THE GENERIC DRUGS DEBATE

Pharmaceutical companies and grassroots health activists are at loggerheads over the desirability and mechanics of making cheaper generic drugs available as an alternative to expensive patented medicines. As Jonathan Fryer explains, this is not a black-and-white issue.

It can take up to 10 years, at a cost of hundreds of millions of dollars, to develop a new drug; this is why multinational pharmaceutical companies are so keen to be awarded water-tight patents lasting a decade or so for their finished products. By operating in a temporary monopoly environment, these companies can reasonably expect to recoup their investment costs and turn a profit. But a less salutary outcome is that new medicines and treatments are often priced beyond the reach of poorer people in many parts of the world.

Accordingly, many health professionals and community groups have been arguing for years that patients should have greater access to ‘generic’ drugs, which use the same ingredients to the same effect as patented remedies but at a fraction of the price. In the emotive language employed by some campaigners, this has become a matter of life and death for the millions of people currently excluded from the healthcare that they need.
The World Health Organisation (WHO) defines a generic drug as ‘a pharmaceutical product, usually interchangeable with an innovator product, that is manufactured without a licence from the innovator company and marketed after the expiry date of the patent or other exclusive rights.’ A number of drugs companies complain that in some less developed countries – such as India, where patent laws are relatively weak – they are suffering unfair competition from the manufacturers of these generic alternatives.

Recently, Gilead Sciences, a US pharmaceutical company, has been involved in a legal struggle in India to prevent the manufacture of non-licensed ‘copies’ of its anti-AIDS drug, Tenofovir (marketed under the trade name Viread), by Cipla, an Indian company which has become a world leader in the manufacture of low-cost, generic antiretrovirals. Although Gilead has already entered into licensing deals with ten other local pharmaceutical firms, Cipla has filed a pre-grant opposition to Viread with the Indian patents office – a move that, if successful, would render Gilead powerless to enforce its ‘right’ to profit from the generic manufacture of Viread in India. Dr Yusuf Hamied, Cipla’s Director, is something of a living legend in development agency circles, though Richard Sykes, the head of giant pharmaceutical multinational GlaxoSmithKline (GSK), has reportedly dubbed him ‘a pirate’. Not to be outdone, Dr Hamied retorted that GSK, in charging such high prices for its potentially life-saving drugs, is ‘a global serial killer’.

India is something of a battleground for generic producers and pharmaceutical giants because of the sheer quantity of generic medicines being made there. Two years ago, another US company, Novartis, fought and lost a case aimed at obliging the Indian government to protect domestic markets by tightening its patent laws. Both Indian and, increasingly, Chinese generic drugs are extending their reach, not only in the developing world but also in the home countries, such as Britain and the United States, of some of the biggest pharmaceutical companies.

This trend has prompted the US Food and Drug Administration (FDA) to increase its monitoring of Indian and Chinese manufacturers. ‘As the manufacturing goes to China and India, the risk to human health is growing exponentially,’ said Brant Zell, a former chairman of the Bulk Pharmaceuticals Task Force lobby group, when he was interviewed in a 2007 article in The Washington Post. He argued that infrequent follow-up inspections in the big two Asian countries, combined with a burgeoning demand for drug imports in the US (valued at over $700 million each year from China alone), ‘greatly increases the potential that consumers will get products that have impurities or ineffective ingredients.’ In response, an executive for Shanghai Pharmaceutical, one of China’s largest drugs companies, insisted that medicines exported to the United States already comply with FDA standards, and went on to describe some US trade associations’ advocacy of more stringent quality controls on imports as a form of protectionism.
For cash-strapped health authorities such as Britain’s National Health Service (NHS), the attraction of generic drugs is self-evident. According to the British Generic Manufacturers Association, while almost two-thirds of medicines dispensed by the NHS are generic, they account for less than 30 per cent of the total NHS drugs bill. An investigation by the European Commission in Brussels concluded that generic drugs are on average 40 per cent cheaper, two years after market entry, than their original patented counterparts.

