CID at Harvard University :: Drug-maker pricks MNC arrogance, Statesman (India) 4/20/01

Drug-maker pricks MNC arrogance

When the Indian generic drug manufacturer, Cipla, offered a cocktail of three anti-HIV drugs to the Nobel prize-winning NGO, Medecins Sans Frontieres (MSF) at prices lower than any other drug-maker early in February, it achieved what no amount of cajoling and arguing with pharma multi-national companies could do.

Prices tumbled overnight. Setting off a price war, three of the five big drug-makers - Merck, Abbott and Bristol-Myers Squibb - dropped prices and came up with one international price for the developing countries, something that was being urged for a long time.

In that sense, Cipla took the lead in pricking the price arrogance of the MNCs. Market leader GlaxoSmithKline (GSK), which had earlier offered special packages for the developing countries, is expected to discount prices further in June; many firms dropped hefty margins; others like Merck and Abbott sold some formulations at cost.

There is a general movement towards reduced drug prices if for no other reason than to cope with competition.

To date, however, Cipla's offer is yet to be matched by the multinational giants. Two Indian firms - Hetero and Aurobindo - alone have been able to top it. These two firms made the offer not just to MSF but to the UN, other NGOs, and countries in general.

Cipla offered to sell a cocktail of three anti-HIV drugs - stavudine, lamivudine and nevirapine - for $350 per patient a year to MSF and $600 to interested countries.

A few days later, Hetero offered the package for $347 followed by Aurobindo which promised the cocktail for $297.

This was great news for an Aids-scarred world, especially in South Africa where only 10,000 out of an affected population of 25.3 million receive treatment because of the high cost of drugs.

In international markets, the price of these triple-combination, anti-retroviral drugs ranged from around $1,000 in the West to $15,000 in the USA.

Post-Cipla, the costs have come down to $750. For the Indian drug-maker, HIV and cancer make up only about two per cent of its total turnover.

So its decision could be construed to be more a matter of principle than policy, though it has not responded to any query by this newspaper.

Further, absence of product patent legislation makes it easier for countries like India, Thailand and Brazil to copy drug formulae as they please so long as they don't copy the process.

This way, Cipla can afford to undercut the MNCs though it would self-confessedly incur some loss anyway. MSF is gung-ho about the Cipla offer not because it matches its price expectations. It does not. Rather, as spokesperson Suerie Moon explains, Cipla has redefined the concept of HIV care.

Where everyone was talking about preventing an epidemic till January, we now have international leaders, donors, academics and doctors discussing care in terms of treatment, a privilege largely limited to the developed world till recently.

Two weeks ago, a group of Harvard University researchers chalked out a plan, which drove home the point that we can no longer refuse treatment to the developing world. So far, this appeared to be the birthright of only the developed world. This plan now aims to reach out to three to five million patients in sub-Saharan Africa over the next five years.

While this is encouraging, organisations working with HIV cases are emphatic that it is only when governments step into the picture that large-scale treatment programmes become possible. And that has not happened so far.

The MSF has just started using the drugs from Cipla in its Aids treatment project in Cambodia. It is also beginning anti-retroviral programmes in about 10 countries.

However, Cipla has not got the deserved response from governments, which should ideally be the vehicle for treatment access. This is curious, given the fact that these subsidised drugs could reach out to so many more patients. Two months on, no government except that of Nigeria has cashed in on its largesse.

The Indian government, for one, has yet to grab the drug-maker's open offer and ease the cost burden of HIV treatment on at least some of the suffering public.

The drug-maker, too, has not approached the Indian government, presumably, for fear of the daunting red tape. Also, the imposition of excise, sales and octroi would pad up costs. Getting exemptions would entail protracted rounds of lobbying with the ministry of health and the ministry of drugs and fertiliser which it may be unwilling to do.

The Indian indifference seems curious, especially, when over one million are believed to have died of Aids in the country and 90 per cent of those diagnosed cannot afford the costs of health care. Dr I S Gilada, secretary-general of the People's Health Organisation, an NGO active in Aids, says, "I am surprised to find nobody has seized the Cipla offer."

One stumbling block in India is the identification of an agency with a clean track record that would take over the burden of distribution and keep drug-makers out of these rigours.

In this context, the offer to MSF is understandable, given the latter's reputation and tremendous field work in making available emergency medication all over the world.

MSF, though, believes the prices of triple-combinations drugs could be lower. $200 would enhance access, it says. The figure was arrived at during the World Aids Conference last year in Durban. However, even at that rate, the healthcare provider is doubtful whether many countries hard-hit by Aids would be able to afford it. What it is actively advocating is more international donor funding to combat the epidemic. Cipla's offer also brings into sharp focus the huge margins imposed by the pharma sector. These are being explained as the cost of research and development.

And a debate is afoot on whether it is better to cure a few patients with hope for better drugs through research and development or to treat many with cheap drugs which seals all scope of future development.

MSF is arguing for low prices. "It's frustrating for our doctors since we know the drugs exists but the patient can't afford it," says Ms Moon. What the big firms cannot shy away from is the glaring lack of transparency in their dealings.

In a bid to increase access of HIV patients to drugs, UNAIDS had kickstarted an initiative along with five major MNCs in May 2000 called the UNAIDS Accelerating Access Initiative. As a thumb rule, each company entered into a separate deal with every country for each individual drug.

The negotiations were conducted in an atmosphere of utmost secrecy.

Apart from being painfully laborious and encouraging arbitrary pricing, fears were expressed that the deals had strings attached.

For instance, some countries were pressured to offer patent protection to MNCs in return for discounted prices of HIV drugs. That the initiative was not working well was obvious from the fact that up to date, only six countries could sign contracts.

And then, there was discrimination in prices. Even when countries took up projects, they were not meant to reach a large number of the affected population.

Senegal received pricing offers in the $1,000-$1,800 range for every patient every year for different drug combinations, while Uganda paid much more - $2,000 to $3,000. The Senegal programme was meant to benefit only 900 patients out of 79,000 HIV-infected people.

The government subsidy, too, was limited in both countries. Health care providers were vocally demanding one public offer from the MNCs for all developing countries.

That was not happening till February. Cipla's offer, open and without restrictions, changed that. Soon, three of the MNCs were scrambling to quote fixed prices for their products. However, charting a new role for pharmaceuticals in pricing for humanitarian purposes could not have been the foremost concern with Cipla.

One half-expected countries and NGOs to jump on to its bandwagon for a freebie ride. According to NACO's figures - which have not been updated for almost six years, the total number of HIV patients in India are 3.7 million of whom five lakh have Aids.

Unofficial estimates, though, suggest the figures could be 10 million and 1.5 million for HIV and Aids cases, respectively.

In the circumstances, seizing the golden goose with both hands would appear to be the obvious thing to do.

(The author is The Statesman's Mumbai-based Special Representative.)

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