Brand-Name Price Gouging

By Dara Colwell, AlterNet. Posted March 18, 2004.

After a year's delay in funding, the Bush administration's five-year, $15 billion global AIDS initiative has finally been unveiled. Two weeks ago, the 99-page report of the President's Emergency Plan for AIDS Relief was submitted to Congress, and U.S. Global AIDS Coordinator Randall Tobias hit the forum circuit, discussing future strategy. As part of that strategy, 55 percent of the Plan's total funds will be earmarked for treatment, with 75 percent of that amount reserved solely for the provision of antiretroviral (ARV) drugs -- the cocktail therapy that helps keep AIDS patients alive.

Lacking in the discussion, however, is mention of how current U.S. trade policies may undermine the ability of developing countries -- those in urgent need of medicine -- to expand their access to ARVs. According to international humanitarian organization Doctors Without Borders, the U.S. has exercised stringent intellectual property protections in bilateral and regional trade negotiations to curtail generic competition -- leaving the poverty-stricken developing countries that often have the highest number of AIDS cases in the lurch. "This is an immediate concern for us," says Rachel Cohen, US Director of Doctor's Without Borders Campaign for Access to Essential Medicines. "When it comes to trade, health is always at the bottom of the agenda."

The trade pacts include the Free Trade Area of the Americas (FTAA) draft, currently under negotiation, US-Central American Free Trade Agreement (CAFTA), finalized last December, and trade deals with the South African Customs Union, Thailand and Morocco. Under CAFTA, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua will be obliged to extend pharmaceutical patent terms beyond the 20 years required in World Trade Organization (WTO) rules. Proposed FTAA provisos include a five-year delay for small generic companies using test results completed by brand-name competitors, and restrictions on compulsory licensing -- which allows governments to authorize themselves or a third party to produce generic medicine without the patent holder's approval.

"The consequence will be very clear," says Cohen, who finds the restrictions worrisome. Both agreements, she says, undermine the Doha Declaration on the Trade-Related Aspects of Intellectual Property Rights (TRIPS), which explicitly prioritized public health over profit. "There will be thousands of needless deaths every year because the drugs are too expensive."

Over the past few years, generic competition has ensured sustained price reduction, dramatically driving down costs from $10,000 to roughly $300 per person per year. From 2000-2002, Oxfam International conducted research on the price of brand name drugs in Uganda and discovered that prices fell by as much as 97 percent over two years. The largest decreases were for Stavudine/ D4T, which fell from $173 in May 2000 to $6 in April 2002. In Latin America, which has 1.9 million HIV cases of 42 million total worldwide, countries have relied heavily on generic drugs to save lives. For example, Brazil's free AIDS drug program has treated more than 110,000 HIV-positive people with primarily generic medicines. Mortality rates have dropped by over 60 percent.

Lack of generic competition can lead to market monopolization, which inevitably hurts developing countries. One such example is that of Merck & Co, which patented Stocrin (efavirenz, EFV), an antiretroviral recommended by the World Health Organization for treatment. ERV comes in a 600mg combination formulation, which enables patients to take one tablet a day, or 200mg capsules, taken three times. As yet, Merck has not registered the fixed dose combination in low and middle-income countries, despite promises to do so in 2002. Because virtually no generic competition for ERV exists, countries such as South Africa must pay for each individual drug -- the only formulation available -- hiking costs 44 percent higher, according to Doctors Without Borders. On March 3, the organization renewed its calls for Merck to stop backsliding on its pledge.

In terms of the President's 5-year strategy for AIDS relief, Ambassador Tobias has remarked that the government's policy will be to buy safe, effective drugs at the lowest possible price. "Now, if those happen to be drugs that are manufactured by generic companies, fine; if those are drugs that are manufactured by brand name companies, fine," Tobias said during a briefing at the U.S. Department of State's Bureau of Public Affairs. However, Tobias, former chairman and CEO of Eli Lilly, might be swayed by brand name lobbying when it comes to allocating spending.

Tobias has plans to meet with the Food and Drug Administration and other regulatory bodies in the upcoming month, to discuss drug safety and efficacy standards. "I think there's a real possibility that the issue of price affordability is going to become less of an issue," he said during a Q&A session at an American Enterprise Institute forum February 5, later adding, "If we can get effective, safe products that are going to work, we're going to buy them."

Tobias' words are not something Asia Russell, co-coordinator for international policy at Health GAP, is willing to bank on. Health GAP is a U.S.-based activist organization focused on increasing developing counties' access to AIDS treatment. "Bilateral plans are turning into a slush fund for Big Pharma," said Russell, who spoke from Zimbabwe, where she was attending a regional AIDS conference. Russell said attendees were "extraordinarily angry" at the U.S.'s efforts at political arm-twisting in trade talks. "It's hypocrisy. The Bush Administration is exploiting the issue of the AIDS pandemic to cast a worthy glow. But it's denying countries the right to obtain what makes sense -- drugs at lower cost and maximum coverage."

While Tobias has spoken broadly about intellectual property concerns, Secretary of Health and Human Services Tommy Thompson has openly defended the U.S.'s tough pro-IP stance. "We're going to protect intellectual property rights," Tompson said during the American Enterprise Institute forum. Tompson stated the pharmaceutical industry had a corporate responsibility to offer low prices, yet he remained adamant that he wasn't willing to "stifle the innovation of pharmaceutical companies" to create new drugs.

The industry's interest in safeguarding its tremendous investment is unmistakable. The U.S. pharmaceutical industry, including the International Intellectual Property Alliance, a coalition of six U.S. trade groups, has asked for the "highest levels of protection" under the FTAA. Repeated phone calls to the IIPA went unreturned.

The outcome of regional negotiations has already shown how powerful the U.S. has been in forcing the hand of developing countries to accept restrictive measures that curtail WTO requirements. In 2003, Guatemala modified its national intellectual property bill to consent to a standard of five years exclusivity on pharmaceutical test data, effectively blocking the entry of low cost generics.

"There's no question the government has been very reluctant for developing countries to have access to generics," says Mark Harrington, executive director of Treatment Action Group, an organization that advocates for efficient research efforts for AIDS. Harrington believes this is further exacerbated by finance and trade ministers, with little knowledge of AIDS issues, who negotiate away certain rights under pressure. "Ministers of Health and certainly sick people are not part of that decision-making process," adds Sharonann Lynch of Health GAP. "The U.S. has quadrupled the number of trade negotiators signing on to talks. It's no secret they negotiate aggressively for what they want."

Harrington believes the issue is not only one of intellectual property protection, but "a matter of where U.S. dollars are being spent," and this raises a valid point. The generic cost for six-dose combination ARV therapy at two pills a day runs about $270 per patient per year, according to a price guide published by WHO and DWB. This cost could drop much lower for certain eligible countries -- to $132, a price reduction secured by the Clinton Foundation. Separate drugs sold from a brand name company, however, cost $562.

Examining market alternatives to ensure the lowest possible cost may prove the key to saving more lives -- a stated goal of the Bush Administration. And with the President's commitment of $15 billion of the American public's money to address the global AIDS pandemic, where tax dollars ultimately go remains a fundamental issue. "If you pay brand name prices you'll keep one person alive," says Cohen. "But if you use bio-equivalent, quality medicine produced by generic manufactures that meet international standards set by the WTO, you will keep three people alive at current prices."

Dara Colwell is a freelance writer based in Brooklyn.

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