Delegates from governments and civil society organisations, attending a global forum on fair pricing and access to medicines, have called for greater transparency around the cost of research and development as well as production of medicines, to allow buyers to negotiate more affordable prices. The forum held recently in Johannesburg and co-hosted by the World Health Organisation (WHO) and the government of South Africa, aimed to provide a global platform for frank discussion among all stakeholders – including governments, civil society organizations and the pharmaceutical industry – in order to identify strategies to reduce medicine prices and expand access for all.
The affordability of medicines has long been a concern for developing countries, but today it is also a global one. Each year, 100m people fall into poverty because they have to pay for medicines out-of-pocket. High-income countries’ health authorities are increasingly having to ration medicines for cancer, hepatitis C and rare diseases. The problem extends to older medicines whose patents have expired, such as insulin for diabetes.
“Medical innovation has little social value if most people cannot access its benefits,” said Dr Mariângela Simão, WHO assistant director general for medicines and health products. “This is a global human rights issue – everyone has a right to access quality healthcare.”
A report by researchers at the University of Liverpool, Harvard TH Chan School of Public Health and Imperial College London, and commissioned by WHO in 2017 showed that the cost of production of most medicines on WHO’s Essential Medicines List was a small fraction of the final price paid by governments, patients or insurance schemes. Some delegates at the forum noted that a lack of transparency around prices paid by governments means that many low- and middle-income countries pay higher prices for certain medicines than wealthier countries do.
There was consensus that countries can take an initial step towards fostering greater transparency by sharing price information. Countries from the so-called Beneluxa network have already joined forces to share such information, and the results have been promising. The data highlights discrepancies in what different countries are paying and can serve as a powerful tool to negotiate reduced prices. WHO’s database on vaccine markets and shortages – MI4A – was also highlighted at the forum as a useful tool to achieve competitive vaccine prices.
The event highlighted other successful examples of countries’ collaboration around achieving more affordable medicine prices; these include pooled procurement and voluntary sharing of policies. If several countries in the same region purchase medicines as a block, they can negotiate reduced prices due to the larger volume of medicines purchased. And European countries led by Austria have been sharing different policies to expand access to medicines through the WHO-supported PPRI (Pharmaceutical Pricing and Reimbursement Policies).
Industry bodies at the forum expressed support for the goal of access to medicines for all, and expressed their commitment to the Sustainable Development Agenda, which calls for partnership with the private sector to address global challenges such as access to medicines.
WHO will launch a public online consultation in the coming weeks to collect views and suggestions for a definition of what actually constitutes a ‘fair price’ from relevant stakeholders.
Introduction: There are persistent gaps in access to affordable medicines. The WHO Model List of Essential Medicines (EML) includes medicines considered necessary for functional health systems.
Methods: A generic price estimation formula was developed by reviewing published analyses of cost of production for medicines and assuming manufacture in India, which included costs of formulation, packaging, taxation and a 10% profit margin. Data on per-kilogram prices of active pharmaceutical ingredient exported from India were retrieved from an online database. Estimated prices were compared with the lowest globally available prices for HIV/AIDS, tuberculosis (TB) and malaria medicines, and current prices in the UK, South Africa and India.
Results: The estimation formula had good predictive accuracy for HIV/AIDS, TB and malaria medicines. Estimated generic prices ranged from US$0.01 to US$1.45 per unit, with most in the lower end of this range. Lowest available prices were greater than estimated generic prices for 214/277 (77%) comparable items in the UK, 142/212 (67%) in South Africa and 118/298 (40%) in India. Lowest available prices were more than three times above estimated generic price for 47% of cases compared in the UK and 22% in South Africa.
Conclusion: A wide range of medicines in the EML can be profitably manufactured at very low cost. Most EML medicines are sold in the UK and South Africa at prices significantly higher than those estimated from production costs. Generic price estimation and international price comparisons could empower government price negotiations and support cost-effectiveness calculations.
Andrew M Hill, Melissa J Barber, Dzintars Gotham
There are global efforts to rein in excessive profiteering but removing the secrecy around prices is complicated, says a Health-e News report. US citizens pay about six times what Europeans do for insulin, the cost of which has almost tripled over a decade in that country, according to the American Diabetes Association. Meanwhile, Humira, the most popular arthritis medicine in the US, costs patients in the region of $50,000 (R700,000) a year and pharmaceutical company AbbVie, has lodged an astounding 136 patents to keep competitors away.
