UNAIDS report on compulsory licensing and access to HIV drugs

[James Love <love@cptech.org>]

Subject: UNAIDS Perrien's paper
   Date: Mon, 13 Dec 1999 17:49:18 +1100
  From: Joe Thomas <joethomas@hivnet.ch>
    To: love@cptech.org, paco@hivnet.ch


Dear Jamie

Attached pls fine the paper from J Perriens, UNAIDS.

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COMPULSORY LICENSING AND ACCESS TO HIV DRUGS

By J. Perriëns, M.D.,
Paris 1999 Conference on Community and Home Care for People with HIV
infection.


Ladies and gentlemen,

The title of my presentation today is  "Compulsory licensing and HIV
drugs?, and I will speak in my personal name.

>From the previous speaker you will have remembered that patents are a
national affair, and that a compulsory licence can be granted under
certain circumstances, such as a national emergency, or when a patent
holder fails to supply the market with his invention at a reasonable
price.

In a discussion on compulsory licensing it is useful do refer to the
framework in which such discussion should take place.  Our goal is to
make HIV drugs more widely available to those who need them.  In respect
to the latter, I would like to highlight what our programme, UNAIDS,
said about this at the WTO summit:

The availability of HIV/AIDS drugs, like others, depends upon at least
three main factors:
(i) sustainable financing for drug procurement at the national level;
(ii) national and local health infrastructure for delivering drugs and
monitoring patient compliance;
(iii) affordable drug prices.?

Governments must ensure sufficient financing for procurement and
adequate health system capacity to support care for people with
HIV/AIDS.

Making drugs affordable to those who need them is a formidable
challenge.

High HIV/AIDS drug prices are due, in part, to the fact that many
HIV/AIDS drugs are protected by patents that
on one hand are necessary to allow their development, but that
on the other hand allow the exclusive control of their manufacture and
sale.
Patent holders have not yet introduced preferential pricing to the
extent necessary to make the prices of HIV/AIDS drugs consistent with
local purchasing power in many developing countries.

THE UNAIDS SECRETARIAT POSITION

The UNAIDS Secretariat supports patent protection as an incentive for
innovative research and development of new HIV/AIDS drugs and,
hopefully, the discovery of HIV vaccines, in particular vaccines
suitable for use in developing countries.
At the same time, however, intellectual property rights must be
considered in the context of other social interests,
such as the human rights concerning health
and the benefits of scientific progress and its applications.

The UNAIDS Secretariat further supports:

1) Preferential pricing of HIV/AIDS goods, including male and female
condoms, and HIV/AIDS drugs and other pharmaceutical products, so that
these products are priced affordably at levels consistent with local
purchasing power.

2) Reduction or elimination of import duties, customs and taxes on
HIV/AIDS goods, including condoms and pharmaceutical products.

3) Measures to promote generic drug competition and the "early working"
of patented drugs (e.g., the so-called "Bolar amendment") so that
generic HIV/AIDS drugs can be made available more rapidly.

4) The UNAIDS secretariat recognizes that recourse to compulsory
licensing may be necessary, as provided for under the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS), such as
in countries where HIV/AIDS constitutes a national emergency.

WHY THIS ORDER ?

You will have noted that UNAIDS mentioned compulsory licensing last in
the series of actions that should lead to better HIV drug affordability.

Why is that?

The number one reason is that compulsory licensing can be used only when
a drug or commodity is under patent protection.

The WHO and UNAIDS have just completed a review of the patent rights on
24 drugs of interest to people with HIV infection.
The preliminary outcome of this review is available as an appendix to
Pascale Boulet?s presentation from the WHO/UNAIDS booth.
I would like to share with you what was found out so far about some
antiretrovirals.
WHO nor UNAIDS assert that the data are complete, and welcome additions,
but the

1) d4T (Stavudine)

US and EU patents for stavudine will expire in 2007 and 2008 (except in
France, where protection will last until 2011). The only developing
countries where d4T (Stavudine) is under patent protection are Egypt,
South Africa, and the Philippines.  There appears to be no patent
protection for this drug in countries with a significant generics
industry, such as Argentina, Brazil, Spain, Israel, or India.  At least
2 of them produce their own generic alternative.  It follows that
intellectual property protection as such cannot be blamed for its
unavailability or unaffordability in the majority of developing
countries.

