Procurement Power

All governments spend money, typically siphoned from their citizens’ pockets and nominally for the good of those citizens and society in general.  Governments in developing/emerging economy countries have increased their spending on improving health, although the amount varies widely, from tens of US dollars to several hundreds per person per year (Guardian datablog).  One action governments take to increase access to and affordability of medicines, vaccines, and other tools for better health is to procure large quantities of these products for use in their public health systems through a competitive bidding process.  If done right with clear specifications and rational minimum pricing (and no graft), procurement contracts can create a market for products and result in lower-cost, improved health care.  (For some background about procurement for global health, see my post, “More Bang for the Buck”, May 2012).

One of the world’s major emerging economy countries, Brazil, is apparently pursuing a multi-year plan to leverage its governmental health care spending to increase the capacity of the government and domestic companies to produce needed drugs and medical equipment.  However, I found only limited information on the plan and no analyses by the health economics community, leaving me wondering if its goal is production of low-cost products for domestic use only or if those state-subsidized companies will also become international suppliers of low-cost drugs and vaccines.

The most complete description of the plan I found was in a press release issued by the Brazilian Ministry of Health (MOH) last month (MOH press release).  To quote:  “In April this year, Minister Padilha announced a package of initiatives aimed at providing a further boost to national production.  Eight partnerships between public and private laboratories were entered into for the manufacture of medicines and equipment. … Through partnerships for productive development between public and private laboratories, the Ministry of Health aims to ensure access to high-cost treatments and expand services to SUS patients [the SUS is the national health service that has 180 million beneficiaries, or almost the entire population, see SUS facts].  63 partnerships are currently in place between 15 public and 35 private laboratories for the national production of 61 medicines and six types of equipment.  These partnerships account for R$ 5.9 billion [about US$2.6 billion] in public procurement and approximate annual savings of R$ 2.5 billion to the public coffers.”  But what drugs were being procured (patented? generic?), over what period of time, and at what price and how were the savings calculated?  Are the participating companies all domestic and how large?  Was the selection process competitive or political?

A key government agency for health in Brazil is the Oswaldo Cruz Foundation which does R and D, runs hospitals, educates and trains, publishes, and produces vaccines, drugs, reagents, and diagnostic kits (Fiocruz portal), and it does the last at a large scale.  According its Production and Innovation page, Fiocruz makes 40% of the drugs purchased by the MOH, hundreds of million of vaccine doses, and reagents for millions of diagnostic kits.  But other than lists of Brazilian and international company “partners” (Brazilian companies and international companies), I found no details on these partnerships.

From other sources, I learned that one important element of Fiocruz’s partnerships with non-Brazilian companies is a requirement that the procurement requires transfer of manufacturing technology for the product to Fiocruz.  As I noted in a post in July 2010 (“Fio Cruising”), Fiocruz and Chembio Diagnostics Inc. of Medford, NY, closed a procurement and tech transfer deal for HIV diagnostics, and in September 2009, Fiocruz and GlaxoSmithKline (GSK) completed a similar deal for GSK’s pneumococcal vaccine.  In the press release for the latter, GSK noted that since 1985 the company has had Fiocruz manufacture the its vaccines for Brazil for polio, Haemophilus influenza type b, measles, mumps, rubella, and rotavirus (GSK press release).  Another big pharma company has also transfer a drug and its manufacture to Fiocruz.  In 2011, Bristol-Myers Squibb, a long-time provider of HIV drugs to Brazil, agreed to transfer its process to make HIV drug, atazanavir, to Fiocruz under undisclosed terms (BMS press release).

More recently, the MOH demonstrated an interest in biologics other than vaccines when it completed an agreement to acquire a drug for a rare disease and a highly novel manufacturing technology.  As I mentioned in my post last week (“Soup to Nuts”), in June Fiocruz made a commitment to buy up to $280 million of an enzyme replacement therapy the rare lysosomal storage disorder, Gaucher’s disease, made by the Israeli company, Protalix Biotherapeutics, in exchange for transfer of the manufacturing process to a government facility over a seven-year period (GEN article).  Interestingly, the biotherapeutic is made in plant cells, not mammalian or yeast cells, the industry standards (Protalix platform).  Even more interesting (and curious), is that the MOH is also acquiring a plant-cell-based, biologics manufacturing technology from the US company, iBio, and putting it into a $170 million facility which will be built through a contract with GE Healthcare (iBio April press release and June press release).  Apparently, this deal was a follow-on to licenses granted in 2011 by iBio to the Brazilian government for use of its technology in making Fiocruz’s yellow fever vaccine (which is exported 70 countries) and other vaccines (Pharmaletter article).  And to add to its deal-making, last month the MOH announced that it plans to make an H1N1 vaccine using technology transferred from Sanofi and it initiated “27 partnerships with public and private labs to produce biopharmaceuticals, including an allergy vaccine, a growth hormone, a cicatrizing drug, and medications to treat cancer, arthritis and diabetes.  Through the partnerships, Brazil expects to produce a total of 25 biopharmaceutical drugs.” (Antara News article).

