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Worldwide Drug Pricing Regime in Chaos

    By Kevin E. Noonan —

The crisis regarding the pricing of patented drugs in poor and developing countries continues this week, with actions by current and former U.S. chief executives contributing to the situation.

Ustr
The U.S. Trade Representative issued a "Special 301 Report" on Monday, pursuant to the provisions of the Trade Act of 1974.  This report on the state of intellectual property rights worldwide identifies twelve countries on a "priority watch list" and promises consultations with Congress, affected industry groups, and foreign governments to address IP issues.  Although the majority of the report focuses on software and entertainment piracy, the portion addressing pharmaceuticals focuses particularly on Thailand.  This country has over the past six months moved aggressively with regard to anti-AIDS drugs, compulsory licensing, and parallel imports.  Most disquieting to Western drug companies is Thailand’s expansion of what it considers
"necessary" drugs outside the "traditional" boundaries of
anti-AIDS drugs to include medications like Plavix®. Even more disquieting are comments this week
Mongkol_2
from the Thai Public Health Minister, Mongkol Na Songkhla (at left), that indicate
that Thailand will further expand this category for all "essential"
drugs needed to support the government’s universal health care plan. However, the report was constrained to
specify merely perceived procedural irregularities rather than the substantive
actions of the Thai government, because these actions fall squarely within
World Trade Organization (WTO) rules (most importantly the Doha Declaration)
that permit compulsory licenses and parallel imports of generic equivalents of
patented drugs in times of national medical emergency.

Surprisingly absent from the priority watch list is Brasil, which recently granted its first compulsory license after years of threatening to do so.  The license was for efavirenz, an anti-AIDS drug that Brasil plans to import from India.  The U.S. Trade Representative’s failure to include Brasil on the priority watch list continues a trend in which the Bush administration has been reluctant to oppose Brasil’s exercise of its WTO rights to the detriment of Western, particularly American, drug companies.

Cpflogored
The actions of the Clinton Foundation and the comments of former President Clinton yesterday exacerbate the problem with unnecessary rhetoric, while demonstrating how nongovernment organizations (NGOs) are becoming increasingly involved players in international drug pricing policy.  Mr. Clinton announced that the Clinton Foundation, acting in concert with a group of world governments headed by the French, and acting through the Global Fund to Fight AIDS, Tuberculosis and Malaria, would provide part of a $100 million dollar fund for purchasing anti-AIDS drugs from generic drug makers, including Cipra and Matrix in India, to be distributed in so-called "better-off developing countries."  (This category includes countries such as Mexico and Brasil.)  The effect of this effort is predicted to be a 50% reduction in drug costs in these countries, and a 25% reduction in poorer countries, based on their already discounted drug costs.  The combination of such international humanitarian relief efforts and the provisions of the Doha declaration leave Western drug companies completely undefended in this dispute, absent efforts by the American and other Western governments before the WTO, that they frankly have not shown the political stomach to undertake.

050807clintonarvdrugannouncement
In view of the full-fledged retreat the developing world has imposed on Western drug companies, Mr. Clinton’s comments in support of Thailand’s compulsory license scheme, that "[n]o company will live or die because of high price premiums for AIDS drugs in middle-income countries, but patients may," is unnecessary and inflammatory.  More importantly, such comments are irresponsible insofar as they hasten the day when the economics of drug discovery and development retard or preclude Western companies from performing basic research, and incurring the exorbitant costs thereof, that produces new drugs.  It is clear that world governments need to fashion a means for distributing the costs of drugs for deadly diseases, such as AIDS, malaria, dysentery, and if we are very unlucky, avian flu, but applauding steps that increase the political and economic tensions between the West and the developing world is not a useful way forward.  It is ironic that Mr. Clinton, whose presidency was so bruised by the politics of stigmatization and character assassination, should employ those methods against the only actors on the world stage developing the drugs that save lives, both at present and in the future.

