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Drug Price Reductions
for the Poorest Countries?

By John S. James
AIDS Treatment News

On March 7 Merck & Co. Inc. announced it would sell Crixivan(R) (indinavir) in some poor countries for $600 per patient per year, and Stochrin(R) (efavirenz, better known in the U.S. as Sustiva(R)) for $500.

The same price will be available to governments, international agencies, nonprofits, and private companies such as employers who want to provide access to AIDS treatment to their employees. The only condition placed on this program is that the drugs must be used in the country and not exported. Merck claims that it will not make a profit on these sales to developing countries. It said it expects to triple production of Crixivan to meet the new demand.

And on March 14 Bristol-Myers Squibb Company announced that it was making its drugs ddI and d4T available "in every country in Africa" at 15 cents per day for d4T and 85 cents per day for ddI, which it said is below its cost, "under its existing ACCESS partnership program with international agencies, including UNAIDS, World Health Organization, World Bank, UNICEF and U.N. Population Fund." (March 14 company press release).

Bristol-Myers Squibb also said that it would not let its patents interfere with access to its AIDS drugs in Africa. "The company will ensure that its patents do not prevent inexpensive HIV/AIDS therapy in Africa. The patent for Zerit, rights to which are owned by Yale University and Bristol-Myers Squibb, will be made available at no cost to treat AIDS in South Africa under an agreement the company has recently concluded with Yale. The company has no other patent rights in Africa which it will allow to prevent AIDS therapy there," (March 14 press release). Outside of Africa, "we will maintain our existing ACCESS pricing program and address the subject on a country-by-country basis." (About 70% of people with HIV or AIDS in the world live in sub-Saharan Africa.)

Last May, Merck, Bristol-Myers Squibb, and three other major pharmaceutical companies announced major price reductions for developing countries, through the ACCESS program with UNAIDS and other agencies. But that program required country-by-country price negotiations between each government and the companies. Only three countries (Senegal, Rwanda, and Uganda) have completed these negotiations, while about 30 others have expressed interest; after 10 months, only about 2500 people are being served. The new procedure should be much simpler in practice, because of the transparent (public), uniform price.

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With prices currently announced for poor countries by other pharmaceutical companies (which might be reduced in the near future), prices to Africans for triple therapy including either Crixivan or Stochrin (efavirenz) will still be over $1000 per person per year. Two Indian generic manufacturers (Cipla Ltd., and Hetero Drugs Ltd.) have now offered a nevirapine-based triple combination for as low as $350 per year or less. (Efavirenz and nevirapine are in the same drug class, non-nucleoside reverse transcriptase inhibitors; indinavir (Crixivan) is a protease inhibitor. Indinavir is more difficult to manufacture than nevirapine; we do not know about efavirenz.)

A March 7 Wall Street Journal report attributed Merck's and other new pricing programs for poor countries to "increasing concern by pharmaceuticals executives that generic competitors are winning a public-relations battle that could eventually undermine international patents -- their most precious asset."

In a March 19 op ed in The New York Times, one of the inventors of d4T, William Prusoff of the Yale University School of Medicine, looked at the history that led to the current developments. He supported the drug being either cheap or free in sub-Saharan Africa, while also acknowledging the contribution of Bristol-Myers Squibb, which tested the d4T at its expense in more than 13,000 patients in the U.S. and Europe before it was able to get any income from sales. He is amazed at how rapidly this issue has moved recently.


These programs are clearly an important step forward, and have generally been welcomed by agencies and advocates trying to make treatment available. But clearly the $500 or $600 price will require international assistance for countries with income levels less than that and public health expenditures sometimes less than $10 per person per year -- in addition to money for training and other infrastructure. Eventually millions of people will come in for treatment, and it is not known how much funding will be available to help provide it.

While we do not contest the companies' statements that it will not profit on the sale of the drugs at these prices to developing countries, we do note that any such calculation is based on many accounting choices, which are not public. Also note that with the huge profit margins on patented pharmaceuticals in the industrialized world, patent holders have little incentive to reduce production cost, since it makes up so small a part of the price. So even accepting the companies' statements fully, developing countries will have to bear production costs set by rich-world economics and not appropriate for them.

For the same reasons, there is not necessarily any conflict between Bristol-Myers Squibb's statement that it will sell ddI at a loss, and at least one generic company's quote for ddI at a fraction of the price. Bristol has little incentive to reduce production cost; generic companies have great incentive. This is one of the reasons many activists insist that generic competition must remain an available option for providing these life-critical but expensive drugs in poor countries.

We should think through the pros and cons of having an individual-patient price (such as $600 per year for Crixivan) for critical drugs for poor countries -- as opposed to governments, international agencies, and others contracting to pay pharmaceutical companies a flat price to manufacture whatever amount of drug is needed for treatment programs there.

The problem with the individual-patient price is that it could end up being charged as an out-of- pocket expense to individual patients, who often have no possibility of paying that much. On the other hand, the problem with not having an individual price is loss of flexibility; for example, the drugs might be restricted to governments, some of which will not have distribution programs ready even when some private employers want to provide coverage.

Perhaps using both would be best: government and other public programs could receive the drugs at a flat price regardless of quantity, yet employers, insurance plans, and other private organizations could buy the drugs for each patient they treat, if for whatever reason the government did not provide them.

Both generics and reduced-price drugs from patent holders will likely be used in the world's poorest countries. Either way, the key to treatment access for most people will be effective institution building to bring together the necessary support -- including money, education and other infrastructure, and rules that everyone can live with.
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