[Ip-health] Clinton Foundation Sets Up Malaria-Drug Price Plan

[Sam Houshower]

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[ Picked text/plain from multipart/alternative ]
http://online.wsj.com/article/SB121626447476161201.html


Clinton Foundation Sets Up Malaria-Drug Price Plan
Aim Is to Stabilize
Fluctuating Prices,
Boost Availability
By MARK SCHOOFS
July 17, 2008
Wall Street Journal

Former President Bill Clinton's foundation is set to unveil a pricing
agreement Thursday that it hopes will make malaria drugs available to
millions of poor people.

The agreement points to the sophistication needed to harness market
forces and get lifesaving medicines to countries where treatable
diseases still take a staggering toll.

First-line malaria drugs -- known as ACTs, for artemisinin-based
combination therapies -- present a tricky problem: the volatile cost
of the powerful antimalarial plant extract artemisinin. During the
past few years, the price of that key ingredient has fluctuated from
as little as $150 a kilogram to as much as $1,100, according to
Chinese producers.

Such instability makes it difficult for those in the market -- from
artemisinin producers to pharmaceutical companies to the health
ministries that often buy the drugs -- to plan. That can make
pharmaceutical companies wary of reducing prices for fear of another
price spike and deter generic-drug makers from entering the market and
fostering more-competitive pricing.

The agreement Mr. Clinton plans to announce aims to limit price
fluctuations. It creates a consortium of two Chinese raw-artemisinin
suppliers, two Indian companies that convert artemisinin into the
active pharmaceutical ingredient and two Indian generic-drug
companies. Among other things, the deal puts a ceiling on the price of
the raw artemisinin in return for a guarantee that other consortium
members will purchase large proportions of their artemisinin from the
two participating suppliers, unless nonmembers can offer equal-quality
product at an undisclosed discount.

The deal also reduces the price of one drug, known as ASAQ, by about
30%.

Scheduled to join Mr. Clinton at the presentation is Novartis AG Chief
Executive Daniel Vasella. The Swiss drug company has been supplying
the overwhelming majority of ACTs in the developing world -- 66
million treatment courses last year alone -- at an overall loss that
Dr. Vasella said exceeds $100 million, including research-and-
development costs. Mr. Clinton is expected to thank Novartis for
supplying the drug and for not raising the price despite the
artemisinin price increase.

Novartis isn't part of the consortium, but Dr. Vasella lauds the
effort to make malaria drugs more available. His main caveat is that
the Clinton agreement "doesn't address the need for new drugs and the
incentives for innovators to engage more."

"How was it possible that we have a product that completely
transformed malaria treatment, saving 500,000 lives? It's only
possible by innovation," Dr. Vasella said.

One attempt to spur innovation was introduced in February 2007, when
the Bill and Melinda Gates Foundation and five countries began funding
"advance market commitments," in which donors such as the U.K. and
Italy would guarantee that they would buy enough vaccines of various
types to lure companies to invest in developing them. But the approach
remains untested while its supporters iron out the legal framework.
Cutting prices and stimulating new research are only parts of the
challenge; many developing-world health systems can't deliver the
treatments effectively.

The Clinton Foundation's malaria work builds on previous efforts. In
1996, when lifesaving AIDS drugs first appeared, activists pressured
patent-holding pharmaceutical companies to reduce prices and pushed
the U.S. government to stop opposing the use of patent-busting generic
drugs in poor countries. The stark cost difference between generic and
branded versions helped pressure the major drug makers to slash prices
in poor nations.

Still, by 2003, AIDS drugs were reaching only a tiny fraction of
people, because poor countries weren't buying them partly out of fear
that they lacked the resources to properly administer lifelong
regimens. The result: Although millions of people were wasting away
from the disease, there was little market demand for the drugs that
could save them.

In its first major price-slashing effort, the Clinton Foundation
effectively catalyzed demand, working with African governments to
develop plans to deliver the drugs on a mass scale and then using that
demand to bargain with generic-drug companies to reduce prices through
economies of scale. Another key: Rich countries ponied up millions of
dollars to help poor ones buy the drugs.

To address the malaria market, the Clinton Foundation tapped 31-year-
old Inder Singh, who holds five educational degrees, including an
M.B.A. from the Massachusetts Institute of Technology. He worked on
two Silicon Valley start-ups before starting two businesses of his
own. He soon realized that, for malaria, the challenge was to manage
demand.

After the World Health Organization in 2004 recommended that ACTs be
used as first-line malaria drugs, demand skyrocketed. It takes a year
or more for the Artemisia annua plant to mature, which led to hoarding
and price gouging, Mr. Singh said. The resulting price increase
attracted Chinese farmers who flooded the market, leading to
subsequent oversupply and a plunge in price.

Creating reliable demand forecasts helped the foundation cobble
together the pact being announced Thursday. The agreement solves
another problem: multiple purity specifications that are measured by
different methods. The Clinton Foundation coordinated the
establishment of a single quality standard within the consortium.