Hudson White Paper The Full Cost of HIV AIDS Treatment

HUDSON INSTITUTE Access to Medicine by Carol C. Adelman, Dr.P.H., Director, Center for Science in Public Policy Jeremiah Norris, Senior Fellow S. Jean Weicher, Research Associate White Paper The Full Cost of HIV/AIDS Treatment Preface This is the second edition of a series of White Papers by the Hudson Institute’s Center for Science in Public Policy covering access to AIDS medicines in developing countries. The first paper, Myths and Realities on the Prices of AIDS Drugs, was published in May 2004 to clarify misconceptions about the prices of the most commonly used anti-retroviral drugs (ARVs) to treat HIV/AIDS in developing countries. Prior to this, the prevalent view was that the prices of patented ARVs were higher than their copies being manufactured in India and Thailand. The price issue was held out to be a significant barrier to treating poor people in developing countries. This common perception was not accurate. Of the thirteen comparable ARV drugs listed in Untangling the web of price reductions, 6th Edition by Medecins Sans Frontieres (MSF), eight patented drugs were cheaper than the average copy drug prices. 1 Of the remaining five drugs, only one patented drug, nevirapine, was significantly higher-priced than its equivalent copy drug. The German manufacturer, however, offers this drug free of charge to developing countries for use in their mother-to-child-transmission prevention programs.2 The first edition also raised other issues concerning patient access and drug prices, particularly the effect of tariffs, customs and duties levied by developing countries as well as the long term costs of using potentially sub-standard medicines. Introduction This second edition will update the comparative prices of patented and non-patented drugs using MSF’s latest guide, Untangling the web of price reductions, 7th Edition. We will look at quality issues over the last year for drugs prequalified by the World Health Organization (WHO) and commonly prescribed for poor patients. Since the first edition the WHO had to remove many of these drugs out of safety and efficacy concerns, particularly because they lacked proof of bio-equivalence with the patented product. New AIDS drugs that have come into the market in the last year will also be discussed. HUDSON INSTITUTE 2nd Edition, May 2005 CENTER FOR SCIENCE IN PUBLIC POLICY This will include the under-researched cost of second line treatments as well. None of the forecasts from WHO, the World Bank, or the Global Fund for HIV/AIDS, Tuberculosis and Malaria have taken into account the medical costs for treating a rising number of chronically ill patients that have developed drug resistance. This therapy requires more expensive second and third line drugs. We will offer a scenario for these costs in 2010. The second edition will consider in greater detail how customs, duties, and taxes affect drug prices and access. In view of the pricing debates over essential medicines, it is questionable why such taxes exist in developing countries. The European Union (EU) and other developed country markets do not apply tariffs on imports of pharmaceuticals from other developed World Trade Organization (WTO) members. If developing countries are serious about increasing access to ARV treatment, then lowering consumer prices of pharmaceuticals is one important way of doing this. The paper also looks at how other internal country issues such as trade diversion, counterfeiting and inadequate regulatory structures affect access to AIDS drugs. Obtaining safe and efficacious treatment involves even more factors outside the price of medicines. The paper examines government policies and health system capacity problems that complicate the delivery of even the least expensive drugs. Poverty and inadequate health systems remain the most significant hindrances to distributing treatment to patients in developing countries. We will consider these barriers and issues in view of current policies for enhancing ARV treatment in poor countries. As the UN has unveiled its latest commitment to halt HIV/AIDS infections by 2015 and reverse the spread of the disease, these barriers are worth reviewing in order to obtain a fuller picture of what hinders access in the developing world. The Hudson Institute will show that the barriers are many and varied. Even at a zero-price for the drug, they are formidable. In some cases, where funding is ample for large programs, the barriers are proving to be almost insurmountable. Generic AIDS Drugs What is a Generic Drug? FDA vs. WHO Generic and original medicines exist side by side in most developed countries of the world, serving the needs of patients and society alike. However, in the current debate on access to essential medicines, the drug classification “generic” has often been inaccurately applied to many AIDS medicines. These drugs are almost entirely AIDS drugs made in India and Thailand that are copied and manufactured for developing countries. The fact that companies in these countries have produced their own versions of patented medicines has led many in the media and global health community to conclude that they are really generics. Contributing to the misunderstanding, the WHO has approved many of these drugs for use in United Nations (UN) programs. Part of the confusion stems from a lack of understanding about what constitutes a “generic” drug and what constitutes a copy of the drug. Copy drugs are also called “investigative drugs,” and, in Brazil, they are “similars.” The Hatch-Waxman Act in 1985 opened the way for generic drugs to enter the US market. The Food and Drug Administration (FDA) then developed regulatory standards for generic drugs. These standards describe how the generic must be similar to its brand name equivalent: HUDSON INSTITUTE 2 The Full Cost of HIV/AIDS