For additional information on the topic of compulsory licensing in developing countries, please see:

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7 responses to “Worldwide Drug Pricing Regime in Chaos”

  1. Just Asking Avatar
    Just Asking

    “It is ironic that Mr. Clinton, whose presidency was so bruised by the politics of stigmatization and character association, should employ those methods against the only actors on the world stage developing the drugs that save lives, both at present and in the future.”
    Could you clarify, Kevin? Who are the “only” “actors” “on the world stage” who are “developing” life saving drugs “at present and in the future”?
    Also, can you name a company that will go bankrupt if it does not receive a high price premium on its AIDS drugs in a middle-income country?

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  2. Kevin E. Noonan Avatar
    Kevin E. Noonan

    Gladly – the innovator drug companies (including biotech startups as well as big pharma). Do you know anyone else doing basic drug discovery? What is the last new drug that Cipla, Matrix, Dr. Reddy’s et al. developed?
    The point is that there should be, indeed must be, ways of accommodating the legitimate needs of developing countries (where the distinction between “middle” and poor countries is a matter of degrees of poverty) with the legitimate needs of investors in Western drug companies.
    My point is not that anyone will go bankrupt, but if the history of biotech teaches us anything, it is that investors will flee in droves if they don’t get the return they want. This isn’t going to change unless it is accepted as a part of a more global arrangement (as I have proposed in other posts).
    My other point is that Mr. Clinton should be the last person to make the comment, not that his group shouldn’t make the contribution.
    Thanks for the comment.

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  3. Donald Zuhn Avatar
    Donald Zuhn

    One of the posts to which Dr. Noonan refers in his comment is entitled “A Modest Proposal Regarding Drug Pricing in Developing Countries,” the link to which can be found at the end of the above article.

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  4. Just Asking Avatar
    Just Asking

    Thanks Kevin. I’m not convinced by your answers, however.
    Innovator drug companies are not the only “actors” doing “basic drug discovery.” University researchers are engaged in this as well.
    I agree with Clinton’s proposal and his comment. I do not have a significant interest in their profit margins.
    To characterize Clinton’s statements as “character assassination” and “stigmatization” is laughable. Whose character is being assassinated? Who or what is being “stigmatized”?
    Like you, Kevin, Clinton is a reasonably well-to-do white man. That makes him the perfect advocate. You see, Kevin, like you, Clinton probably has a good health care plan. Like you, Kevin, Clinton could afford to pay high prices for AIDS drugs if he or his family needed them. I don’t believe that Clinton personally needs the benefits of the plan he is trying to obtain for others.
    I’m sorry, Kevin, but the only “character assassination” or “stigmatization” I saw in your post was your implicit condemnation of Bill Clinton as some sort of “say anything” hypocrite. I’m not buying.

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  5. Kevin E. Noonan Avatar
    Kevin E. Noonan

    Always happy to amuse.
    Seriously, I would be happy to hear from you about the last drug identified by a university researcher. While wonderful people, they are not in the drug development business. They are in the target discovery business, figuring out how the biology works, not developing a specific drug. Not only are they not interested, they are not equipped, either financially or otherwise, to do so.
    My objection to Mr. Clinton’s remarks, and your bias, is that it makes big pharma an unmitigated bad guy. Besides being a childish slander, it misses the places where pharma is justifiably castigated for its own shennanigans, and is based on (in my view) an unrealistic vision of the world. The US has very high regulatory standards, due to experiences with everything from Thalidomide to Celebrex and phenfen, and in order to meet these standards expensive clinical trials are necessary. You wouldn’t want to take a drug that hadn’t been tested for toxicity and effectiveness, nor would I, nor should we have to, especially if the motivation is money. The fact is that investors will not invest in such drugs unless there is a sufficient return. Nothing we (or Mr. Clinton) say will change that.
    As you will note if you read my other posts in this string, it is not my possition that people in poor and developing countries should pay exorbitant amounts for drugs. It is my position that demonizing drug companies won’t get us anywhere, and I think Mr. Clinton’s comments, coming standing next to the health minister of a country that had granted a compulsory license for Plavix, were ill-timed. And I say this as someone who voted for him twice and think he is the best President since Truman.
    And, finally, how is my status as a white man germane to this discussion?
    Thanks for the comment.

