Global Issues of Access to Pharmaceuticals and Effects of Patents. 

Richard Laing,
Associate Professor, Department of International Health,
Boston University School of Public Health

AIDS and Essential Medicines and Compulsory Licensing Meeting

Geneva, March 26-27, 1999

VA1 Introductory Slide

I really value this opportunity to be here to learn from people particularly like Dr Correa who I heard yesterday - in that this is a really difficult issue to understand what the real issues are and how compulsory licensing can be used to improve access. The material I am presenting has been generated by a group of students who worked with me for the past few weeks and when I finally get to write the article those students will all be recognised for the substantial contributions of searching out some of the information.

I think we will talk about access, and we should be clear that when we say access geographical access is nearly always the least of the issues. The vast majority of times we are talking about economic access and it is the balance between ability to pay, how much money do people have, and the prices of the drugs. So the poorer the people are the less access they have and the more expensive the drugs, the less access exists. And its true in rich countries as well as poor countries. Poor people in rich countries have limited access and rich people in poor countries do have access - so this is the balance between poverty and prices.

VA2 Overview

What I'd like to do is review a few selected diseases. Although the focus of this meeting is on AIDS and AIDS-related drugs, I will be taking in the broader sense - I was asked to talk about the global burden of disease and related drug issues. I want to also review the pharmaceutical market very briefly and the students have gone through the annual reports of the companies pulling out data and there is a magazine called Medicine, Media and Marketing which is the inhouse magazine of the industry and we have been able to get hold of a whole lot of interesting stuff from that. I would like to talk about criteria - the issue is not can countries do compulsory licensing - of course they can - the TRIPS agreement clearly allows it. The question is when should they do it. And I will be suggesting some criteria that may be somewhat contreversial and I hope will serve for the basis for discussion. I would also like to suggest possible candidate drugs for compulsory licensing, not just in the AIDS area, but other drugs that meet needs and then to discuss other methods and I am very plaesed that James Orbinsky mentioned other methods of obtaining drugs. For many countries those are likely to be easier, quicker and more immediate methods [than compulsory licensing] that can be used.

Lets just look briefly at a few diseases in the world and put things into perspective (slide).

VA3 Global Burden of Disease

Cases/deaths in (000's)

Malaria - 213,743/856
Depression - 127,419/801
Gonorrhea - 50,552/65
HIV/AIDS - 30,600/2,300
Tuberculosis - 7-8000/2-3,000
Meningitis - 614/180

So thats the situation, we have a lot of morbidity and mortality associated with the diseases I've mentioned and most of it is happening to poor people in poor countries.

VA4 Global Pharmaceutical Market 2002

Now lets look at the size of the global pharmaceutical market. This is a projection for the year 2002 - I wasn't able to get the same data for now. But in many ways I think this may be more intersting - where are we going? And this is from the International Marketing Survey or the Markeing Intelligence Industry for the pharmaceutical industry. And when you look at the markets, the global markets, you are looking at:

North America = 170 billion dollars in 2002
Europe 100 billion dollars
Japan 45 billion dollars
Africa 5.3 billion dollars

out of the total global turnover of 400 billion dollars. Thats 1.3% going to the whole of Africa. The whole of South-East Asia and China is only 5%. So these countries are only a very small part of the global pharmaceutical market. And I would suggest that these markets are so large that they could so easily accept to cure Africa, South-East Asia, the CIS and they would not be affected. If there was compulsory licensing affecting these parts, it would probably not affect the profitability of the pharmaceutical industry in any way.

So who are these companies? If some of these companies were countries, they would be among the top twenty or thirty countries in the world, but clearly some of these companies are more than just pharmaceutical industries. I have chosen a few companies who have drugs that I have selected as candidates for compulsory licencing.

VA6 Company Total sales

Bayer with total sales of 30 billion dollars (98)- Ciprofloxacin earned them in one year 1.3 billion dollars (98).
Smithkline Beecham - 13 billion dollars (98)- Augmentin earned them 1.5 billion dollars in 1998
Glaxo W.- 13 billion dollars (98) - AZT earning them 244 million dollars (98)
Hoffman LaRoche - 12.8 billion dollars (97) - still a privately-owned company so its impossible to get more details.
Lilly - 8.5 billion dollars in 1997 with sales of over 2.5 billion dollars on Prozac alone.