“A patient could fly first class to Paris, stay at the Ritz, dine at a top Michelin restaurant, buy a one-year supply of Humira at local prices in France, fly back home and finish with enough profit to hire a registered nurse to administer the injection every two weeks,” the report quotes rheumatologist Dr Lonnie Hanauer as saying.
Meanwhile, Doctors without Borders (MSF) reports that Tunisia and Morocco pay more for the pneumonia vaccine than France does.
The report says how pharmaceutical companies set the prices of their medicines is surrounded in secrecy, but their general approach seems to be to make them as high as the various markets allow. Over the past few years, both the UN and the WHO have launched global initiatives to reduce medicine prices.
But, the report says, stopping pharmaceutical companies from profiteering from sick people is complicated. Lack of transparency about how prices area arrived at – including how much the cost of research and development of new medicines and production costs – is a key obstacle. How do you dismantle something that is constructed out of secrets?
The report says as with the first Fair Price Forum that met two years ago in Amsterdam, the Johannesburg participants – from governments, civil society and the pharmaceutical industry – grappled with this lack of transparency, as well as the price negotiations countries engage in with pharmaceutical companies, which are often smothered by confidentiality clauses.
The Forum also discussed other examples of how countries could collaborate to lower medicine prices, including “pooled procurement”. “If several countries in the same region purchase medicines as a block, they can negotiate reduced prices due to the larger volume of medicines purchased,” according to the WHO.
The report says although the drug companies like to evoke the World Trade Organisation (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to protect their products, TRIPS does allow countries flexibility to waive patent rights in the face of serious public health challenges.
Eighteen years ago, members of the World Trade Organisation adopted the Doha Declaration, which clarified that the TRIPS agreement allows member states to “take measures to protect public health”, including the right to issue compulsory licenses to third parties to make medicines without the consent of the patent holders where warranted – such as during health emergencies.
But, the report says, few governments have had the courage to go this route, often because of threats from the pharmaceutical industry, according to a High-Level Panel set up by the UN secretary seneral in 2016 to address “incoherence between human rights, intellectual property rights and public health objectives”.
“WTO Members must make full use of TRIPS flexibilities as reaffirmed by the Doha Declaration on TRIPS and public health. This is essential to promote access to health technologies,” said Michael Kirby, a member of the High-Level Panel and chair of the Expert Advisory Group at the launch of the panel’s report in 2016.
“In particular, governments and the private sector must refrain from explicit or implicit threats, tactics or strategies that undermine the right of WTO Members to use TRIPS flexibilities. WTO Members must register complaints against undue political and economic pressure.”
The report says opening the recent Fair Price Forum, South African Health Minister Aaron Motsoaledi nudged delegates to make decisions based on health needs rather than profit. “Those of us that are WTO members committed ourselves to the Doha Declaration on TRIPS and public health. However, sadly this commitment has been forgotten and decisions are based purely on commercial benefit,” said Motsoaledi.
The Health Minister also raised the lack of transparency in the pricing of medicine: “We hear from the pharmaceutical industry that the argument for the excessive price relates to the cost of research and development for new products. What we do not have is transparency from the industry around the cost of their research and development and how they calculated the price that we are expected to pay.
“It is only fair that the suppliers of the product share such information with the purchasers of the medicine. There needs to be a trust relationship since we need each other in order to improve global health,” said Motsoaledi.
The report says the excuse of the high cost of research and development – R&D in pharma lingo – of new medicines was exposed last year in a WHO report on cancer medicine pricing. The report found that, by 2017, the 99 cancer drugs approved by the US Food and Drug Administration had each made an average “return” of $14.50 for every $1 of R&D money spent. In the report, the WHO also condemned the huge cost of cancer medicine, revealing that many treatments were only available in countries if patients paid the entire cost themselves.
“In the absence of insurance coverage, cancer treatment is unaffordable for many patients. A course of standard treatment for early stage HER2 positive breast cancer (doxorubicin, cyclophosphamide, docetaxel, trastuzumab) would cost about 10 years of average annual wages in India and South Africa,” according to the WHO report.
Doctors without Borders (MSF) says in the report that “price transparency is both possible and desirable”, and that it has been done for antiretroviral (ARV) drug pricing. “Price transparency for ARVs has enabled competition and fair price negotiations, and the price of HIV treatment has dropped dramatically – from around $10,000 per person per year in 2001 to around $100 today – enabling treatment scale-up to over 22m people living with HIV/Aids and saving millions of lives,” said MSF. “One thing is very clear: when countries know what others are paying for medicines, they have the leverage they need to demand fairer deals and increase access to treatment.”
