Examination of Witnesses (Questions 760
- 779)
TUESDAY 22 APRIL 2008
Dr Harvey Bale Jr, Mr Guy Willis, Dr Stefanie Meredith,
Dr Ryoko Krause and Dr Eric Noehrenberg
Q760 Baroness Whitaker:
So the authorities can pick it up?
Dr Bale: Exactly, differentiation in boxing,
packaging and in the tablet itself. It has to be approved by the
regulatory authorities, of course, and it has to show the same
efficacy, it is the same product, we are not selling a product
to the Third World that we would not ourselves want to consume
in the First World. You still have to try to differentiate that
product along those lines, otherwise you get what we call parallel
trade and re-exportation of the product and the product is lost
to the supply chain.
Dr Meredith: I could, maybe, add something not
on the tier pricing but on the donated products. As Harvey mentioned,
there are four major drug donation programmes and all of these
donation programmes are long-term, the companies have committed
to donating the drugs for as long as needed, which is very different
from the small-scale donations to clinics and emergency relief.
When I worked in the Mectizan Donation Program, we did have problems
because the drug is extremely effective, it is very safe, free,
but it was not available on the market; and occasionally we had
massive diversions which had to be managed and managed carefully.
That is the same for our other drug donation programmes. What
you have to put into place are very careful distribution channels.
Once it has been nipped in the bud, there has to be good communication
about the fact that drugs are free and how to get them.
Q761 Lord Jay of Ewelme:
Could I ask a question about donations, to perhaps take one example.
What proportion, as it were, of the total drugs needed are donated?
In the overall treatment of the disease, how important is the
donation programme?
Dr Meredith: Mectizan or ivermectin for onchocerciasis,
right now more than 50 million receive treatment a year. When
we started the programme we estimated that there were some 18
million people infected with the disease, but as techniques improved
we discovered through better assessment methods and non-invasive
assessment methods that, in fact, the number of people infected
was far greater. The coverage is probably about 80 per cent of
the total who need it and the remaining 20 per cent are not eligible—they
are pregnant, under-age or ill. For Mectizan for onchocerciasis,
the majority are actually covered now.
Q762 Lord Jay of Ewelme:
By the donations?
Dr Meredith: By the donations. The drug is not
available to be purchased. It is under another label, other packaging,
as stromectol for other indications and for the First World market.
With lymphatic filariasis, the problem here is having funds. When
you have a free drug, it is not the drug that costs the money.
Boehringer Ingelheim, which donates Viramune, estimated the drug
was maybe about two per cent of the cost of people accessing healthcare.
For lymphatic filariasis, which is global, it is bigger than onchocerciasis,
only a few countries have really good programmes, because the
funds that are needed to distribute the drug are not widely available,
so it is not a lack of the drug, it is a lack of funding that
impedes progress.
Q763 Lord Jay of Ewelme:
It is the distribution network?
Dr Meredith: Distribution and healthcare infrastructure.
Q764 Chairman:
That is really to ensure that the drug reaches the person in a
state in which it can be used effectively, is that right?
Dr Meredith: Safe and effective, yes.
Mr Willis: As Stefanie has indicated, there
are certain diseases for which donation programmes seem to be
the most appropriate solution. The medicines that are available
are cheap, they are effective, they are relatively easy to distribute.
For those diseases that Stefanie has mentioned, you only need
to give one or two tablets once a year, say, and then you have
to go back and do it year after year. For the more complicated
diseases, like HIV/AIDS and Malaria, the pattern that we see is
you have new generations of treatments, they are much more sophisticated,
much more expensive, and in those cases the distribution model
seems to be through the tiered pricing that Harvey was referring
to. In the case of TB, the first-line treatments are old, well-established
medicines, the problem is that you need to take them for a very
long time and the problem is keeping patients on them. You go
into treatment, you start treatment and within a month or two
you start to feel much better and it is very difficult to keep
people coming back to keep taking the treatment, having to do
it every day in environments where it may be difficult for them
to get to medical facilities. The WHO has recommended treatment
which is Directly Observed Therapy, where you have to be in the
presence of a health worker when you take the medicine, which
is difficult to implement in countries where there is poor transport
infrastructure and few health workers.
Q765 Chairman:
The effects of the treatment are sometimes unpleasant, is that
right or not? Somebody said to us they were unpleasant. That is
the MDR one.