Clearly, Brazil is aiming at self-sufficiency, but this level of investment could lead to over-capacity for domestic needs and possibly an industrial base capable of producing low-cost pharmaceuticals and vaccines for non-major market, rest-of-world consumption.  As was noted in a Financial Times article on the 2009 pneumo vaccine deal with GSK, “Paulo Gadelha, president of the Fiocruz institute, which will produce the vaccine, stressed that the technology received could also be used to help it make other vaccines in future.  He said his institute was already pledging to provide technology transfer to make low-cost drugs and vaccines for African countries, in what could provide a challenge for large pharmaceutical companies” (Financial Times article).  More to follow, I hope.

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Tech Transfer for the Rest of the World

Last week, I attended a discussion organized by the Harvard chapter of the student-oriented Universities Allied for Essential Medicines (UAEM) on “Global Access Licensing of Biomedically Relevant Technologies” (Harvard UAEM).  The panelists were representatives of local university and medical center technology transfer offices (TTOs) who spoke for about an hour on their efforts to promote access to essential medicines and improve global health in the rest of the world (ROW) specifically through application of a “Statement of Principles and Strategies for the Equitable Dissemination of Medical Technologies” (AUTM Statement), a document written by tech transfer officers and backed by the UAEM in 2009.  The Statement provides guidance on patenting and licensing (and calls for biannual self-assessment), but, in my opinion as expressed my post, “An Academic Approach to Global Health”, was unlikely to have much effect.  The organizers did a great job in selecting the speakers and attracting a small but informed audience of mostly academics (students and faculty), who participated during the hour and a half question and answer period.  My regret was that the time was too short to allow a full discussion of the issues and to ask the TTO reps what progress, if any, they have actually made.

First, a bit of background on university technology transfer.  US government funding of health-related research has been and continues to be in the tens of billions of dollars per year.  For example, our local complex of academic institutions and medical centers received $1.8 billion in 2012 (Boston Globe 4/25/13 article), and the funding results in a tsunami of information, the vast majority of which is made public and used mostly by other scientists to generate more information, but a small amount is diverted mixed with existing information, becomes knowledge, and is used to make products, mostly by companies looking to make a buck.  TTOs facilitate the process by creating a financial incentive to companies to use the information by turning it into a patent-protected “invention,” even though the relation of the invention to a useful product is hypothetical and the universities lack the wherewithal and inclination to find out.  The idea is that a company would be more likely to develop a product if it, or some aspect of it, is patented and therefore exclusively owned by the company and not available for copying by a competitor, at least until the patent expires (now 20 years).  So TTOs spend time and money on patents with the hope that a company will negotiate an exclusive, income-generating license.  This rarely happens because the university invention is typical many steps away from being a product and the majority of TTOs lose money, but it happens often enough that just about every research university has a TTO with an average of six employees.  To hedge their patent strategy, TTOs patent methods of finding or making products which are even more removed from products but are attractive to start-up companies and venture capital because they could generate multiple products and revenue (for more on VC funding strategies and view of academic inventions, see Bruce Booth’s recent post at Life Sci VC).

So has the UAEM been effective in getting TTOs to facilitate the diversion of the academic tsunami into yielding products for global health?  As far as I can tell, no.  In his introductory presentation, Anthony So, UAEM advisor and Duke University faculty member (So Bio), stated that the potential is there since academic patents underlie 153 pharma products sold over the past 40 years, citing a study of Stevens et al. 2010, but which I found in my review of the publication was closer to 40 (see my post, “Slicing the Baloney”).  He also cited an example of a method of making a standard malaria drug that originated at UCSF, was licensed to Amyris, a startup, in 2003 and as of last month will used in making drugs by a major pharma, Sanofi (Amyris press release).  Use of the process will lower the cost of the drug, which is good, but the invention is not resulting in new, essential, medicines.  As was pointed out by the TTO discussants, their technology (and patents) is very early on the path to products and their ability to induce their licensees (should they even have one) to develop ROW products diligently or at all is minimal.

