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World CAB: Focus on International Drug Pricing

January/February 2004

Over the past year and a half, HIV community members from around the globe have begun meeting to discuss how they can advance treatment literacy and increase PLWHA input into decisions by the research, education and care programs that affect them. Community advisory boards (CABs) have long been an important vehicle for representing the needs of people living with HIV to researchers and drug companies in the developed world. In February of 2004, for the first time, a World CAB was convened to allow PLWHAs from the developing world to voice their concerns about drug pricing in their regions to senior-level representatives of the multinational pharmaceutical industry. Twenty-eight individuals from 21 countries met with officials responsible for global pricing policy at Roche, Glaxo-Smith Kline, and Boehringer Ingelheim. The following is a digest of two of those meetings.


Christopher Murray, Director of International Pharmaceuticals, Roche, Basel

Murray: All of our policies regarding access to our drugs come from Roche headquarters in Basel. I have responsibility for these international issues within the company. The Roche pricing policy for protease inhibitors is that Least Developed Countries (LDC) receive a no-profit price from Roche Basel. Currently, the Roche no-profit price is better than that of generic versions of nelfinavir. Roche also offers a clear pricing policy for direct supplies of Invirase and Viracept on ex-factory sales to low-income and lower-middle-income countries as classified by the World Bank.

Subha: What does no-profit mean?

Murray: No-profit means no marketing or R&D costs are covered. It only covers what it costs to get the drug into a finished pack; no financing or inventory costs. There are no royalties paid to Pfizer, who owns the patents on nelfinavir. Effectively, the no-profit price includes a contribution from Roche. These prices are for direct sales from Basel. We only quote a price in Swiss francs due to exchange rate fluctuations and zero margin. We don't differentiate between public and private sectors. We don't differentiate between any NGO (non-governmental organization). We will only re-price based on changes in economy of scale or reduction of demand.

Gregg: But many of these lower- and middle-income countries still can't afford your drugs.

Murray: You may not like the classifications, but this gives us transparency in how we set our prices. I must be rigid because otherwise we will have to negotiate with every country separately.

Stern: The price jumps from $880 in LDC to nearly $2,900 in lower-middle-income countries. This says a lot about the profit to be gained in those countries.

Murray: Our transparency policy is not to negotiate country to country. The prices we have today are derived from people in your countries saying exactly how much they need.

Gregg: How did you make the decision on who gets the no-profit price?

Murray: Kofi Anan asked the pharmaceutical companies to offer the lowest possible price in the Least Developed Countries, and we did.

Lobna: Can't you offer the no-profit price in countries not on the LDC list where there is a great need but no resources?

Murray: No. We are not going to have the no-profit price for regions other than the LDC countries. The lower and middle income countries still receive a reduced price from the European price. We offer an equitable pricing structure.

Mark: You can't say your prices are equitable even though they are uniform, because people can't afford them. We're saying they are not fair, period.

Murray: There are huge variations in income levels within and among developing countries. The classification includes oil-rich states and states with a strong industrial base. High-income, non-OECD countries are classed as developing. They pay the middle price of $2,900. Upper-middle-income countries pay the regular price. And all of these countries have different prices in-country depending on distribution costs.

There are additional costs for freight, import duty taxes and distribution to be added. For example, the no-profit price ex-Basel is 90.90 Swiss francs, which becomes 125 Swiss francs in South Africa. That's 38% higher:

Clearing, freight and insurance adds 2.5%
Local packaging and quality control adds 6%
Local warehousing adds 4.5%
Distribution adds 8%

So the local cash price is net plus 21%. Then the government adds a 14% VAT (value added tax), which equals a 38% increase.

Lei: We are puzzled by the huge differential between your prices and generic prices.

Murray: The nelfinavir sold in Botswana is the same as sold anywhere else. Our suppliers optimize their existing resources. But there is not a huge difference in price between ours and generic nelfinavir.

Green: Would increased volume lower the cost?

Murray: You would need substantial volume increases to get small reductions in price.

Lei: Are you looking at options to manufacture in countries where costs are lower?

Murray: The manufacturing model is to have the machines running 24-hours a day making the same product. Moving the site of production doesn't change the cost.

Green: We've heard multinational pharmaceutical companies say that this is our rock bottom price. Then generics come in at 1% of that and the companies say: "Now we can reduce the price."