So these are very substantial amounts of money and if you think of the amount of lobbying power, the amount of public relations and the amount of advertising that can be generated out of these sales, you can see why the US State Department jump so high when the pharmaceutical industry expresses its mild concern. Because for them to mobilise say 100 million dollars of lobbying power is easy.

VA5 US Pharmaceutical Market 1997

Now I have some more specific data just about the US.
This is 1997 data. The total sales for 1997 was 112 billion dollars. Up 11.5% on the previous year so this is a rapidly growing market. And the market for new pharmaceutical products is growing far faster than inflation. Promotional spending was 4.2 billion dollars, and that's not all. This does not include direct to-the-consumer advertising which comes under a secondary category. I don't know how many hundreds of millions they are spending on that. But now if you think back to the previous slide, at the little slice of the pie that was Africa, you suddenly see that promotional spending in the US is about the same as the total drug sales in the whole of Africa.

What are the leading sellers?
One drug Omeprazole (Prilosec) generated 2.2 billion dollars - lets put that in perspective. How much does the whole of WHO worldwide cost to run? Can you give us a quick figure [glances towards one of the WHO representatives in the audience]. I keep hearing a figure of 1.3-1.4 billion dollars. So 2.2 is nearly double the budget for the whole of WHO. The sales of one drug is nearly twice of what the whole of WHO costs. And we have the other drugs Prozac, 1.9 billion dollars, Augmentin, 800 million dollars and the new protease inhibitors in ten months of sales (and you have to remember that this is just at the beginning of the sales period) 162 million dollars. What it was in 1998 we don't know, but it was probably in the 300-400 million range. Vast amounts of money circulating.

VA7 Suggested Criteria for Compulsory Licensing

When it comes to a case where there is so much money circulating there is clearly a case for compulsory licensing. But how do we decide? How do we go to our governments and say when compulsory licensing should be used? After all its a very dangerous weapon in terms of generating a dramatic response.

Just to generate discussion and I don't claim any certainly on this but clearly:

1. It [compulsory licensing] needs to be used in the case of a serious disease with severe morbidity and mortality. Although the focus of this meeting is on HIV and AIDS, I would suggest we should be focusing first on other diseases where we can make an equally good case. I think depression is a vastly under-treated condition in many countries. I think meningitis is another condition which is a very serious one with very effective drugs available but not accessible.

2. There also needs to be an effective drug available to treat the condition as in most of the cases I've just mentioned. Whereas dealing with HIV and AIDS we have difficulties in thinking and talking about *an* effective drug. We are talking about an effective cocktail of drugs and so we are compounding the issue. We are not talking about one compulsory license we are talking about multiple compulsory licenses.

3. The drug should be manufactured in the country, the infrastruture to do so should exist. In our discussions last night with the panel members, we found differences of understanding. My understanding of the TRIPS agreement is that it refers to raw material production - other people were suggesting no its not raw material production but tableting and reformulation would also be possible under compulsory licensing. I look forward to clarification of that issue because it has very substantial implications.

4. The final criteria which again makes the difficulty is that the drugs should be useable without sophisticated monitoring or tests - and again we run into problems here with the HIV/AIDS drugs. So few developing countries where the epidemic is spreading have the capacity to do CD4 counts or viral load and lack the technology required to bring down the costs of those tests. And so for many countries, Zimbabwe for example, we are really struggling to make those tests available in an effective way.

VA8 Candidate Drugs for Compulsory Licensing

Global Issues of Access to Pharmaceuticals and Effect of Patents 

So what are the candidate drugs? Through the wonders of the internet and a course I am organising on national drug policies, in India in November, on Monday I e-mailed my colleagues saying I was thinking about talking on these drugs, do you have the wholesale prices available? And by Tuesday the prices had all come back to me.

- Lariam (mefloquine) for the treatment of malaria - in the US the patent expires in 2004, and 5 tablets cost 37 dollars - in India the same 5 tablets cost 4 dollars.
- Depression and Prozac (fluoxetine)- in the US cost 75 dollars a month, in India 1.56 dollars, about a 50th of the price.
- Gonorrehea and Augmentin (Amoxycillin and clavulenic acid) for which the patent has already expired in the States (although you would not know it from the lack of generic alternatives), 66 dollars in the US for a course, compared to 17 dollars in India.
- TB is a disease about to make an incredible impact on the world - Ciprofloxicin used as a second line treatment for resistant TB 325 dollars a month in the US, 22 dollars a month in India.