Well, what can the UAEM do to hold the universities’ and the TTOs’ feet to the fire for getting research that is generously funded by the US public to yield products to improve ROW health?  The UAEM can first, redefine their mission as improving ROW health rather than improving access to medicines which is only part of the larger problem.  It can then encourage university administrations to:

  • recognize the reality of tech transfer and, rather than regarding the TTOs as profit centers, view them a facilitators of early-stage product development regardless of whether they think those products will be “profitable” or not; and
  • lower the barrier for using university inventions in ROW product  development by promoting the use of internal technology development funds on projects that may lead to ROW/affordable products (Harvard received a $50 million gift to fund their accelerator program this week [Harvard Gazette article]).

For the TTOs, the UAEM can push them to:

  • not patent methods of discovery or manufacture (patent products only);
  • avoid worldwide exclusive licensing (which constrains opportunity to license for the ROW) and actively seek licensees that are developing ROW/affordable products;
  • apply the “Statement of Principles” to all future licenses for health-related technologies not only those relevant to the neglected diseases (i.e., include the non-communicable diseases like cancer and diabetes) and for all middle- and low-income countries not only those defined by the World Bank as “undeveloped;”
  • apply the above to existing licenses and try to renegotiate them; and
  • promote the start-up of global health-relevant or affordable healthcare-relevant companies by helping aspiring entrepreneurs, whether enthusiastic students or someone in off the street, in business planning, advising, fund-raising, and no/low cost licensing.

And if the UAEM or the TTOs choose to take up my suggestions, I’m available to help.

Vax Patch

Early last month, it was announced that our fair city of Cambridge, MA, had attracted yet another up-and-coming biotech company, Vaxxas Inc. (MassHighTech article).  Vaxxas is a spin-out from the University of Queensland, Brisbane, Australia, that is developing the Nanopatch™, a one-centimeter square micro-patterned silicon chip that, with a spring-loaded applicator, delivers a vaccine dose into the skin (nice pictures at Vaxxas).  The advantages of the technology are that it may allow the use of less vaccine per dose (may be 100x), require less training to administer, and not need refrigeration before use, all good for mass immunization campaigns in under-resourced areas.  Those familiar with vaccine practicalities will recognize the Nanopatch as the latest in the evolution of technologies to deliver vaccines and injectable drugs in general that avoid syringes which are fragile, wasteful, dangerous (to the  administrator), and scary (to some recipients).  The most numerous of these alternatives are various liquid injectors that a use stream of gas to propel the med into or through the skin, e.g., products made by Bioject Medical Technologies, D’Antonio Consultants, AcuShot, Injex, and PharmaJet.  Another approach and the only one used with a commercially-available vaccine (Sanofi’s influenza vaccine) is a microneedle made by Becton Dickinson (Soluvia).  Other technologies in development are microneedle arrays by Zosano Pharma (Zosano) and by a team at Georgia Tech (GEN article) and a miniature solid dose injector by Glide Pharma (Glide).  One projection puts the market for these alternatives at $4.4 billion by 2022 (Visiongain Research Report 2012).

Various groups in the international public health community has been promoting the development of liquid injection technologies for global health use since the mid-2000s with PATH and the WHO being the most active (PATH Projects).  For example in the past two years, PharmaJet had received funding to develop its technology for global health use from several sources:  a Gates Grand Challenges award, a Centers of Disease Control SBIR II, a US Army CRADA, and a $15.5-million, five-year grant jointly awarded to Inviragen by the NIAID (PharmaJet PR).  However, other than being tested in many pilot studies, the alternative technologies have not been adopted for routine use.  A recent WHO bulletin cited 90 clinical trials of intradermal delivery against 11 diseases and provided a number of possible reasons limiting wider use (Hickling et al. 2011):

  • uncertainty on the equivalence of protection between the intradermal and subcutaneous and intramuscular routes of injection;
  • uncertainty on which vaccine is appropriate;
  • lack of clear cost benefits;
  • need for manufacturers to reformulate vaccines and redesign packaging lines; and
  • regulatory approval.

In fact, Pharmajet’s launch of its FDA-approved injector was tripped up by a regulatory problem.  When its partners, several retail pharmacies, started touting “needleless shots” for the 2011 ‘flu season, the FDA pointed out that, while the device was approved, the use of the device with a particular vaccine requires separate evaluation and approval (Govtech article and FDA Questions).

