Knickers in a Twist

A few AIDS aid advocates have their knickers in a twist.  Back in December 2009, the executive board of Unitaid, the Swiss-based drug access and global health advocacy organization (Unitaid), approved an implementation plan, two yeas in the making, for a “Medicines Patent Pool” intended to facilitate the licensing of HIV/AIDS drugs and decrease their prices to public-sector purchasers (Exec Summary Patent Pool Plan).  The pool administrators will invite any company with relevant patents (they have identified 9 companies and 19 drugs) to donate that IP and will grant nonexclusive licenses at no/low royalty rates to qualifying manufacturers who, in turn, will flood the market with low-cost, high-quality drugs and drug combinations that are increasingly needed to treat the estimated 6.7 million needing treatment (about two-thirds of the total, Unitaid AIDS).  Two weeks ago, a Unitaid spokesperson was cited as saying that three companies (Merck, Gilead, and Tibotec [owned by Johnson and Johnson]) “are in advanced talks” and “we are now talking about how rather than whether,” while one (ViiV Healthcare, whose largest shareholders are Pfizer and GlaxoSmithKline) is “the least interested in making this work” (Reuters article).  In my experience public statements about ongoing negotiations are in bad form and may be counter productive, but needless to say these comments add to the pressure directed at the innovator companies, especially GSK.  Medecines Sans Frontiers has a multi-pronged campaign aimed at the companies (Make It Happen), Oxfam has called for their participation (Oxfam PR), an undersecretary of state in the UK government has chimed in (Lancet comment), and at least one blogger is firing at “greedy Glaxo” (Pharmexec blog).

Evil companies behaving badly or yet another well-meaning but misguided bureaucratic morass in the AIDS aid industry (of which there seem to be too many; see my posting of April 15, 2010, and a recent opinion piece, Business Daily opinion)?  As a former licensing professional, I looked at some of rationale for pooling offered by Unitaid:   that the pool will reduce transactions costs (time and money spent writing agreements), the resulting drugs will have lower prices, and the pool will be attractive to the participants (licensors and licensees).  I’m not convinced.  First, for big pharma, transaction costs are less than pocket change; licensing is more about finding trusted partners who will have access to IP, technology, and know-how.  Further, at least two of the HIV drug innovator companies already have a proactive, no/low royalty, HIV drug licensing programs.  As part of its Access Program since 2006, Gilead  has provided nonexclusive licenses to multiple generic manufacturers (Gilead Fact Sheet and Gilead HIV Drug Access).  GSK has stated that Viiv is and will pursue “widespread licensing” (GSK Access) and CEO Andrew Witty has said the licenses have been and will continue to be royalty-free (January 20, 2010, In Vivo blog, and July 17, 2010, PRI report).

Second, more products don’t a priori mean affordable prices since even the generic companies need to be profitable and there for the price of any drug will stabilize around some point due to market forces and the cost of manufacture and distribution.  Right now the generic versions of Gilead’s Truveda, a second-line therapy, costs about $100 per patient per year, according to an article in Forbes, but this price is still too high for MSF to treat all its clinic’s patients (Forbes article).  The article also says that, according to Unitaid, the pool would bring the price down to $86 per year.  So 14% more patients could be treated on the same budget; is that enough?

Third, patent pooling works best when there are many suppliers of similar products who will gain slightly more (or not lose much) market share and still stay in business.  This seems not to be the case with the Unitaid pool since there are only nine suppliers, and fewer if one parses the market by drug type (e.g., first-line vs. second-line).  Certainly, Unitaid had a lot of advice on these issues, but maybe should have listened more carefully to the “several” companies that were consulted (the full plan has not been released with its Appendix 2 list of who was consulted).  Clearly, an analysis of all the issues is beyond the scope of this posting, and, when I have time, I will read Unitaid’s cost/benefit study (Cost Benefit study); an analysis by Van Gelder and Stevens of the International Policy Network, which points out a number of flaws (Empty Patent Pool); and a study of ARV medicines markets (Waning et al. 2010).

Overall, Unitaid is one global health group that is taking a new direction toward achieving effective and sustainable drug access.  They have supported the efforts of the Clinton Health Access Initiative (CHAI; see my posting of June 3, 2010) including:  creating a market through purchaser aggregation, improving demand forecasting, building stockpiles of needed drugs, and conducting business-like negotiations.  And they are applying their approach to drugs for TB and malaria.  Unitaid put $26 million to date into the Global Drug Facility for TB drugs, which ended in 2009, for a drug management system and stockpile (Unitaid TB).  In malaria, they have committed $130 million over next 2 years to the Affordable Medicines Facility- malaria for drug purchases  (Unitaid AMFm; see my posting of June 10, 2010).

Unfortunately, the organization relies on OPM (other people’s money in the form of involuntary donations through a tax levied on airline tickets) and passes through most of its budget to other organizations where it is diluted considerably before having an effect.  I think they need to clarify and stick to their mission and resist the advice of their “expert” advisors from the academic/government/NGO complex to add more projects and associated bureaucracy.  I’m afraid their emphasis on the patent pool, the likely prolonged negotiations (there are many issues to be worked out), likely dissatisfaction of all parties with the final outcome (typically the result of a negotiation), and animosity generated toward the innovator pharma companies will divert their attention from the real needs:  discovery of effective drugs, lowest possible cost possible manufacture, a competitive market, effective treatment protocols, and an effective diagnosis, treatment, and care system.

I hope the knickers get untwisted.

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