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  6. Just Askin Avatar
    Just Askin

    C’mon Kevin, you are moving the goalposts.
    “Seriously, I would be happy to hear from you about the last drug identified by a university researcher…They are in the target discovery business, figuring out how the biology works, not developing a specific drug.”
    What about drugs like siRNAs that more or less mirror the identity of their targets? Your distinction is weak, Kevin. You are being unfair to these researchers and their contributions in your efforts to “resuscitate” drug companies from Clinton’s alleged “demonization,” “stigmatization” and “character assassination.”
    As for your whiteness, it is plain from my comment what the relevance is. You labeled Clinton a hypocrite who should have more empathy for drug companies because he was “attacked” in the past. That is a very strange standard.
    Feel free to disagree with Clinton’s approach. The fact is that those who targeted Clinton — including the so-called liberal media and conservative lawmakers on both sides of the aisle — were successful. They were also successful in doing the same to Senator Gore in 2000. And Senator Kerry in 2004.
    And those outcomes affected the world far more profoundly than the health of today’s (as opposed to tomorrow’s) big pharma companies.
    You write that “The fact is that investors will not invest in such drugs unless there is a sufficient return.” That’s nice. What’s a “sufficient” return? What is the net worth of the major stockholders in America’s top five largest biotech companies? How much does the CEO of Abbott earn?
    Or am I “demonizing” capitalism by asking such questions?

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  7. Kevin E. Noonan Avatar
    Kevin E. Noonan

    Askin’:
    Like it or not, capitalism has won the contest of history (for now). And the fact is that the rise of capitalism has been concommitant with increased standards of living, improved sanitation, improved healthcare, etc. I’m not enough of an economist to say whether this is good fortune or the result of a good system, and your opinion about that probably speaks more about who you are and how well you are doing that it should. (Just look at the brickbats John Edwards is getting for being wealthy and still speaking out about the problems of the poor and underprivileged).
    My challenge remains: I don’t think you can find any university researcher who has discovered a drug, and I contend that’s because it isn’t what they do. siRNA’s were discovered by university researchers, because that is what they do, but drugs, not so much. The confusion about that illustrates the problem: even if a university researcher handed a drug company a druggable siRNA on a silver platter, it would take hundreds of millions of dollars to get that siRNA into a useful drug.
    And that misunderstanding makes it easy to demonize drug companies. It’s like “The Little Red Hen” – no one wants to bother with all the work that goes into getting a drug to market, they just want to get the drugs they need as cheaply as possible. It doesn’t work that way, and if you understand that you start to think about how to address the problem in the real world. Mr. Clinton’s way is one way – have philanthropists pay for drugs in poor and developing countries. I have proposed another way in a different post – tie the cost of drugs to national per capita income or GNP or some other measure, so that the relative costs of drugs are the same in different countries. It makes no sense for a drug to cost the equivalent of a cup of coffee in the US and for the same drug to cost the equivalent of a week’s wages in a poorer country.
    My argument with Mr. Clinton is that he usually thinks about what he says and understands the nuances, and not only that, he tries to communicate them to his audience. His comments were worthy of someone like Newt Gingrich, all soundbite and no substance, and as a Clinton supporter I was disappointed.
    You may think that the CEOs of American companies make too much, but that is hardly a problem limited to drug company CEOs. And, frankly, I think the consequences of one less Madonna video, or Shrek sequel, or SUV, are a lot less significant than a new drug, so why do people think it a good thing to attack drug companies when there is nary a peep about the CEOs of these other types of companies?
    Manning the baracades and overthrowing the established order sounds good, but this kind rhetoric neither addresses the problem nor changes the discussion.
    And you still haven’t told me what my being white has to do with anything.
    Thanks for the comment.

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