DeCanio Economics

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Journal of Environmental Management 85 (2007) 1–8

Economics of ‘‘essential use exemptions’’ for metered-dose inhalers

under the Montreal Protocol

Stephen J. DeCanioa, Catherine S. Normanb,

aUCSB Washington Program, 1608 Rhode Island Avenue, NW, Washington, DC 20036, USAbDepartment of Geography and Environmental Engineering, The Johns Hopkins University, 3400 N. Charles Street, Baltimore, MD 21218, USA

Received 3 April 2006; received in revised form 23 June 2006; accepted 12 July 2006

Available online 18 September 2006

Abstract

The Montreal Protocol on Substances that Deplete the Ozone Layer has led to rapid reductions in the use of ozone-depleting

substances worldwide. However, the Protocol provides for ‘‘essential use exemptions’’ (EUEs) if there are no ‘‘technically and

economically feasible’’ alternatives. An application that might qualify as an ‘‘essential use’’ is CFC-powered medical metered-dose

inhalers (MDIs) for the treatment of asthma and chronic obstructive pulmonary disease (COPD), and the US and other nations have

applied for exemptions in this case. One concern is that exemptions are necessary to ensure access to medications for low-income

uninsureds. We examine the consequences of granting or withholding such exemptions, and conclude that government policies and

private-sector programs are available that make it economically feasible to phase out chlorofluorocarbons (CFCs) in this application,

thereby furthering the global public health objectives of the Montreal Protocol without compromising the treatment of patients who

currently receive medication by means of MDIs.

r 2006 Elsevier Ltd. All rights reserved.

Keywords: Montreal Protocol; CFCs; Metered-dose inhalers; Stratospheric ozone layer; Public health consequences of environmental regulation; Essential

use exemptions

1. Introduction

The Montreal Protocol on Substances that Deplete the

Ozone Layer (hereafter the ‘‘Protocol’’) has successfully

and dramatically reduced production and consumption of

the otherwise useful compounds, known collectively as

ozone-depleting substances or ODSs, that deplete the

protective stratospheric ozone layer. For the better-off

developed countries, phase out of these chemicals is now

complete, with some exceptions, chiefly: limited agricultur-al uses for methyl bromide (‘‘Critical Use Exemptions’’

including soil fumigation for certain crops, as well as

quarantine and preshipment applications), and a relatively

small number of ‘‘Essential Use Exemptions’’ (EUEs) for

metered-dose inhalers (MDIs) using chlorofluorocarbons

(CFCs) as the propelling agent.

The Protocol permits an EUE for an ODS only if ‘‘it is

necessary for the health, safety, or is critical for the

functioning of society (encompassing cultural and intellec-

tual aspects)y[and] there are no available technically and

economically feasible alternatives or substitutes that are

acceptable from the standpoint of environment and

health’’ (Technology and Economic Assessment Panel

(TEAP), 2001; the ‘‘Essential Use’’ criterion is from

Decision IV/25 of the Parties to the Protocol). The

language of the Protocol and its amendments does notexplicitly define or interpret ‘‘economic feasibility,’’ how-

ever. This vagueness of terminology has both advantages

and disadvantages. It provides the Parties with a certain

degree of flexibility in meeting the stringent regulatory

targets of the Protocol. On the other hand, the vagueness

can offer opportunities for Parties to attempt to evade their

responsibilities, by seeking to stretch out or avoid

completely the phaseout of ODSs in particular applica-

tions. This possibility is illustrated by the US 2007 EUE

nomination, which states that ‘‘CFC MDIs will still be

ARTICLE IN PRESS

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0301-4797/$ - see front matter r 2006 Elsevier Ltd. All rights reserved.

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Corresponding author. Tel.: +1 410516 5184; fax: +1 410516 8996.

E-mail addresses: [email protected] (S.J. DeCanio),

[email protected] (C.S. Norman).

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vitaly in the US for the foreseeable future’’ (US

Environmental Protection Agency (US EPA), 2005, p.

