Important Terms and Laws:
Parallel Imports (PI
in table on costs) - are legal imports into a country through unauthorized
distributors. "Parallel importers find the national markets where
goods are cheapest, and import them into countries with higher
prices." Several pharmaceutical manufacturers oppose parallel imports
because they set different prices for different geographic areas. Prices
in the US, for example, are often higher than those for Europe, so European
import-export firms could buy and then make a profit re-selling them in the
US. Significance: using an example from the chart above, Spanish
pharmacists could buy Clozaril from Novartis for $51.94, then sell the drug
back into the US at a higher price (maybe $299), for a tidy
profit.
Exhaustion of Intellectual
Property Rights, also known as "The First Sale Doctrine" -
Basically the doctrine says whenever a good protected by patents, copyrights,
or trademarks is sold, then the owner of the goods has realized the
benefits of the protection. Those rights are "exhausted" at the
point of first sale. That "first purchaser" of the good is free to resell the
good wherever he wishes, even if he is competing against the original producer. The
exhaustion doctrine has received the blessing of the European Court of Justice
(Merck v. Stephar, 1981) and the Supreme Court of Japan. The WTO rules, specifically the TRIPS
accords, Article 6, permit the "exhaustion doctrine." Countries
make their own laws on whether to permit parallel imports--if they do, they have
ruled in favor of "Exhaustion" or "First Sale"
doctrine. Pharmaceutical firms object to the Exhaustion Doctrine (and
Parallel Imports), and lobby vigorously against both.
Territoriality
Principle of Intellectual Property: Individuals and/or firms must
obtain patent, trademark, copyright in each country of the world where they
wish protection, oftentimes paying high fees to each country. Each
country has its own rules granting trademark, copyright or patent
laws. The argument made by some is that parallel imports violates the
protection the firm or individual has obtained by registering and paying for
the patent, trademark, copyright. Treaties and other international
conventions have been silent on "parallel imports;" courts,
both domestic and international, have supported freer trade, and not the
territoriality principle for sales.
Proprietary
Drugs - refers to drugs protected by patent. They can only
be made by the manufacturer or a specific licensee. In the US
patent protection lasts 20 years, and covers the end result; only
chemical formulations (not natural products) can be patented in the
US. Other countries set years, and protection differently.
- Germany, for example, permits patenting of
natural herbal products. Pharmaceutical firms have rigorously
tested the safety and efficacy of herbal preparations. (US
pharmaceuticals and herbal firms cannot gain patent protection, thus do
very little testing.)
- India has a 5 year "process"
patent. If an Indian pharmaceutical firm can figure out a
different way to make a drug, they can do so quite legally. The
"end product" cannot gain protection, just the way it is
made. Even so, five years is very short time.
Bolar Amendment -
US law, recognized and accepted by the World Trade Organization, that allows
manufacturers of generic drugs to prepare in advance to enter a market after
a patent expires. (Of course, the Congress can extend a patent for 2
or more years.) The Bolar Amendment is seen as a minor check on the
power of patent holders.
Compulsory Licensing
- Governments can override patents for emergencies, or in cases of
public interest or concern about anti-competition. The provision is
found in Article 31 of TRIPS (International Agreement on Trade-Related
Aspects of Intellectual Property Rights). The government can assign a
firm a license to manufacture a drug; that firm must pay the
patent-holder a royalty, and must use the drugs primarily in that
country. The patent holder, of course, still retains right to manufacture
and distribute.
Health
Registration Data: Exclusivity for Regulatory Approval -
The US regulation that permits companies who register new drugs with the FDA
(Food and Drug Administration) five years of exclusive rights to use the
scientific data that shows the safety and efficacy of the drug.
The period of exclusivity--which ensures a monopoly for sales and clinical
trials--begins with the date of drug approval by the FDA. The
protection "uses regulatory barriers concerning health registration
data to protect the drug from competition." Generic drugs
cannot use the data developed on safety and efficacy; if they are to
sell their product they must make costly independent studies.
Bristol-Myers-Squibb is extraordinarily active in trying to get South
Africa, Canada, Netherlands, Australia, Indonesia, Pakistan, China, Turkey,
Argentina, Thailand, and other countries to adopt a similar rule; the
goal is to establish an "international norm" for exclusivity for
regulatory approval. Thus far, the rule applies only in the
US.
Bristol Myers Squibb did not invent
"Taxol" or discover its cancer-fighting attributes, so it cannot
obtain a patent. The US
government did so, and even sponsored and paid for the clinical data for
FDA approval. Love says BMS prices Taxol "excessively" and expects sales of $1
billion in 2000. BMS charges wholesalers almost $5 per
milligram; BMS acquires Taxol in bulk from a contractor such as
Hauser Chemical for only $
.25 per milligram. BMS is trying to get exclusive rights to sell the
drug for five years using the health registration data provision.
