E-DRUG: HIV/AIDS drugs price reduction
------------------------------------------------------------
Makers of AIDS Drugs Agree To Slash Prices in Third World
By MICHAEL WALDHOLZ
Staff Reporter of THE WALL STREET JOURNAL
In a landmark response to the AIDS crisis in Africa, five of the world's largest
pharmaceutical companies are offering to slash the prices of HIV drugs for
people living in poor nations. The companies' unprecedented joint agreement,
which is expected to be announced by the United Nations Thursday, should make it
possible for considerably more people in the devastated continent to gain access
to the life-saving but extremely costly drugs that have revolutionized treatment
in the U.S. and Europe. Following delicate discussions with U.N. officials on
ways to mount a broad attack on AIDS in developing lands, several companies are
pledging to sell their drugs there for as little as pennies above manufacturing
costs. Some are considering prices as much as 85% or 90% below the prices
Americans pay, or about one-fifth of the already-discounted prices now charged
in some African nations. "It's the first time the companies are collectively
willing to discuss a truly significant decline in prices," says Peter Piot,
director of the United Nations AIDS Program, who has been negotiating the
agreement since early April. "It is something many of us have long hoped for."
Groundbreaking as the agreement is, it falls far short of a solution to the AIDS
catastrophe in Africa, and it contains problems of its own. The pact may make it
possible for tens of thousands of Africans, and someday maybe hundreds of
thousands, to afford the drugs, yet the continent has an estimated 23 million
people infected with HIV, the virus that causes AIDS. For most, even the new
prices will remain too high. Moreover, Africa has nowhere near enough of the
trained medical people needed for the complex drug regimen, a failing the
agreement says must be remedied. The AIDS therapy is a taxing program that must
be followed to the letter; lapses risk not only a worsening of the disease in
individual cases, but also the development of AIDS strains resistant to the
drugs, with potentially deadly consequences for the whole world.
'Long Overdue'
"The companies' initiative is an excellent idea, long overdue," says Jose
Zuniga, executive director of the International Association of Physicians In
AIDS Care. But he adds: "If the offer isn't well thought-out and combined with
funding to educate people about how to use the drugs or build health services to
provide and monitor their use, the drugs' availability in Africa could be
disastrous. These are potentially dangerous medicines."
For the companies, the initiative holds big risks. Cutting prices so deeply will
expose closely guarded secrets about manufacturing costs and profit margins.
This is likely to feed a clamor in the U.S. for curbs on drug prices. At the
same time, companies fear that if they don't sharply cut prices for poor
nations, those nations will turn en masse to generic AIDS drugs that are being
produced in several countries in violation of corporate patents. Finally, the
initiative holds the risk of spurring a black market in AIDS drugs. The
participants in the breakthrough drug-cost agreement are Bristol-Myers Squibb
Co., Glaxo Wellcome PLC, Merck & Co., Boehringer Ingelheim GmbH and Roche
Holding AG. Mindful of antitrust law, they haven't discussed specific prices
among themselves but only in individual negotiations with U.N. officials.
Broad Effort Sought
Exact prices aren't likely to be settled upon for several more weeks. But Glaxo,
for instance, has made clear it is willing to offer its Combivir for $2 a day.
This is a mixture of AZT and 3TC, two drugs that form the backbone of AIDS
therapy. Two dollars is about one-third of Combivir's current daily cost in
Uganda and one-fifth of its price in the U.S. People close to the negotiators
say the company might be willing to go even lower in price. Long-term AIDS
therapy often requires the addition of at least one other drug, such as a
protease inhibitor, which could drive the price up to between $5 and $7 a day. A
"joint statement of intent" being released by the U.N. Thursday makes clear that
pricing is only one piece of the puzzle. It calls as well for new efforts in
prevention, health-care infrastructure, international funding and political
commitment by afflicted nations. A major obstacle to combating AIDS in
sub-Saharan Africa is that many nations have been slow to acknowledge the extent
of the epidemic, which has left millions of children orphaned, slashed life
expectancies, swamped health-care services and crippled already-enfeebled
economieS. As things stand, only the fortunate few in many developing countries
have had access to modern AIDS therapy. Richard Constant Okou, 36 years old and
infected since 1988, has been able to keep working at a bank in Uganda, and
thereby keep paying for his children's education, because he takes daily doses
of three anti-HIV medicines. "I can't afford the drugs," he says, noting his
monthly salary of about $500. Mr. Okou, who wears loose-fitting sandals because
one of the drugs produces a painful nerve condition in his feet, says he
regularly receives a "care package" of the drugs from a doctor in Europe he once
met. Several weeks ago, he had just enough drugs on hand to last a few more
days. "I just got an e-mail saying a friend will be bringing me more drugs
soon," he says. "It's not very reliable." Mindful of the tremendous need, the
U.N.'s Dr. Piot and others have implored the drug industry for more than three
years to cut prices. Responses before today have been spotty and individual.