Dr Bale: With sleeping sickness, for example,
the eflorithine and some of the other treatments are difficult
to administer and some of the alternatives in the sleeping sickness
regime are even worse. One of the issues we have is to try to
find better formulations, easier to take, also fewer tablets.
I am thinking of Coartem, where there is now a formulation where
children will take a cherry-flavoured tablet which is a lot more
palatable than the existing Coartem tablets, which are rather
distasteful to children. That formulation is still in clinical
development.
Dr Meredith: It will be out later this year.
Dr Bale: So it has just finished.
Q766 Lord Desai:
As a professional economist, we always have a big debate about
patents. All economists believe that they are a restrictive practice
and, therefore, harmful. This is because all economists believe
in a free market and, therefore, patents must be wrong. Clearly,
that must be one of the big criticisms that you must be facing
because they do hold up the dissemination of medicine.
Dr Bale: As a fellow economist let me answer
that. Joseph Schumpeter was one who differed with that view. I
know the view though, I am a student of the Austrian school and
a number of the others. The question is the trade-off between
long-term competition in the case of innovation versus the short-term
grant of what was, I guess, 1625, the English Monopolies Act that
reformed the old royal monopolies into the innovative model that
was instituted for the so-called period of temporary monopoly
or temporary exclusivity. It is not just restricted to medicines,
it is also true in the case of biotechnology, environmental biotechnology,
et cetera, that if you do not have an IP patent system with a
so-called temporary period of exclusivity you will not deliver
the new medicines, new antibiotics and new biologicals. This is
why, during this period of time when the companies have the responsibility,
they are more than willing, as our document states, to work with
countries to make sure that the patent does not become a barrier
to access to medicines. This is one of the big challenges that
we have. We do think that over time the costs of clinical development
will change as a result of the growing presence in developing
countries of clinical trials, which are very expensive. If we
look at the total cost of developing a drug, which can range from
a couple of hundred million pounds to £500 or £600 million,
the greatest part of that cost is the eight to ten years of clinical
trial testing that the drug has to go through. It is a combination
of the direct cost of having these trials in place, typically
in developed countries, very expensive, and also the tied cost
of the money that is invested, simply what you do not gain in
interest or return on that investment that you put in as cash
outlays on clinical trials. Many developing countries, China,
India and others, are now working to improve their clinical trial
structures, which would significantly reduce many of these costs.
That is coupled with the growing competition globally in R&D.
R&D itself is a competitive model. It is interesting and changing
the way that the patent system affects the development of medicines.
It used to be thought, and some still argue, that a patent guarantees
you a profit. It is interesting that less than a third of the
products that actually come out recoup their own R&D costs.
The market is becoming extremely competitive, so that you have
a large volume of relatively innovative medicines that have been
developed over the last decade that will lose their patent status
this coming decade. The estimate (the current annual sales of
major, best-selling medicines who patents will run out in the
next few years) is in the order of US$70-80 billion (where the
R&D companies that developed these medicines will be exposed
to generic competition, which will significantly reduce prices
and companies' ability to recoup their total R&D costs—for
the medicines concerned and the lesser ones that struggle to make
money) that companies doing R&D will have to compete with
in the generic sector while at the same trying to recover their
costs. You are right on the patent model and I have watched both
of these arguments. Personally, and philosophically, I tend to
side with the Schumpeter argument, which is that the patent system
helps set up the creative destruction of what has gone before
through ideas and the genius of people that is applied to commercial
enterprise. That patent system has successfully done that, and
I think we owe a lot to the UK historically for instituting those
reforms over the years.
Q767 Lord Desai:
You were saying in the introduction that only one Indian firm
has joined.
Dr Bale: So far, because India—
Q768 Lord Desai:
Why are they all out? What do they not think they are going to
gain from joining you?
Dr Bale: If I could do a quick overview on the
Indian pharmaceutical industry as we see it. There are three associations
in India right now. One is the OPPI, which is our member, and
it includes Indian and international companies doing R&D.
By numbers of companies it is still a relatively small minority.