Treatment • Pharmaceutically equivalent (as determined by such methods as in vivo and in-vitro studies). A generic drug must have the same active ingredients, dosage form (e.g., tablet or capsule), strength, and route of administration (e.g., oral or IV) as its brand-name twin. Bioequivalent. A generic drug must act on the body in the same manner and to the same degree as the original brand-name drug. One measure of this condition is how readily the generic enters the bloodstream and becomes available to the body. Approved as safe and effective. A generic drug meets this requirement by showing that it is equivalent to the original FDA-approved drug, such as the same dissolution rates. Manufactured in compliance with current Good Manufacturing Practice (GMP) regulations. All drug manufacturers--generic and brand-name--must meet the same high production standards. The FDA inspects drug manufacturers to ensure that their products are safe and that their efficacy will not vary. Areas reviewed include the company’s manufacturing procedures, raw material specifications and controls, and sterilization procedures. Adequately labeled. Generic drugs must have the same patient information inserts as the original labeled drugs they replicate.3 • • • • Other developed countries, such as those in the EU, Canada, Australia, Japan and Brazil, have adopted similar if not identical standards to those of the FDA for generic drugs. The WHO lists the drugs it approves for use throughout the world via a pre-qualification system. This system is by no means a scientific or rigorous approval system. It simply lists drugs and publishes the list as a procurement guide for Non-Governmental Organizations (NGO) purchasing bulk medicines. While the WHO uses the word “pre-qualified,” it does not warrant the safety and efficacy of the drugs it pre-qualifies. Table 1 compares the differences between the FDA, a regulatory agency approving drugs before they enter the market and WHO, a membership organization pre-qualifying drugs after they have been on the market. As a membership organization, WHO is not authorized by its Charter to operate as an independent international regulatory agency. If a manufacturer fails to meet WHO’s minimum requirements, the organization does not have the authority to close the factory. It lacks the legal authority to enforce the same clinical standards as those of a developed country. For instance, WHO’s stated reason for its disclaimer on safety and efficacy is that these two attributes are the responsibilities of manufacturers to enforce. AIDS patients, however, do not know this and could easily believe that because a drug is on a pre-qualified list of WHO, that it has been adequately tested. WHO can de-list products, but it cannot ensure that the drugs are taken off the market until their quality can be assured. Most importantly, WHO cannot order a manufacturer to recall drugs that have been de-listed, withdrawn or labeled “undesirable” by developing country regulatory agencies. This was most evident when the de-listing began in May of 2004. WHO simply issued a public notice, leaving it up to the manufacturers to decide on recalls. Only one, Ranbaxy of India, accepted corporate responsibility and publicly offered to recall, replace products, and follow-up with any patient that might have experienced an adverse reaction. May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 3 WHO has become an advocate for certain medicines as it recommends both suppliers and procurements at the cheapest price notwithstanding quality, safety and efficacy. The FDA approves drugs but offers no recommendations as to which drugs should be purchased. Drugs are submitted to the WHO for pre-qualification on a voluntary basis, but after they are already available in the global market. Table 1. FDA: a Regulatory Authority vs. WHO: a Membership Organization FDA Compulsory drug approval Drugs approved before market entry Independently validated clinical trials required A legal and regulatory authority with enforcement mechanisms Guaranteed quality, safety and efficacy No role in pricing WHO Voluntary pre-qualification Drugs pre-qualified after market entry; listed rather than ‘approved’ No trials required A Membership organization with no basis in law, no enforcement authorities. Quality in principle, a disclaimer on safety and efficacy Recommends least priced drugs it has pre-qualified for procurement by all UN agencies. At present site inspection reports are proprietary No authority Not required No legal basis for malpractice Examiners vary from manufacturing site to site, usually only one member from WHO/Geneva. No known standards for copy drugs WHO has pre-qualified a cartel in India for copy drugs. It is governed by a centralized licensing authority for two years, then it devolves to various states. An advocate for its pre-qualified drugs Pre-qualification operated through WHO Office of Essential Drugs and Medicines. Only one-third of its operating budget is voted on in Annual Assemblies. The choice of activities for the funds for the other two-thirds is determined by donor and not by the community of Member States comprising the Organization. Does not license CROs, and did not inspect them prior to the initial de-listings of May 2004. WHO says it will now inspect all CROs and hold them accountable for integrity of data. Transparency and public disclosure Authority to close plants and fine manufacturers for noncompliance Post-marketing surveillance to determine presence of adverse reactions required of manufacturers Manufacturers can be sued for medical malpractice of FDA approved products Consistent set of professional examiners Scientific standards for innovator and generic drugs Centralized authority Impartial regulator FDA under juridical authority of the US Congress, and guided by 99 years of legal