Murray: If Ranbaxy can make nelfinavir for $600, then you should buy it from them.

Olive: Can those of you here from Africa afford nelfinavir?

Murray: It is not our job to arrange funding. It's not our role to buy our own products. It's the government's role. In South Africa the problem is political apathy. When the government is only spending $5 to $10 a year per capita on health, the situation is their responsibility, not Roche's.

Hanna: But most of the people who need your drugs are poor, so even if they live in a middle income country, they have no access.

Murray: We don't have differential pricing within a country. There are people in rich countries who can not afford the drugs. We will not reduce the price any further.

German: If you know that the Global Fund will be providing the money for a lower or middle income country, will this change your policy on who can get the no-profit price?

Murray: No. We will work within the 3 by 5 plan to increase the volume, but that won't change the no-profit status of the price. It is not possible to negotiate for a better price in the middle income countries. We are willing to be priced out of the market in those countries when generics come in.

Subha: Can we discuss lowering the $880 price in least developed countries?

Murray: No.

Mauro: The most promising untapped market is in the developing world. Why are you giving up on this market?

Murray: There is no profit for us.

Subha: I want you to leave us with a different message. You have to give us something to help us get going with your drug.

Murray: I can't give you anything more. The fact that our drugs are not affordable in some parts of the world is not Roche's responsibility. I can't give you a warm glow when I leave the room.

World Bank Classification of Economies
The World Bank divides economies on the basis of gross national income (GNI) per capita. Pharmaceutical companies use these classifications to set prices outside of the High Income countries.

The 2002 divisions are:

Low-IncomeAverage income under $735 per person per year64 countries
Lower-Middle-IncomeBetween $736 and $2,935 per person per year54 countries
Upper-Middle-IncomeBetween $2,936 and $9,075 per person per year34 countries
High-IncomeOver $9,075 per person per year56 countries

Boehringer Ingelheim

Larry Phillips, Director of Marketing, Virology and Infectious Diseases, Boehringer Ingelheim

Phillips: There's quite a learning curve going on in our company about providing access to our drugs in the developing world. For us, in terms of price reductions, there are two ways to go about it. One way is you can donate drugs, which we don't think is a solution. The other way is to grant voluntary licenses to generic drug makers and create competition in the market. We think the best idea is to have as many people producing nevirapine as possible at the local level. True price reduction will never come from one company; it has to come from competition.

Of course, we have to make sure a company we license has the obligation and the capacity to actually produce the drug. We will then grant a voluntary license, but they have to produce the drug and produce a quality drug.

Anastasia: Is the generic nevirapine the same as your Viracept?

Phillips: There are some differences between the generics and drugs from the developed world, but those mostly have to do with registration issues and not necessarily with potency.

Gregg: Would you also grant voluntary licenses to middle income countries?

Phillips: Eligibility for our donation program is based on lower and middle income status as classified by the World Bank. But in a country where it is obvious that the people can't afford to pay for their therapy, then we are willing to consider voluntary licenses.

Within the industry, everyone is worried about the diversion of generic drugs back into the markets where they make their money. Everyone is concerned with diversion and re-importation, and if it is handled irresponsibly, it damages the process. We don't think it is an insurmountable problem, though. But I think a lot of local legislation is needed. These people are crooks. Voluntary licensing can't be done without some guarantees in the market.

There are also tricky issues with the FDA about voluntary licenses. One has to do with safety. We have a safety reporting obligation, but we can't make the generic companies report their safety.

German: Your company is interested in granting voluntary licenses. Which countries have you done that with? Are you also interested in doing technology transfer to those countries so they can learn to make the drugs?

Phillips: Technology transfer varies from company to company. When we deal with Ranbaxy, they already have a version of the drug, so it's no problem. We are in active negotiations in South Africa; we are looking in Eastern Europe; we have licensed the Indian companies; and there is a possibility to find one in Asia and one in South America.

Anastasia: In Eastern Europe, I don't believe you can't find a producer in our region.

Phillips: Eastern Europe has not gotten the attention it deserves because the immediate concern was Sub-Saharan Africa. You have to sell the idea of making HIV drugs to generic makers. Some don't want to get into HIV because it is such a hassle.

Ben: If BI's HCV protease inhibitor makes it to market, will you have voluntary licenses in countries with large HCV prevalence like Egypt?