So if compulsory licensing was done, in other words if the price of the drugs was set around the price of production, these India costs probably represent the cost of production. These are the kinds of price differences we would be looking at and reduced costs using compulsory licensing.

VA9 Candidate Drugs for Compulsory Licensing HIV AIDS

What about the expiry dates for other drugs?
Expiration of AZT patent is coming but don't hold your breath - 2005. ddI, 2007, PI's 2014 - that's a long way off for 30 million people waiting to have access. I don't know that they will be around in 2013. And this is the tradegy. And what is the cost - 239 dollars is the cost of AZT in the US (47 dollars/month in India) but the PI's are 450-580 dollars.

Why that price?
We should be absolutely clear that the price of drugs is set arbitrarily - it is not related in any way to the cost of production or the cost of research. The cost of the drugs is set at the price that people are willing to pay. So why are Americans prepared to pay that amount of money? People with health insurance don't care and people without insurance get those drugs for free. Up to 20% of production is given away by pharmaceutical programmes on compassionate programmes. And those compassionate programmes may be labeled as being out of concern. I would suggest that those programmes are available to reduce popular outrage about the price of the drugs. Because anyone who can't afford the drugs can get them for free.

VA10 Other Methods to Obtain Drugs at reasonable Prices

Compulsory licensing is one method but I don't think that we should ignore the fact that it is a difficult and problematic one. I think there are alternative methods where there is a much longer history and a likelihood of success:

- Parallel importing - in the EU parallel importing is very widely used and is very effective at equalising prices. I think for many countries particularly in Africa, parallel importing suits limited capacity to produce raw materials and may well be the way to go. And what we were hearing yesterday was that the major obstacles to parallel importing often exist within the country - the countries own laws are preventing them from parallel importing. I think we should be looking at lobbying to change those restrictions.
- I think also what is happening in Australia is a neglected secret that should be more publicised. In Australia the buyer or the Pharmaceutical Benefit Scheme of the state determines the [drug] price on the basis of therapeutic value. When a new drug becomes available they look at the drug and say this is just a little bit better, we will only allow you to sell that drugs at say 10% more than the original drug. If you don't like it, don't sell it. And I cannot for the life of me understand why major consumers, particularly in the US, like the Veterans Administration do not use this approach to drug pricing.
- For small countries, pooled procurement like that seen in the Caribbean may be an alternative option. Seven different countries have combined to purchase drugs. They have been doing it now for more than 10 years and have reduced prices by around 50%.
- Negotiated procurement through large organisations buying drugs in large amounts can also bring down prices.
- Finally, donations are something we should think seriously about. WHO and other organisations have done extremely well in establishing guidelines for drug donations. I think we should go one step further. Instead of just taking donations from Pharmaceutical companies, I think we should be going to them and saying 'we don't want your about-to-expire waste, we need these specific drugs' One company Johnson and Johnson now have a planned giving programme of this kind. Three years of donations planned three years in advance.

If compulsory licensing applies to raw materials, I think we are thinking about large countries, like India, China and Brazil. We should be mobilsing to support such countries so that they can produce raw materials under compulsory license.

VA11 Assessment

Assessment
- If compulsory licensing can apply to tableting and reformulation then it may be a broader issue. But clearly for parallel importing to work we need some countries to compulsory license.
- Drugs that can be used with minimal monitoring should be the first candidates - so when we talk about HIV/AIDS, I would like to start with something like fluconazole, an anti-fungal drug, easy to use, easy to monitor, very effective, and a very common problem for people.
- HIV AIDS drugs may not be good candidates because of monitoring costs and prolonged duration of use
- Many factors other than manufacturing cost affect access and correct use, and we have to pay attention to those.

VA12 Conclusion

I would like to finish by just highlighting that the major problems to access come from within the countries. Most of the drugs we need to treat conditions are already off-patent. Most essential drugs are no longer patent-protected. The reason why those drugs are not available in countries are because of choices made by countries themselves - countries which spend more on defense than they do on education or health combined. Countries like Zimbabwe sending 8000 troops to Congo to fight a war for a few mines at the expense of the health system. Countries like South Africa spending nearly a billion dollars on defense when they have an HIV epidemic exploding in their back yard - these countries are making choices that affect access to drugs and we need to look at them in perspective.

Thank you very much.

Richard Laing
Associate Professor
E-mail richardl@bu.edu
Tel 617 414-1444
Fax 617 638-4476

Department of International Health
Boston University School of Public Health
715 Albany St
Boston MA 02118-2526