11). Our purpose is to consider what would constitute a

reasonable interpretation of the meaning of ‘‘economic

feasibility’’ in the context of the use of CFCs in MDIs used

for the treatment of asthma and chronic obstructive

pulmonary disease (COPD).In April 2005, the US Food and Drug Administration (US

FDA) issued a Final Rule on CFCs in medical MDIs (US

FDA, 2005) specifying that CFCs in salbutamol1 MDIs for

treatment of asthma and COPD will no longer be considered

an ‘‘essential use’’ after December 31, 2008. The US had

already submitted an EUE nomination for 2007 (US EPA,

2005). The FDA’s Final Rule indicates that after a possible

EUE nomination for 2008, the US will not make an EUE

nomination for this CFC application for 2009 and beyond.2

Focusing on the most recent EUE nomination submitted

by the US, we discuss the economic advantage of not

producing CFCs beyond the quantity necessary to conform

to the FDA’s phaseout schedule. After domestic MDI uses

are eliminated, the only remaining permitted production

will be for use in Article 5(1) countries,3 where full

phaseout is delayed until 2010. The size of remaining

stockpiles of the compounds has economic implications

that affect the transition phase, particularly through their

effect on the relative prices of CFC MDIs and alternatives,

generally hydrofluoroalkane (HFA) MDIs.4

At present, HFA MDIs are considerably more expensive5

in the US than CFC MDIs. This is not the case in other non-

Article 5(1) countries and is largely due to the particular way

in which intellectual property laws are applied to prescrip-

tion medications in the US; generic and thus much cheaperversions of CFC MDIs are available to the US market,

while HFA MDI manufacturers produce branded products

that continue to enjoy protected monopoly rights.

The HFA MDI producers have stated that they will be

able to increase production to satisfy the entire MDI

market in one year from the date of publication of the

Final Rule. This commitment, plus the existence of

stockpiles of medical-grade CFCs in the US, means that

under a stable regulatory regime patients requiring MDIs

should be able to receive their treatments during the period

of transition out of CFCs. We will show that this means

that under a reasonable interpretation of the meaning of

‘‘essential use,’’ the FDA’s phaseout date provides ample

time for the transition to alternative MDI propellants.

There is a risk, however, that existing stockpiles, plus the

CFCs requested under pending EUEs and possible future

EUEs, will have negative economic and environmental

consequences associated with excess CFC production, and

that reliance on an increasing supply of medical-grade

CFCs will risk gaps in provision of MDIs.

2. Defining ‘‘economic feasibility’’ and issues of

distributional equity

The technical and economic questions around MDI essential

use nominations involve two separate issues. Non-CFC aerosol

delivery systems for albuterol/salbutamol are available in the

medical markets of the Parties requesting exemptions as well as

those Parties that have completed the phaseout of CFCs in

MDIs. Thus, there is no dispute as to whether non-CFC

salbutamol inhalers are ‘‘technically feasible.’’ Their active

medical ingredients, ease of use, portability, and all other

characteristics are not meaningfully different from those of the

CFC MDIs. The HFA MDIs may even have superior

technical characteristics leading to more effective and reliable

delivery and use of some medical compounds and subsequently

lower systemic side effects (Stein and Stefely, 2003; Koninck et

al., 2004; Thongngarm et al., 2005).

Of the open questions to be considered when assessing the

EUE nominations, the first is whether or not social costs

and benefits are such that phaseout is ‘‘economically

feasible’’; the second is whether or not the phaseout is or

can reasonably be made to be consistent with public health

goals. Supporting materials for the US nomination seem to

focus on the latter but actually mix the two questionstogether, asking if it is economically feasible for a group of

particular public health concern to meet the financial

burdens associated with transition themselves. The concerns

of the US FDA and US Environmental Protection Agency

center on the possibility that low-income users of MDIs will

bear a disproportionate burden of the phaseout due to

reduced access caused by the higher cost of HFA MDIs.

While this concern is clearly a legitimate public health issue,

it has historically been separated from the concept of

‘‘economic feasibility’’ under the Protocol. The Montreal

Protocol is an international treaty, and as such it constitutes

an agreement among the governments of the Parties, notindividual citizens or particular groups. Within-country

strategies for implementation (including how costs are to be

shared among citizens) are left to each Party.

It is not appropriate for the Medical Aerosols Technical

Options Committee (ATOC) or the Technical and Eco-

nomic Assessment Panel (TEAP)6 to judge how a Party

ARTICLE IN PRESS

1In the US, this is usually referred to as ‘‘albuterol.’’ We use the

terminology that is most common worldwide.2Other drugs delivered by CFC-powered inhalers are not covered in the

FDA’s Final Rule. See the 2005 TEAP Progress Report for the status of

these medical delivery systems in the US.3These countries are defined by the Protocol. Roughly speaking, they

are the developing countries that were granted a ‘‘grace period’’ for the

phaseout of the banned substances to accommodate development needs.4Dry-power inhalers (DPIs) are also replacing CFC inhalers in some

uses with considerable success. Like HFA inhalers, consumer costs are

higher for DPIs, so our analysis applies in both cases.5Here and throughout, we use the term ‘‘expensive’’ to refer to the cost

to consumers rather than the cost of production.