Pfizer Inc. recently agreed to give away Diflucan, its costly drug for
AIDS-related fungal infections, in South Africa. Bristol-Myers Squibb last year
said it would donate $100 million over five years to bolster health-care
services in Africa. Other drug makers have made somewhat similar commitments,
but the companies haven't previously worked together on the acute affordability
problem. What sparked Thursday's five-company response was an impassioned plea
by U.N. Secretary General Kofi Annan at a special session on AIDS in December.
At the meeting, Glaxo Chairman Sir Richard Sykes said his company was committed
to a policy of offering "preferential" prices to poorer nations. Afterward,
Bristol-Myers Vice Chairman Kenneth Weg suggested that he and Sir Richard
encourage a trade group to convene a series of private talks with executives
from their companies plus Merck, Roche and Boehringer Ingelheim. Following a
meeting in London in early March, the five agreed on a new system of
preferential pricing, and on April 3, Mr. Weg presented the idea to Dr. Piot.
Even with the new prices, the combination of three or more drugs needed to quell
the virus will cost perhaps $150 or $200 a month. That's far below the $800 or
so a month the combo now costs in Africa (or $1,000 a month in the U.S.). But
per-capita income in Africa is less than $50 a month, and few African countries
or employers pay for any health care. Even much cheaper drugs for ills such as
malaria, tuberculosis and sexually transmitted diseases other than AIDS aren't
widely available outside Africa's urban areas.
The Patent Issue
Many in Africa will surely see the drug companies' proposal as laudable but late
and insufficient. Skeptics, especially some African governments long
antagonistic to multinational corporations, are sure to view it as a cynical
public-relations effort to mute the thunder of criticism in the U.S. and in poor
nations over high drug prices. The action comes two months before the World AIDS
Conference in Durban, South Africa, where activists have been planning noisy
demonstrations to demand drug-company concessions. One of their demands is that
companies allow wider use of generic copies of their AIDS drugs. Over the past
year, several African governments have threatened to buy these inexpensive
generic versions, which are being produced in Brazil, Thailand and India without
regard to company patents. In one dramatic example, a day's supply of AZT that
sells for $10 in the U.S. is sold by generics makers in Brazil for $1.08. One
indication of the rising generic threat: The Clinton administration Wednesday
reiterated a trade policy that would allow African nations facing health
emergencies to authorize companies to make generic AIDS drugs, regardless of
U.S. patents. Enforcing patents, even in desperately poor nations, is an
important component in the five companies' agreement. Several say they agreed to
take part only after the director-general of the World Health Organization, Gro
Harlem Brundtland, gave a January speech in which she, too, appealed to the drug
companies. In an effort to "inspire" an industry response, she says, she
pointedly stated that to "stimulate innovation," WHO believes drug makers'
"intellectual property rights" should be protected. "We saw her statement as a
call to action," says Per Wold-Olsen, president of Merck's Europe, Middle East
and Asia operations. The joint agreement contains the same sort of promise to
protect intellectual property. Mr. Wold-Olsen has declined so far to tell the
U.N. or WHO exactly how much Merck will cut prices. "We have signaled that we
will be flexible," he says. "We will be very flexible."
