As Drug Makers Wage ‘Price War’ in Africa, Merck Lowers AIDS Drug Prices Again
An "extraordinary price war" in the AIDS drug market in developing nations has triggered an onslaught of discount deals from drug makers whose executives "seek to blunt a growing threat from generic drug companies" and "recoup some moral high ground" amid the AIDS epidemic, the Wall Street Journal reports. Executives worry that the "vilification" of the drug industry will embolden governments to take away drug patents even in wealthy nations. The new round of pricing "reflect[s] increasing concern by pharmaceutical executives that generic competitors are winning a public relations battle that could eventually undermine international patents -- their most precious asset," the Journal reports. The current pricing "free-for-all" was instigated by Indian generic drug maker Cipla Ltd.'s offer last month to sell a combination of three antiretroviral drugs to Africa at $600 per patient per year, 40% less than the discounted price for a similar regimen offered by international drug companies (Schoofs/Waldholz, Wall Street Journal, 3/7).
Yesterday, Cipla added more fuel to the fire by asking the South African government to permit it to sell eight AIDS drugs currently available only at high prices from their patent-holding multinational manufacturers. In a letter to the South African Department of Trade and Industry, Cipla requested compulsory licensing to offer the drugs and their combinations at $600 per patient per year, a move that would give the generic drug maker "the upper hand" in the African market. Cipla, which offered to pay royalties for the license, first asked several multinational companies to grant the license voluntarily, but did not receive a response. Cipla Chair Dr. Yusuf Hamied said, "We have now decided it is best to approach the government. What we've offered is an opportunity to Africa. It's up to the Africans to take it up." Several drug giants declined to comment on Cipla's offer, and others said they would argue against the plan. Kevin McKenna of Boehringer-Ingelheim said, "If they accuse us of abusing our patent position, we can only say that we have offered the governments of all developing countries preferential pricing" (Swarns, New York Times, 3/8). Now, a second Indian generic drug manufacturer, Hetero Drugs Ltd., has announced that it will sell the same drugs for only $347 per patient per year. South African generic drug firm Aspen Pharmacare Ltd. has already entered an agreement with Hetero to distribute its drugs. AIDS activists have "hailed" Hetero's entry into the "AIDS pricing fray," citing the subsequent pressure the company will apply on all drug companies to reduce their prices.
The Merck Model
Merck on Tuesday confirmed its offer to immediately sell to any government, charitable organization or employer in developing nations its "powerful" protease inhibitor Crixivan for $600 per patient per year, the Wall Street Journal reports. That price is 43% less than the price Merck offered in May when it joined Bristol-Myers Squibb, GlaxoSmithKline, Boehringer-Ingelheim and Pfizer in offering antiretroviral drugs to Africa for price discounts of up to 90%. In addition, Merck will supply Stocrin (known in the United States as Sustiva) for $500 per patient per year, 55% lower than the price offered in May. Both drugs are "critical components" in antiretroviral combinations, therapy that has successfully decreased the HIV mortality rate in developed countries, according to the Wall Street Journal. Merck's new price for Crixivan is even less expensive than the generic copies made by Hetero, which is offering the medicine at $2,300 per patient per year. Previously, Merck declined to reveal discounted drug prices except to those countries participating in UNAIDS negotiations, but the drug giant has now reversed this policy to publicly disclose discounted rates, a move UNAIDS Executive Director Peter Piot calls "crucial to helping governments in the hardest-hit regions plan sustainable HIV care programs." However, the drug maker still refuses to disclose the production costs of its medicines, although it states that the new prices for Crixivan and Stocrin will not deliver a profit. Merck decided to offer discounted drugs last May after it was "heartened" and assured by WHO Director Gro Harlem Brundtland's comments that agreements honoring drug firms' patents must accompany any effort to increase access to their medicines.