Phillips: People like the voluntary license with nevirapine because it is such an easy drug to make. With other drugs it won't be so easy.

Green: What royalties do you expect?

Phillips: MSF calls for 3%, which is what we ask for. We ask the company to put it into local HIV programs as part of the contract. But we can't enforce it. If they don't do it we can't pull the license.

Delme: The 3% donation can't be enforced?

Phillips: You could try to enforce it, but I don't know how you could. What if you give a voluntary license and the company doesn't produce the drug -- do you take it back?

Olive: I'm a suspicious person. What's in it for you? I like what you're saying but how does it translate into something we need?

Phillips: Nothing is in it for us. It's philosophical in a sense: There is both a business and an ethical component to pharma. We have a high standard of health care in the North; but our industry doesn't sell cookies. We want to make a profit and we know health is a human right. You can think of all the reasons for why you can't deal with these problems, or you can try to deal with them. It's the belief of the people on my team that the industry must take responsibility for what is going on. But the governments have to take responsibility too.

We found you can't just give drug away; you have to go out and market it to governments. Within your ability as a company you have to approach governments, WHO and NGOs. Then you need to get the people in your company behind you and try to make it work.

Stern: In Jamaica, there is no patent on nevirapine and a company called Lasco is distributing Cipla's Triomune at an inflated price.

Phillips: The problem in Jamaica can best be addressed by competition. Where people are poor, there is no way to make it perfect. The pharmacist adds a markup because he wants to eat too.

Anastasia: In Ukraine the price of one package of your drug is 100 Euros, in Belarus it is 280 Euros. What is the difference?

Phillips: It's probably due to the local pharmacies. Whatever the ex-factory price is, you can't be sure what the pharmacy sells it for. All we can do is recommend a price.

Svilen: In Bulgaria we have registered nevirapine, we have the money to buy it, you have local reps there, but still we have no drug.

Phillips: I don't have an answer for you.

Lobna: In Egypt, the free nevirapine program works through UNICEF but only two women have used it.

Phillips: You have to market the program and tell them it is available, but I can't force governments to use it. We say, use the MTCT donation sites to build your treatment programs upon, since there is at least minimal infrastructure. We lobby where we can, but the NGOs need to get going too.

Augustine: You've spoken of a strong presence in South Africa, but we don't seem to see the effect in price reductions in Zambia.

Phillips: We are working in Zambia with the nurses association on education. The problem with the granting of voluntary licenses is to get the companies started. With the tenders, you say, I've got a million dollars, how much drug can you give me for that? Supply and demand regulates prices. Then, some countries don't want you to import; they raises taxes at the border, etc. If they can tell us how much drug they want and when, then I can do more.

Augustine: What are you doing in very rural areas where the need is great?

Phillips: We've approached WHO to have them make these sites part of 3 by 5. We will give help and assistance to qualified groups but we don't want to tell people what to do.

James: Can you do extended stability studies so we can have extended expiry dates, especially in the African climate?

Phillips: We can look into that.

Gregg: What's the pricing policy in middle income places without generic production?

Phillips: We look at our own processes and try to make it cheaper. We produce our drugs in a different regulatory environment and it costs more. Maybe we can farm out production, but we still have to produce to FDA standards, so it still costs more. Producing to WHO standards produces equivalent therapeutic quality, but it costs less. Viramune is produced in Ohio, which is probably not the cheapest place to make it.

Gregg: So, what is the price in those middle income countries?

Phillips: Sixty cents per day, the same as in the AAI (Accelerating Access Initiative) countries.

Lobna: What are the criteria?

Phillips: It is the World Bank criteria, but lower-middle-income countries also get the AAI price.

Lobna: In Egypt the problem is availability. There's no market so the companies don't register the drugs. The big distributors don't order them. There's no market for generic makers. We simply need cheaper prices.

Phillips: I don't know about the situation there. Where we've had local BI business units for a long time, they have become very independent. Like a lot of companies, we let the local guys run the local businesses. Getting them to approach HIV from a different standpoint has not been all that easy. In the middle income countries prices are often negotiated on a case-by-case basis.

Subha: Can you cite a good example of case-by-case negotiations?

Phillips: The CARICOM (Caribbean Community and Common Market) countries approached us as a group and asked for our lowest price, which is what they got. When you apply for registration in Africa, sometimes you can do it in a block for several countries. It would be good if that process were streamlined for HIV.