precedence and case law. Does not license Contract Research Organizations (CROs) but can inspect them and hold manufacturers responsible for the integrity of data There are several critical distinctions between national regulatory agencies with legal authorities and a membership organization that maintains the principle of sovereign equality for all members in its Charter. On September 1, 2004 WHO’s Office of Essential Drugs and Medicines Policy issued a six-page press release in response to the many questions it had been receiving on the de-listings. It commented that, “Bioequivalence tests are clinical trials conducted in healthy volunteers to find out if the concentration of a generic medicine in the blood is equivalent to that of the originator product.”4 The statement went on to say, “The standards used by WHO for pre-qualification are more stringent than those applied by many countries. For example, not all countries legally require in vivo bioequivalence studies for generic drugs.” The above statement by WHO is based on tests for generic drugs, but since all of the de-listed products were copy drugs, the point is mute. Even though WHO requires in vivo studies for its pre-qualification list, HUDSON INSTITUTE 4 The Full Cost of HIV/AIDS Treatment it cannot and does not enforce the requirement if a member country doesn’t conduct these studies. This is of particular importance in that Schedule Y of India’s Drugs and Cosmetics Act does not require toxicity or bioequivalence/bioavailability studies if the drugs are destined for export. Since all of the de-listed products were manufactured in India, it is disingenuous of WHO to praise its own standards as more stringent than many other countries. Lastly, WHO acknowledged that, “It is not a supranational regulatory authority….The pre-qualification process developed by WHO is based on a reliance on the information provided by the National Drug Regulatory Authority in the manufacturer’s country.” Basically, this is a re-affirmation of the principle of sovereign equality of members, which confirms that WHO cannot guarantee high quality of drugs. Since WHO only pre-qualified Indian copy drugs, that authority would be the Drugs Controller General (India). However, this is not a regulatory authority. It is a licensing agency that licenses drugs for only two years. Thereafter, the central authority is subordinated to individual State Control Authorities, e.g., in the case of Triomune, a drug that is the cornerstone of the WHO’s 3 by 5 plan, it went to Maharashtra State in 2003. Although the state normally accepts the transfer without challenging the original basis for the license, it can subsequently use its authority to close a plant for infractions. This dual licensing authority between national and state entities complicates adjudication of claims for adverse reactions in the countries of use, especially since the drugs are exported under the laws of India’s central authority, which do not require toxicity or bioequivalence/bioavailability studies. Since many individuals and groups have confused the functions of a stringent regulatory authority with the WHO pre-qualification system, Table 1 offers a useful perspective. The First True Generic AIDS drugs Generic ARVs have only just emerged on the market. The FDA announced on May 17, 2004 an offer to approve any generic ARV application from any country on an expedited basis. It offered to waive application fees, and to move foreign companies ahead of American companies seeking an FDA approval. A successful “fast track” application permits generic ARVs to be purchased with US foreign aid funds. Since no foreign companies applied right away, an American firm, Barr Laboratories, was the first company to win approval under the fast track process in December 2004. It will produce a generic version of Videx, the brand name for the single dose drug, didanosine. This was followed by Aspen Pharmacare of South Africa that won approval in January 2005 for a co-packaged ARV double dose regimen containing lamivudine+zidovudine, plus a separate tablet of nevirapine. This packaging allows healthcare workers to administer nevirapine when clinically indicated, or withdraw it when not and substitute another single ARV. The successful Aspen application represents the first time that the FDA has approved a foreign made generic ARV product. A number of the research and development based pharmaceutical companies have also voluntarily licensed their products to pharmaceutical companies in developing countries. In September and October of 2004, Boehringer Ingelheim issued licenses to the Kenyan drug company Cosmos and Aspen Pharmacare to manufacture nevirapine, also known by its brand-name, Viramune. Bristol-Myers Squibb’s (BMS) licensed its drug, Zerit (stavudine) in August 2003. Merck issued a license for efavirenz to Thembalami May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 5 Pharmaceuticals in South Africa in July 2004. In October 2004, GlaxoSmithKline (GSK) voluntarily licensed the manufacture and sale of ARVs containing zidovudine and/or lamivudine to the Kenyan drugmaker Cosmos for sale and use in the public and private sectors in Kenya and other East African countries, namely Uganda, Tanzania, Burundi and Rwanda. GSK also granted a license to Feza Pharmaceuticals, a joint venture between Creative Outsourcing Solutions International and African Healthcare Solutions, for ARVs containing zidovudine and/ or lamivudine in South Africa. (See Table 2) Table 2. Generic AIDS Drug Approvals and Voluntary Licensing Antiretroviral Stavudine Lamivudine 150 mg/ Zidovudine 300 mg Efavirenz Zidovudine and Lamivudine Nevirapine Company Aspen Pharmacare (South Africa) Aspen Pharmacare Thembalami Pharmaceuticals (South Africa) Feza Pharmaceuticals (South African) Aspen Pharmacare Status Licensed by BMS – 8/07/03 