University-based approaches to ensuring access to medicines

Universities Allied for Essential MedicinesUniversity of PennsylvaniaSeptember 30, 2006

Caveats

• Striking the balance between complexity and accessibility

• Stop me!

• HIV exceptionalism

Defining the problem

• Adequate drugs and diagnostics simply do not exist for many neglected diseases

• Even where drugs and diagnostics do exist, prices in developing countries are often out of reach when the market is not competitive

• Even where prices are affordable, other barriers to delivery exist (human resources, infrastructure, management capacity)

Price Disparity Across Markets

AverageNVP regimen

EFV ABC ddI TDF LPV/r SQVRTV

$270 $330$705

$300 $250$460

$840

$120

$390$480

$1,580

$3,560 $3,540

$1,930

$540

1st-Line ARVs 2nd-Line ARVs

Low-Income Countries

Middle-Income Countries

Disparity driven largely by originator price discrimination; Potential prices are even lower than LIC prices for drugs that

lack robust generic competition

Consequences for developing countries

*World Health Organization. http://www.who.int/medicines/services/essmedicines_def/en/

0

10

20

30

40

50

60

70

DevelopedCountries

DevelopingCountries

Percentage ofTotal Public andPrivate HealthSpending

January 2006

ARV Price Comparison: 3TC+d4T(40)+NVP

Branded BestPrice

$562

Generic ListPrice

$290

$562

$192

October 2003

Branded BestPrice

Generic ListPrice

Effect of generic competition on market prices

Other problems associated with originator market exclusivity

• Untimely product launch– Heat-stable LPV/r

– Tenofovir

• Unreliability of supply in single-source situations

• Barriers to innovation

Pricing is not the sole concern with respect to patent-

protected market exclusivity: do not equate ‘access’ with

‘low prices’

Features of generic competition

Generic competition produces superior outcomes

Economics(cost advantages,

competition)

Innovation (eg, FDCs, pediatric

formulations) + + Quality

Potential university role in promoting generic competition

• Increasing rates of university patenting and licensing post-Bayh-Dole: roughly two-fold increase 1993-2003

• 4 of top 10-12 antiretroviral compounds were developed at universities (d4T, 3TC, FTC, ABC)

• Recent report found that 15 of the 21 drugs with the most therapeutic impact emerged from university research

• Out-licensing to biotech & pharmaceutical companies for downstream development creates moment of opportunity

Case study: Emory Univ. and Emtricitabine/Tenofovir

• Case study will be presented in greater detail tomorrow

• Emory developed Emtricitabine (FTC) and licensed the compound to Gilead for development

• Gilead linked FTC with Tenofovir (TDF) in a fixed-dose combination called Truvada that proved very successful

• Gilead and Royalty Pharma recently bought Emory’s rights to royalty stream for $525 million

TDF/FTC: Under-realized potential

Originator

$370

Potential generic

$140

Price comparison

$190

Leading first line regimen

• TDF is a wonder drug: - Low toxicity- Potentially dominant 2nd line drug in near term

- Potentially dominant 1st line drug in medium term- Potentially widely used prophylactic in long term

• Unbridled generic competition is essential for TDF (+ FTC) to realize full potential

Current situation in the TDF market

• Possibility of patent protection in key countries such as:– India

– Brazil– China

• Patent opposition in India

• Gilead voluntary licenses to Indian suppliers but with restrictions

Pricing will not be as low as is achievable due to restrictions, in market where every $ matters

Yet this outcome represents close to the best possible outcome in absence of ex ante university-pharma agreement

Ex post

Ex ante

Potential university approaches

Description of possible approaches

• Rely on potential for government march-in

• Address access concerns and seek exceptions post-launch and only upon activist pressure (as with d4T)

• University non-patenting in Low and Middle Income (LMI) countries

• Potential ex ante agreements with licesee (pharma or biotech): – Equitable Access License (to be discussed)– “Fair pricing” provisions– Provisions stipulating voluntary license program meeting certain minimum

standards– Other means of retaining some discretion for licensees?

Equitable Access License (EAL) overview

• Basic idea: Means of maintaining open door for robust generic competition

• Deals with three basic hurdles: patent, regulatory/data, and production capacity

• Major benefits include simplicity and ease of administration, maximum flexibility for generic producers, and wide coverage

• Leaves relatively little discretion to university or licensee: self-executing rights, covers all LMIs, no eligibility (eg, quality) restrictions on suppliers, etc.

EAL schematic: Cross-license and grant-back

EAL schematic: Notification

EAL schematic: Notifier improvements

4.Royalties flow to university and

licensee

Universities

Objections to the EAL

Known and suspected objections

• Lost revenue

• Lack of leverage/lost deals if individual universities adopt EAL alone; big disincentives to ‘first movers’

• Anti-trust concerns if universities move toward EAL in concert

• EAL-specific concerns:– Lack of discretion over licensed suppliers– Lack of discretion over companies– Limited discretion re: license terms

• Usual concerns about generic production as general matter: – Parallel importation– Quality and legal liability concerns– Fear of price/cost transparency– Loss of revenue will force cut-backs in R&D because R&D costs will not be

recouped

Pharma

Changing strategic considerations for pharma

• Parallel importation poses severe risk to sales in developed nations

• Substantial risk of legal liability if generic producers/licensees sell poor-quality product that produces adverse clinical events

• Fear of cost transparency

• Revenue loss will compromise R&D

• Public pressure to reduce prices via generics in LMIs can be withstood

• Excess manufacturing capacity can be allocated to developing world demand

• No benefit to be gained from licensing to generics

Initial perspectives

• Little empirical evidence of widespread parallel importation

• Increasing confidence in quality standards among leading Indian generic manufacturers, coupled with expanded WHO and FDA quality assurance

• Costs have become quite transparent, at least in HIV/AIDS sphere, with only modest increase in public pressure on pricing in developed nations

• Disingenuous claim from beginning

• High levels of public pressure on pricing in LMIs, and generic competition difficult to avert entirely

• Little desire to invest in new manufacturing capacity to serve rapidly growing low-margin developing world demand

• Potential strategic benefits to voluntary licensing: new sources of intermediates/API, and significant potential for grant-backs of process improvements

Emerging perspectives