Profit Margins
The companies are reluctant to say they will price drugs at cost because doing
so would reveal a coveted industry secret: that profit for these and other
drugs, once research costs have been covered, can equal 90% of the prices
charged. The drug makers already fear that pressure for price controls would
rise with certain legislative proposals to have Medicare pay for outpatient
prescription drugs. Offering much lower prices in other countries could also
increase U.S. price-control pressures, they worry. Within Africa, deep price
cuts could set off a wave of other changes in health care. "With the prices so
high, there was little incentive for the governments to build the health
infrastructure to provide care," says James Wolfensohn, president of the World
Bank, which is part of the new agreement. "The companies' offer may now
stimulate that effort and inspire wealthy nations to help fund it." The World
Bank has tentatively agreed to provide added grants and loans to help educate
health providers and buy the medicines. Mr. Wolfensohn says one of the biggest
obstacles in Africa is that less than 5% of its HIV-infected people know their
status. "How can you treat people who aren't aware they are infected?" he says.
Lowering prices "is a good step forward, but it doesn't solve the problem, not
by any means." Other concerns about an influx of somewhat-more-affordable AIDS
drugs in developing countries are that this could tempt corruption among
government employees or produce civil protest among those unable to get the
medicines. And if the low-priced drugs fell into the wrong hands, the result
could be black-market AIDS medicines showing up in developed nations where
prices are much higher.
Pilot Program
The companies' price pledge is likely to startle many Africans battling AIDS.
Just two weeks ago, Peter Mugenyi, who runs an AIDS clinic in Kampala, Uganda,
went to Geneva to press Dr. Piot to organize an international effort to lower
prices and improve services. "Can you even begin to imagine," Dr. Mugenyi says,
"how a doctor feels when he knows there is treatment for a merciless disease but
no way to get it to your patients simply because of its cost?" Dr. Mugenyi has
been involved in a pilot program set up by UNAIDS --which is linked to both the
U.N. and WHO -- to promote drug affordability. It is an effort by a small team
of UNAIDS staffers who have struggled since 1997 to wrest significant price cuts
from drug makers and prove that lower prices could blunt the African AIDS
epidemic. Many believe this effort, led by a physician named Joseph Saba, helped
lay the groundwork for the price promises now being made. The idea actually came
from a former Glaxo executive, Peter Young, who in 1996 was looking for a way to
get Glaxo's AZT and 3TC into developing nations. He approached the U.N. in 1996
with a proposal: If it would make sure the drugs were used properly, Glaxo would
offer them at reduced prices. Mr. Young sold the idea to his bosses at Glaxo by
arguing that unless it cut prices, Africans would eventually buy large
quantities of AIDS drugs from illegal generic producers, and then those patent
violators, fattened by profits, might extend their sales to developed nations.
That would threaten products generating about $1 billion a year in revenue for
Glaxo. A U.N. group under Dr. Saba created test programs in Uganda and the Ivory
Coast. Setting up a nonprofit company and wangling funding from drug makers, Dr.
Saba began bargaining for discounts on HIV drugs in return for making sure they
didn't fall into black-market hands. The nonprofit company agreed to sell the
drugs only to patients treated by doctors or clinics that could prove they knew
how to use them.
Glitches Arise
Right off, the plan ran into problems. Doctors were flooded with requests for
the drugs after UNAIDS announced the project at a news conference in Kampala in
1997. Doing so "was a very big mistake," says Dr. Mugenyi. "People came here
saying they wanted the new medicines they'd read about in the papers and heard
about on the radio. But we didn't have the medicines yet, and of course people
didn't even understand how expensive they'd still be or that the drugs were
going to have to be taken daily for the rest of their life." It wasn't until
mid-1998 that the nonprofit company got its first shipment of discounted AIDS
drugs from Bristol-Myers, Glaxo, Roche and several other companies. And then,
the price discounts were wiped out when Uganda devalued its currency by almost
half. As a result, a three-drug combination needed to keep AIDS at bay still
costs $800 to $1,000 a month in Uganda. In a country where 1.5 million people
are infected, fewer than a thousand are buying the drugs from the nonprofit.
However, research by Axios, a Dublin-based drug-marketing consultant that helped
Dr. Saba, suggests that thousands more could afford the combination therapy if
its price fell to $100 or so a month. It's a critical point, because Dr. Saba's
pilot program has come under intense criticism from international public-health
providers, who argue that focusing so much effort on the enormously costly
medicines is an impractical, wealthy-nation response to a poor-nation problem.
Far more Africans would benefit, this argument goes, if the continent's limited
resources were used to buy low-priced drugs for sexually transmitted diseases or
malaria, to improve water sanitation and nutrition and to educate people in how
to avoid HIV infection. This, the critics say, could be accomplished with an
influx of money supporting local healers, religious groups or the thousands of
grass-roots nongovernment organizations that provide much of the social and
health-care service on the continent. "I understand that argument," says Dr.