Licensed by GSK – 10/16/03 Licensed by Merck – 7/13/04 Licensed by GSK – 9/21/04 Licensed by Boehringer Ingelheim– 10/15/04 FDA approved via fast track– 12/3/04 FDA approved via fast track– 1/25/05 Brand Name/Innovator Company Zerit/BMS Combivir/GSK Sustiva/Merck Retrovir and Epivir/GSK Viramune/ Boehringer Ingelheim Videx/BMS Combivir/GSK + Viramune/ Boehringer Ingelheim Barr Pharmaceuticals, Inc. Didanosine 200, 250, (United States) 400mg Lamivudine/Zidovudine + Aspen Pharmacare Nevirapine Researched-based pharmaceutical companies have already developed some fixed dose combination ARV products, such as Combivir, which is a double dose combination. The triple dose is much more challenging, however. On April 28, Merck and Gilead jointly announced that after nearly a year of effort in their laboratories, their potential new product (emtricitabine+tenofavir+efavirenz) had failed a bioequivalence trial and the companies would have to redouble efforts to produce an effective, equivalent FDC drug. This announcement underscored the FDA’s guidance to industry when it offered “fast track” applications. The FDA stated, “In clinical studies, some triple-nucleoside regimens have been shown to have high virologic failure rates associated with high rates of drug resistance. The cause of high failure rates appears to be associated with the emergence of single or dual cross-resistant mutations.”5 WHO’s Pre-qualified AIDS Drugs: De-listings, Withdrawals, and “Undesirables” Since the first comparative pricing study, a number of AIDS drugs were de-listed by WHO, withdrawn by the manufacturer due to discrepancies in the bioequivalency tests, or labeled as “undesirable” by the South African regulatory authority. The original number of drugs de-listed and voluntarily withdrawn was 20, but two were reinstated after the manufacturer carried out new bioequivalence studies. Thus, by November 2004, the number of de-listed and voluntarily withdrawn drugs totaled 18 in various strengths and dosage forms. (See Table 3) The South African drug regulatory agency, the Medicines Control Council (MCC) termed one of Cipla’s de-listed products as “undesirable” in August 2004. After the de-listings and voluntary withdrawals, WHO alerted other UN agencies about the problems with the drugs. It did not require or ask companies to recall the drugs or conduct any post-marketing surveys to determine if there had been any adverse effects among those taking the de-listed drugs. Some companies acted on their own accord, while others have yet to issue formal announcements. Neither Cipla nor HUDSON INSTITUTE 6 The Full Cost of HIV/AIDS Treatment Hetero took action after their products were withdrawn or de-listed, but Ranbaxy voluntarily issued recall notices and offered immediate credit. The company also sent letters to health-care providers asking them to identify patients using their drugs and report adverse effects as well as offering to provide alternative drugs. Though many UN agencies and NGOs continue to insist on the safety and efficacy of copy drugs without independent confirmation by a stringent regulatory authority, or insist that WHO’s approval of a drug is tantamount to that of an international regulatory agency, the removal of these drugs, whether by WHO or the pharmaceutical companies, should raise serious concerns about their quality. For NGOs and other international organizations involved in treatment programs, the prices of these copy drugs should not be a primary consideration in future purchasing decisions. Many of the patented products are available at lesser prices. They have assured quality, safety and efficacy profiles. Lastly, if so many of the copy drugs have been de-listed or voluntarily withdrawn from the market, there have been compelling reasons for these actions, at least to avoid using them in patient care until such time as WHO reinstates them. Table 3. The World Health Organizationʼs History of Pre-qualified AIDS Drugs: De-listings, Withdrawals and Undesirability Antiretroviral Stavudine 40 mg Stavudine 30 mg Lamivudine 150 mg + Zidovudine 300 mg Indinavir 400 mg Lamivudine 150 mg Zidovudine 300 mg Indinavir 400, 60, 100mg Lamivudine 150, 60, 100mg Lamivudine/Stavudine 150 mg/40 mg Lamivudine/Stavudine 150 mg/30 mg Nevirapine 200, 60, 100mg Stavudine 30,10, 60mg Zidovudine 300, 60, 100mg Lamivudine 150mg + Zidovudine 300mg Lamivudine 150mg + Stavudine 30mg + Nevirapine 200mg Lamivudine 150mg + Stavudine 40mg + Nevirapine 200mg Lamivudine 150mg Lamivudine 150mg + Zidovudine 300mg Company Hetero (India) Hetero Hetero Hetero Hetero Hetero Ranbaxy (India) Ranbaxy Ranbaxy Ranbaxy Ranbaxy Ranbaxy Ranbaxy Ranbaxy Ranbaxy Status Withdrawn – 11/19/04 Withdrawn – 11/19/04 Withdrawn – 11/19/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 Withdrawn – 11/09/04 De-listed – 8/04/04 De-listed – 8/04/04 Brand Name/ Innovator Company Zerit/BMS Zerit/BMS Combivir/GSK Crixivan/ Merck Epivir/GSK Retrovir/GSK Crixivan/ Merck Epivir/GSK N/A N/A Viramune/ Boehringer Ingelheim Zerit/BMS Retrovir/GSK Combivir/GSK N/A Ranbaxy De-listed – 8/04/04 N/A Cipla (India) Cipla De-listed – 5/27/04 Reinstated by WHO – 11/30/04 De-listed – 5/27/04 Recalled and termed “undesirable” by South Africa’s MCC – 8/12/04 Reinstated by WHO – 11/30/04 Epivir/GSK Combivir/GSK May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 7 Currently, however, the main source for the price of AIDS drugs, MSF, still procures drugs that have been removed from WHO’s list. They are included in its pricing guide, Untangling the Web of Price Reductions, 7th Edition, February 2005. For this reason some de-listed products are included in our comparative pricing section. (Tables 4 and 5) AIDS Drugs Pricing: Patented and Non-Patented First-Line Treatment In the first comparative study, the Hudson Institute concluded that the prices of patented drugs were