By Brecht Ingelbeen (ITM)     Brecht

“We did not develop this medicine for Indians. We developed it for western patients who can afford it.” (Marijn Dekkers, CEO Bayer, 3 december 2013, Bloomberg Business week)


Only last week this quote was picked up by access to treatment activists but it went viral almost instantly. Being part of the pharmaceutical industry in a previous life, I have often defended “Big Pharma” with the argument that patents are not perfect but probably the best compromise to keep pharmaceutical innovation going. Nevertheless an enormous part of the profits of the industry that could be spent on R&D is often spent on marketing campaigns that do not always promote rational use of essential medicines (and that’s obviously an understatement). With quotes like this one from Bayer’s CEO it’s rather hard to keep on defending the drug patent model, I have to admit, so I won’t try. But the (latest) patent debate has been raging for a while now, even before this (rather callous) quote. Let’s try to put things in some perspective, and see what the alternatives could be for the system we have now.


Why now?

Everyone of us agrees there are plenty of shortcomings to the patent model as it is now, and that these problems will only increase in the future when much of the global disease burden will be related to NCDs and when treatments will increasingly be individualised. In November last year some parts of the Trans-Pacific Partnership (TPP) were leaked. That is one reason for the resurgence of the patent debate. The TPP, when it materializes, will be a trade deal between the US and 12 other states and includes an agreement on drug pricing. If the leaked information is correct, the use of compulsory licenses to deal with infectious epidemics will be rather limited and this could interfere with the production of generic medicines in India. If you know those drugs are supplying many hospitals and health centres in Africa or Asia, you understand where the fear comes from. A second reason for the renewed drug patent debate, is the flood of new hepatitis C and TB drugs that have entered (high income) markets recently. One 12-week treatment course of sofosbuvir, a hepatitis C drug, will cost 84 000 USD in the US, while its production cost could go down to less than 250 USD. A six-month course of bedaquiline, a new drug to treat DR-TB, would cost about 3000 USD in middle-income countries.


Some alternatives

The latter is an example of tiered pricing, where innovator companies set their prices differently in high and middle- and low-income countries. Tiered pricing is the solution for drug accessibility, proposed by the industry and many others. Nevertheless it remains too expensive. In the emerging markets, where demands for treatment will only increase, up to half of the health care budget is already spent on drugs (44% in India, 43% in China, compared to 12% in the UK and US according to the Economist ). Access to these drugs is already problematic now because of their cost, so prices need to be as low as possible. You get low prices for drugs when they are produced generically in India, without expenses on marketing or an expensive CEO. Not when Bayer is producing and marketing these drugs in Leverkusen, in other words.  

Other models currently proposed by the industry are risk sharing – you get reimbursed if the treatment doesn’t work- or when that’s too complex, the pharmaceutical companies simply sell smaller doses (both are ideas from Joseph Jimenez, Novartis CEO, in a Project Syndicate Op-Ed, “Rethinking Pharmaceutical Models”). These ideas are totally out of touch with settings where access to treatment is hampered, and where drug resistance or treatment failure are caused by not taking the full course of treatment. His proposals do not amount to a fundamental rethinking of the model to ensure pharmaceutical innovation, they are simple drug pricing strategies, to ensure profit.

A different idea is this one: can the large pharmaceutical companies not be encouraged to split their research divisions from their production & marketing divisions – which can be much cheaper if outsourced, so that the majority of income is not spent (spoiled?) on marketing? The research divisions could be funded according to the impact of their drug discoveries, and that funding can come from contributions from the production & marketing divisions or other generic drug manufacturers. These contributions could again be correlated to the pricing of the drugs (higher prices > higher contributions), and inversely correlated with the access to the drugs. There would be no incentive anymore to push the prices higher through marketing but drug manufacturers would be encouraged to provide better access in remote and neglected places.

Innovation by smaller start-ups and university spin-offs would be better rewarded because they would not have to wait the entire 20 years of the patent running to get the return on investment. Interventions with a larger impact, i.e. to treat the big killers globally, will get priority. No billions would be wasted anymore on pushing health care workers to prescribe or sell not the best product, but the most expensive one.

