Background and follow-up of the drug court case in South Africa

Dr Wilbert BannenbergWHO Technical Adviser Pharmaceuticals

“The goal of the National Drug Policy is to ensure an adequate and reliable supply of safe, cost-effective drugs of acceptable quality to all citizens of South Africa and the rational use by prescribers, dispensers and consumers”

1996: NDP implementation strategy

Technical support (WHO/SADAP) Legislation (Act 90 of 1997) Standard Treatment Guidelines,

Essential Drug Lists Training, capacity building programmes Transformation of Medicines Control

Council

WHO access framework

1. Rational

selection

4. Reliablehealth and

supplysystems

2. Affordable

prices

3. Sustainable

financing

ACCESS

What Act 90 was to achieve...

Parallel import (15C) Generic substitution Preventing perverse incentives

(bonusing, sampling) Licensing dispensing doctors Pricing Committee

Why did Industry block Act 90?

South Africa sets dangerous precedent: 1st TRIPS compliant developing country

“TRIPS does not allow parallel import” “Unfettered powers of the Minister are

unconstitutional” Perverse incentives = marketing tool Delay generic substitution (R 2m / day)

1. Selection

1. Rational

selection

ACCESS

Good selection practices

priority for essential drugs evidence based standard treatment

guidelines provide objective information accompanying training systems consult widely

mostly accepted by industry

New drugs needed!

big needs:– growing resistance problems (MDR-TB)– new diseases (HIV/AIDS)

limited progress:– R&D geared towards developed countries– few drugs for diseases of poverty

if invented, drugs are patented, and often unaffordable

2. Affordable prices

2. Affordable

prices

ACCESS

1998: Affordable prices?

HAART: R 70,000 / year Cryptococcus: R 13,500 pp / year MDR-TB: R 25,000 pp / year CMV retinitis: R 12,000 / 2 weeks

1998 data

Discount for public sector?

124

29

1.80

20

40

60

80

100

120

140

SA private SA public Thai generic

Fluconazole, Rands

Patents keep drugs expensive!

5.59

0.4

0

1

2

3

4

5

6

SA public Indian generic

Ciprofloxacin, Rands

What can the public sector afford? Preventive care: yes Testing, counselling: yes Opportunistic infections: almost all Palliative care: yes Needlestick injuries: yes MTCT: yes Antiretrovirals for AIDS: needs further price

reductions (generics) and additional drug budget < Trevor Manual

Can the private sector afford ARVs?

up to 37% of health expenditure already spent on drugs & medical supplies

14,000 AIDS patients receive ARVs from “Aid for AIDS” project in SA

After recent price reductions, ARVs are affordable (USD 900 pp/yr) and cost-effective.

Politics of competition: d4T pricing

0

50

100

150

200

250

300

Oct2000

Nov Dec Jan2001

Feb March April

US$

d4Tbrandd4Tgeneric

BMS: $274

Brazil: $197

BMS: $55

Cipla: $69Hetero:

$47

Other price reduction strategies

Information service - UNICEF/WHO/UNAIDS negotiation: equity pricing for poorer

countries: based on need and ability to pay - tiered vaccine prices a model?

reduction of taxes and duties application of TRIPS “health safeguards”:

– early working / Bolar, – compulsory licenses, – parallel imports

Impact of TRIPS on drugs

Higher prices for new drugs Generics competition delayed Weaker local pharmaceutical industry in

developing countries Drug production concentrated in a few

rich countries (17 countries 84%)

Parallel import

World-wide shopping for same drug Cause: differential pricing by industry Principle not (yet) enabled in Patent Act Act 90, 15C allows parallel import Private sector: 5% savings (R400m?) Public sector: modest saving (R 20m?)

Compulsory licenses

Limits to exclusive rights in case of:– public health emergency– non-commercial government/public use– excessively high prices (abuse)

Savings 10-97% (depends on pricing) Was always legal under SA Patent Law Bilateral trade pressures prevented its

use; court case reversed this!

Early working (Bolar provision)

Testing, registering generics (before patent expiry) currently illegal in SA

but not outside SA (competitive advantage foreign companies!)

Unnecessary delay 1-2 years Early working provision agreed by DTI

and DOH (amendment Patent Act?)