generally within the range of non-patented AIDS drug prices, if not less expensive. We reviewed data available from MSF, which regularly publishes the prices of both patented and non-patented drugs it procures for its country programs. MSF consults companies that make patented drugs and those that make non-patented to obtain pricing information. The prices listed in their guide are the selling prices, and do not account for the additional costs of storage, in-country transport, distribution mark-ups through middlemen, or tariffs.6 These product prices are available to all eligible poor countries, though exceptions have been made for South Africa and Botswana due to their high HIV/AIDS prevalence rates. In the organization’s latest report, the transportation costs of non-patented drugs are included, since companies making non-patented drugs do not cover this cost, whereas those making patented drugs do. MSF estimates that transportation raises the prices of non-patented drugs by 10 percent. Though not mentioned by MSF, this percentage is an estimate subject to variation depending on the distance from the purchasing country to the manufacturing country, whether drugs are shipped via air or sea freight, if the shipment is needed on an emergency basis, and/or the size of the order. The latest data from MSF in February 2005 again disproves the common perception that patented drugs are always more expensive than non-patented. Table 4 lists the 18 single dose ARV drugs in various strengths and dosage forms which have both patented and copy versions available. For each drug, Table 4 includes: the price of the patented drug and the range of copy prices available for the drug since there are usually more than one copy drug for each patented drug. As Table 4 shows, out of 18 drugs, 5 patented are cheaper than the lowest copy price available (efavirenz 600mg; nelfinar 250mg; ritonavir 100mg; saquinavir 200mg; and stavudine 1mg/ml). Of the 18 drugs, only 4 patented drugs are more expensive than the highest copy price (efavirenz 200mg; nevirapine 200mg and 10mg; and zidovudine 10mg). While both dosages of nevirapine are more expensive, in actuality Boehringer Ingelheim offers this drug free of charge in developing countries for prevention of mother-tochild transmission of HIV. The remaining 9 patented drugs fall within the price range of their counterpart copy drugs. Thus, out of 18 comparable AIDS drugs, 14 patented drugs are either less expensive or fall within the range of copy drug prices. HUDSON INSTITUTE 8 The Full Cost of HIV/AIDS Treatment Table 4. Prices of Single Dose AIDS Drugs Single Dose ARV* Abacavir, 300mg Didanosine, 100mg Didanosine, 400mg Efavirenz, 200mg Efavirenz, 600mg Indinavir, 400mg Lamivudine,150mg Lamivudine, 10mg Nelfinar, 250mg Nevirapine, 200mg Nevirapine, 10mg Ritonavir, 100mg Saquinavir, 200mg Stavudine, 30mg Stavudine, 40mg Stavudine, 1mg/ml Zidovudine, 300mg Zidovudine, 10mg Patented Drug Price (Transportation Included) $887 $310 $279 $500 $347 $400 $69 $82 $1036 $438 $401 $91 $1059 $48 $55 $35 $212 $223 Modified from Untangling the Web of Price Reductions, February 20057 Copy Price Range (10% Transportation Included) $776-1445 $161-456 $179-368 $361-482 $381-519 $353-514 $60-188 $64-84 $1245-1967 $88-183 $93-153 $225-482 $1124 $15-66 $35-84 $88 $154-319 $105-130 Fixed Dose Combination (FDC) drugs, differ from single dose drugs in that they contain the single dose drugs commonly used in a drug cocktail combined into one tablet. None of the three comparable FDCs are more expensive than the highest copy price. (Table 5) Table 5. Prices of Fixed Dose Combination Drugs Fixed Dose Combination ARV Lamivudine + Zidovudine + Abacavir, 300 + 150 + 300mg Lamivudine + Zidovudine, 150 + 300mg Lopinavir/ Ritonavir 133.3 + 33.3mg Patented Drug Price (Transportation Included) $1241 Copy Price Range (10% Transportation Included) $1132-1737 $237 $550 $201-469 $2168 Modified from Untangling the Web of Price Reductions, February 20058 Critics often suggest that comparing the cost of a FDC with the cost of its two or three separate single dose drug components is a meaningful way to compare them. Unless there is an exact comparable FDC that has been tested for safety and efficacy, this is a specious argument. Because combining pills can change absorption and excretion rates, a FDC can have no effect or a completely different effect on a patient than a drug cocktail containing the same individual drugs administered separately. The combined drugs may compete for the same receptor sites and thus not work identically to the original separate drugs. The FDC may even become harmful to the patient and/or induce drug resistance. Many of the drugs touted by activists and the US media are fixed dose combinations that have not been independently validated to determine their effects. Triomune, the cornerstone of WHO’s 3 by 5 plan for AIDS, is a drug with no comparative originator product. Though it contained the ingredients of a commonly administered ARV cocktail of separate drugs, one of its ingredients, nevirapine, was placed on the FDA’s Medical Product Safety List for potentially causing “severe, life threatening and in some cases fatal” problems stemming from liver toxicity. ________________________ * All prices listed are first category prices. First category prices are for the poorest countries as denoted by the UN. May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 9 Tariffs, Value Added Taxes and Other Duties Outside of the manufacturer’s price for its products, AIDS drugs and other pharmaceuticals are subject to additional costs once they reach their ports of destination. Developing countries generally levy customs duties or import tariffs on essential medicines and other pharmaceutical products to generate revenue and to shield local industries from outside competition.9 As