So Vaxxas faces challenges in commercializing its Nanopatch.  On the technical side, the company will need to jump from demonstrating induction of an immune response in rodents (which have pretty tough skin) to humans (according to Vaxxas, their applicator design “addresses variations in the skin by exploiting our knowledge of the skin’s mechanical properties to achieve uniform penetration and delivery across the natural variation in a patient population,” Vaxxas Technology).  On partnering with vaccine makers, its move to the Boston area helps both by being closer to a major investor (it occupies a suite in the HealthCare Ventures offices) and in gaining visibility with potential partners, like Novartis’s vaccine division, which is down the street.  And its new CEO, David Hoey, a local biotech guy, has lots of deal-making experience.

A bigger challenge, and one that I may be the only one thinking about, is how the company will license its technology so it may improve the health of the greatest number of people, especially those in the low- and middle-income countries.  As I wrote in a previous blog (“Starting Uphill”), I think small companies with innovative enabling technology (that is, not a product but technology that enables the development or use of products, like a drug delivery or manufacturing platform) should sell product-specific licenses and not licenses for broad use, e.g., for vaccination against a certain disease.  Of course for Vaxxas, this non-exclusive type of licensing will not be as lucrative as exclusive licensing, but it would allow a much wider use of the patch technology including by companies that specialize in low-cost, global health vaccines like the Serum Institute of India.  Alas, it appears that Vaxxas is not on this track.  At the same time the company announced its move to Cambridge, it also announced its first corporate deal with Merck in which it will receive an upfront payment and research support and milestones and royalties on a Merck vaccine for an undisclosed disease and will grant options to Merck for use of the patch with two other diseases to be negotiated (In Vivo Blog).  But it is not too late for Vaxxas to modify it partnering strategy since there are lots of existing vaccines and some in development for global health where the patch technology may have significant benefit.  Vaxxas could easily set up a low-fee piloting program to allow vaccine manufacturers to do proof-of-concept tests with the Nanopatch and their vaccines with an option to license at predetermined terms.  Looking at the Vaxxas board, all of whom have lots of experience in first-world biotech mega-dealing, I’m not hopeful they will see the good in this approach.  I did note, however, that the Mark Kendall, the company’s scientific founder, may have an interest in increasing vaccine access.  He is the principal author on a paper titled “Improving the reach of vaccines to low-resource regions, with a needle-free vaccine delivery device and long-term thermostabilization” (Chen et al. 2011).

A Quiet Week at Lake Woebegone

While the politically-motivated impasse in Washington has been closing in on precipitating a financial meltdown of the US and, in turn, world economy, it’s been a quiet week for the business of global health.  In my business development work, I rearranged the deck chairs by adding three pro bono clients and dropping one, but have spent most of my time on one compensated project, cycling about the local ex-urbs, and attending to house maintenance jobs.  So, instead of a thoughtful analysis of news, here are follow-ups to three earlier postings.

Last summer I attended the BIO Ventures for Global Health Partnering for Global Health Forum and wrote about the progress of the Clinton Foundation’s Health Access Initiative’s (CHAI) Drug Access Team (DAT) which at the time was headed by Inder Singh, and specifically on the DAT’s “Innovator Access to Medicines Strategy.”   In my posting of 6/3/10, I boiled down this strategy to a few key practices that run contrary to the “conventional wisdom” in big pharma product marketing.  In addition to the usual selling in a few lucrative markets, companies should license nonexclusively to low-cost, high-quality generic manufacturers who are likely to enter most potential markets (i.e., increase access and revenue), allow licensees to invent “new” drugs through new formulations and combinations  to increase revenue opportunities, register broadly to create robust private markets for your licensees, and partner with (sell to) the leading public sector purveyors to ensure appropriate adoption and use at an affordable and fair price (mutual value).  So when I learned that Inder was a panelist on “New Product Introduction” at the 2011 Partnering Forum, I reviewed the web cast (PGH web cast) to see what progress had been made, e.g., what has been the response of biotech/pharma companies to whom the DAT had pitched this strategy.  Alas, Inder gave no update but made several points that were new to me:

  • he is now Executive Vice President of Access Programs;
  • CHAI has 600 employees;
  • DAT’s mantra is “affordable yet sustainable pricing;”
  •  the “sweet spot” for negotiating developing world access to new medicines is 12 months prior to 6 months post product launch;
  • one role for intermediaries like the DAT and others is to neutralize conflict of interest, either on the part of the drug companies who may be accused of negotiating deals that maximize profit rather than access and governments who may be accused of being influenced by pay offs and kick backs;
  • South Africa has a model and sophisticated drug procurement division; and
  • the best companies for low-cost, quality drug production and manufacturing innovation are in India.

