[Ip-health] TRIPS+ threaten fivefold increase in PEPFAR costs

[Benjamin Krohmal]

courtesy of Brook Baker:

U.S. Pursuit of TRIPS-plus Intellectual Property Rights and its
Opposition to Thailand's Lawful Compulsory License for Merck's
Efavirenz Undermines its own Global AIDS Initiative, Threatening a
Fivefold Increase in the Costs of Medicines

Professor Brook K. Baker, Northeastern University School of Law,
Program on Human Rights and the Global Economy and Health Global
Access Project, Inc.
December 22, 2006

The U.S. PEPFAR Program reports that in FY'06 it allocated
approximately $868 million for HIV/AIDS treatment (roughly 50% of its
entire prevention, treatment, and care budget) and that approximately
one-third of that ($287 million) was allocated for ARV treatment.
Historically, U.S. purchases of ARVs has been biased toward brandname
medicines, including both first-line and second-line medicines.  More
recently, following fast-track approval of over two dozen generic
drugs, 70% of U.S. purchases in some programs are generic.

The current average cost of drug procurement and total treatment cost
per patient is unknown, but the U.S. claims to be contributing to the
treatment of 822,000 people meaning that the per-person cost of PWAs
supported by PEPFAR is approximately $1000, one-third of which is for
medicines.  Reports from African and Asia ARV treatment programs
estimate that one-quarter of costs are for medicines, a fact probably
explained by increased reliance on cheaper generic products.

In any event, it is clear that the cost of second-line drugs greatly
exceeds the costs of first line medicines, whether the brand/generic
mix purchased by PEPFAR or the mostly generic mix purchased by poorer
governments.  This higher cost is associated with the second-line
medicines being patent protected and having fewer if any generic
competitors.  According to its Untangling the Web Report (July 2006),
Doctors Without Borders (MSF) reported that it pays 12 to 36 times
more for second-line ARVs in low- and middle-income countries than
for first-line ARVs ($144 vs. $1700 vs. $5229).

Even if we assume U.S. PEPFAR drug purchases cost an average $333 a
year instead of the MSF average of $144, it is obvious that U.S. drug
costs will escalate significantly as a result of the higher cost of
second line medicines that are patent- and/or data-protected.  In
PEPFAR's focus countries, which are generally eligible for the lower-
tier pricing, costs for second line drugs will increased from roughly
$333/patient-supported/year to $1700/patient-supported/year and raise
total costs per patient-supported per year from $1000 to $2366 =F1 a
500% increase in medicines costs and a 240% increase in total
treatment costs.  Medicines will escalate from 33% of treatment costs
to 72% of treatment costs.

The U.S. continues to seek higher intellectual property protections =F1
patent and data-registration rights =F1 in its bilateral and regional
trade agreements.  It also seeks to interfere in the efforts of
developing countries to utilize TRIPS-compliant flexibilities to
issue compulsory licenses, like its current interference in the
Thailand/Merck efavirenz case.  This interference guarantees that the
U.S. PEPFAR program will become more and more costly over time and
will reduce its ability to scale up the number of people on
treatment.  Each patient who is started on a cheaper first-line drug
regime will need to transfer to second line therapy at some point
because of drug-resistance or adverse effects.  Each such transfer
will mean that only one patient can be treated for the same cost that
2.4 patient were treated previously.

It is the height of fiscal irresponsibility that the U.S. is
contributing needlessly to price escalation in its own signature
global health program.  Instead of promoting policies that threaten
generic production of cheaper medicines of assured quality abroad, it
should be facilitating TRIPS-compliant production of affordable
medicines so that it and others can attend to the pressing public
health needs of developing countries.

Benjamin Krohmal
Coordinator - Project on Medical Innovation
Consumer Project on Technology
Tel: +1-202-332-2670 ex. 14
Fax: +1-202-332-2673
ben.krohmal@cptech.org