researcher Libby Levison highlights in her 2003 study, countries with larger local industries such as Nigeria, Pakistan, India and China, are among those with the highest import duties.10 Developed countries do not have similar tariffs. As part of the Uruguay Round General Agreement on Tariffs and Trade, WTO members apply no tariffs on imports of 7,000 different pharmaceuticals from other member states.11 Developing countries are not signatories to this agreement and many continue to place tariffs on imported medicines. It is difficult to obtain full information on tariffs and other duties imposed by developing countries, though there is some recent data available. A 2003 study by the EU Commission reviewed duties on essential medicines in the treatment of communicable diseases in 57 countries. Drawing from EU data on exports, the study found that total duties and taxes (custom duty, Value-Added Tax (VAT), and other duties) ranged from .01 percent in Malaysia to as high as 60 percent in India, with the global average at 18 percent.12 For the least developed countries, the rate was estimated at 14 percent on average.13 Taxes and duties collected on pharmaceutical products represented 17 percent of the public health expenditure of least developed countries and 9 percent on average for the all of the countries surveyed.14 The International Federation of Pharmaceutical Manufacturers Association (IFPMA) estimated the costs of tariffs in non-developed countries. Based on data from the 1990s, tariffs ranged from 31 percent in Burkina Faso to 0 percent in several countries including South Africa, Uganda, Cote d’Ivoire, and Sri Lanka. Tariffs varied according to whether the product in question was a medicine or just active ingredients of the medicine. Tariffs and VATs are not the only hidden costs that increase the price of a drug. Other costs include markups by local wholesalers, distributors, and retailers, transportation, storage, clearance and freight stock losses, and procurement practices. Combined with the tariffs and mark-ups, these additional costs are estimated to be sometimes more than double the manufacturer’s price.15 Researchers Libby Levison and Richard Laing conducted a study on the hidden costs of nine developing countries and concluded that they increased the cost of medicines, on average, by 68.6 percent.16 Table 6 provides the full breakdown for the following nine countries: Sri Lanka, Kenya, Tanzania, South Africa, Brazil, Armenia, Kosovo, Nepal, and Mauritius. HUDSON INSTITUTE 10 The Full Cost of HIV/AIDS Treatment Table 6. Examples of Hidden Costs on Pharmaceutical Procurement Additional Costs (%) Sri Lanka Kenya Tanzania South Africa Brazil Armenia Import Tariff Port Charges Clearance and Freight Pre-shipment inspection Pharmacy board fee Importer’s margins VAT Central Govt Expense State Govt Tax Wholesaler Retail Total Mark-up 0 4 0 8 1 2.8 10 1 2 1.2 2 25 14 18 6 7 22 82.4 20 15 0 11.7 0 1 4 Kosovo Nepal Mauritius 4 1.5 5 5 10 8.5 16.3 64.0 15 20 54.2 0 50 74.3 21.2 50 74.1 25 25 87.5 15 25 73.6 10 16 48.1 14 27 59.3 Source: Levison and Laing17 Researchers Roger Bate, Richard Tren and Jasson Urbach conducted a study on the average tariffs, taxes, and duties applied to the WHO list of essential drugs in 53 countries. The combined rates ranged from 0 percent in Malaysia to as high as 61 percent in India.18 The complete data from their study is listed in Table 7. Most economists believe that reducing or eliminating tariffs will benefit the consumer market or, in this case, the patient. Tariffs and other protectionist measures obstruct a competitive market by sheltering inefficient producers who charge high prices for their goods. This can have a devastating effect on all consumers, but most importantly, the poorest. It is ultimately the local industry and not the consumer that benefits from protectionist measures. In the long-run, domestic industries that profit from protectionist measures like tariffs do not generate future innovations and are generally unable to compete successfully in the global market. Though most developing countries rely on the revenue from these tariffs and other taxes, if they are serious about increasing access for all patients they will seek to reduce or eliminate them entirely. Recent reports indicate that at least some policy-makers in developing countries are aware of the problems taxes and duties impose on expanding access to ARV treatment. Dr. Elioda Tumwesigye, chairperson of the parliamentary standing committee on HIV/AIDS in Uganda, was quoted in World Market Analysis on April 1, 2005 expressing concern about the impact of a 10 percent tax on AIDS drugs, recently introduced under the umbrella of the East African Customs Union.19 He urged East African governments to exempt AIDS medicines from the tax. May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 11 Table 7. Average Tariffs, Taxes and Duties, Selected Countries Country Algeria Bangladesh Benin Bolivia Botswana Brazil Brunei Burkina Faso Cambodia Cameroon Central African Republic Chad China Colombia Congo, Dem Rep Congo, Rep Costa Rica Cote d’Ivorie Dominican Republic Ecuador El Salvador Ghana Guinea Bissau Honduras India Indonesia Kenya Laos Lebanon Lesotho Madagascar Malaysia Mali Mexico Morocco Mozambique Myanmar Namibia Niger Nigeria Pakistan Peru Philippines Senegal South Africa Swaziland Tanzania Thailand Togo Uganda Venezuela Vietnam Zimbabwe Tariffs % 9.5 6.6 1.6 10 0.85 19.1 0 1.6 3.5 5 5 5 6.5 10 8.8 5 0.6 1.6 2.4 10 1 10 1.6 1 38.2 4 10 1.6 2.8 0.85 5 0 1.6 11.8 18.5 1 1.2 0.85 1.6 20 12 10 4.4 1.6 0.85 0.85 10 11.1 1.6 10 10 2.2 7.5 VAT % 11.5 15 17.5 13 10 18 0 17.5 10 18.7 18.7 18.7 17 10 13 18.7 13 17.5 15 12 13 12.5 17.5 12 22.5 10 16 10 10 10 9 10 17.5 12.5 18.5 6 5 10 17.5 5 15 19 10 17.5 14 14 20 7 17.5 17 15 15 15 Other Taxes % 2 1 2 2 2 2 0.5 2 0.8 US $50 2 