Speaking of drug access, last year I posted on the less important role of patents and the more important role of licensing in improving access to drugs, specifically commenting on UNITAID’s push for drug companies to “donate” key drug patents to their “Medicines Patent Pool” (my posting of 8/5/10) and in contrast the success of Gilead’s licensing program for first-line HIV drugs (my posting of 8/12/10).  UNITAID, as one may remember, is the WHO-backed and airline-ticket-tax-funded “International Drug Purchase Facility” established in 2006 with the intent of accelerating the access to drug and diagnostics for HIV, tuberculosis (TB), and malaria in high-disease burden countries (WHO press release).  Although the intent was for UNITAID to act as an intermediary between the product inventors/producers and the pubic procurers (similar to the CHAI DAT), the group has made its most progress in funding a wide variety of projects, like evaluating ways o minimize maternal HIV transmission, and buying and supplying TB drugs (UNITAID 2011 fact sheet).  Hence, I was happy to see the group’s recent announcement that Gilead was the first company to sign on to the UNITAID pool (FierceBiotech article).  Happy for Gilead because the agreement with UNITAID is a rational extension of Gliead’s long-standing strategy of licensing generic manufacturers for developing world markets, happy for UNITAID because it gives them credibility as an drug market intermediary, and happy for the procuring agencies since the agreement includes Gilead’s second-line drugs (and one in development) and hence there should be lots of competition among the generic companies to come up with low-cost manufacturing (and low-price products) and new combinations.  Of course, UNITAID will need to market to, sublicense, and support any technology transfer to the generic companies, as well as line up and fund buyers, and I look forward to learning how it will do so (from the press release:  UNITAID “will publish the licenses on its website, welcoming feedback and suggested improvements from all stakeholders.”)Finally, I note that it was reported in June that the new monovalent meningitis vaccine, MenAfriVac, had demonstrated a superior antibody response to that of an older vaccine, Glaxo’s quadrivalent Mencevax (96% vs. 64% response rate, Bloomberg article).  This is good news.  First, it means that the 20 million people in sub-Saharan Africa who have received the vaccine to date and the additional 45 million people who will be inoculated this year will be well-protected against the most prevalent African infection due to Neisseria meningitides, subgroup A.   Second, as I posited in my posting of 12/6/10, the results may encourage the MenAfriVac producer, the for-profit Serum Institute of India, to apply the conjugation technology it licensed (invented by scientists at the US FDA) and used to make MenAfriVac to developing a low-cost, multivalent vaccine which would really be useful globally.

Fio Cruise

One hobby horse that I ride is the idea that, as the developing world develops, it will also be developing the multiple inputs needed to support a biotechnology industry, one that will invent and make affordable and profitable products for both domestic use and export (e.g., my posting of April 8, 2010).  This topic was well-studied by Peter Singer, Sarah Frew, and colleagues at the McLaughlin-Rotman Centre for Global Health, University of Toronto (MRC Global) for the BRIC countries and South Africa, e.g.:

-Frew et al. 2007 (India) (Pubmed Citation);

-Frew et al. 2008 (China) (Pubmed Citation);

-Rezaie et al. 2008 (Brazil) (Pubmed Citation); and

-Al-Bader et al. 2009 (South Africa) (Pubmed Citation).

A compilation of these studies was published by Frew et al. in 2008 (Pubmed Citation) in which seventy-eight “homegrown,” small to medium biotech companies (excluding generics manufacturers and subsidiaries of the MNCs) were survey.  The authors found that a quarter of the 500 products these companies sold or developed were aimed non-major money-making diseases (HIV, malaria, TB, and the neglected tropical diseases), about half in the neglected disease category.  The products were mostly diagnostics but also included vaccines and therapeutics, and about half were in development and about half were on the market (sales data were not given).  One of their conclusions, over-simplified by me, is that these companies are demonstrating success at “affordable innovation” and will be best helped by access to pro bono management consulting through a Global Health Accelerator.  I think such a program may add complexity and friction and am more in favor of market-driven, B-to-B acceleration (see my posting of March 4, 2010).