The other two organisations are IPA, the Indian Pharmaceutical
Alliance, which is an alliance of the more important Indian pharmaceutical
companies, like Dr Reddy's laboratory, Ranbaxy, et cetera; and
the IDMA, and there are some 7,000 Indian pharmaceutical companies
roughly speaking. There used to be estimates of up to 20,000,
but a good survey would indicate about 7,000. These are very small
operations and have no capacity to do R&D. The emergence in
2005 of India adopting patent legislation—and, although
many people criticised it, the fact of the matter is that India
has embarked on a process of applying patents in the pharmaceutical
sector—is now generating to varying degrees a large increase
in the R&D of Indian companies. There is no doubt it is the
right way to go because in the generic sector India faces enormous
competition that is now emerging from China. If Indian companies
do not move, as we would say, up the value chain of the R&D
away from the purely generic commodity business, they will be
in big trouble. The biggest leap was done by a relatively small
company, but a very dynamic and growing company, Nicholas Piramal,
that took the step of applying to IFPMA for membership. The others
are not quite ready for that, but a number of them are members
of our local organisations in a number of different countries,
although they are not ready for it on a global scale.
Q769 Lord Desai:
Because of some kind of entry barrier to joining you?
Dr Bale: No. A company that joins IFPMA has
only two or three commitments. First of all, they should adhere
to the IFPMA ethical marketing code on the advertisement or promotion
of medicines. This carries with it some restrictions that do not
apply to non-member countries. I was just reading a story that
a major company in India, is promoting a drug for certain types
of cancer which it has not been approved for. This type of activity
in IFPMA would not be permitted, it would be a clear violation
of the ethical marketing rules. The second commitment is to support
IP protection. The third commitment is to establish and support
good manufacturing practices. There are a lot of the companies
in the world which do not produce products to standard and do
not produce what we call safe and effective medicines. Those are
really the three commitments and they are commitments that are
political and moral quality commitments. Those are the only "barriers"
to entry.
Dr Noehrenberg: I am also an economist. One
often overlooked aspect on the question of patents and development
and competition is the fact that patents create competition. Let
us look at the AIDS field, for example. The first AIDS drug, AZT,
was developed back in 1987 and it is a good drug and still used
quite effectively. However, if that was the only drug on the market
and you do not respond to it or you develop resistance to it,
which unfortunately happens, you would be in very serious trouble.
Thanks to the patent system, other competitors have had to find
other ways of attacking the AIDS virus than by using AZT. If you
look at India, for example, that has been copying and copying,
they have a number of variations of AZT but none of them are innovative.
Thanks to the patent system, thanks to forcing competitors to
find different ways of tackling the HIV virus, we have about 26
different medicines on the market which are used in various combinations
to effectively treat HIV in a variety of countries. I can see
your argumentation, and we debate that quite often, but I think
the creation of competition, the creation of public health benefits
through the patent system is often overlooked but very important
as well. The question of therapeutic competition on a variety
of drugs also helps to keep prices down. If you look at the various
sectors of the healthcare system treating AIDS, heart disease,
cancer, et cetera, you will see that, although they are not exactly
the same drug and the patent gives you a so-called monopoly over
that particular drug and that particular indication, nevertheless,
if someone else develops a different way of attacking the problem,
the competition among those products helps to drive prices down.
Indeed, when India passed the Act in 2005, Minister Nath, the
Minister of Trade and Industry, said explicitly that he counted
on such therapeutic competition to continue keeping prices down
in India.
Mr Willis: A practical consequence of Indian
patent legislation is that we are now seeing products in development
for Tuberculosis and Malaria being done by Indian companies.
Q770 Chairman:
I would like you tell us a bit more, if you could, about your
relationship with some of the organisations, like GAVI on vaccines
and inoculation and WHO generally. You have talked about your
three As—availability, accessibility and affordability—and
my guess is that the affordability one is the one that there is
quite a battle over. I wonder how you see the relationship between
yourselves and those organisations out there saying, "Hey,
we want to get drugs down to people who need them in an affordable
way".
Dr Bale: Can we start with the vaccines, because
Ryoko has not said anything yet. You mentioned GAVI, and Ryoko
is responsible for that area.
Dr Krause: As Harvey has mentioned, all of our
vaccine members have committed to work with GAVI from the very
beginning. They started their work in 1999 to prepare for the
initiative of the GAVI Alliance to provide vaccines to children
in the least developed countries. What they have been doing is
supporting the infrastructure development of GAVI initially and
then contributing to provide the vaccines through a UNICEF procurement
system in large quantities of high quality vaccines for those
GAVI recipient countries. I think there is a lot of confusion
about what GAVI does. GAVI does not give vaccines, it focuses
on two vaccines for the time being. One is basic vaccines which
are used all around the world for measles, mumps and rubella.