2.9 2 2 4 Other Duties % 1.94 11.75 6.2 - Combined % 21 22 21 25 11 38 0 21 14 24 24 24 24 20 22 24 14 21 19 22 14 23 21 14 61 14 38 12 13 11 14 10 21 25 38 7 + US $50 6.2 11 21 28 27 29 14 21 14 15 36 18 21 31 25 17 23 Source: Bate et al.20 Substandard Medicine: The Problem of Counterfeit Medicines and Trade Diversion Counterfeit medicines stand as one of the greatest barriers to increasing AIDS treatment. WHO defines counterfeit medicines as those that are “deliberately and fraudulently mislabeled with respect to identity and/or source.” Thus, the classification “can apply to both branded and generic products… and may include products with the correct ingredients but fake packaging, with the wrong ingredients, without active ingredients or with insufficient active ingredients.”21 The use of either counterfeit or substandard medicines leads to therapeutic failure, drug resistance and, in many cases, death. For the population at large, regular use of these drugs can increase disease transmission in general and the growth of drug-resistant strains in particular. Treating drug-resistant AIDS patients increases costs over both the short and long-term. Unfortunately, counterfeiting is a lucrative growth industry with few signs of abating. In a workshop hosted by the World Bank on March 10, 2005, it were estimated that in 2002 approximately $30 billion was expended on “fake drugs,” in the same countries where overall assistance to broad scale, legitimate health HUDSON INSTITUTE 12 The Full Cost of HIV/AIDS Treatment activities were only $8 billion.22 In 2003, approximately a quarter of medicines consumed in developing nations were thought to be counterfeit, the vast majority of which were for treating malaria, tuberculosis and AIDS. Within individual countries, surveys from the past few years demonstrate that the percentages of counterfeits are extensive. In 1999, a survey of pharmacies in the Philippines found that 8 percent of drugs bought were fake.23 The British Medical Journal has reported that counterfeit drugs account for 40 to 50 percent of all drugs sold in Nigeria and Pakistan.24 Counterfeit drugs remain fundamentally a developing world concern, though a recent article from the British Medical Journal reports that counterfeit versions of the erectile dysfunction brand-name drug Cialis have been found in the United Kingdom.25 In the spring of 2002, GlaxoSmithKline (GSK) received four complaints that bottles containing tablets of Combivir were being replaced with Ziagen tablets within the United States. In addition, the firm determined that counterfeit Combivir labels were placed on authentic bottles of Ziagen tablets. Both medicines are used as part of a combination regimen to treat HIV infection. The issue of counterfeit drugs remains more pronounced in developing countries, however, with some 70 percent found there. More recent data indicate that this number is increasing. The absence of laws against counterfeits and proper law enforcement accounts for the problem in many countries. For this reason, reexported counterfeit drugs are a risk to developing and developed nations alike. For example, it was reported in the Financial Times that 25 percent of GSK’s discounted AIDS drugs bound for Africa did not arrive at their intended destinations between June 2001 and July 2002.26 The increased use of counterfeit and substandard drugs can have at least two serious consequences: 1) a donor or country spends scarce foreign exchange to acquire worthless products; and, 2) they induce drug resistance earlier than if legitimate drugs were used. This constitutes a huge future un-funded liability for countries. The following section will provide an estimate of the cost of drug resistance for AIDS patients in developing countries. Second Line Treatment and Drug Resistance: Looming Un-funded Liabilities Second Line Treatments Second line treatments pose a long-term set of new problems in treating HIV/AIDS in developing countries. Since people can develop resistance to ARV treatment or develop side effects that cause them to discontinue treatment, the costs of these medicines should be included in any discussion about ARV drug pricing. Compounded with first line treatment they represent additional costs to any national HIV/AIDS program. MSF lists the following ARVs as those used in their programs for second line treatments (didanosine (100 & 400 mg), tenofovir disoproxil fumarate, lopinovir+ritonavir, abacavir, and saquinavir/ritonavir.) With the exception of tenofovir disoproxil fumarate, all second-line treatments have both patented and non-patented versions available. For the five second line treatments listed, four patented drugs are less expensive than the highest copy May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 13 price. For the drug, tenofovir disoproxil fumarate, there was not a copy product to compare with the patented price. (Table 8) Table 8. Prices of Second Line Treatments Second Line Treatment Didanosine 100mg Didanosine 400mg Tenofovir Disoproxil Fumarate 300mg Lopinavir/Ritonavir 133.3 + 33.3mg Abacavir 300mg Patented Drug Price (Transportation Included) $310 $279 $331 $550 $887 Copy Price Range (10% Transportation Included) $161-456 $179-368 N/A $2168 $776-1445 Modified from Untangling the Web of Price Reductions, February 200527 Drug Resistance: A Long-Term Projection Lessons learned from clinical experience in the US and EU since 1988 on ARV treatment strongly indicate that drug resistance is a persistent problem. Drug resistance means a patient has to move from first line regimens to more expensive second and third line regimens. What can be expected in less developed countries? Most data on drug resistance in developing countries is in the preliminary stages of being collected and reported. In 2004, World Bank data lists primary HIV-1 drug resistance at 6.6 percent