A related hobby horse is how governments are/may be accelerating the development of indigenous affordable biotech innovation, especially in ways different from those in the major market countries (e.g., underwriting basic research, subsidizing small-scale commercialization, offering tax incentives, and running an effective regulatory and IP infrastructure).  Not having the inclination, ability, or time to do a full-scale review, I looked at one government-based institution that is doing some pretty creative stuff, the Oswaldo Cruz Foundation of Brazil, also know as Fiocruz.  Fiocruz has a glorious history that began with its founding in 1900 as a pubic health institute to produce vaccines against the bubonic plague, small pox, and yellow fever (Fiocruz history) and is now a key part of the country’s ministry for health.  It currently has 7500 employees and describes its activities as including “research and development; highly-regarded hospital and ambulatory care services; production of vaccines, drugs, reagents, and diagnostic kits; education and training of human resources; information and communication in the area of health, science and technology; quality control of products and services, and the implementation of social programs.”  In short, it is a combination of the NIH, CDC, and a mid-sized pharmaceutical company.

Fiocruz got into the drug-making business in 2004 when, in an initiative they call unprecedented, the government purchased a GlaxoSmithKline (GSK) pharmaceutical plant for $6 million, and it was incorporated into Farmanguinhos, Fiocruz’s pharmaceutical division. Farmanguinhos now makes and sells a range of drugs (anti-inflammatory, anti-infective, anti-psychotic, analgesic and antiulcer drugs, therapeutics against AIDS (9 of the 17 used), malaria, schistosomiasis, tuberculosis, leprosy, filariasis, onchocerciasis, anemia, diabetes, hypertension and cardiovascular and central nervous system diseases).  Its production represents 36 percent of the Ministry of Health’s purchases and has estimated annual sales $100 M as of 2004 (Fiocruz drugs and, if you read Portuguese,  Farmanguinhos).

As a vaccine developer and manufacturer, Fiocruz’s Bio-Manguinhos division produces 47% of the vaccines used in Brazil’s National Immunization Program and is certified by WHO to supply the yellow fever vaccine to the United Nations procurement agencies and to export to other countries (Bio-Manguinhos).  It also has a creative model for accelerating Brazil’s affordable innovation:  it trades Brazilian market entry and guaranteed sales to a multinational company (MNC) for technology and rights to manufacture the MNC product for its own and other markets.  The exemplar deals are those with GSK.  According to the GSK website on technology transfer and joint ventures (GSK TT and JV), since 1985 the company has had Fiocruz manufacture the GSK vaccines for polio, Haemophilus influenzae type b (Hib), measles, mumps, and rubella, for use in Brazil and, in 2007, got a government contract for up to 50 million doses of Rotarix (a vaccine against rotavirus, cause of gastrointestinal illness and death in children) which required the transfer of the vaccine manufacturing technology to Fiocruz and a license to make the product starting in 2012 (although this maybe for the domestic market only).

More recently, in September 2009, it was announced that GSK will sell $2.2 billion of its new pneumococcal vaccine, Synflorix, to Brazil at an affordable price, about $15 and decreasing to $7/dose compared to about the $50/dose major market price, for about 8 years, guaranteeing a revenue stream.  GSK is also transferring manufacturing and a license for Brazil to make its own vaccine and apparently other similar vaccines (Financial Times article, Financial Times article; Nature Biotech article).  Another kicker is that GSK and Fiocruz will work together on a dengue fever vaccine, apparently putting $50 million each into the effort (FeirceBiotech article).

Bio-Manguinhos also makes reagents for laboratory diagnostics tests and the kits themselves, producing 2.5 million per year (2004 data) for diseases such as leptospirosis, leishmaniasis, viral diarrhea, Chagas Disease, leprosy and dengue fever, and HIV (Fiocruz diagnostics).  For the first-generation HIV tests, Fiocruz used the buy, technology transfer, and manufacture model with the test originator, Chembio Diagnostics Inc. of Medford, NY (Fiocruz partnerships).  Fiocruz and Chembio extended the deal to the next-generation platform (http://www.chembio.com/globalhealthproducts.html) which was recently approved for sale in Brazil and resulted in a $400K license fee (Chembio press release).  According to Chembio’s first 2010 10-Q,  approvals are pending for similar tests for Leptospirosis and Canine Leishmaniasis with similar compensation.  Finally, Bio-Manguinhos also makes interferon and erythropoietin (Fiocruz biologicals).

