This blog is a summary of a panel titled “The Future of Affordable Antiretroviral Treatment: Trends in Patents and Price” at the XIX International AIDS Conference in Washington, DC on July 25, 2012. The authors’ presentations are available on a page provided by the conference: http://pag.aids2012.org/session.aspx?s=228#4
The first speaker, Francisco Viegas Neves da Silva from the Brazilian Ministry of Health, presented “Compulsory License and Access to Medicines – Economic Savings of Efavirenz in Brazil.” The country’s compulsory license on efavirenz was issued in 2007, when there were 75,000 patients taking the medicine in the country. Prior to issuing the license, the government held more than 8 negotiations with the patent holder, and eventually was offered a reduced price of USD 1.11 per pill. However, Brazil rejected the offer, noting that the patent holder offered a price of USD 0.65 to Thailand.
A Presidential Decree granted a five year renewable compulsory license for public noncommercial use with a 1.5% royalty. It applied to the 200mg and 600mg formulation. An extension beyond the original period was allowed (and eventually granted).
When the compulsory license was issued, the price per pill dropped by about two thirds. The government’s annual expenditure on efavirenz dropped from about USD 40 million to about USD 12 million. The expenditure has increased as the number of people receiving the drug has increased from approximately 70,000 to 100,000. The Brazilian government has saved 58.47% by buying from generic suppliers. Its total savings from 2007 through 2011 amounted to $103,567,369 million USD.
Nonetheless, international prices are still lower than those offered to Brazil, and IP is a significant element of price negotiation. It is still necessary to fully use and implement TRIPS flexibilities.
Da Silva noted that since 1996, Brazilian law has guaranteed universal access to antiretroviral drugs, and that the nation’s strong response to HIV/AIDS has been driven by an active civil society. He believes that these forces favoring the increase of access is more important than economics.
[Later on in the panel, Da Silva answered a question about Brazil’s efforts to combat counterfeiting in Brazil by saying that there are no counterfeit ARVs in the country. The Brazilian government provides universal free access, so why would anyone spend money buying a fake?]
Chan Park from the Medicines Patent Pool presented a survey of licensing policies by branded pharmaceutical firms in a piece titled “Understanding Voluntary Licensing – An Analysis of Current Practices and Key Provisions.” His paper examined the content of voluntary licenses offered by branded pharmaceutical companies to generic producers. Key provisions in the licenses include:
- Geographic scope: there is wide variance within the industry. The companies generally cover lower income countries. There is more varied coverage of lower-middle income countries, and not a lot of licenses apply to upper-middle income countries. The broadest scope is the best option from a treatment point of view because more people benefit. Another question related to the scope of the licenses is the where manufacture can take place. It is important that generic manufacturers are allowed to manufacture anywhere in the world.
- Number of licensees: There is also a lot of variance in how many generic producers receive licenses for production. There is a lack of clarity about how licensees are selected. When firms have a small number of licensees, this limits generic competition. A drug’s price falls as the number of prequalified producers rises. In some cases, licensees are not currently producing the licensed products. From a public health point of view, any manufacturer who can produce should be offered a license.
- Provisions related to active pharmaceutical ingredients (APIs): Some licenses don’t allow generic licensees to manufacture their own APIs . The cost of APIs is a significant portion of the price of final product. Reducing competition in API markets leads to higher prices which is bad from access maximizing perspective.
- Freedom to co-formulate Fixed Dose Combinations (FDCs): There is a lack of transparency regarding terms that allow or prohibit licensees from producing FDC products. It appears that existing licenses by some (including Johnson & Johnson) only permit specified combinations. FDCs are preferable to separate medicines for many reasons – they promote better adherence, tend to be cheaper, improve supply chain management, etc.
- Compulsory licensing provisions: Again, there is limited information about the terms of the licenses. However, the Patent Pool licenses with Gilead allow for the sale outside licensed territory in the event of issuance of a compulsory license. In other voluntary licenses, selling to countries not covered by the scope of the license could be problematic, even if those outside countries issued compulsory licenses. The freedom to manufacture and sell where there is no patent at the country of origin or the country of destination is another one of many important things to look out for in licenses.
