World CAB: Focus on International Drug Pricing

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.

Hoffman-LaRoche

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.

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.