[Ip-health] Health24.com on South African competition complaint over efavirenz

[Mike Palmedo]

HIV drug exploitation?

Health24.com
January 16, 2008

According to the experts, the Department of Health is paying much more
than it needs to for a key HIV drug. And it's not only South Africa's
5.5 million HIV-positive people who feel the pain: every South African
taxpayer is paying a price for the alleged foot-dragging of both the
state and a drugs company.

Is government's failure to negotiate better deals and to enforce
licencing powers granted by international treaties a symptom of its
reluctance to accept the science of HIV? And, are certain pharmaceutical
companies benefiting from the Aids pandemic in an anti-competitive way?

The battle for cheaper Efavirenz

It is estimated that government is currently providing almost 400 000
state patients with one of two first-line highly active antiretroviral
therapy (HAART) regimens =96 both consisting of three different drugs. One
of the drug combinations contains the non-nucleoside reverse
transcriptase inhibitor (NNRTI) drug Efavirenz.

According to figures from the Western Cape Antiretroviral Programme
Monitoring report 2006, quoted by the HIV/Aids activist group Treatment
Action Campaign (TAC), 64 cents out of every rand spent on first-line
drugs is spent on Efavirenz. This makes Efavirenz alone more expensive
than the two other drugs combined.

The report also stated that "Efavirenz use is the most significant
driver of antiretroviral drug costs."

Generic versions of Efavirenz are available in other countries at
significantly lower prices.

Prices quoted by the Clinton Foundation as well as the September 2007
edition of Medicins Sans Frontieres' report Untangling the Web of Price
Reductions, shows that the South African government is paying between
15% and 30% more than other countries for the drug.

Why we're paying more

Until recently, Merck, Sharpe and Dohme (MSD =96 Merck international's
South African subsidiary) was the only company selling Efavirenz in
South Africa. Merck holds the patent, and other companies wanting to
make the drug need to be issued a licence.

Such licences were granted to Thembalami Pharmaceuticals (no longer in
existence)and Aspen (which has not yet brought a product to market).

In August 2007, Adcock Ingram was granted a licence, and in November it
brought the first generic Efavirenz product to the SA market =96 although
the price is only marginally cheaper than that of MSD's product. (The
most recent comparison we have is R124 for Adcock's 600mg product vs
R135.53 for MSD's - both prices excluding VAT.)

Critics contend that more competition will drive prices down, and that
by refusing to grant more licenses, MSD is in a sense conspiring to keep
the price high.

Anti-competitive behaviour?

In November 2007 the TAC and the Aids Law Project (ALP) lodged a
complaint with the Competition Commission, charging MSD and Merck with
failing to licence Efavirenz on "reasonable terms".

Their first concern is that MSD has granted so few licences. Two
pharmaceutical companies, Sonke Pharmaceuticals and Ciplamedpro, already
have Efavirenz products registered with the South African Medicines
Control Council, but are not allowed to sell them in South Africa.

According to Nic de Jongh, medical director at Ciplamedpro, the company
could have an Efavirenz product available in South Africa within six
weeks of being granted a licence.

Similarly, Sonke Pharmaceuticals are already producing Efavirenz in
South Africa and can have a product on the market by February (2008),
according to Sotse Segoneco, CEO of Sonke. He also said that their 600mg
Efavirenz product would be 20% cheaper than MSD's.

Why Sonke and Ciplamedpro have not been granted licences is unclear.

Open to discussion

When challenged on why so few licenses have been granted, MSD replied
that "Merck continues to be open to discussing licencing proposals for
the manufacture and supply of available ARV's in line with supporting
the Government's objectives as outlined in the National Strategic Plan,
with companies who request licences."

The company insisted that objective criteria are used for the granting
of licenses. "This is very important to ensure safe and effective
medicines for patients," said MSD, "as well as security of sustainable
supply of ARVs. The criteria put in place are to address these concerns."

Segoneco however holds that there are "no valid reasons whatsoever" to
refuse licences. He points out that Sonke/Ranbaxy and Ciplamedpro/Cipla
are providing antiretrovirals globally at accessible prices.

Bad relations

In response to the TAC/ALP complaint to the competition commission, MSD
said: "We are disappointed that notwithstanding what we believed was
constructive engagement, the ALP apparently decided to file the
complaint. The company denies that it has violated the Competition Act,
and will co-operate in full with the Competition Commission in an
investigation."