The report says South Africa has had particular success in negotiating some of the cheapest antiretrovial (ARV) prices in the world. Key to this success was the development of a price reference list which listed what government thought were fair prices for ARVs.
Anban Pillay, deputy director general of health, explained this approach in an earlier interview: “We, as the Department of Health, working with Treasury and others, decided to evaluate the cost of production of ARVs and work out what was reasonable. We developed a reference price list that included a reasonable margin of profit, which we published as part of the 2009 ARV tender.”
Pillay also travelled to India and met with generic medicine manufacturers to encourage them to tender to supply the ARVs and, since 2010, those supplying the country’s ARVs have been a mix of local and international companies, as well as generic and patented medicine.
The report says one of the solutions to the runaway prices suggested by the UN High-Level Panel was for the WHO to set up and maintain an accessible international database of the prices of patented and generic medicines and biosimilars in the private and public sectors of all countries where they are registered. But Daniela Bagozzi, senior communication manager in the WHO’s access to medicines department, warns that “prices in data bases are not the real prices paid – negotiated prices between governments and companies for different medicines are confidential”.
“We have done what we think is much more useful for countries – namely, we have promoted sharing of price information between countries through networks and promoted publication of estimated cost of production,” said Bagozzi.
The report says much information sharing happened at the Fair Price Forum, but much more progress still needs to be made if patients’ rights are to be prioritised over profits.
The WHO has undertaken to “launch a public online consultation in the coming weeks to collect views and suggestions for a definition of what actually constitutes a ‘fair price’ from relevant stakeholders”.
“Fair pricing depends on fair negotiations, and there cannot be fair negotiations without transparency,” said the MSF ahead of the forum. “MSF is joining patient advocates and healthcare professionals worldwide in calling on governments to make bold commitments to fair medicines pricing and mandate complete disclosure of the real prices at which medicines are sold. It is time for leaders to prioritise people’s health over pharmaceutical industry profiteering.”
Health activists had earlier called for greater transparency from the pharmaceutical industry, reports Business Day.
The report says a coalition of 64 civil society organisations issued a joint statement calling for greater transparency on medicine prices, and the research and development costs incurred by pharmaceutical companies. The coalition includes the Fix the Patent Laws campaign, which consists of 42 South African civil society organisations including Section27, the Treatment Action Campaign, the Cancer Alliance, Médecins sans Frontières (Doctors without Borders), with Knowledge Ecology International and Public Eye.
“The system lets them (pharmaceutical companies) hide what countries pay, and it allows them to charge what they want,” said MSF advocacy officer Candice Sehoma. “We need transparency to empower and inform (the) governments when they negotiate prices,” she said.
The report quotes Sehoma as saying the high price of medicines is a global issue, and South Africa is no exception. While South Africa had made strides in driving down the price of the HIV drugs, patients were still confronted with unaffordable prices for medicines for other diseases, such as cancer, she said.
Sehoma cited the multiple myeloma drug lenalidomide as an example of a “prohibitively expensive” cancer drug. It is currently only available in South Africa as Celgene’s patent-protected product Revlimid, as no generic rivals have been approved by the SA Health Products Regulatory Authority. “It is priced at R69,000 a month and may be required for the rest of your life. A generic version is available in India for about R3,900 (a month),” said Sehoma. A small number of patients were currently accessing the generic version, by importing it under special provisions in the Medicines Act. Section 21 of the Act allows the importation of an unregistered medicine that is approved by another medicines regulator, but it has to be done on a patient-by-patient basis.
The activists said many medicine prices remained high in South Africa because the government’s “industry-friendly” patent laws impeded generic competition. South Africa had also failed to regulate the launch price of medicines, they said.
The report says they called for full disclosure of the research and development costs throughout the drug discovery process, and a revision of the WHO’s definition of a fair price to include a consideration of the role public funding may have played in developing a drug. “This must be considered in defining fair prices to ensure the public does not pay twice and receives a public return on public investments,” they said.
The Fair Pricing Forum was aimed at discussing options for fairer pricing systems and research-based and generic pharmaceutical industries. The forum comprises health departments from various government countries around the world, policymakers and pharmaceutical industries.
