[Pharm-policy] U.S. at Odds With Europe Over Rules on World Drug Pricing

[love@cptech.org]

 http://www.nytimes.com/2001/07/20/international/20DRUG.html

July 20, 2001

By DONALD G. McNEIL Jr.
 
Before the United Nations has even raised up to $10 billion for its new
fund to fight AIDS, the Bush administration and the European Union are
engaged in a behind-the- scenes struggle over how that money will be
spent, particularly on pharmaceutical drugs.

Communications between the United States trade representative and his
European Union counterpart, obtained by The New York Times, show starkly
opposing views on several key issues.

The Bush administration, like the giant pharmaceutical companies,
opposes the creation of any system to regulate world drug prices, or the
creation of a database where prices could simply be posted. The
administration, while it has dropped moves against Brazil's production
of cheap generic drugs, emphasizes that patent rights must be protected
and wants the companies left alone to offer discounts when they see fit.

The Europeans appear to be siding with poor countries and campaigners
for cheaper drugs.

No unified European position has yet been laid out, but different
leaders and European Council resolutions favor a "tiered pricing
system," endorse the right of poor countries to shop for cheap generic
drugs from countries that ignore Western patents, and favor the creation
of a worldwide database to show prices for all drugs from any supplier
and to indicate whether the supplier is considered reliable.

While acknowledging that patents are important, the Europeans often note
that they are blamed for driving up the cost of health care, and
emphasize the exceptions to patent rights contained in world trade
treaties.

"Basically, the European Union is saying that it doesn't want the fund
to turn into a subsidy for Big Pharma, and the U.S. is saying the
reverse," said Ellen 't Hoen, a drug price specialist at Doctors Without
Borders, a medical charity that has led the fight for lower-priced
drugs.

The United Nations' global fund to fight AIDS was proposed by Secretary
General Kofi Annan at a special General Assembly in June. He asked
donors to contribute $7 billion to $10 billion a year. So far, only
about $1 billion has been committed.

The rules governing the new fund are expected to be one topic discussed
when President Bush meets the leaders of the world's seven wealthiest
nations and Russia this week in Genoa, Italy.

The Europeans — to the frustration of the Bush administration — have not
defined what they mean by a tiered pricing system, although the
assumption is that it would mean low prices for poor countries, high
prices for rich ones and some sort of system for verifying that it was
working.

Some leading members of the European Parliament appear to favor a system
like that used for getting vaccines and contraceptives to the third
world. For those, the pharmaceutical multinationals and their generic
competitors in countries like India submit bids to international
agencies like Unicef or the United Nations Population Fund, which handle
distribution costs. The vaccines or contraceptives sell for a fraction —
sometimes as little as one two- hundredths — of their prices in
developed countries, and the makers still turn a small profit.

Price cuts by the multinational companies have been voluntary, in
response to public indignation and counteroffers from generic producers.

The most obvious targets of the drive are anti-retroviral AIDS drugs,
which 18 months ago cost as much as $10,000 a year per patient, and now
are offered by generic makers for as little as $350 per year.

But AIDS also makes the body susceptible to secondary diseases like
malaria, tuberculosis, pneumonia, meningitis, fungal infections and
cancer. Pressure on pharmaceutical companies to offer poor countries
discounts on virtually all therapeutic drugs is thus expected to mount.

The extent of the European-American debate is outlined in a letter sent
in late June by Robert B. Zoellick, the United States trade
representative, to Pascal Lamy, his counterpart on the European
Commission.

In the letter, a copy of which was obtained by The Times, Mr. Zoellick
expressed his distress that the commission was endorsing a tiered
system. The Bush administration is "opposed to the creation of an
international institution or convention to regulate drug prices," Mr.
Zoellick wrote. "I also would question establishment of a verification
process." Further, he stated that "we have practical and legal concerns
with the concept of maintaining a database on drug prices." 

The database, he wrote, would be "difficult to keep accurate" and "the
sharing of drug pricing information can at times present problems under
U.S. antitrust laws."

An official in Mr. Zoellick's office said the letter had two purposes.
"One, we're challenging them to be specific about what they mean by a
tiered pricing system," he said. "And, two, we're communicating that
we're pretty skeptical."

Mr. Zoellick wrote that he was troubled by the reasons that Mr. Lamy's
colleagues had offered for tiered pricing, including the argument that
cheap drugs were still not available in Africa. Repeating an argument
often made by spokesmen for the drug industry, he wrote that it was
"more likely the result of the enormous infrastructure problems plaguing
this region, rather than drug prices."

Millions of AIDS-infected Africans live in cities with hospitals or
within walking distance of rural clinics, and have enough clean water to
take pills. Many African countries now treat tuberculosis, which
involves essentially the same regimen as AIDS requires — a daily handful
of pills and occasional lab tests. Standard "first-line" tuberculosis
drugs, however, are priced much lower than anti-retrovirals; recently,
drug companies began voluntarily lowering the prices of their
"second-line" tuberculosis drugs, which are prescribed if other drugs
are ineffective.

Mr. Zoellick's letter concluded by saying that the drug companies ought
to be trusted. "We should expect companies to sell at the lowest
possible prices," he wrote. "However, it appears to me that many
companies are now doing so; there is no indication that their pricing
commitments are short-term or of such limited quantity that we should
doubt their sincerity."

Doctors Without Borders argued at a drug price conference in April that
relying on the good will of pharmaceutical companies was not a sound
approach for battling AIDS. The companies, the charity argued, deeply
slashed their prices last year "only after immense international public
pressure began to jeopardize the industry's image."

The official in Mr. Zoellick's office confirmed that the Bush
administration still backed the policy started under the Clinton
administration of not seeking trade sanctions on African countries that
legitimately used patent-nullifying provisions under World Trade
Organization treaties to get AIDS drugs. "And," he added, "about three
weeks ago, we settled our W.T.O. dispute with Brazil. That's gone down
fairly poorly with the pharmaceutical companies."