6The TEAP was set up under the Protocol to assist Parties in planning

and implementing their phaseouts of ODSs. The TEAP encompasses

‘‘technical options committees’’ that are concerned with the various

industrial sectors that used ODSs—sectors such as aerosols, solvents,

refrigeration, foams, etc. See Canan and Reichman (2002) for an extensive

description of the structure and functioning of the TEAP and its

committees.

S.J. DeCanio, C.S. Norman / Journal of Environmental Management 85 (2007) 1–82


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should arrange its domestic health care system. The

question of the commitment by the Parties to the phaseout

of CFCs under the Montreal Protocol should be distinct

from issues raised by the characteristics of different

countries’ structuring of health care delivery. To conflate

commitment to the Protocol with issues primarily relating

to domestic health care financing and burden-sharingchoices obscures the nature of the issues, and may make

the phaseout appear more difficult than it actually is.

The ATOC and other bodies associated with the

Montreal Protocol are obliged to consider carefully the

implications for public health, as well as for the environ-

ment, of denying the exemptions, and these may have an

economic component. However, the concept of ‘‘economic

feasibility’’ in the context of the Protocol’s Decisions

regarding EUEs cannot mean no change in cost, product

characteristics, or product delivery to anyone. If it did, the

implication would be either that: (1) any kind of change in

cost or characteristics, no matter how minor, would be

grounds for granting an EUE, or (2) there would be no

need for the Protocol because unregulated market activity

would automatically result in a timely phaseout of ODSs.

Neither of these is sensible. Significant costs have been

borne at the national, consumer and producer levels for the

CFC phaseout in the US and other developed countries

(IPAC, 2005). The history of the Protocol gives many

examples in which ODSs have been phased out from once-

vital uses, even ones where lives were at stake. Halon fire

suppression systems have been replaced; CFCs have been

eliminated in refrigeration systems critical for the safe

storage of food and medicines; use of CFCs in electronics

manufacture of ‘‘mission critical’’ components has beenterminated.

The domestic problem of how the burden of any costs or

adjustments that must accompany the phaseout are to be

distributed across the population of a Party is not

addressed by the Protocol; it is left to the individual

Parties to work out their own arrangements. Thus, it is

incorrect to conclude that some cost incurred to comply

with the Protocol would constitute an undue burden (or

would not be ‘‘economically feasible’’) if that cost were

borne entirely by a small subgroup of a Party, especially if

government policies or other measures are available that

could more equitably distribute the cost across the entire

population. Failure to arrive at an equitable burden-

sharing plan is not a matter of ‘‘economic feasibility’’

under the Protocol, but rather indicates an institutional or

political failure or unwillingness on the part of the Party to

spread the costs faced by the vulnerable group.

For this reason, the access or lack of access of low-

income, uninsured asthma and COPD sufferers to non-

CFC MDIs would be an issue of the ‘‘economic feasibility’’

of CFC substitutes only if there were no policies available

to provide for such access and thus achieve public health

goals. As will be seen below, such policies exist for US

citizens and there is thus no ‘‘economic feasibility’’ barrier

to maintaining a timely phaseout schedule for CFC

salbuterol MDIs. Indeed, there have been policy innova-

tions associated with the phaseout that have improved

anticipated public health outcomes relative to the period

from 1981 to 1995, when there were no generic salbutamol

MDIs available in the US market.

The potential inability of poor, uninsured patients to

afford HFA MDIs that cost 2.3–2.4 times as much as CFCMDIs (US FDA, 2005, p. 17188) is not a consequence of

the Protocol per se, but rather is a result of domestic policy

choices about how medical care and prescription medica-

tions are developed and provided. However, the tradeoff

between granting exemptions vs. consistently rewarding

innovation and efforts to phase out ODSs quickly is very

much an issue facing the ATOC and the Parties. It is

especially relevant because of the importance of continued

progress on phaseout for future ODS abatement, both for

uses currently without substitutes and for continued

technological transfer between Article 5(1) and non-Article

5(1) countries.

Extending exemptions for CFC MDIs until patents on

HFA MDIs expire will make investments in MDI

innovation much less valuable to those who research and

develop them. To the extent that innovators cannot profit

from investments, regardless of where the money comes

from, they undertake less investment activity. Transition

from CFCs requires significant investment; if it is to be

provided by the private sector there must be a significant

profit incentive. In the US, this is the opportunity to earn

supernormal profits on branded medical preparations. To

the extent that investment in innovation has benefits

beyond the transition from CFCs to HFAs or DPIs for a

particular product, discouraging innovation by removingthe opportunity for innovators to profit from their

investments has additional current and future costs. This

is relevant not only if newer MDIs perform better than

previous ones; it also can be expected to determine the level

of support for investment in finding alternative ways to

deliver other compounds for which a technical fix has not

yet been found.