Cancer Alliance’s Salome Meyer is quoted in a Daily Maverick report as saying: “We as civil society are saying prices of medicines, and very particularly cancer medicines, are unaffordable. The ordinary person in the street, we’re talking … low-income countries globally, and not just South Africa, cannot afford these medicines.”
“The World Health Organisation, our governments, need to put pressure on pharmaceutical companies to stop making a profit out of our lives. People are dying and the majority of the people who are dying are poor people who cannot afford effective but expensive medicines for cancer, HIV and for tuberculosis,” said Anele Yawa, general secretary of the Treatment Action Campaign.
“R828,00 per year is not a fair price” read one of the placards displayed during the picket. Lenalidomide is a medicine that is used for the treatment of multiple myeloma, a type of cancer. According to the Cancer Alliance, “a year’s supply of lenalidomide is priced at R882,000 in South Africa and less than R32,000 in India. Many cancer patients in South Africa do not have access to affordable cancer medicines – many of which are available in other countries at a fraction of the price paid here.
The report says civil society organisations were also concerned by the lack of transparency from the pharmaceutical industry. “The research and development category that pharmaceuticals hide behind needs to be transparent. Transparency is one of the principles of good governance, of principles in which you negotiate the price. Lots of meetings and deals happen behind closed doors. Prices cannot be negotiated on our behalf,” Meyer said.
The report says another report published by the WHO indicates that current policy on cancer medicines does not adequately meet health and economic-related objectives.
“Prices of medicines are high in both absolute and relative terms compared to other therapeutic areas. Some stakeholders have influenced medicine prices higher than the true clinical value of cancer medicines, essentially lending higher negotiation power to the pharmaceutical industry,” according to the report.
Given Selepe, one of the demonstrators, said: “We are here on behalf of people who are in lack of medications for illnesses such as cancer, HIV and TB. The possibilities of those people getting medicines, especially cancer, is low due to poverty and lack of knowledge of their rights. We are here to fight for their rights.”
According to the report, international civil society organisations say that richer countries in Europe are also battling with the same obstacle of exorbitant cancer prices. “Since last year, we have started a campaign in Switzerland to show that the problem is not only in poorer countries but also in richer countries. Cancer medicine prices are taking such an exorbitant proportion, even in Switzerland, that the universal health coverage in one of the richest countries in the world is in danger,” said Patrick Durish, a health policy advocate for Public Eye, a Swiss non-governmental advocacy organisation.
One of the objectives of the forum is to discuss what a “fair price” is and how it should be defined globally. “The WHO and everybody involved in the forum needs to discuss what is a fair price. But what is fair for you is not necessarily fair for me and what was fair yesterday is not fair today. And those are the types of issues that need to be discussed,” Meyer said.
But the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) says health activists’ call for greater transparency on medicine prices could backfire, and drive up drug costs in low and middle-income countries. “Price transparency potentially risks price convergence, which would mean some countries would pay rather more (than they do at present)”, IFPMA director-general Thomas Cueni is quoted in a Business Day report as saying. His remarks illustrate the gulf between the pharmaceutical manufacturing industry and activists intent on ending the secrecy surrounding drug prices in many countries.
Activists are also campaigning for greater disclosure on the true costs of research and development (R&D) involved in discovering new medicines. The report says many drug companies argue that the high price of innovative new products is largely due to the costs they incur in the high-risk business of drug discovery, but activists counter that these figures are frequently inflated by hidden marketing costs.
Cueni said the industry clearly needs to reflect on these calls for transparency, but the costs of R&D are difficult to tease out on a product-by-product basis. “Industry always has a portfolio approach: 97% of Alzheimer’s drugs failed – how do you account for that?” Determining the true R&D cost of drug discovery was further complicated by the fact that the process could span decades, he said.
Cueni added in the report that he was struck by activists’ “single-minded focus on price” and the meeting’s hostile tone towards the pharmaceutical industry. “The approach in Johannesburg was ‘how can we gang up on the private sector’. It was seen as an easy scapegoat. I regret it. If we want to make progress we need to join forces. We need to maintain a balance, which on the one hand makes medicines more affordable for people in resource-poor settings, and [on the other] maintains the incentives for research,” he said.
The report quoted Cueni as saying that the pharmaceutical industry is sensitive to the debate about pricing and acknowledged that it needs to do more to find ways to make its medicines more affordable in many more countries. But he also drew attention to the industry’s concerns about other barriers to access to medicines, such as weak supply chains, corruption, counterfeit medicines, and the mark-ups levied between factory gate and pharmacy shelf.