I’m not the first one to think of this option. The so called ‘Health Impact Fund’ is an idea of Thomas Pogge, a philosopher and professor at Yale Law school. His plan is almost identical to my thoughts in the last 2 paragraphs. Even better, its first pilot project is already scheduled, with a partner to provide the drug for the pilot: bedaquiline (from Janssen). It will be used to assess the health impact of this drug in a variety of countries. An initiative to follow closely, obviously

Yet another (slightly different) option is already in place – the Medicines Patent Pool. In this model the patent holder negotiates with the Medicines Patent Pool to allow a generic manufacturer to produce a drug, and receives royalties in return. Once an agreement is reached between both parties, generic manufacturers can apply to produce the drug and to bring it on the market at low cost. The advantage of this model is that the Medicines Patent Pool can set a number of requirements for the generic manufacturer in terms of quality and safety of the drugs and in terms of drug development – for example encourage the production of pediatric formulations. Because the generic manufacturers now enter a partnership with the patent holder, the product development and registration processes are quicker and cheaper, enabling faster access to cheap good quality medicines. The downside of this system is that such royalty alone is not enough incentive for the patent holder to develop new drugs for the largest global public health needs.


Emerging markets?

One question remains: where are the emerging markets in this story? 75% of the 184 million hepatitis C infected people live in middle-income countries. The BRICS represent a good proportion of the global disease burden but no longer benefit from most of the discounts to improve access to treatment. What could be their role in an adapted model for pharmaceutical innovation? Both India and South Africa have been at the forefront of treatment access activism and of the controversies around intellectual property. Only a week ago there were allegations against the pharmaceutical sector in South Africa and the US hiring “high caliber” consultants to undermine the reforms of patent laws South Africa’s health minister had initiated, based upon a leaked memo of Merck. In 2001, as is well known, 39 multinational pharmaceutical manufacturers already attempted to block flexibilities in the patent laws for antiretroviral drugs that were and still are essential for survival of the (now 2 million) South Africans living with HIV and using antiretroviral treatment. Western pharmaceutical companies also keep a close eye on what’s happening in India (and vice versa). Just last year India’s Supreme Court upheld the countries’ Patent Act after multinational pharmaceutical producer Novartis battled the flexibilities in that law for 7 years. The Indian Patent Act allows domestic production of low cost generic drugs in cases of national emergency, extreme urgency, or for public, non-commercial use. So far this exception has been allowed for some cancer drugs that are still under patent but not accessible, but last week Bloomberg Businessweek  revealed  the Indian government is reviewing over 20 more drug patents in the field of diabetes and HIV.

Most BRICS rely on domestic pharmaceutical manufacturing, but for now none of the 25 “biggest pharma” companies originate from the BRICS, and the vast majority of pharmaceutical innovation still happens in the US and Western Europe. But as the BRICS markets are steadily growing, more resources could be generated in the future which might then be spent on R&D… or on marketing and sales representatives. Some examples are encouraging. CNBG, a Chinese vaccine manufacturer, has brought its first Japanese encephalitis vaccine on the market, at a much lower price than the existing ones. WHO has prequalified it,  in other words it has endorsed the quality of the vaccine. The Gates Foundation funded the development of this vaccine. If we want more examples of pharmaceutical innovation coming from emerging countries without having to wait decades until purchasing power is sufficient to fund R&D, wouldn’t a new model encouraging pharmaceutical innovation to treat global health threats be worth a try?


Where is WHO in all this?

Speaking of WHO, how to finance R&D for diseases that affect poor populations who cannot pay for the drugs resulting from that research is obviously also a question being asked at WHO. In fact, for many years committee after committee has tried to come up with some ideas but all of them were opposed either by governments or by the private sector. Last Friday, the WHO Executive Board discussed the issue again, based on a report of the Consultative Expert Working Group on R&D, and reached an agreement on 8 R&D demonstration projects. The projects are now supposed to further work out their proposed innovative model for financing and for conducting research. But it is doubtful any of these demonstration projects will come near to a new global model of pharmaceutical innovation that responds to the current gap in research for neglected diseases. I’m afraid that as long as there is no political will to create for example a “Health Impact Fund”, we will not see a lot of pharmaceutical innovation addressing the bulk of global health threats.

Share →

One Response to Wanted: a new model to encourage pharmaceutical innovation

  1. Craig Welch says:

    “… tiered pricing, where innovator companies set their prices differently in high and middle- and low-income countries. Tiered pricing .. remains too expensive.”

    Referring to companies as innovators is part of the problem – they are originator companies. Whether what is originated proves to be an innovation is surely in the eye of the beholder. What we need is a better understanding of what is in fact, an innovation.

    And if tiered pricing is ‘too expensive’ then doesn’t that simply mean that the tiers have not been set appropriately? See Lopert et al in Lancet doi:10.1016/S0140-6736(02)08911-0

Leave a Reply

Your email address will not be published. Required fields are marked *

Please fill in the below * Time limit is exhausted. Please reload the CAPTCHA.

Set your Twitter account name in your settings to use the TwitterBar Section.