2)   Indinavir

US and EU patents for indinavir will expire in 2012 and 2013.  However,
this is meaningless for most developing countries, because the only
developing country where indinavir is under patent protection is South
Africa. Like for stavudine there appears to be no patent protection for
this drug in countries with a significant generics industry.  Brazil
will start the production of its own generic next year. Intellectual
property protection as such cannot be blamed for its unavailability or
unaffordability in the majority of developing countries.

3) Saquinavir

The antiretroviral with the largest patent protection is saquinavir,
because of a patent delivered by the OAPI (Organization Africaine de la
Propriete Intellectuelle), and (process) patents in Zimbabwe, Malawi and
China. However, there appears to be no patent protection for this drug
in countries with a significant generics industry, including South
Africa. Intellectual property protection could be blamed for part of its
unavailability or unaffordability in some developing countries.

I could go on with this list, but let me suffice to state that the
situation of these 3 drugs is fairly typical for other drugs of interest
to PLWH.

While it is clear that at present the scope of compulsory licensing
agreements is limited, it might expand in the future.  This potential
led to the activism around compulsory licensing in recent times.

What does this say for the drug access agenda?

Now, if the patent situation of most HIV drugs is not the main reason
for their poor affordability in most developing countries today (with
the notable exception of South Africa), what needs to be done, in
addition to just keeping the provisions of the TRIPS agreement intact (a
likely consequence of the Seattle conference)?

1) You might have noted that I mentionned ?Preferential pricing? as one
of the remedies to increase drug affordability.

People in low-income countries simply cannot be expected to pay the same
prices for drugs as people in wealthy countries.  The principle of
solidarity, namely that the richer pays absolutely and relatively more
than the poor, is very common in national tax laws. We suggest that the
same needs to be achieved in internationally.

There is a range of options which might be used to achieve preferential
pricing, including voluntary licensing with transfer of know-how.  But
one does not even need to go this far : preferential pricing is already
a reality today.

Drug costs in the UNAIDS-facilitated drug access initiative in Uganda
and Cote d?Ivoire, which buys its antiretrovirals exclusively from the
pharmaceutical companies that hold the patents to them in the USA and
Eurape,  ARE less than drug costs in Europe or the USA:  from 5600 US
per year for a year of triple antiretroviral therapy, compared to
approximately 11000 US per year.  However, this is clearly  still not in
keeping with the local purchasing power.

When we flagged this as the main problem to expand coverage of the
initiative, the more enlightened of our pharmaceutical counterparts
stated that, in order for them to lower their prces, they first of all
need political protection in their home markets.   A second equally
essential condition is that measures that prevent  exporting of
preferentially priced drugs to their home markets need to be in place
(as was the case for the Drug Access Initiative).

Is this enough ??

The answer is ?no?.

Experience in the vaccine sector demonstrates that significant price
differentials can be achieved between prices in developed countries and
those in low-income countries.  However, these differentials resulted in
affordable developing country prices only after significant competition
from generic manufacturers forced the prices down.

Experience from countries with ?generic-friendly? policies clearly
demonstrates that the resulting market competition greatly increases
affordability of medicines for the population, stimulates genuine
innovation within the research-based industry, and encourages increased
production efficiency by the generic industry.

To promote generic drug competition the "early working" of patented
drugs (e.g., the so-called "Bolar amendment") was given high visibility
in our statement to the WTO.