Those are not procured by GAVI. GAVI is focusing only on the Hib
vaccines Hepatitis B vaccines and vaccines for Yellow Fever. They
are trying to expand their remit to new world vaccines coming
in, which are very high-tech innovative vaccines for Rotavirus
diseases, Diarrhoea and Pneumococcal diseases. Those are the new-area
that GAVI is starting to work on. Their success has been incredible,
it brings all the funders together and uses the money and resources
in a very effective way. The vaccine industries are at the table
as a Partner. That is the difference between how the other organisations
work with industry, because very often industry, although they
come up with extremely good products, high quality and innovative
products, is treated as somebody who is not contributing enough
to the developing countries. The GAVI model is ideal that all
industries can work together on an equal level as Alliance partners.
Q771 Chairman:
On all the other drugs that these organisations want to get down
to low cost, and an enormous amount of money is now going into
it, is there real tension between you and these organisations
about delivery of drugs at what they would regard as a price that
will deliver the right outcome to people on the ground in sufficient
numbers?
Dr Bale: I think overall that is a good perspective,
a reasonably accurate perspective on the issue. I would underline
the point that I would derive from Ryoko's comment, which is to
distinguish WHO, because when you ask who sits at the governing
table, industry does not sit there, we are a non-governmental
organisation. Who sits at the table are the Member States, the
Health Ministers and their representatives. Who sits in an organisation
like GAVI are the Global Fund and the Medicines for Malaria Venture.
When you take something out of the official UN system and create
a partnership, which is what these organisations are, you then
find the industry typically at the table. It is a very interesting
phenomenon which reflects the political structure and history
of the UN as a Member State-driven organisation. We are going
through debates right now with the WHO on who can sit in a room
at a meeting. At the end of the day I think that debate will not
matter too much, but it matters for the moment in the heat of
battle. That tension is there and it is a tension between an industry
that you started off by saying is in the private sector. There
has been no other model that has been developed that consistently
can deliver $50-70 billion in R&D over a long period of time
in a commitment like this, and companies that cannot go to the
capital markets and borrow the money have to raise the money through
venture capital and shareholders. They will not find a bank who
will lend them $100 million and say, "Here, go develop a
new drug". At the same time, it is an industry that has a
large foot in the public health sector, as you suggest, in which
we have to be able to justify how we deliver these medicines at
affordable prices, or in some cases when they are not affordable
what can be used to get them to the people who are disadvantaged
and without income. There is that tension, and it exists primarily
at the World Health Organisation, I would say, where the industry
is cooperating on a number of fronts. For example, Ryoko's group,
the IVS, the vaccine supply taskforce, is very closely involved
in preparations for avian flu. Here the problem is not the industry,
the problem is one of the Member States, specifically Indonesia,
which is threatening to upset the whole system of surveillance
and sharing of the virus samples that threatens public health
and is a violation of the International Health Regulations. We
are not always the bad guy. In fact, if you ask the WHO, the more
senior the person you talk to, the greater appreciation comes
about as an understanding of what industry really does. At the
same time there are a lot of people in the WHO who do not understand,
do not want to understand, what the private sector does, it is
not part of their world view. We deal with those people but sometimes
we deal with them a little bit more contentiously than others.
I am quite pleased. Over the years I think our relationship with
the WHO has improved. There has been a better understanding, particularly
under the last two Directors General, Dr Lee, who in an untimely
way died, and Dr Chan. I am hoping that will continue. We have
added a specific partnership function with Stefanie in the last
couple of years to try and reach out and work more with the WHO.
Q772 Chairman:
Does UNITAID help you in the way that they work?
Dr Bale: That is an interesting case. We are
not at the table with UNITAID.
Q773 Chairman:
Why not?
Dr Bale: At the beginning we had a lot of dialogue
with the French Government in particular, which was really the
driver of their airline tax on funding, which I understand is
yielding something in the order of €300 million a year.
Q774 Chairman:
It is a lot of money.
Dr Bale: We have known Philippe Duneton for
years, and Jorge Bermudez is the Executive Director. On a personal
level we are on good terms, but officially we are not there with
UNITAID.
Q775 Lord Avebury:
Would it be helpful if you were?
Dr Bale: I think so, and we would be more than
willing to on technical issues, on the issues where they are going
to be running into difficulties. A few organisations came about
rather quickly and UNITAID was a very quick development as a result
of Foreign Minister Douste-Blazy's efforts to sell UNITAID and
the tax. We went to meetings at the beginning with UNITAID and
I remember sitting in two or three of them. But, when it comes
to day-to-day interaction or participation, we are not anywhere
in the governing organisations, nor is our French industry counterpart,
who is very closely monitoring and following what is going on
there. We wish them well and we would like to help, but theirs
is kind of a smaller version of the Global Fund. In the case of
the Global Fund, we are formally at the table through the private
sector membership on the board, but the UNITAID organisation has
not placed that structure into existence.