The Commission moreover accused some drugs firms of using ‘a variety of instruments to extend the commercial life of their products without generic entry as long as possible.’ In July this year, the EU launched an antitrust investigation of Les Laboratoires Servier, a French pharmaceutical company, over allegedly unfair ‘patent settlements’ – whereby an innovator offers to pay a generic manufacturer in consideration for latter delaying production after a patent has expired – as well as its tendency to create ‘thickets’ of patents surrounding its drugs.

Generic drug production has found strong political support in several parts of the world, perhaps most dramatically so in Brazil. Faced with what at the time was one of the highest rates of HIV/AIDS infection outside sub-Saharan Africa, Brazilian President Luiz Inácio ‘Lula’ da Silva seized the bull by the horns and, in 2007, authorised the import of a generic version of Efavirenz, an antiretroviral drug, without obtaining the patent-holders’ consent. In a ground-breaking programme that is being hailed as a model for other parts of the world, Brazil has since halted the rise of HIV/AIDS mortality by distributing the generic antiretroviral for free. Most governments in Africa cannot afford to be so generous, but mortality rates among their peoples would be similarly reduced if imported generic drugs were made available at affordable prices. (These drugs must almost always be imported, as most countries in the world are not able to manufacture pharmaceuticals themselves, owing to limitations in their industrial capacities and/or domestic markets. Interestingly, one small country that has managed to develop an export-led pharmaceuticals industry is Israel).

As far back as 2001, at a ministerial conference in Doha, Qatar, the World Trade Organisation (WTO) astonished some of its more hostile critics by declaring that developing countries should be allowed to import, by way of compulsory licence, generic versions of patented medicines in order to tackle serious and epidemic diseases such as HIV/AIDS, tuberculosis and malaria. In effect, this was a declaration that public health should take precedence over intellectual property rights – a contention that big pharmaceutical companies continue to take issue with, for understandable (if controversial) commercial reasons. We are talking about billion-dollar businesses here; many of which are prepared to rack up enormous legal costs in defending the integrity of their patent rights. But they don’t always succeed – in 2005, Astra Zeneca, a UK-based company, was fined 60 million euros by the European Commission for blocking cheaper rivals to its heartburn and ulcer pill, Losec.

The size of some multinationals, as well as their legal and political clout, has encouraged NGOs active in promoting generic drugs to portray theirs as a David versus Goliath struggle. Oxfam was one of the first in the field – others, such as Christian Aid, have since joined in – to contend that access to medication should be seen as a basic human right. The huge discrepancy between access in the industrialised and developing worlds is obvious – for example, Africa, notwithstanding its acute health problems, only accounts for about one per cent of current global spending on medicines.

Some multinationals have instituted differential pricing, charging far less for their drugs in developing countries. But health professionals and NGOs are still pressing for more to be done. In early September, 15 organisations, ranging from the Stop AIDS Campaign to UNICEF, called on GSK to join a ‘patent pool’ being put together by Unitaid, an international drugs purchase facility, to improve access to drugs for victims of HIV/AIDS and/or other serious diseases in the Third World. According to Alan Smith of the Stop Aids Campaign, the Unitaid patent pool would be the ‘best hope of increasing access to life-saving medicines on the scale that is needed to achieve universal access.’       Stung by some of the comments made by NGOs about his company’s record, Chris Strutt, Senior Vice-President for Public Policy at GSK, wrote in a recent letter to The Guardian that although GSK had not yet made a decision regarding the proposed patent pool, it has ‘offered all [its] AIDS medicines to the world’s poorest countries at not-for-profit prices since 2001, and [has] granted eight voluntary licences to African generic companies to enable them to make versions of [its] AIDS medicines.’

SINISTER VIRUS OF FAKE DRUGS

T Julian Harris describes how taxes and corruption make business impossible for legitimate medicines but open the field to counterfeit dealers. One predictable consequence of the swine flu outbreak has been a rash of devious websites offering fake cures. This is merely the latest adaptation of a swinish global counterfeit drugs industry which, like the flu virus, cleverly yet sinisterly mutates to exploit the most vulnerable patients.