Pedro Villardi from the Associação Brasileira Interdisciplinar de AIDS presented “Panorama of Pharmaceutical Patenting and Sanitary Registration of ARV Drugs in Brazil – Implications to Access and to Health Industrial Complex.” The survey of patent and registration status of ARVs in Brazil was undertaken because there was no public database with complete information for all of the medicines on the market. The projects objectives were 1) to develop a methodology for searching patents and patent applications, 2) to find sanitary registration status of ARVs, and 3) to see if patent and registration barriers were impeding the entrance of generics into the Brazilian market.
A search of public databases was conducted, and researchers found 98 patents in force or patent applications for 30 ARVs (including eight combination products). 22% of patent applications had been granted, 38% had been rejected, and 42% were pending. With additional applications pending, the final patent expiry for many important drugs will be years away. For instance, lopinavir/r and darunavir may remain under patent until 2025.
Of the 30 Antiretrovirals, 11 have one sanitary registration, 11 have more than one sanitary registration, and 8 have no sanitary registration.
Villardi recommended that governments better integrate development policies with their national pharmaceutical and chemical policies. This includes making widespread use of Bolar Exemptions and having high standards of patentability. He recommended strengthening pre- and post-grant patent opposition.
Jean Paul Moatti presented the UNITAID study “Affordability of HIV/AIDS Treatment in Developing Countries – An Analysis of Price Determinants.” Its goal was to identify the main determinants of ARV prices, and to study the price of medicines through the life cycle of their patents. The study used data from the World Health Organization database on transactions prices for 44,354 transactions between 2009 and 2012.
The following factors were found to have a statistically significant affect on the price of ARVs:
- Quantities purchased per transaction
- Whether or not the drug was a pediatric formulation
- Whether or not the drug was a co-blister or fixed dose combination
- Years since FDA approval
- Number of suppliers (each additional supplier reduces the price 3.3%)
- Whether or not the drug is a generic
The study also found that the average price of branded drugs began to rise again in 2008 – due primarily to the higher cost of second and third line drugs. Prices of generics continue to fall, though the rate of the price decreases is slowing.
Another finding is that the price of the branded drug tends to rise after patent expiry, as firms try to differentiate their products rather than compete on price.
Moatti concluded by saying that generic competition is still a driving force for ARV price decreases – though we may be getting close to marginal cost for first line drugs. ARV prices remain a major barrier for the switch to second and third line regimens. Braded firm strategies remain a major source of higher prices. Trade agreements that further favor IP rights over access to generics are a problem – so it is good that the majority of the EU parliament rejected ACTA.
Kajal Bhardwai presented “The ‘Middle-Income’ Curse: Should Global Aid and Treatment Access Decisions Be Based on National Economic Criteria?” Her presentation discussed how the classification of countries that used to be considered “developing countries” as “middle income countries” has complicated access to treatment.
The World Bank’s middle income classification is based purely on gross per capita income, which does not always correlate with the UN’s Human Development Index. The later is a more complete measurement of well being that takes into account health, education, and living standards. Many countries are classified as ‘middle income,’ though they have significant problems related to human development, i.e. – India, Indonesia, Sudan, and South Africa. The middle income classification also does not consider inequality within countries; and inequality in middle income countries is very high.
Most middle income countries are WTO members, and are implementing the TRIPS agreement, requiring patents on second and third line antiretrovirals. Many of them are also negotiating TRIPS-Plus free trade agreements.
Most multinational drug companies have some sort of differential pricing, voluntary licensing, or drug access programs for low income countries. But countries classified as “middle income” are often left out. According to MSF, several companies have “shut down HIV drug discount programmes in middle income countries.” Johnson & Johnson exclude all countries classified as ‘middle-income.’ Merck no longer issue price discounts for 49 middle-income countries for raltegravir – this includes India, Indonesia, Thailand, Viet Nam, Ukraine, Colombia and Brazil. BMS has no pricing program for middle income countries outside of Africa.
The patent pool has been mandated by UNITAID to include “all developing countries” in its licenses. In practice, many middle income countries are left out of the Gilead licenses, including most of Latin America. Also left out are many countries where the macro economy has been growing, but many people still live in poverty.
Only when you have universal access can you really provide treatment to everyone. When you try to exclude is when you run into problems.