3. Economic factors in EUE requests

The US EPA has provided a thorough presentation of its

case for an EUE in its Nomination, and both the US FDA

and contributors to the FDA rulemaking process have

developed extensive data and documentation that can be

used to assess the ‘‘economic feasibility’’ argument for the

US. We rely on this information in our analysis,

particularly the data appearing in the series of the FDA’s

rulemaking documents that have been published in the

Federal Register.

3.1. The cost to society of the CFC-MDI phaseout is small

relative to the benefits

The FDA and various contributors to the FDA Docket

(e.g., National Economic Research Associates, 2004, 2005;

ARTICLE IN PRESS

S.J. DeCanio, C.S. Norman / Journal of Environmental Management 85 (2007) 1–8 3


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Asthma Therapy Coalition, 2004) have employed estimates

of the properties of the demand curve for MDIs to estimate

the cost to consumers of phasing out CFC MDIs in favor

of HFA MDIs. These estimates are based on estimates of

the difference in price of HFA MDIs and generic CFC

MDIs.7 However, this increase in cost to consumers is not a

‘‘social cost’’ in the economic sense but rather a transfer

from consumers to the sellers of HFA MDIs, as the FDA

noted in both its 2004 Proposed Rule (US FDA, 2004, p.

33610) and again in the Final Rule (US FDA, 2005, pp.

17183–17187). The US has built its pharmaceutical policy

around the principle that pharmaceutical innovation would

be rewarded by granting the innovators supernormal

profits for the period of time covered by the patents ontheir innovations. Of course, this is not the only way

pharmaceutical innovation could be promoted—the gov-

ernment could (and does) subsidize research directly, and

the strength of the incentive can be altered by varying the

terms and length of patent protection. Patent holders can

also realize some or all of their gains by licensing the new

technology to other companies.

The existence of such possibilities does not alter the fact

that from an economy-wide point of view, the monopoly

profits associated with a pharmaceutical patent do not

constitute a social cost; the standard measure of the

economic cost of this set of institutional arrangements is

the ‘‘deadweight loss’’ that comes from allowing higher-

than-marginal-cost pricing by the patent holder. The

various quantities are illustrated in Fig. 1.

If demand is relatively inelastic (and all contributors to

the MDI discussion agree that it is), the deadweight loss

will be smaller than the transfer. And indeed, using the

first-order approximation formula:

Deadweight loss or social cost ¼ ð1=2Þ DP DQ,

where DP is the difference in price between the generic

product and the new product and DQ is the change in

quantity after introduction of the new product (and

discontinuation of the generic induced by the CFC

phaseout), we see that the social cost of the phaseout is

on the order of $15.6 million per year. This is based on a

price difference of $26 per MDI dose and the estimate of the number of reduced doses of 1.2 million per year (which

does not take account of programs targeting the uninsured

consumers that have been announced by the HFA MDI

providers (US FDA, 2005, pp. 17187–17188)). The present

value of this social cost over the period from 2009 to 2017,

when the last patents expire,8 is about $118 million

(assuming a 2% discount rate). By way of comparison,

the EPA’s estimate of public health and other benefits from

stratospheric ozone layer protection over the period

1990–2165 is $4.3 trillion in present value (also discounted

at 2% per annum).9 Of course, the EPA benefits estimate

encompasses the entire ODS phaseout, not just the benefit

from the phaseout of CFCs in MDIs, but the FDA has

noted that

ythe environmental impact of individual uses of

nonessential CFCs must not be evaluated indepen-

dently, but rather must be evaluated in the context of the

overall use of CFCs. Cumulative impacts can result

from individually minor but collectively significant

actions taking place over a period of timey.Although

it may appear to some that CFC-MDI use is only a

small part of total ODS use and therefore should be

exempted, the elimination of CFC use in MDIs is only

one of many steps that are part of the overall phaseoutof ODS use. If each small step were provided an

exemption, the cumulative effect would be to prevent

environmental improvements (US FDA, 2002, p. 48380,

references omitted).

The social cost estimated as deadweight loss includes all

the monetized health costs that are internalized by the

MDI users themselves—the concept of consumers’ surplus

and the demand curve that underlies it incorporates all the

internal benefits to consumers.10 That it would be

‘‘economically feasible’’ to compensate consumers for

these costs is evident by comparing the $118 million

present value of the total deadweight loss with other recenthealth care compensation or entitlement programs. The

recently enacted Medicare prescription drug benefit has

been estimated to have a present value of between $700

billion and $1.2 trillion over 10 years (Connolly and Allen,

ARTICLE IN PRESS

Price

Supply or Marginal Costof generic CFC MDIs

∆P

∆Q

Demand for MDIs

Price selected by HFAMDI innovators

Deadweight loss

Quantity

Transfer fromconsumersto HFA MDIinnovators

Fig. 1. Social cost and transfer to innovator(s).