Taking Another Step
Merck acknowledges that now "it must go further" (Wall Street Journal, 3/7). WHO spokesperson Jon Liden explained to Reuters, "The companies ... feel country-by-country negotiations are not progressing fast enough, and they are now coming out publicly with across-the-board price reductions." Merck Chair and CEO Raymond Gilmartin added that by offering Crixivan and Stocrin at significant discounts, "Merck is stepping up our own response to the urgent humanitarian need in Africa and other regions of the developing world" (Reuters Health, 3/7). Although Merck hopes that the price cuts will expand the number of Africans treated for HIV infection, the company maintains that drug discounts alone will not solve the AIDS crisis in Africa, as the countries' health care infrastructures and lack of patient and physician drug education remain obstacles to drug delivery and effective use (Wall Street Journal, 3/7). Per Wold-Olsen, president of Merck's human health business in Europe, the Middle East and Africa, said, "Even at these new low prices, the issue of access is not solved. Antiretroviral therapy will remain out of reach for millions of people in poor countries where the epidemic's ravages are worst. In the long run, the only sustainable way to provide care and treatment for the millions of people living with HIV/AIDS in these settings is through public/private partnerships -- involving governments, (nongovernmental organizations), multilateral organizations like ... the World Bank -- to address all the barriers to care" (Blustein/Gellman, Washington Post, 3/8). However, Piot encouraged drug discounts, saying, "As prices fall as close to costs as we can get them, it means that we can concentrate on the other issues: building and strengthening health systems, raising finance, and ensuring that a wider care agenda is delivered" (Wall Street Journal, 3/7). Merck also announced that it would no longer limit discounts to Africa, but would reduce prices in many other developing regions, on the condition that it receives guarantees that its drugs will not be exported to any other country (Washington Post, 3/8). Merck spokesperson Jeffrey Sturchio said that the company would help countries create a "patient-tracking system" to ensure that the drugs are taken by those for whom they are intended (Collins, Philadelphia Inquirer, 3/8). Gilmartin attributed the firm's changing policies to "gaining experience" and said, "If we don't solve the drug access problem, then our intellectual property is at risk." Drug makers "need to demonstrate that intellectual property is not an obstacle" to drug access in developing countries, he added (Wall Street Journal, 3/7). According to health-care analyst Ira Loss, Merck's decision for a second round of price cuts stemmed from President Bush's decision not to overturn former President Clinton's executive order supporting the use of generic drugs in emergency situations. He explained, "Prior to that, the industry felt they had the U.S. government behind them on the issue of intellectual-property rights. Now the industry has found itself without strong allies. ... Merck's decision was that it was better to placate the enemy rather than wait to be annihilated." Merck executives are hopeful that the Bush administration will "take the lead" in offering more AIDS funds for Africa and other regions in its budget due next month (Philadelphia Inquirer, 3/8).
Other Drug Makers Follow Suit
Discouraged by the "small number of Africans who have benefitted from the first round of price cuts," GlaxoSmithKline CEO Jean-Pierre Garnier said that the company will now extend its heavily discounted drugs to "clinics, employers -- essentially centers in contact with thousands of AIDS patients in Africa." In May, Glaxo offered to cut the price of Combivir by 90% to $2 per day, but offered that price only to governments. The drug firm is currently negotiating with the South African mining company Anglo American Corp. to provide the discounted antiretrovirals, and Garnier said he hopes that as African governments and private charities "endorse our offer, our volume will increase and we will be in a position to realize economies of scale and therefore pass further cost savings to the patients -- the ultimate beneficiaries of this approach." Bristol-Myers and Boehringer-Ingelheim are also considering new price cuts. Bristol-Myers will not reveal whether its prices will drop lower than those offered in May, but several sources say it will soon offer "its own round of sharp discounts" (Wall Street Journal, 3/7). However, Roche announced yesterday that it will not further reduce prices on AIDS treatments in developing nations. "We did what we could do already in the past," a company spokesperson said, referring to last year's agreement to drop prices and provide support for Africa under a United Nations initiative. The spokesperson added that in time the company may have "new flexibility ... but this is not to be expected in the next weeks or months," and noted that drug firms were not coordinating price cuts as this could be viewed as collusion (Reuters Health, 3/7).
Activists Not Appeased
All pharmaceutical firms say that the new prices are as low as they can go without high volume purchasing, but AIDS activists continue to protest pricing (Wall Street Journal, 3/7). Activists remained "unimpressed" by Merck's news and "voiced skepticism" about the drug maker's claim that it was reducing prices to the cost of manufacturing. Some noted Merck's participation in the lawsuit against a South African law that would permit the importation and manufacturing of cheaper generic AIDS drugs. Kate Krauss, a member of ACT UP/Philadelphia, said, "It looks to me like you are announcing an inaccessible price drop that will keep your drugs out of reach in countries with the most giant epidemics, and at the same time you're filing a lawsuit against a law that will increase access" (Washington Post, 3/8). Merck's offer does not go as low as Cipla's offer, and Merck officials acknowledge that the funding gap would leave "millions" in developing nations without AIDS treatment (Philadelphia Inquirer, 3/8). Gilmartin said that drug prices "will never be low enough" to satisfy all activists, but added that the recent reductions "will make a difference" (Wall Street Journal, 3/7).