Saba, a Lebanese-born, French-trained physician who once worked for WHO in
Rwanda. "But why should those who could use the drugs suffer because the drugs
aren't the solution for most everyone else?"
Subsidies Sought
The companies and the U.N. hope that with drugs' prices brought somewhat closer
to affordability, subsidies to help pay for them may be forthcoming from
employers, African governments and donor organizations such as the World Bank or
U.S. and European governments. The argument that Axios, the marketing
consultant, makes to drug companies is that by lowering prices dramatically,
they can spur a market for their products where one doesn't now exist. "We've
been advising the drug companies they need to do two things," says the head of
Axios, Brian Elliott. "Drop the price and provide some funding to underwrite the
cost of expanding health services, such as HIV testing or counseling programs,
that will assure the drugs are used correctly." Before the creation of the
UNAIDS program, the few hundred people receiving HIV therapy in Uganda were
those well-off enough to buy the drug abroad or people such as Mr. Okou using a
wide number of creative techniques. What the UNAIDS program provides, at least
in Kampala, is "reliability in access and price," says Sowedi Muyingo, who was
hired by UNAIDS to be the general manager of the nonprofit company, Medical
Access Ltd. "Even though the prices here are still too high for most people, the
doctors who treat HIV patients know when they prescribe the drugs that we have a
steady and secure supply at prices they can count on." Indeed, the U.N. is using
the Uganda project as an example of what can be done in Africa when the
government, foreign-aid organizations and drug makers cooperate on a grass-roots
level. And the drug companies make clear they won't offer the deeply discounted
prices without assurances of a secure distribution system. To speed things
along, the pharmaceutical coalition has hired McKinsey & Co. to design these
types of programs for other African countries. Mr. Muyingo -- a 30-year-old with
an M.B.A., an entreprenurial instinct and a salesman's cunning -- has turned
UNAIDS' Uganda nonprofit company into an efficient, two-person operation that
negotiates prices with the drug makers, imports the drugs and keeps track of
every physician who prescribes and every patient who uses the medicines. He does
all this out of a tiny one-room office on the second floor of a medical-supplies
warehouse. One floor below, the country's entire cache of AIDS drugs sits in
bins in a specially locked floor-to-ceiling steel-caged closet, its contents
literally worth their weight in gold at the prices predating the coalition's new
offer.
Skimping on the Drugs
One person who already is benefiting from the UNAIDS drug-access program is a
shy 20-year-old called Prudence. She believes she became HIV-positive through
rape two years ago by a fellow student, her only sexual encounter. In November,
she learned she was infected after she began feeling weak and developed a severe
rash. Prudence visited Gideon Rukundo, a 27-year-old physician at the publicly
funded Mulago Hospital who only recently learned how to administer HIV drugs.
Dr. Rukundo says he would like to study in the U.S. some day to become better
adept at helping his patients. Right now he treats about 21 patients with the
drugs, buying directly from Medical Access, but only with cash given to him each
month by his patients. Prudence began taking a three-drug combination in
December, but her mother, who pays for the therapy out of her salary and
savings, has said she is having trouble keeping up the payments. "I don't want
to be a burden to my mother, but I don't want to get sick," Prudence says.
Already, she has cut back to two medicines from three, reducing her mother's
monthly bill by half to about $300. To stretch out the drugs, Prudence says she
often takes the drugs every other day instead of daily, behavior that concerns
Dr. Rukundo because it could cause the virus inside her to mutate into a
dangerous, drug-resistant form. "If my patients can afford the three drugs,
that's what I give them, but I have to believe two drugs are better than none,"
he says. So far, the drugs Prudence takes are keeping her infection in
remission, but Dr. Rukundo frets that she can't pay for a $150 test to detect if
the virus is re-emerging. "Without the test, it's impossible for me to tell if
the drugs are still working," Dr. Rukundo says.
--
Send mail for the `E-Drug' conference to `e-drug@usa.healthnet.org'.
Mail administrative requests to `majordomo@usa.healthnet.org'.
For additional assistance, send mail to: `owner-e-drug@usa.healthnet.org'.