7Branded CFC MDIs cost approximately the same as HFA MDIs, and

have essentially disappeared from the market since the introduction of

generic CFC MDIs in 1995–96.

8Based on US FDA (2005, p. 17183). Note that effective patent

protection of the HFA MDIs might end before or after this date,

depending on whether the patents are upheld; one company notes that

they hold patents related to HFA MDIs that do not expire until 2021

(IPAC, 2005, p. A12).9Most of the benefits over this 175-year period will, of course, accrue

post-2005.10Note that this demand curve likely does not reflect consumers’ demand

for ozone layer protection.



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2005). The deadweight loss or social cost associated with

this level of government spending would be on the order of

$210 billion to $360 billion, using a conservative estimate

of $0.30 as the ‘‘marginal welfare cost’’ of a dollar of

government transfer spending.11 The social cost of the

CFC MDI phaseout is smaller than the retail value of the

free samples committed to by the HFA MDI providers (seebelow).

It should be noted that our deadweight loss estimate,

based as it is on the price projections used in the FDA’s

Final Rule, assumes that prices for both types of MDI are

fixed and constant. New entrants into the HFA MDI

market are expected to lower costs due to competitive

pressures, and increased production may lead to cost

savings associated with economies of scale. At the same

time, sourcing CFCs may become increasingly risky and

costly. The single current supplier is closing its factory and

a new one must be opened or reopened, or permission

sought to establish a new relationship with a foreign

supplier, and any new production facility may not be able

to operate continuously given the relatively small amounts

of CFCs involved as the phaseout progresses. The cost of

CFCs for MDIs may rise with the associated costs of this

change.

3.2. Management of the transfer to HFA MDI innovators;

mitigation of public health concerns by HFA innovators

Given the structure of the current US prescription drug

market and accepting that it may be costly and time-

consuming (or undesired) to change it so that access for

poor and middle income uninsureds is guaranteed,

legitimate public health concerns about access have been

raised by both the US EPA and US FDA and by interested

parties responding to proposed decisions that will affect

CFC MDI availability.

As discussed above, the US has chosen to incentivize

pharmaceutical innovation by offering patent protection to

developers of new technology. The excess gain to

innovators over and above the marginal cost of the

substitute product (the generic CFC MDIs) is shown by

the shaded rectangular area in Fig. 1. This transfer would

be paid through three routes: (1) uninsured consumers

would make higher retail expenditures on MDIs; (2) someinsured consumers would face higher co-pays (although

according to the US FDA (2005, p. 17181) ‘‘[w]hile

copayments are generally higher for branded drugs, they

are not necessarily higher for branded drugs that lack a

generic alternative’’), and their insurance companies would

be responsible for some of the higher price of the HFA

MDIs; and (3) government purchases of MDIs would be

more expensive. The distributional burden of the expendi-

tures via these three routes will depend on how the CFC

MDI phaseout is accomplished in practice.

Salbutamol HFA MDI providers in the US havecommitted to providing 6 million units as free samples

annually12 as well as 500,000 units to health clinics, 3

million available at reduced prices using discount vouchers

and unspecified additional numbers at reduced rates

through private access programs aimed at subsidizing

branded prescriptions for low and middle income patients

(US Stakeholders Group on MDI Transition, 2005). These

policies give back some portion of the transfer from

consumers to pharmaceutical companies associated with

transition from CFCs to HFAs.

Considering only the free samples pledged between the

time of the CFC phaseout and the expiration of the patents

in 2017, the dollar value of this commitment (assuming an

average unit price of $39.47 (US FDA, 2005, Table 3, p.

17185)) is $237 million per year after the phaseout, and has

a present value of $1.8 billion (at a 2% discount rate) over

the estimated period before availability of generic HFA

MDIs.

These free or reduced-price doses represent a significant

portion of the US market demand for salbutamol inhalers

(which totals about 50 million annually) and they

constitute an amount substantially greater than estimates

for annual declines in MDA purchases associated with

price increases likely to be caused by the CFC phaseout.

The FDA final rule estimate for DQ is 1.2 million per year,without consideration of the programs detailed above and

assuming a constant 130% price gap between CFC and

HFA MDIs (US FDA, 2005, p. 17188). Note that the

estimates were developed without price data from after the

availability of the third US salbutamol HFA MDI.

The quantities of free and discounted salbutamol HFA

MDIs currently pledged by manufacturers are even larger

in relation to the population of public health concern.