Some call the US rule an example of "corporate welfare." Using
this same rule, BSM also gained monopoly status on Vides (Didanosene-ddl)
which was developed by the US National Institutes of Health, and Zerit
(Stavudine-d4T) which was invented at Yale University. The latter
had sales of $244 million in 1998, according to Panos. BMQ's
stockholders profited by a 43% return on their shares in 1998;
Love examined IRS data to show 1997 research and development costs for all
drugs was only 7.4% of sales. Examples could also be given for
practices of other firms.
Compulsory
Licensing of Clinical Trial Data is the opposite of "Health
Registration Data" provisions. The term means that when a firm develops and tests a
drug, they must license others to use the data generated which shows safety
and effectiveness. For example, generic manufacturers of HIV drugs
would be able to obtain a license from the original manufacturer--not to
make the drug, but to use the data which shows its safety and
efficacy. The generic firm must show that its product is
"biologically equivalent" to the approved drug. Love lobbied
the South African Government to adopt this policy. (Otherwise the
generic firm would have to make their own studies to generate the data,
which would be very expensive.)
Donation:
Manufacturers donate drug stocks for free, within the "use-by"
date, on a planned, regular basis.
Import Duty:
Some states fund the government through taxes on imports, which are far
easier to collect than sales taxes or income taxes. (In Third World
states, with low literacy, inadequate transportation and banking, many
states have no income tax.) Some have suggested that import duty be
eliminated for pharmaceuticals. In Zambia, for example, 5% duty
is placed on imported drugs, thus driving up expensive HIV drugs even
more.
Pooled
Procurement/Negotiated Procurement: Several small countries
negotiate as a block for bulk purchases. Ex: Caribbean.
Preferential
Pricing: offer lower prices to poorer countries (higher
prices in wealthy countries subsidize prices in poor countries.
Registration
fees: Many states have laws requiring new drugs to be
registered. In April, 2000, the cost of registration fee can be as
high as $12,000.
Therapeutic
Value Pricing - regulation of prices by a government-sanctioned
body. (Australia: independent body sets price the government will pay
for a new drug based on the therapeutic value compared to existing
drugs. If substantial benefit, will set a higher price. Then
government negotiates with manufacturer to get that price. If no
agreement, the drug does not enter the country. If the manufacturer
expects significant sales, it might accept a lower price to get the market.)
Value-Added Tax
(VAT) - many countries, including France, raise money for the
government by adding a tax to each stage of production--think of it as a
sales tax added at each manufacturing stage and becoming part of the
price. In France, 40% of the final price of most goods is the
VAT. South Africa mandates a 14% VAT on both pharmaceutical drugs and
condoms.
Debate: South Africa vs.
Pfizer, Inc.
Below is the open, public account of the
friction between South Africa's Ministry of Health and the US pharmaceutical
firm, Pfizer, Inc. Students will have to use
other information on this web site to develop arguments (pro
and con) that can't be spoken openly because they would seem to be
derogatory, insensitive, or demeaning. Neither countries nor
firms can afford to insult or denigrate others. Since you are neither
a government or a corporation, you can present a more thorough
analysis than the "public" one given
below.
| Group "Pfizer"
are to make a realistic argument supporting Pfizer's stance, with
supportive evidence. |
Group "SouthAf"
will make a realistic argument supporting the South African
position, with explanation/evidence. |
- Each group can decide how to
present the data (what roles members will
play).
- Each group can draw up a
one-page outline (just key words) for the
Document-Camera
- all letters must be at
least one inch high,
- printed with a wide felt-tip
(magic marker) pen (no ball points)
- Leave an inch margin (now
you see why the rule is "words" not
phrases!).
- You can use PowerPoint (Arial
Bold, or Arial Black):
- print off the slide and put
it on the document-cam.
|
The Public Account of What
Happened (taken from Wall St. Journal, June 21, 2000,
Section B, p 1.
Pfizer, Inc. offered to give (Donation)
South Africa "a powerful and expensive drug for treating a deadly
AIDS-related infection." The anti-fungal drug Diflucan treats a
lethal form of cryptococcal meningitis which strikes people who are HIV+,
and can kill within months of the infection.
- Daily doses of Diflucan must be taken for
life, and
- the daily dose is priced between $4.50 -$9
in South Africa.
AIDS activists and French based Doctors
Without Borders (nonprofit NGO--Non-Governmental Organization) petitioned
Pfizer in public demonstrations and letters to lower the price (Preferential
Pricing). A point of interest: Pfizer's patent is not
recognized in Thailand (see Proprietary),
and generic manufacturers there sell their version for less than $ .60 a
day. If Pfizer could not lower the price, they asked the
firm to at least allow South Africa to import the drug from generic
drug makers, because of the health emergency. (10% of the
population, or 4.2 million are said to be infected with HIV.)
Legal counsel to South Africa's Health
Minister says they may reject the offer:
- Donation is only for a period of two years;
originally no time limits were indicated.
- Concern that government program--which
calls for considerable time and money to set it up-- can't be
sustained beyond the two years. (Pfizer's patent expires in 2
years; the gift may be an effort to instill "brand
awareness" among S.A. physicians.)