Stern: I have your prices from the CARICOM negotiations and from your Central American AAI negotiations. I see big disparities between countries in the daily price of nevirapine. The CARICOM price is 60 cents per day, but in very lower-middle-income countries like Nicaragua and El Salvador, your price is $1.66 a day. These are countries where no generics are registered so they must buy from BI.

Phillips: Those countries are controlled by our business unit in Mexico. The Caribbean is controlled by the Canadian BI office. It is a big internal battle within the company. Any company has a lot of politics; and we have a lot of people who came up through the pharmaceutical industry.

Stern: So, here's my headline: "Mexican BI Executives Triple the Price of Nevirapine for Central American People with AIDS." Is that correct?

Phillips: I don't think that headline reflects the intention.

Stern: The AAI, UNAIDS and Peter Piot asked the companies to negotiate in good faith with the regions, yet I know that Central America is paying 2.7 times as much as the Caribbean countries, even though they have lower socio-economic status. So if Canadian BI and Mexican BI are not controlled by German BI, we need to know about it.

Subha: Could we hear some solutions on how we could follow up on this?

Phillips: Are these countries eligible for the lowest price, which is 60 cents a day? Yes they are. Can I make that happen? Yes I can. And I will. You can help me make this happen by working locally with the representatives. Just please be certain that the prices you quote are BI ex-factory prices and not distributor or pharmacy prices.

But, yes. I can go to the countries that meet the requirements for 60 cents per day and make that happen.

Gregg: Any country?

Phillips: If any country fits the criteria we can do it.

World CAB Participants Represent!

Augustine Chella, Zambia

Speaking as an African, I think treatment is life. Without treatment there is no life. I'm coming from a society where the impact of HIV is visible. In Zambia, where I'm from, we see 39 years of independence and development eroded because of HIV and AIDS. We see its impact on our economy, its impact on our industry, its impact on our educational sector, where since 1999, my country lost 1,600 teachers and we have only been able to train 1,000 teachers. This is a disaster and the government accepts that we have a crisis before us, but the question is treatment. Is treatment readily available in Zambia? No, it's not. We have set a target to treat 10,000 Zambians by 2006, but up to now only 900 Zambians are on treatment. We have a population of two million people living with HIV and about 600,000 of those need treatment immediately.

Subha Raghavan, India

In India we are very proud of our generic drug manufacturers for manufacturing all of the potential regimens -- but they don't make them accessible to our own people. We export to the developing world, through the Clinton Foundation, at a much cheaper price than we give our own. We pay one dollar a day or more whereas we are giving it to the Clinton Foundation for 140 dollars per year. So we have this distinction of manufacturing every drug under this umbrella, yet they are not available at affordable prices to our own.

Rolake Nwagwu, Nigeria

Two years ago we had no ARV access whatsoever. The very few drugs we had were from the big pharmaceutical companies, from Glaxo and Roche, and it was just too expensive. In 1998 I paid about 500 dollars a month for my drugs. And that was unacceptable. Two years ago our government announced the roll out of the ARV program and they said they had drugs for 10,000 adults and 5,000 children in 25 centers. The government is paying. These are generic drugs, mainly from Cipla and Ranbaxy: lamivudine, stavudine and nevirapine as individual drugs. The government buys the drugs for about 30 dollars a month and gives them out for about seven dollars a month. There is a waiting list to get in. When this program started, if you went to the HIV clinic it was like death row. The HIV clinic was next to antenatal, which was noisy because you have pregnant women and women with babies; there's festivity there. Next door was the HIV clinic and it was still, because people had no hope. A year later it became much better because all those who came in sick could see people who used to be like them who now had so much hope. So people wanted to get on this program. After the quota was filled people were still desperate to get on.

Anastasia Kamlyk, Belarus

Most of the people in my country who need it do not have access to treatment. Most of the countries in my region do not have many of the drugs registered. In most countries in my region, AIDS is not a priority for government. Only in Russia and Ukraine have we seen the Global Fund money. Some other countries don't have that many official cases of AIDS so the pharmaceutical companies aren't interested in them. It is not a huge market.