Between 470,000 and 700,000 US salbutamol users are low

or moderate income patients without health insurance (US

FDA, 2004, p. 33617). Given the FDA’s point estimate of

the number of these users (620,000), and the estimated

fraction of these using generic salbutamol CFC MDIs

(80%) and their average annual use (3.8 prescriptions), this

population uses about 1.9 million salbutamol inhalers

annually, and would face significant average cost increases

without access to CFC MDIs. As companies marketing

HFA inhalers have already committed to providing more

than three times this number of free or discounted doses

per year, it is difficult to consider it economically infeasible

to establish policies that will ensure that a significant

number of these uninsured patients are provided with HFA

MDIs under free and discounted drug programs. For

ARTICLE IN PRESS

11Two recent estimates of the deadweight loss associated with

government spending are Feldstein (1999) and Parry (2002). Needless to

say, this parameter is difficult to estimate and different values can be

found in the literature. Also, the economic effects of financing new

government programs by taxation or by issuance of debt may not be the

same. A discussion of these issues would take us far afield and would not

alter our basic point that the US has demonstrated a willingness to

undertake public spending commitments for public health that are much

larger than the economic costs associated with the CFC MDI phaseout. 12Contingent upon salbutamol CFC MDIs being deemed non-essential.



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example, in March 2005 pharmaceutical companies

founded the Partnership for Prescription Assistance, which

facilitates patient access to a wide range of pharmaceutical

company, private and public low-cost access programs via

a single application process (US Stakeholders Group on

MDI Transition, 2005). Thus, innovations in access

provision as well as in medical technologies have receivedan impetus from the Montreal Protocol’s phaseout

schedule.

The FDA Final Rule considers two million of the free

samples available as well as a coupon program in

estimating reduced salbutamol MDI consumption asso-

ciated with phaseout, and estimates that they will mitigate

only a small fraction of the estimated reduction in

consumption of 1.2 million: 96,000 through free samples

(after accounting for the significant fraction of samples that

may never reach patients and for those that go to already

insured patients) and 2,000–15,000 using coupons. The

FDA notes that if two million free samples all go to

patients and the uninsured obtain them in proportion to

their share in the population, only about 300,000 unin-

sureds would receive HFA MDIs. If all six million pledged

samples are considered, both the conservative and opti-

mistic estimates above are tripled.

While there is evidence that not all samples go to patients

(Peterson et al., 2004; Morelli and Koenigsberg, 1992, cited

by the FDA, as well as Zweifler et al., 2002), there is also

evidence that to the extent that uninsured patients see

physicians who have access to samples, they are more likely

to receive free medicines via this route than insured patients.

Zweifler et al. (2002, p. 361) found that ‘‘lack of insurance

was the principle predictor of use of sample medications’’ in asurvey of clinic behavior, and Chew et al. (2000, p. 478), in a

survey of prescribers’ views, found that ‘‘avoiding cost to the

patient was the most consistent motivator for dispensing a

drug sample.’’ Morelli and Koenigsberg also found that more

expensive drugs were more likely to be dispensed as samples

when the rationale for providing a sample was to avoid

economic hardship. There are also feasible policy measures

available to increase the proportion of samples that go to

patients. The US Congress has previously considered

requiring that only free sample coupons be available at

physicians’ offices, so that patients could have their prescrip-

tions filled at no cost at a pharmacy and doctors would not

control the samples directly, reducing leakages in the supply

of samples (Morelli and Koenigsberg, 1992).

Although samples are generally directed to doctors with

the goal of increasing branded prescriptions and sales,

concerns about the access of uninsured patients to

salbutamol MDIs could also be moderated by a policy of

providing a larger fraction of samples than is usual to

emergency facilities, schools, and clinics, where the

uninsured are more likely to be treated. As the samples

would be free, such a program might actually expand

overall access of the uninsured to asthma rescue medica-

tions, because generic CFC MDI providers do not give out

significant numbers of product samples.

3.3. Risks to patients of delaying the phaseout; other costs

Countering the potential decreased salbutamol MDI con-

sumption associated with the higher cost of HFA MDIs if

CFC MDIs are deemed ‘‘non-essential,’’ there are a number of

costs to be considered if CFC MDIs are continued to be

characterized as ‘‘essential.’’ Ongoing reliable supply of pharma-grade CFCs through a delayed phaseout is not