- Conditions of use in South Africa set by
Pfizer:
- Who can use the drug
- Only to treat meningitis (80% of
infected) and not other more common fungal
infections.
- Where patients must be treated
- Only for treatment in government
hospitals. Why not in private
hospitals, clinics?
- How patient-recipients are diagnosed
- Patients must be diagnosed by use
of a spinal tap, which draws fluid from the spine. This
would require special test kits and specialized physician
training. Nurses, med techs, and others would not be able
to take a spinal tap.
- How the drug will be distributed
- Only in South Africa's
government hospitals that can certify that they cannot afford the
price of the drug. Why not to
private clinics and hospitals--and in extreme cases to
neighboring countries?
- How the drug's use will be monitored
- Rigorous monitoring with regular
reports on individuals taking the drugs to evaluate effectiveness of the drug.
Is Pfizer
intending to use the gift as a clinical trial in Africa, and to
use results accordingly?
Pfizer replied that they
- intended to evaluate results of program in
two years; if it is working the gift might be extended in South
Africa and begun in other African states.
- demand a program which will ensure proper
use of the drug
- many anti-fungal drugs exist, but
Diflucan is the only medication that prevents death due to the
life-threatening cryptococcal meningitis
- insist on measures to prevent diversion
- Monitoring with individual records,
submitted regularly to Pfizer
- Tablets rather than capsules will be
provided
- will not lower the price, because other
countries will make similar demand
- Lower price does not mean medication
will get to large numbers of people
Debate:
Botswana's Choices
To help Botswana cope with the AIDS problem,
Bill and Melinda Gates Foundation has offered $25 million and Merck has
offered free drugs. Before the money and drugs will be sent,
Botswana must develop a plan for its use which needs approval of
Gates/Merck.
You are the staff for the Minister of Health in
Botswana, and must draw up a plan (which he will probably adopt).
Obviously the plan must be acceptable to Gates/Merck as
well.
Students will have to use
other information on this web site to develop arguments to
support your choices. While your formal report to the Minister of Defense
cannot seem callous, unethical, or insensitive, you can be perfectly frank
and politically realistic when explaining your choices to the Minister in
person. (Click for an optional overview of Botswana.
)
| Group
3 - Part A: Botswana
has limited medical facilities so that a great deal of the Gates money
must go to renting/constructing buildings for clinics, out-patient
facilities, laboratories for testing, hiring doctors, nurses, lab
technicians, and training them. Includes buying generators and
refrigerators, microscopes $20,000 each), etc. This is
"infra-structure,"
How much should be spent on this
infra-structure?
|
still Part
A -A logical
question: how much should be spent on
- Prevention (Educational
campaigns, ads for use of
condoms, purchase & distribution of condoms, infant formula
for HIV+ mothers, etc.)
- Treatment and care
- HIV/AIDS
- Opportunistic Infections
- Orphanages for those whose
parents have died of AIDS
How much on each main category?
|
|
|
Group 3 -
Part A (4 members of group): Given the
amount you have chosen to spend on treatment, you may be able to
provide for two of these groups (both HAART and opportunistic
infections; this is an ambitious program.) Which will you choose and
why?
- 200 Orphans who have HIV, whose parents died of
AIDS, and live in orphanages, Ages 1-15.
- 4000 Pregnant women and babies in
hospitals in cities
and towns (one dose at delivery for Mother and one dose for baby
at 1 week)
- 400 Command Elite of Botswana (political,
economic, social), treated in existing facilities, most in
Gaborone.
- 300 educated, urban employed middle-class
with families, treated in existing facilities (100 in Gabarone, 25
in each town)
- 250 Miners in the diamond mines
(critical industry to earn
foreign exchange) in new clinics at the mines
- 100 unemployed, mid-school education,
who cannot afford drugs, in 5 cities, treated in new clinics (20
each in Gaborone, Tshabong, Mahalapye, Bobonong, Francistown)
- 250 Prostitutes divided among cities
of Gabarone, Francistown, Tshabong, and Bobonong)
|
Botswana Savings Bank in capital city of
Gaborone |
Group 3 -
Part B: Two of you are the Minister of Health and have
been persuaded by the recommendations given. As Minister of
Health, what key arguments will you make to Gates
& Merck to convince them to approve your program and start sending
money?
(Others in class will play the role of
Gates & Merck.)
|
- Your group can decide how to
present the data (what roles members will
play).
- You can draw up a
one-page outline (just key words or numbers) for the
Document-Camera of your choices
- all letters must be at
least one inch high,
- printed with a wide felt-tip
(magic marker) pen (no ball points)
- Leave an inch margin (now
you see why the rule is "words" not
phrases!).
- You can use PowerPoint (Arial
Bold, or Arial Black):
- print off the slide and put
it on the document-cam.
- The class expects
a full and frank VERBAL explanation of your choices.
|