‘It has been seen time and time again that following a global threat or natural disaster, criminals exploit the situation for their own financial gain and in this situation they are searching to take advantage of people’s fears about their health,’ said Jean-Michel Louboutin, Interpol’s Executive Director of Police Services, in April this year.

A study by the US Centre for Medicines in the Public Interest predicts that global sales of counterfeit drugs will be worth US$75 billion by 2010, nearly double the figure in 2005. All parts of the world are affected, with Africa the prime victim and the Middle East increasingly used as a hub for trafficking. (According to an EU report, Dubai is the world’s third-largest shipping hub for counterfeit drugs – many of which are manufactured in India – in transit to Europe).

The common reaction is to call for government action and the common response is a clampdown: more laws, more regulation and more inspections.
We should, however, be wary of this approach for one main reason: health sectors throughout the world are particularly susceptible to corruption. The Global Corruption Report 2006 noted how officials frequently demand ‘fees’ for approving products and how ‘counterfeit or other forms of sub-standard medicines may be allowed to circulate.’ One example of this worrying trend recently emerged in India. In the state of Orissa, a strong drugs controller was supposed, with the help of a team of drugs inspectors, to procure quality medicines for the state health department. Sound robust? Sadly, it transpired that inspectors and officials of the drug controller were in league with counterfeit drug producers and had supplied fake medicines to public hospitals.

This is no isolated case. Health economist Dr Maureen Lewis observed so many instances of corruption while working for the World Bank that she has written several publications based on her experiences. Increased regulation often does little more than increase opportunities for corruption, playing straight into the counterfeiters’ hands.

So what can governments do? In short, they can stop making the problem worse. Many of the root causes of drug counterfeiting are exacerbated by government interference, especially price controls and taxation.

Price controls may aim to make drugs cheaper but they can have dire consequences. They deter companies from registering their medicines in a market, hence reducing competition – the best means of keeping prices down in the first place. Furthermore, purveyors of the best medicines may well have the highest costs (due to their high manufacturing standards) and therefore be the most deterred, while producers of cheap, sub-standard drugs and fakes will be encouraged to enter the market. An article in the British Medical Journal on Indian price controls reported that ‘drugs became unavailable … and a black market – as well as spurious and counterfeit drugs – flourished.’

Price caps in South Africa resulted in the closure of at least 103 small, rural pharmacies that needed to charge more than large, urban shops in order to survive. Previously, the rural poor could choose whether to pay more locally or travel into the cities for cheaper drugs, but now they must travel – or buy them locally from pedlars who sell fakes.

In addition, one must ask why governments impose price controls while simultaneously driving up medicine prices with taxes and tariffs. A World Health Organisation report in May 2006 stated: ‘Taxes and duties levied on medicines, as well as the mark-ups applied, frequently contribute more to the final price than the actual manufacturers’ price does.’ The previous year, a study had found that government-imposed measures such as taxes and tariffs add a world average of 68.6 per cent to the cost of imported pharmaceuticals. By artificially driving up prices, taxes create an even greater opportunity for illegal, unregistered drugs to undercut high-quality versions.

Counterfeit drugs are a growing worldwide threat to health –  a threat that is only being worsened by government policies. Instead of declaring periodic crackdowns, governments must back permanent vigilance and the rule of law. They must also reduce market distortions that help the counterfeiters, such as price controls, taxes and tariffs. Your life may depend on it.

BETTER SPENDING ON AIDS

OPhilip Stevens argues that strengthening health systems overall will have a greater impact both on the prevention and treatment of AIDS and HIV.

The 5,000 researchers and activists making their way back home from July’s International AIDS Society Conference on HIV Pathogenesis, held in Cape Town, were in a fighting mood. For the last 10 years, their cause has been the single biggest beneficiary of the tens of billions of dollars spent each year by wealthy countries to help Africa. This river of money is now under threat as donor governments begin to suspect that drowning a single disease in cash could be doing more harm than good to Africa’s fragile domestic health care systems.