Where is Fiocruz going as a pharma company?  According to the Financial Times, its president, Paulo Gadelha, has said “his institute was already pledging to provide technology transfer to make low-cost drugs and vaccines for African countries” (Financial Times article, Financial Times article).  Not entirely clear.  But as for innovative licensing deals for affordable innovation, Fiocruz is cruising.

Access to Medicines/Access to Markets

When I attended BIO 2010, Biotechnology Industry Organization’s annual gabfest with 15,000 others in Chicago May 3-6 (BIO 2010), I was disappointed at not being able to attend a special session on May 5.  The Clinton Health Access Initiative (CHAI), represented by Inder Singh, their director of drug access, and BIO Ventures for Global Health (BVGH) co-held an information session on “opportunities for pharmaceutical companies to achieve their corporate objectives through the appropriate design of Access to Medicines Strategies.”  However, Inder was kind enough to send me his slides in which were outlined the substantial progress CHAI’s Drug Access Team (DAT) has been making in designing, testing, and implementing a drug access plan that, as they noted, may be a “model of engaging pharmaceutical companies to achieve their access objectives.”  As is well-known, access to essential medicines by the global uninsured population is poor to non-existent and a major world problem (WHO Essential Medicines).  The primary current mode of access is for the producing companies to sell into markets where there are those who can afford to pay or to donors who distribute the drugs free.  But as Inder described, the evolution of the AIDS/HIV anti-retroviral (ARV) drug market from the early 2000s to now provides an example for an alternative approach, one that showed multiple benefits;  it increased the number of patients receiving ARV, decreased the costs of ARV, supported the innovation of better drugs (mostly in the form of “fixed-dose-combinations,” or FDCs), and, of interest to companies, increased the size of the overall market (now estimated at more than $1 billion).

This innovative approach was pioneered by Gilead Sciences (a 20-year old, publicly-traded company in CA with 2009 revenues of about $7 million, Gilead Financial Snapshot), the elements of which are:  tiered pricing in the low/middle income countries based on per capita income and disease burden; broad, low-cost, nonexclusive licensing to generic drug makers; and a distribution system composed of public and private partners which Gilead supports with product-specific training (Gilead Access Program).  In parallel to this approach and over the past four years, the DAT has worked to change the economics of HIV/AIDS treatment by negotiating supply agreements between companies and the public-sector customers.  The result has been, according to the presentation  (note to CHAI:  do a better job of self-promotion on your website) agreements with 16 companies that lowered prices by >50% for 42 drug formulations and 3 diagnostics and improving ARV access for 2.6 million patients.

Building on the Gilead approach and its experience, the DAT drew up an “Innovator Access to Medicines Strategy which Inder presented at the BIO session (sorry, not publicly available).  I’ll boil it down to just a few key practices that run contrary to the “conventional wisdom” in big pharma product licensing and launch practice:  license broadly to low-cost, high-quality generic manufacturers who are likely to enter most potential markets (i.e., increase access and revenue), allow licensees to invent “new” drugs through FDCs  to increase revenue opportunities, register broadly to create robust private markets for your licensees, and partner with (sell to) the leading public sector purveyors to ensure appropriate adoption and use at an affordable and fair price (mutual value).   The presentation also included three case studies of which I try to summarize the first since I lack the details on the other two.  In the first, the DAT negotiated with Pfizer a lower price for its antibiotic, Rifabutin, for developing country markets for treatment of co-infected TB/HIV patients.  The results for the providers were lower per patient costs and better clinical outcomes; for Pfizer, increased Rifabutin sales and experience in entering a new market.  The last slide gave “Key Questions to Consider” that are likely good starting point for discussions on the strategy with companies.

Clearly, I am not a health economist and have done little study of this topic, so am not qualified to provide a weighty review of the DAT strategy, but here’s my off-the-cuff spin.  The biotech/pharma industry is struggling to find new markets and they see the risks in the emerging/developing (or low/middle income) countries as multiple and indistinct, but mostly the risks reduce down to a lack of structure and the accompanying level playing field that for-profits need to function.  The DAT strategy is an important step forward in providing rules of engagement, a rationale market place, a path to predicable demand and therefore “sustainable” (economically viable) supply.  This isn’t to say this approach will solve the problem of access to essential drugs, but the DAT work is substantial progress and is a good complement to the advanced market commitment and other public-sector “pull” approaches.

I’m interested in learning what/how/if there were comments from corporate representatives at the presentation or in any one-on-one meetings the DAT may have had.  I’d also suggest in those conversations the DAT present the strategy not as an extension of a company’s existing “access to medicines program,” which most of the major pharma have as part of their corporate social responsibility effort (c.f., my posting of January 28), but as much needed tool to accessing new markets (and staying in business).