I suspect that MSF will show data on the price of zidovudine and
fluconazole in different markets, and I will therefore illustrate the
point that generic competition is necessary with reference to the
evolution of the price of 2 drugs in Brazil:

A month of ddI costs 46 US in Brazil, and 186 US in the USA, or 25% of
the US price.  The evolution of its price over time is shown on the
overhead.

A month of ddC costs 38 US in Brazil, and 207 US in the USA, or 18% of
the US price.  The evolution of its price over time is shown on the
overhead.

One of the factors that allowed a progressive decline in the price of
both drugs is that they were produced locally, by state-owned companies,
to whom orders were given as part of intenational competitive bidding.

In 1995 prices of these drugs from the original patentholders were at
the same level in Thailand.

While incomplete, because ideally one would like to see more prices from
more sources, the message from them is that, when generic competition is
possible,  prices do come down.

Is generic competion enough to make drugs affordable ?

A glance at the cost of ARV treatment in Brazil as a fraction of per
capita GDP  might make one suspect that, even with all possible measures
to decrease their cost, the antiretrovirals will remain too expensive
for many developing countries, most of which have GDP?s much lower than
that of Brazil (where it is almost 5000 US).

To make a long story short, any treatment that costs more than the per
capita GDP in a country is for all practical purposes unaffordable with
very well developed  natioanl solidarity mechanisms.  If those
mecahnisms are less well develped, the affordability benchmark probably
looks more like a third of GDP.  The challenge is therefore to get
prices of antiretroviral therapy down to as low as 200 US a year, 15 to
20 times less than in Brazil.

This should be possible, but is in my view only in collaboration with
those companies who developed the drugs in the first place, because they
would likely be best positioned to get into cost+ pricing efficiently.
(Cost+ pricing factors in only the cost of raw materials, production
facilities, labor and a fixed disclosed profit margin to produce the
goods, not marketing or development costs.)

Surprisingly, what is needed to make this a reality is nothing
spectacular :

1) Like now, pharmaceutical companies should increase the extent to
which they apply preferential pricing. The limited value of the pharma
market in developing countries makes this economically viable. To make
it politically viable is a challenge for us all, and should be high on
our agenda.

2) Pharmaceutical companies should continue not to apply for or forego
patent protection for HIV drugs in markets where they have no intent to
recoup their R&D investments, i.e. developing countries, so that generic
competition will remain possible.  A solemn declaration to this effect
could be issued by those companies that develop drugs of importance to
people with HIV infection.  If our pharma partners can work together in
multi-drug clinical trials, some form of voluntary trade civism should
be possible.


3) Like now, pharmaceutical companies should continue to compete with
generics manufacturers in those markets.  To guarantee that this
competition will remain possible, it is essential that the provision on
compulsory licensing in the TRIPS agreement be preserved and enshrined
in national law, in particular in developing country markets where
patents for HIV pharmaceutical will be requested and HIV is a
significant problem.

4) Advocacy to ensure that trade contributes towards a more equitable
distribution of economic benefits.  This requires linking trade policies
to sound social policies that recognize health as a global public good.
In the pharmaceutical arena, for example, there is a need to provide
sufficient incentives and patent protection to ensure development of new
drugs, while ensuring affordability and access to existing drugs.

Last, there are actions that need more support.  It is my conviction
that in the debate around access to HIV drugs not enough attention went
into the identification of those responsible for the state and the
financing of the public health infrastructure in developing countries.
Who is responsible for ?linking trade policies to sound social policies
that recognize health as a global public good? ?  Who sets import
duties, customs and taxes on HIV/AIDS goods ?  Who condones corruption
to the extent that prices of drugs at times cost more in developing than
in industrialized countries?

Of course, action needs to be targeted, but in view of the outcome of
the Seattle conference, I wonder whether a continued focus on compulsory
licensing as a tool to reduce drug prices remains needed.


-- 
James Love / Director, Consumer Project on Technology
http://www.cptech.org / love@cptech.org
P.O. Box 19367, Washington, DC 20036
voice 202.387.8030 / fax 202.234.5176