certain. It is tied to the success of other EUE exemption

requests (1/3 of the European Community nomination is for

export to the US) as well as commencement of production of

medical-grade CFCs at a US plant in Baton Rouge (because

the Dutch plant at Weert is slated for closure). There is no

consensus regarding whether or not this new production can

be undertaken in time to replace what has until now been

provided by the Weert plant. Honeywell, the owner of the

Baton Rouge plant, has assured the FDA that it can ramp up

production of medical-grade CFC in time to meet demand.13

On the other hand, the US Stakeholders Group on MDI

Transition14 points out that significant questions have been

raised regarding the production of medical-grade CFCs at this

plant.15 Section 614(b) of the Clean Air Act ‘‘provides that in

ARTICLE IN PRESS

13‘‘Honeywell assures the FDA that it has the ongoing capacity to

supply the chlorofluorocarbon propellants (‘‘CFCs’’) necessary for

ongoing use of MDIs, including salbutamol MDIs, until well into the

next decadey.Honeywell plans to start production of CFC-11 and CFC-

12 at Baton Rouge this year. Honeywell expects to have CFC-11 and

CFC-12 available for our customers who wish to start sourcing from

Baton Rouge this year’’ (Honeywell, 2004, pp. 1–2, emphasis in the

original). Note that this statement was sent to the FDA docket on April20, 2004.14This group consists of nine organizations of physicians, respiratory

therapists, healthcare professionals, and patients, and represents more

than 25 million Americans who suffer from asthma and other respiratory

diseases (US Stakeholders Group on MDI Transition, 2004).15In particular, the Stakeholders submission to the FDA notes that

ythere is doubt even about whether pharma-grade CFC-11 has ever

been produced at the site. For some time, we have understood also that

there are industry-wide concerns about stability issues in MDIs

manufactured via the ‘liquid-phase’ process, used in Baton Rouge but

all but abandoned elsewhere. This is of particular concern to us if

patients are to rely on Baton Rouge as the sole source of pharma-grade

CFCs after December 31, 2005. Additionally, we understand that

production of pharma-grade CFCs in Baton Rouge would be

‘periodic’ (also known as ‘swing’ production), which calls for extensivecleaning of the equipment to make sure that all traces of previous

production—feedstock, products and by-products—are completely

removed. Our understanding is that only one of the traditional sources

of medical grade CFCs has been a swing plant, so we would expect that

as part of the certification process, FDA would seek proof of adequate

cleaning/switch-over procedures. Finally, we refer to the several

serious safety violations that have occurred at this site in the past

eighteen months, including a worker fatality which led to temporary

closure of the plant. Again, the STAKEHOLDERS [caps in original]

have neither full information nor the expertise to assign a level of

confidence to Honeywell’s stated intent. But taken together, we believe

the evidence warrants carefully [sic] scrutiny by FDA of the Baton

Rouge facility and the likelihood that CFCs will be available from

there after December 2005’’ (US Stakeholders Group, 2004, p. 7,

footnote 4).



7/8

the case of a conflict between any provision of the Clean Air

act and any provision of the Montreal Protocol, the more

stringent provision will govern’’ (US FDA, 2005, p. 17170).

Environmental advocacy or business interest groups could

bring a lawsuit under the Clean Air Act against Honeywell as

it attempts to restart CFC production in the Baton Rouge

facility, with an outcome that cannot be known in advance.16

If supply fails or is halted along a slow or indefinite

phaseout path, transition may be uncontrolled rather than

controlled. HFA MDI producers may not increase their

production as rapidly as they would have if the CFC

phaseout date had been earlier than the end of 2008 or if

steady declines in use were mandated along a path to

complete phaseout. A combination of drawing down of

CFC stocks17 and interruption of production of new CFCs

could even make salbutamol MDIs unavailable to patients

for some period of time.18

Compounding the risk of a cutoff in the availability of

CFCs, the HFA providers estimate that they may need as

much as a year to be able to meet market demand in the

absence of CFC MDIs. Continuation of the uncertainty

about the phaseout date for CFCs has a ‘‘domino effect’’ in

creating uncertainty about when full HFA production

capacity will be online.

Current stocks of CFCs are in excess of the quantities

necessary under a straight-line phaseout on the FDA

schedule. With the granting of 1242 metric tonnes (Tm) of

CFC production as an EUE for 2006, and given the

stockpile of post-1996 supplies reported in the US

accounting framework, TEAP estimates the US will have

2045 Tm at the end of 2005 if consumption does not decline

from 2004 levels. Additionally, the US reports 400 Tm of pre-1996 stockpiles and a pharmaceutical company re-

ported an additional 605 Tm of pharmaceutical-grade pre-

1996 CFCs directly to the ATOC. Linear reductions in

consumption over the 2006–2008 period to zero in 2009

would require a total of 1863 tonnes. Even without

consideration of pre-1996 stocks, in every year there would

be sufficient excess stocks to allow for 6 months produc-

tion, including 2008. Stocks remaining in the US after the

end of 2008, either in MDIs or in raw form, must be

destroyed or transferred to Article 5(1) countries, or

transferred to non-Article 5(1) countries which have been

granted an EUE (Technology and Economic Assessment

Panel (TEAP), 2005). Phaseout prior to the end of 2008

appears possible and reduces the risk associated with

reliance on the continued availability and affordability of

CFCs, provided the stocks of pharmaceutical CFCs are

managed responsibly.