In contrast, the TAC has described the almost six-year-long negotiations
as progressing agonisingly slowly. It has, however, indicated that it
remains open to further discussions. The TAC said in a press release
that it "has no interest in protracted litigation and would prefer for
the parties to negotiate a settlement in the public interest. If such a
settlement could be reached, as was the case in 2003 with GSK and BI,
the TAC would be prepared to withdraw its complaint."

Yet the TAC's Zackie Achmat told Health24 that, "the sooner the
Competition Commission decides this matter, the more lives can be saved.
Merck has attempted to hoodwink us with promises that they will licence
a range of generic companies for more than four years. This has allowed
them to abuse their patent and profiteer from illness."

In a similarly frustrated vein, a senior figure at a local
pharmaceutical company described, on condition of anonymity, how four
years of correspondence with MSD had been typified by vague answers and
a lack of clarity from MSD.

And what about government?

Faced with similar problems, the Thai and Brazilian governments have
issued compulsory licences, which they are allowed to do under current
international treaties. In such cases, other companies are given the
right to produce and sell Efavirenz irrespective of whether Merck grants
a licence.

According to the ALP's Jonathan Berger, "a minister of state could issue
a licence 'for a public purpose', acting in terms of Section 4 of the
Patents Act." Berger argues there is a strong case for the Minister of
Health to be forced to use this power.

When asked why the Department of Health (DoH) has not issued a
compulsory licence for Efavirenz, a spokesperson replied that "we
believe compulsory licences are just one of =96 and not the only =96 means
of making medicines affordable."

Honouring obligations

The DoH continued that: "It must be recalled that the government must
honour the current contractual obligations of the tender for the
purchase of antiretrovirals. At the time of the award of this tender,
MSD's price was more favourable compared to generic products on the
market at the time. When the current tender expires next year (2008), a
full evaluation of the fairness and appropriateness of prices will be
undertaken."

The fact is that at the time of the tender there was no generic product
on the local market; and at present there is only one.

The DoH admits that "generic products are generally between 30% and 40%
lower in price than the originator when there are two to three players".
Given this admission, and the fact that the it has also admitted to
being concerned over the price of Efavirenz, it remains unclear why it
hasn't been able to successfully negotiate prices in line with those in
other countries.

According to Berger, "there may be political pressure not to act. But
countries such as Thailand and Brazil were able to withstand the
pressure and issue licences. It's likely that South Africa would not be
subjected to the same pressure, given the size of our Aids problem."

No combinations

A second aspect of the TAC/ALP complaint to the Competition Commission
relates to the limited terms of current Efavirenz licences =96
particularly regarding the lack of licences for co-formulations. Such
co-formulations are widely seen as the future of first-line HIV treatment.

According to HealthDayNews, about half of newly diagnosed HIV patients
in the US are receiving the drug Atripla (a combination of Efavirenz,
Tenofovir and Emtricitabine). Atripla has also recently been approved in
Europe.

Atripla significantly simplifies Aids treatment by reducing it to a
single, once-daily pill =96 something that is expected to significantly
improve compliance.

"The existing licences only cover stand-alone Efavirenz products, not
fixed-dose combinations or co-packaged products. This means that there
will be no generic competition to MSD's Atripla, if and when it comes to
market," says Berger.

One combination that is likely to come to market should Efavirenz
licences be expanded, is the co-formulation of Efavirenz, Tenofovir and
Lamivudine. This co-formulation is considered to be therapeutically
equivalent to Atripla and is currently selling for as much as 45% less
than Atripla.

Thus, should the current licences not be expanded in time for the next
state tender, it is likely that the South African government will
continue to pay more than many other countries for HIV drugs.

- (Marcus Low, January 2008, Health24)

Sources:

Untangling the web (10th version), September 2007 - Medicins Sans
Frontieres.
http://www.accessmed-msf.org/resources/key-publications/key-publication-det=
ail/article/untangling-the-web-10th-version-english/

Treatment Action Campaign press release on their complaint to the
competition commission.
http://www.tac.org.za/nl20071107.html

Western Cape Antiretroviral Programme Monitoring report 2006.

Summery report from the Global price reporting mechanism on
anti-retroviral drugs, July 2007.

CHAI Antiretroviral price list, 05/08/2007 - Clinton Foundation HIV/Aids
Initiative.

--
Mike Palmedo
Research Coordinator
Program on Information Justice and Intellectual Property
American University, Washington College of Law
4910 Massachutsetts Ave., NW Washington, DC 20016
T - 202-274-4442 | F 202-274-0659
mpalmedo@wcl.american.edu