James Kamau, Kenya

MSF (Médicins Sans Frontières) are doing treatment and right now they are reaching nearly 1,000 people. They are a fantastic example of how to roll out ARV (antiretrovirals) in a resource-poor setting. They are using the triple therapy combination in a single pill, Triomune. It's working out to be much cheaper but the demand is too great. They have successfully shown that it can work. Compliance is 90 percent, which is fantastic. It's because of the way the do it. Before they start you on drugs you go several times for training. After they give you the medication, they follow-up, and they follow-up on opportunistic infections. Having been in the field, they are able to detect the problems much faster. PWAs are involved in their teams; they are in fact the counselors and the people who follow up. Quite a number of MSF patients become educators.

Svilen Konov, Bulgaria

In Bulgaria, the only medications we can use are the originator's products. There are no generics. Unfortunately there is only one center where HIV-positive people are treated and the center has only two doctors. With the money from the Global Fund, the national coordinator on HIV/AIDS claims that the system will be decentralized, but so far we see no measures taken in that direction. Doctors outside of that center have no experience and no real knowledge about treatments. Even a rich person would have a hard time getting special care. If you are knowledgeable you can ask for a better combination, but you can not get anything exceptional.

Delme Cupido, Namibia

The Government has taken up the drug donation offer made by Boehringer. They are using brand name drugs at the moment through the donation programs, which is problematic because I'm not sure now sustainable that is. The Government has said to us the intention is to roll out treatment across the country, to expand it to the 13 regions and at the end of it they are hoping to roll out to something like 55 sites across the country. They are doing a progressive realization type of plan; you get the donation then you are able to treat so many people. We are going to get funds from the Global Fund which can then finance the roll-out to other sites. We are on the cusp of getting treatment for a quite a number of people. When that's going to happen, who knows?

Karyn Kaplan, Thailand

Because of the Global Fund grant, the government announced a plan to scale-up from 2,000 to 70,000 by 2005. At a cost of about 30 dollars per month, GPOvir (3-in-1 nevirapine, lamivudine, stavudine) is available for 80 percent of the people who can tolerate it. They are planning comprehensive care centers where a person with HIV coming in will immediately meet and be counseled by another person with HIV. Their entire treatment support will come from another person with HIV and this is a key component of the plan. They are already seeing that adherence is better with support that includes equal involvement of PLWAs.


David Ananiashvili, Georgian Plus Group, Georgia
Augustine Chella, NAP+ -- Network of African People
Living with HIV/AIDS, Zambia
Ben Cheng, Forum for Collaborative HIV Research, USA
Lei Chou, ATAC -- AIDS Treatment Activist Coalition, USA
Polly Clayden, HIV i-Base, UK
Rachel Cohen, MSF -- Médicins Sans Frontières, USA
Simon Collins, HIV i-Base, UK
Delme Cupido, Legal Assistance Centre, AIDS Law Unit, Namibia
John Daye, NAPWA -- Australia
Roman Dudnik, AFEW -- AIDS Foundation East-West, Russia
Olive Edwards, JN Plus -- Jamaican Network of Seropositives, Jamaica
Lobna Ibrahim, PATAM -- Pan African Treatment Access Movement, Egypt
Gregg Gonsalves, GMHC -- Gay Men's Health Crisis, USA
Chris Green, Spiritia Foundation, Indonesia
Mauro Guarinieri, EATG -- European AIDS Treatment Group, Italy
Mark Harrington, TAG -- Treatment Action Group, USA
Bob Huff, GMHC -- USA
James N Kamau, PATAM -- Kenya
Anastasia Kamlyk, Positive Movement Belarus, Belarus
Karyn Kaplan, TTAG -- Thai AIDS Treatment Action Group, Thailand
Hanna Khodas, All-Ukrainian Network of PLWH, Ukraine
Svilen Kolev Konov, Plus and Minus' Foundation, Bulgaria
Rolake Nwagwu, Nigerian Treatment Access Movement, Nigeria
Germán Perfetti, Asociación Líderes en Acción, Colombia
Subhasree Sai Raghavan, SAATHII -- Solidarity and Action Against the HIV Infection in India, India
Richard Stern, Agua Buena Human Rights Association, Costa Rica
Paisan Suwannawong, TTAG -- Thailand
Vladimir Zhovtyak, All-Ukrainian Network of PLWH, Ukraine

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This article was provided by Gay Men's Health Crisis. It is a part of the publication GMHC Treatment Issues. Visit GMHC's website to find out more about their activities, publications and services.