For most AIDS activists, this shift in thinking is unconscionable. After years of campaigning, they had convinced the world that AIDS was an exceptional disease that posed an existential global threat and therefore demanded an exceptional response.

This campaign gave birth to one of the biggest political mobilisations in recent history. Governments sat up and took note. New NGOs started up by the hundred. In 1996, the UN took the unprecedented step of creating a dedicated agency for the disease, UNAIDS. Since 2003, AIDS programmes have tripled their financial support.

Nevertheless, it is increasingly clear that the leaders of the AIDS ‘industry’ have not been good custodians of this largesse. An early strategic blunder was the prioritisation by the UN of treatment over prevention, a path also followed by President Bush’s Emergency Plan for Aids Relief (PEPFAR). With the lion’s share of funding going to buying and distributing anti-retroviral drugs for those already infected, not enough attention was paid to educating people about the behaviours that transmit HIV. This led to far more infections than would otherwise have been the case and therefore more people to treat at greater expense — a permanent vicious circle.

Furthermore, much of this treatment money has been badly spent. One study presented in Cape Town showed that while global spending on AIDS has climbed to around 60 per cent of the level needed to care for all HIV sufferers in the developing world, only around 30 per cent of them are actually receiving treatment. This outcome was entirely predictable, considering the parlous state of the health care infrastructure of the worst-affected countries, such as Malawi or Zambia.

More egregiously, many AIDS activists have until recently  systematically mischaracterised the true nature of the pandemic, leading to much wasteful spending. Initially they claimed that everyone, everywhere — young or old, straight or gay, male or female – was at equal risk. Professor Jim Chin, a leading expert on AIDS epidemiology, describes this as a ‘politically-correct myth’ propagated to ensure that no HIV sufferer is stigmatised. This myth has resulted in billions being wasted on AIDS prevention messages targeted at people at negligible risk, such as Western European schoolchildren. In reality, HIV has largely confined itself to particular populations (sex workers, intravenous drug users and men who have sex with men) everywhere except sub-Saharan Africa, where the pandemic is more general for a variety of reasons specific to those societies.

UNAIDS also exaggerated the numbers infected worldwide in order to keep the disease (and the money) high on the political agenda. In 2007 the organisation was embarrassingly forced to revise down its estimates by up to 50 per cent for dozens of countries.

Other critics have focused on the damage to overall health systems done by treating AIDS as an exceptional disease. Roger England, of the Health Systems Workshop think-tank, points out that dedicated AIDS funding has created parallel health systems within countries, sucking in scarce trained personnel and resources from other activities and thus undermining the overall provision of healthcare.

It is now clear that HIV/AIDS is not the global ‘emergency’ the AIDS lobby claims it to be. While it remains a serious problem in southern Africa, research shows that the rate of infection is declining and the global peak in new infections passed in the mid-1990s. Yet AIDS still receives a quarter of all health aid, despite accounting for less than four per cent of deaths in developing countries.

Fortunately, donors are beginning to recognise that an AIDS-centric approach to spending is not an effective way to improve general health in poor countries – a goal better achieved by strengthening overall primary care, as provided by doctors and clinics. This makes it easier to deliver cost-effective interventions, such as vaccinations, while also better integrating HIV treatment into the wider health system.

Last year, the UN established a Taskforce on Innovative International Financing for Health Systems. In May, its report argued that strengthening health systems should henceforth be the priority – a change of thinking that is long overdue.

Predictably, perhaps, advocates of this fresh approach are under attack from the AIDS lobby.
At the Cape Town conference, Stephen Lewis, the former UN Envoy on AIDS, accused them of ‘naked bureaucratic envy’ and of wanting to pit different diseases against each other. Donors should not let such vituperative rhetoric derail them as they strive to improve health for everyone, not just a few.