGF trust had investments in chemical and pharmaceutical corporations BASF, Dow Chemicals, GlaxoSmithKline, Novartis and Pfizer. The report thus argues that BMGF stands to directly gain from the profits of pharmaceutical companies. BMGF’s support for medical patents must therefore be seen in the context of its coziness with Big Pharma. BMGF maintains however that it has a global access policy whereby “knowledge and information generated by our projects will be promptly and broadly disseminated and that the developments created will be delivered at an affordable price to the people who need them most.” There seem to be no studies, however, that examine the functioning and outcomes of this policy.

But, to be fair, BMGF regularly funds research into diseases that have been neglected by the drug market for their close to zero-potential. It has also poured millions of dollars into the GAVI alliance – a public-private global health partnership that seeks to increase access to immunisation in poor countries. And, even though BMFG earmarks its contributions to the WHO, these are primarily for polio eradication and maternal newborn and child health in the developing world.

The coziness between BMGF and big pharmaceutical companies is perhaps more of concern in light of the huge influence BMGF, and Gates in particular, has on the global health agenda. In 2008 Dr. Arata Kochi, former head of WHO’s malaria program accused BMFG of acting as a “cartel” that suppressed the diversity of scientific opinion, that was “accountable to no-one other than itself,” and which “could have implicitly dangerous consequences on the policymaking process in world health”. A report by Global Health Watch similarly argues that while “[T]he Foundation has become the dominant actor in setting the frames of reference for international health policy,” there is a “fundamental lack of democratic or public accountability”.

There is also a broader systemic argument that must be considered when evaluating BMGF’s position on medical patents and its growing influence on the global health agenda, despite the seeming contradictions.

There is a growing expectation that private finance and philanthropy, rather than traditional aid, will be critical for meeting global development needs – this was brought out most recently by the global Financing for Development conference in Addis Ababa last year. Current thinking on development finance thus legitimises both the use of market solutions and business principles, as well as the idea that a profit incentive can help create sustainable and innovative solutions for global development. Similarly, BMGF’s approach makes sense if we see it not as a form of charity but as a form of ‘philanthrocapitalism’ or ‘venture philanthropy.’ That is, BMGF doesn’t simply donate money to global health but seeks to harness the power of the market to produce development outcomes, evaluating investments in terms of their probable returns and measuring performance using business metrics.

A problematic development paradigm

While such philanthrocapitalism undoubtedly injects the much-needed financial resources into global development programs, it is important to pay attention to the kind of development paradigm that is promoted as a result and the broader implications of such philanthrocapitalism.

BMGF’s philanthrocapitalism, like much of private sector investments for development, tend to promote vertical, issue-based solutions that are often rooted in new technologies and innovation. As the Global Health Watch report argues, “The Foundation’s corporate background and its demand for demonstrable returns on its investments appear to have resulted in a bias towards bio-medical and technological solutions.” Vaccination, for example, is considered a “catalytic” intervention that can simulate major progress in health.

However, this vertical approach does not contribute to building urgently needed health systems in the developing world. Responding to the criticism, in 2005, GAVI included a health system strengthening support window into its program portfolio. However, GAVI’s total commitments towards health systems between 2000 and 2013 are still only 10-11% of its overall spending.

Philanthropy is also fundamentally dependent on inequality and hierarchy. As Canadian sociologist Linsey McGoey argues, inequality provides both the reasons and resources of philanthropy. To illustrate the point, developing countries lose approximately $100 billion per year in revenues due to tax avoidance by large multinationals, monies that could go a long way in providing development solutions. A 2012 report from the US Senate found, for example, that Microsoft’s use of offshore subsidiaries enabled it to avoid taxes of $4.5 billion annually, a sum greater than the BMGF’s annual grant making ($3.6 billion in 2014). Neither Gates nor BMGF can be held accountable for the global rules and structures – for example, those of global taxation – that produce global inequalities, but there is surely an irony in looking to the benefactors of such structures for equitable and just development solutions.

The broader point is not to assign blame to a particular actor such as BMGF, but to consider the contradictions and limitations of the reliance of private finance, and global philanthropy in particular, for development solutions. It is also to highlight the need for close and regular scrutiny of their power and practice. Finally, it is to argue that without adequate investments and safeguards by states, and greater democratic debate about the nature of private aid monies and investments, organisations such as BMGF can provide at best, partial solutions and at worst, entrench the very systems whose symptoms they seek to address.

Dr. Urvashi Aneja is Associate Professor in International Relations, Jindal School of International Affairs.