[Random-bits] AstraZeneca tells New Zealand cancer patients they will withdraw cancer drug from the market to protest government pressures to lower prices

[James Love]

http://www.huffingtonpost.com/james-love/astrazeneca-tells-new-
zea_b_12475.html

AstraZeneca tells New Zealand cancer patients they will withdraw
cancer drug from the market to protest government pressures to lower
prices
Huffington Post
James Love, 18 December 2005

On December 15, 2005, AstraZeneca, the big pharmaceutical company,
announced it would pull its cancer drug Zoladex from the market in
New Zealand. Zoladex is used to treat both breast and prostate cancer.

The decision to withdraw the product from the Zealand market is due
entirely to a dispute over the amount of money the New Zealand
government would pay for the drug.

AstraZeneca's move is aggressive, but this is what companies do to
get top prices for medicines.

I was in New Zealand in 1998 when Bristol Myers Squibb (BMS) withheld
the supply of a life saving drug in a dispute over pricing. The drug
was ddI, an AIDS drug invented and patented by the US government and
licensed to BMS, which it sells under the brand name of Videx. BMS
wanted New Zealand to pay 30 percent more than the US price. The New
Zealand drug reimbursement agency PHARMAC wanted the US price. BMS
stopped supplying the drug to New Zealand pharmacies, until the
entire national supply was gone. At that point PHARMAC agreed to pay
the higher price.

In the current dispute over Zoladex, New Zealand again wants a price
that is closer to what AstraZeneca charges in some other countries,
including the UK. But AstraZeneca decided to pull the drug from
market, rather than accept price cuts.

The decision by AstraZeneca is the flip side of threats by
governments or insurance companies who refuse to pay for drugs when
prices are too high. New Zealand, like other countries, is struggling
to find a way to pay for expensive new drugs, some of which are
priced as high as $4,000 to $20,000 per month, for treatments that
can last a year or more.

When prices are high, third party insurers (governments, private
insurance companies or employers) try to find ways to not pay for
products like the breast cancer drug trastuzumab (Herceptin) or the
brain cancer drug temozolomide. For example, the drugs can be limited
to only certain medical conditions, or as second or third line
treatments, rather than first line treatments.

These disputes arise because we reward drug developers with temporary
monopolies on new medicines. The companies that control the
monopolies have incentives to be as aggressive as possible on drug
pricing, particularly when the treatment is for a severe illness.
Governments and insurance companies threaten to not pay for drugs,
and drug manufacturers threaten to withdraw products if they don't
agree with the price. These threats are only credible if each party
can demonstrate its willingness to follow through on the threat.

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New Zealand is a good place for a company to demonstrate its
willingness to withhold a product from the market for four reasons.

1.  New Zealand is a small country, so the total loss in global
revenue is smaller than would be the case if a product was withdrawn
from a larger market, like France, Japan or Germany.

2.  New Zealand has bowed to US trade pressures and agreed not to use
parallel importing to obtain cheaper supplies for the drug in
countries where prices are lower.

3.  New Zealand's domestic market is too small to justify efficient
production, which reduces the threat of a compulsory license for
local manufacturing.

4.  New Zealand is one of the countries that have "opted-out" of the
recent WTO agreement which could have been used to make it easier to
import generic drugs manufactured under a compulsory license.

---------

The increasingly aggressive pricing of new medicines is a global
crisis. But it can be fixed, and fairly easily.

Firms that develop new drugs don't need monopolies on drugs, but they
do need money. There is no need to link R&D incentives to high drug
prices, if you can get the money to the drug developers through a
different mechanism. Fortunately, there are mechanisms that will
work, and people are taking them seriously.

A US legislative proposal, HR 417, would create a very large medical
innovation prize fund. The Prize Fund would provide money to
successful drug developers, on the basis of the positive health
outcomes their products provide (over the first ten years they are
used). In the current version of HR 417, it would give drug
developers one half of a percent of US GDP, or about $60 billion per
year, a number that could be changed if policy makers want to
increase the total size of innovation incentives.

The important thing in the Prize Fund approach is that it separates
the market for innovation from the market for the physical copies of
the drug. If passed, it will eliminate the marketing monopolies for
all medicines. Competition would lead to much lower prices. When new
drugs are priced the same as off-patent generic products (at the cost
of making copies), doctors, governments, insurance companies and
employers would no longer have an incentive to restrict access.
Medicine would be prescribed on the basis of medical merits, rather
than cost effectiveness.

The New Zealand story is one of countless reminders the current
system is broken. Things are much worse in developing countries,
where high prices for any drug means very unequal access.

Since rationing of high priced medicines is a completely unnecessary
problem, we should fix it. If we move to the prize fund approach for
rewarding successful drug developers, we can radically change access
to medicine from Uganda to Beverely Hills, and that is worth doing.

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James Love, CPTech / www.cptech.org / mailto:james.love@cptech.org /
tel. +1.202.332.2670 / mobile +1.202.361.3040

"If everyone thinks the same: No one thinks."  Bill Walton