Said Cueni: “Even medicines that are incredibly cheap don’t reach the majority of patients in Africa.”
Health Minister Aaron Motsoaledi has, meanwhile, called for comment on possible changes to the way his advisory committee on medicines determines price increases for the private sector, reports Business Day.
The pharmaceutical industry has long complained about what it says is an unpredictable outcome when the minister announces the annual price hike for private sector medicine sales, and the effect that this has on planning. Private sector medicine prices are tightly controlled by the Health Department, and companies are usually only allowed one price increase a year, known as the single exit price (SEP) adjustment.
The report says the SEP is the regulated price at which drug makers must sell their medicines to all their customers, regardless of the volumes purchased. Medical schemes also have a keen interest in the SEP adjustment, as medicines constitute a large portion of their spending.
In a notice published in March in the Government Gazette, the pricing committee said it had noted stakeholder feedback and was considering a review of the methodology used to calculate the SEP adjustment. The report says it proposed that the new methodology be applied for three years and called for comment on five possible options for the formula used to calculate the SEP adjustment.
Four of the formulas include a consumer price inflation (CPI) component and various weightings for fluctuations in the exchange rate of the key currencies affecting pharmaceutical manufacturers the US dollar, the euro, the Indian rupee and China’s renminbi while the fifth formula is entirely CPI. It said it was open to other suggestions too.
The committee said CPI and exchange rates had varying effects on the pricing structure of different types of medicines and asked for input on whether to differentiate between locally manufactured and imported medicines, generics compared with innovator products, and very expensive medicines. “We are trying to be more transparent and to get consistency in the application of the SEP adjustment in terms of factors and timing,” pricing committee chair Fatima Suleman is quoted in the report as saying. She emphasised that provisions of the Medicines Act allow the minister to consider additional factors in determining the SEP adjustment, including global prices and affordability.
The report says the Pharmaceutical Task Group (PTG), an association of the four key trade associations representing drug makers operating in South Africa, welcomed the committee’s review. “There is quite a lot of convergence across all four industry bodies, because what is paramount is having certainty both in terms of the process and in terms of the formula. This trumps any other concern. It is very difficult in the absence of predictability to do any form of planning, whether it is budgeting for medical scheme or a pharmaceutical company,” said PTG chair Stavros Nicolaou.
The PTG is advocating for the implementation of the formula based solely on CPI, as the exchange rate is so volatile. The effects of exchange rate fluctuations would in any event feed through into inflation, Nicolaou said. Ideally the hikes should be implemented each January, as medical schemes operate on the calendar year, he said.
The report says the four key associations represented by PTG are Pharmaceuticals Made in SA, the Innovative Pharmaceutical Association of SA, the Self Medication Association of SA and Generics Biosimilar Medicines of Southern Africa (GBM).
GBM CEO Vivian Frittelli said the organisation is still assessing the proposals and had yet to make its submission. “We would like the option that gives us the most predictability for future planning with the least subjective interventions,” he said.
Pam Saxby, writing for Legalbrief Policy Watch, notes stakeholders have until 8 June to make “substantiated comments” on various options being considered by the committee.
Comments received during “previous annual reviews of the adjustment methodology” point to the possible merits of factoring both CPI and foreign exchange weightings into calculations on the percentage adjustment required. According to the notice, this would be in addition to the average CPI for the preceding year; the average PPI for the preceding year; changes in the rates of foreign exchange and purchasing power parity; international pricing information; comments received from interested persons; and the importance of ensuring the availability, affordability and quality of medicines and scheduled substances in South Africa.
Should the committee decide to revise the methodology used in calculating the adjustment, it would be ‘applied consistently for the years 2020, 2021, and 2022’.
However, Saxby writes, in considering the merits or otherwise of doing so, it would need to identify the most appropriate options in terms of time period; parameter weighting; the most reliable parameter source; and differentiated exit price adjustment application.
With that in mind, the committee has also invited stakeholders to submit ‘relevant research related to (the) affordability of medicines in South Africa, including but not limited to (the) prices of proprietary and generic medicines relative to international averages and the impact of … (the single exit price adjustment) on out-of-pocket expenditure and medicine utilisation’.
Saxby writes that alternative configurations in calculating the weighting of parameter values will also be “welcomed”.