There are risks to environment and public health of

continued US use of CFCs. Health risks from ozone

depletion, in particular, may be expected to have a

disproportionate impact on the poor and uninsured inthe same way that unmitigated higher MDI costs would

under the current configuration of the US healthcare

delivery system. This disproportionate impact occurs

because poor people are more likely to work in occupations

exposed to the sun and are less likely to use chemical

protection against ultraviolet light. Furthermore, poor

people are likely to have less frequent physical examina-

tions where skin cancer could be detected early and are

therefore likely to suffer more serious consequences than

wealthier people with better access to medical care.

Additionally, there are risks to environment and health of

other Parties’ ongoing use of CFCs that may be required (in

the European Community application, to meet US demand)

or encouraged (in other applications that may be submitted

using arguments that have been successful for the US) by an

exemption granted to the US. Other countries, especially

Article 5(1) countries, depend on knowledge and technolo-

gical transfer gained from phaseout in non-Article 5(1)

countries; continued delay in US phaseout of salbutamol

CFC MDIs may discourage those countries from pursuing

their own CFC MDI phaseout programs aggressively. As in

the case of the methyl bromide phaseout, continued

exemptions in non-Article 5(1) countries slow the rate of

technical innovation that is transferred to Article 5(1)

countries, potentially raising costs to the MultilateralFund,19 as well as encouraging Article 5(1) countries to

seek their own exemptions subsequently.

4. Conclusion

Public health would not be served by continued delays in

the phaseout of salbutamol CFC MDIs in the US and

other non-Article 5(1) countries. The burdens associated

with phaseout of these products are neither unprecedented

nor economically infeasible. The producers of HFA MDI

alternatives have committed themselves to programs thatwill mitigate the impact of more expensive MDIs on the

poor and uninsured. In addition, government policies are

available to spread the cost of compliance with the

Protocol’s phaseout requirements equitably, reducing the

burden on that segment of the population most vulnerable

to higher prescription drug prices.

ARTICLE IN PRESS

16See the Natural Resources Defense Council’s filings in the FDA

docket (Natural Resources Defense Council (NRDC), 2004a–c) for some

of the arguments that are likely to arise if such a case were to be filed.17As CFC production is eliminated, existing stocks may be diverted

away from salbutamol MDIs to other uses for which there is no developed

technical substitute.18Temporary and local shortages of CFC MDIs have been reported in

the US as CFC MDI producers reduced their output: ‘‘The prime reason

for the shortage during the transition is that Ivaxyhas cut back

production. The company says it will no longer sell the product after

July 1, because the European Union will not allow it to obtain more CFC

for its factory in Ireland’’ (Pollack, 2006).

19The Multilateral Fund is an international fund set up under the

Montreal Protocol to assist developing countries in meeting the ‘‘agreed

incremental costs’’ associated with their phaseout of ODSs. To date it has

dispensed US$1.74 billion for this purpose (www.multilateralfund.org).

See DeCanio and Norman (2005) for a more extensive discussion of the

methyl bromide case, including trends in transition costs over time and

with experience as well as analysis of exemption requests.


http://www.multilateralfund.org/http://www.multilateralfund.org/


8/8

It is entirely proper to consider equity issues in

implementing national policies to achieve the global goal

of stratospheric ozone protection, but the Montreal

Protocol is not required to perform the double duty of

safeguarding the ozone layer and ensuring access to

adequate medical care for all. In addition to their

obligations under the Protocol, national governments havea responsibility to implement public health policies that

create incentives for healthy lifestyles, reward medical and

pharmaceutical innovation, and structure a health care

delivery system that meets the needs of their citizens. An

economic feasibility argument is insufficient to justify

continued delays in CFC MDI phaseout in the US. On

the contrary, rich nations such as the US have an

obligation to lead the way in the global environmental

protection efforts that are an integral component of

maintaining public health.

Acknowledgement

We conducted this work without any external grant or

other financial support. Both DeCanio and Norman have

been involved in the past with the Technical and Economic

Assessment Panel (TEAP) that operates under the Mon-

treal Protocol on Substances that Deplete the Ozone Layer.

DeCanio previously received grant support for work

related to stratospheric ozone layer protection from the

US Environmental Protection Agency, the National

Science Foundation, and the United Nations Environment

Programme, and Norman also worked on the UNEP

grant. We acknowledge the helpful suggestions of three

referees.

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