1997: TRIPS-plus pressures

TRIPS = minimum agreement USA: 301 Watch list; bilateral pressure

for more patent protection– patent extensions (USA: 23 years)– no compulsory licensing– no parallel import

EU: trade pressure– no Bolar

1999: International opinion shifts

AIDS activists follow Al Gore Clinton “allows” parallel import for AIDS

crisis in Africa (if TRIPS compliant) USA stops bilateral trade pressures EU also reverses trade pressures

2000: Accelerating access (?)

10 May 2000 UNAIDS announcement Few hard data - bilateral negotiations Senegal, Uganda, Kenya, Rwanda: less

than 2000 HIV+ people benefit from 75-90% price reductions

SA: industry offers, but politicians not interested in ARVs

SA: private sector prices down (USD 900 pp/year)

2001: Why drop the court case?

AIDS is a crisis beyond proportion Moral outrage on profits drug companies Parallel import accepted by WTO USA, EU changed position Legal arguments are weak Bad PR: “stop case whatever it takes” Multinationals press local PMA

Donations

Pfizer: fluconazole for cryptococcal meningitis, oesophageal candidiasis (2 years)

Boehringer Ingelheim: nevirapine for MTCT (5 years)

prevent loss of control at any cost (compulsory licensing)

more profitable to donate than to sell cheap!

Compulsory license or price reduction?

Compulsory License Patents Act SA controls non-exclusive allows generics clear procedure prices cheaper? Conditions, royalties

Reduced price offer voluntary offer international control exclusive brandname only terms not yet clear prices higher? Conditions?

Current Patent Acts in Africa?

Many African countries have no pre-TRIPS patent Act– <2006: free import of all generics– >2006: free import of all drugs patented

before 1995 Is the drug patented? (e.g., ddI in SA) Namibia, Mozambique: ARVs not

patented (bus trips, Internet pharmacy?)

3. Financing

3. Sustainable

financing

ACCESS

Sustainable financing?

Public Private

Turnover R 2 billion R 8 billion

Per capita R 64 R 952

Drugs % ofHealth

9% 36-43%

Health spending in Africa 1977-1997 (% of GDP)

0

0.5

1

1.5

2

2.5

3

3.5

4

1977 1987 1997

Private

Public

Financing: sustainable?

Declining total public health funding in Africa, changing public and private shares.

Substantial out of pocket spending Four principal sources of finance for health:

out of pocket, tax-funding, insurance contributions, external support (donations, loans (debt?)).

National “pooling” strategies recommended by WHR2000. Public finance offers greatest pooling potential in LDCs; rarely achieved

ARVs for SA’s public sector?

Prices have dropped 90%, but...

Big farma USD 600/yr Generics USD 250/yr 500,000 AIDS cases

needing ARVs cost >>USD 125m /

year (and increasing!) need additional drug

budget! Botswana example?

0

50

100

150

200

250

drug

bud

get

AR

V

USD(millions)

4. Health infrastructure

4. Reliablehealth and

supplysystems

ACCESS

Infrastructure, supply, training

new ARV drugs need more than $$: – more, better trained doctors– dedicated infectious disease nurses?– VCT, laboratory services (CD4, VL?)– informed patients– COTS, FOTS, NOTS?

controlled distribution 95% adherence needed… pilot projects, then scale up?

Court case follow-up

Act 90 Regulations to be gazetted (December?)

Sections of Act 90 to be promulgated by President

Pricing Committee? Political climate more conducive for

voluntary (and compulsory?) licensing

Pricing Committee

Minister to appoint members Committee’s tasks:

– draft Regulations– study Pricing Systems (public+private)– monitor prices– recommend action where needed (PI, CL,

negotiations, etc) Pharmaco-economic evaluation

Licensing Dispensing Doctors

NDP objectives:– Separate prescribing / dispensing– Remove financial incentives for Rx

Licenses for services in rural areas and where there is no pharmacy

License requires training, inspection Emergency administration allowed

So what?

The TRIPS compliance debate is over Doha to review health issues TRIPS Country support needed to include public

health safeguards into law Drug prices will drop to prevent CL Access to ARVs = next debate

– private sector (SA): cost-effective– public sector: Botswana test case?

Thank you!