An Academic Approach to Global Health

On November 9, the Board of Trustees of the Association of University Technology Transfer Managers (AUTM) released and endorsed a “Statement of Principles and Strategies for the Equitable Dissemination of Medical Technologies” (AUTM Statement), which sounds like a good idea.  After all, US universities, which receive more than $24 billion each year in public funds for health-related research, should have an interest in “disseminating” the resulting technology equitably and in ways that benefit US public health and, since the US is a world leader, global health.  And the 1981 Bayh-Dole Act, through which the government created the university technology tech transfer industry by granting ownership of inventions made with federal funds to the institutions doing the research, was intended to promote commercialization of research results for pubic benefit (Council of Government Relations on Bayh-Dole).  Consequently, almost every institution receiving federal research funding now has a tech transfer office (TTO) with an average staff of five people and gross licensing income of about $6 million (AUTM 2007 Licensing Survey).   Institutions should be happy to endorse the Statement (six universities have signed already) since it is well-intentioned and unlikely to interfere the TTOs’ primary mandate to generate licensing revenue.

So what actions will the signatories undertake to achieve the equitable dissemination of technology for the public good?  In addition to being “innovative and persistent” and making “vigorous efforts,” the institutions agree:

-not to pursue patents in countries where a generic (competing) version of the licensed product may be developed (essentially encouraging development of cheaper versions) but with exceptions one of which is for countries with the ability to sell a generic version in the major markets (e.g., China, Brazil, and India) (essentially making the commitment meaningless);

-to negotiate licenses that “draw on” (why not “include”?) “strategies” (“terms”?) like:  no or low royalties on sales in low-income countries, the right to license others who may be willing to create products for low-income markets if the original licensee does not, required diligence in the development of products (for low income countries?), and “appropriate pricing;” and

-to “support the development” global health technologies at their institutions by accepting research funding from not-for-profits and “appropriate” for-profits “without regard to the economic value” of the funding (does this mean Harvard is giving up its 85% overhead rate on these contracts?).

The signatories also agree to the general obligations of developing measures for evaluating their efforts, sharing their experiences, encouraging others to adopt the Principles, and review the Statement every two years.

Obviously the Statement is well-intentioned what will be its practical effect on the much-needed invention and dissemination of new ways to diagnose and treat the diseases afflicting most of the world’s population?  Unfortunately, very little, and for several reasons:

-being a statement of principles, it provides only non-binding guidance;

-it has major exceptions (noted above) that allow patenting and licensing as usual;

-it presumes that a TTO is licensing a product which is extremely rare (most licenses are for technologies leading to products) so the TTO’s leverage in negotiating the recommended terms is limited;

-the likelihood that a licensee (especially a start-up company) will accept the recommended restrictions (in addition to dealing with the TTO’s typical over-valuing of its technology) is low; and

-the patent coverage for products or technologies relevant to global health is the least important factor in their commercialization and use (evidence that they may work is most important).

So what should the TTOs and their universities and research institutions be doing?  My recommendations are:

-rather than granting exclusive world-wide licenses, license non- or semi-exclusively by indication, geography, price, or national origin of the proposed licensee;

-grant multiple time-limited, no-cost options to interested parties to generate competition and proof-of-concept data;

-seek out entrepreneurs interested in creating no/low-profit ventures (tap alums if needed) as opposed to chasing venture capital firms (who aren’t interested in global health markets anyway);

-pool patents with other institutions to create patent packages needed for product development and make them easily accessed through standardized licenses;

-stop patenting methods for drug and vaccine discovery or at least stop licensing them exclusively;

-provide internal funding for proof-of-concept research on global health-relevant technology (some universities already have technology development funds to add value to early-stage research);

-review all existing licenses for global-health-relevant applications and try to force renegotiation in line with the Principles;

-be aware that, in addition to the “neglected diseases,” chronic conditions like cardiovascular disease, diabetes, and cancer are major contributors to mortality in low-income countries and therefore negotiate licenses for technologies for these indications in line with the Principles; and

-dissuade their administrations from measuring TTO performance solely on revenue and persuade them that licensing for social good is a duty of a publicly-funded university.

I thank AUTM, the authors, and institutions for drafting and endorsing the Statement, but we have got a long way to go to putting a meaningful fraction of our billions of academic research dollars to work in addressing global health.