Q776 Chairman:
You said they will run into difficulties. Why will they run into
difficulties and of what type?
Dr Bale: For example, with regard to WHO and
the vaccines field, there is very, very technical information
that needs to be delivered and a lot of misapprehensions and misconceptions
that we have been able to address by being in the room and discussing
the issues at the so-called Intergovernmental Meetings that have
taken place about what is the science of vaccines. In the case
of HIV/AIDS, TB and Malaria, which is UNITAID's remit, there are
going to be a lot of issues around the supply of the products,
questions of whether and how fast you can develop fixed-dose combinations,
which they would like to do, paediatric formulations, which is
on their agenda, and fixed-dose combinations on their agenda.
Industry can help with regard to the technical aspects of how
to develop and deliver such medicines.
Q777 Chairman:
Before I call my colleague in, is the implication that the sort
of problems you think they might run into could be quite serious
in terms of the failure of the drug regime or whatever?
Dr Bale: Probably even more so on the questions
of delivery and quality assurance as well as the formulation of
fixed-dose medicines.
Dr Meredith: I feel quite strongly about this.
One of UNITAID's major foci is development of paediatric formulations
where they do not exist already, and only the R&D, the research-based
pharmaceutical industry, can actually do that. If you are not
sitting at the table, there is not the dialogue. On the whole
question around quality assurance, we know that, if you take the
lowest price you are willing to offer, that does not give you
the quality that is going to be needed in the long-term. Eventually
UNITAID will need the private sector at the table. It is not just
for drugs but also for diagnostics. They will need us. At the
moment, to be honest, the reticence to having a dialogue with
the private sector is coming from a few of the people on the Board;
it is not the UNITAID people themselves, it is a few of the stronger
voices, some of the Member States. I understand that recently
they had an evaluation and assessment of a new partnership model
they have developed, where there have been questions about why
the private sector is not at the table, and perhaps this will
lead to some changes.
Q778 Baroness Whitaker:
Before I move on to generic drugs, returning to R&D I just
wanted to ask you whether your members stimulate manufacture in
countries where the need is greatest, bearing in mind that there
is so much research in the West and so much disease in the South.
If they do so, either through their own companies or other organisations,
what do they do about accreditation standards?
Dr Bale: There is some of this in the material
that will give you more detail than perhaps we have time to give
you today. GSK, for example, right out there in West London, has
been a good example of what we call technology transfer. They
very, very carefully select their partners in the case of these
medicines because their reputation is really on the line here.
The types of technology transfer that occur, when they make sense,
do make a lot of good sense. In the case of HIV/AIDS and GSK,
they have done technology transfer with Aspen Pharmaceuticals,
a generic company in South Africa, to help with the distribution,
because they feel that Aspen can better handle the distribution
in the SADEC region, the southern African area, not in South Africa
alone but in the regional context. Lilly, in selecting its partners,
has spent over US$70 million to develop these four partnerships
with four generic manufacturers going to India, China, Russia,
et cetera, to do that. Accreditation becomes a very important
issue and it is done at a very micro level. You have to send manufacturing
teams, and we have had some of this in the vaccine field. There
is quite a bit of discussion going on right now about how we can
build capacity in developing countries and in what way. Typically,
the companies will start off with a very basic technology transfer
agreement, which is called filling and finishing. Basically, you
are taking an active ingredient that comes typically in very large
drums, cartons, and sending these to the countries where they
are put into the final tablet form. If you start to develop the
skills with regard to that, then later on you can go to a more
refined operation. Some companies, like Merck, have developed
turnkey vaccine facilities.
Q779 Baroness Whitaker:
Have they saved money on R&D by so doing? Not yet?
Dr Bale: No. Typically the goal is not to save
R&D in the case of technology transfer agreements. Where costs
on R&D can be saved is where you can access procedures, subject
to the presence of ethical review boards, that allow the company
to do clinical trials in developing countries. In developing countries
you have many more patients who are available simply by virtue
of the fact that these countries have not been very well-served
because of lack of infrastructure, poverty, unaffordability of
medicines, and colloquially they are called naïve populations,
so you have naïve populations in many developing countries
that are very hard to find in Europe and are simply less expensive.
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