in Brazil and as high as 27.7 percent in developed countries like US and Canada.28 The Human Virology Institute at the University of Maryland reports drug resistance at 44 percent in Brazil after two years of ARV treatment with the WHO recommended triple dose combination.29 MSF reported a lower figure of 20 percent globally after two years of treatment with this combination. Alongside the increased costs, drug resistance can also limit the choice of second line options. There are three broad classifications of ARV drugs: 1) nucleoside reverse transcriptase inhibitors (NRTIs); 2) nonnucleoside reverse transcriptase inhibitors (NNRTIs); and, 3) protease inhibitors (PIs). According to the University of Maryland’s Institute of Human Virology, the following implications can result from failure with the triple dose combination drugs: • • If early virologic failure, the remaining treatment options are some NRTIs, none of the NNRTIs, but all of the PIs. If late virologic failure, then none of the NRTIs or NNRTIs can be used, but all of the PIs are eligible for use.30 If there is late virologic failure, then this scenario increases medical infrastructure costs as PIs require refrigeration in climates above 83 degrees Fahrenheit. Drug resistance has significant implications for the countries seeking to expand and/or maintain current treatment levels. We have used WHO’s plan to treat 3 million patients by the year 2005 as a model for demonstrating what the cost of drug resistance may entail. Under the WHO’s plan, Table 9 estimates the HUDSON INSTITUTE 14 The Full Cost of HIV/AIDS Treatment total cumulative number of primary HIV-1 drug-resistant patients by 2010, using a conservative figure of 10 percent per annum. That is, it can be expected that 10 percent of all those under treatment in any given year will end that year in need of a second line therapy. If WHO were successful in meeting its goal of having 3 million AIDS patients under treatment by the end of 2005, it will likely add 1 million more in each of the next five years, for a total of 8 million by 2010. No estimates are provided for third line therapy resistance, though it can be expected. Table 9. Cumulative Number of Patients on Second Line Treatment, 2005-2010 Year 2005 2006 2007 2008 2009 2010 Total Patients under Treatment (millions) 3.0 4.0 5.0 6.0 7.0 8.0 # of Drug-Resistant Patients (millions) 0.3 0.4 0.5 0.6 0.7 0.8 3.3 Table 10 shows that the number of drug-resistant patients in 2010 is estimated at 3.3 million. Since the ARV cocktail of the single dose drug efavirenz and the FDC lamivudine and zidovudine is often prescribed in the UN Accelerated Access Initiative (UN AAI), which at 385,000 patients is the most extensive treatment program in the developing world to date, we used the cost of this drug regimen in our model. The combined price for these medicines from the innovator companies is $584. Accounting for the average EU estimate for taxes and tariffs at 18 percent raises the price to $689. Then, we added a 10 percent storage and distribution fee, which raised product price to $758 per person per year. The per person per year cost for second line treatment is $2,653 calculated by multiplying the first line drug costs of $758 by a multiple of 3.5 for the increased cost of second line drugs. While there is not a great deal of field experience yet with the use of second line therapies, MSF estimates that the price multiple can be 20 that of a first line drug.31 We used a conservative multiple of 3.5 for this model. This price is then multiplied by 3.3 million patients for a total of $8.8 billion. Including medical infrastructure costs at 4 times the total product price brings the cost of second line treatment to $44 billion in 2010.32 Table 10. Second Line Treatment Costs for 3.3 Million, 2005-2010 Number of HIV/AIDS patients on second line therapies in 2010 (est.) ARV second line drug price per patient per year at a multiple of 3.5 over first line price ($758 x 3.5) ARV second line drug prices pp/py (3.3 million persons x $2653) Medical infrastructure costs at a factor of 4 Grand Total 3.3 million $2,653 $8.8 billion $35.2 billion $44 billion Table 10 illustrates that the combined total costs to treat just the drug-resistant patients under the 3 by 5 model are estimated at $44 billion. These estimates do not include any deductions for product pilferage, damage to goods in transit, diversion, or provision of substandard and counterfeit drugs. Nor do they include the substantial transaction and overhead costs for the GFATM and its local fund agents, WHO/ Geneva and its country field offices, the World Bank financial administrative costs, overhead for contracMay 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 15 tors under the U.S. President’s Emergency Plan For AIDS Relief (PEPFAR), and USAID contractors. As can be seen, there are no estimates for orphan care, as well as tuberculosis and malaria prevention and treatment programs or for AIDS prevention programs. Macroeconomic effects on economies including inflation, the dilution of local currencies, and distortions in national pharmaceutical markets when so much foreign exchange is focused on one therapeutic product for a single disease have not been expensed either. Long term care in the out-years for patients moving into third line therapies, requiring most probably some levels of inpatient hospital services, is also omitted. Lastly, the societal costs, e.g., lost productivity, health insurance and social security are excluded from current projections by international health groups involved in AIDS treatment programs. The central policy issue faced by global society lies not in the price of an ARV. Rather, by failing to assign a proper value to the consequences of post-price effects, policy-makers drastically underestimate the costs involved by the sequential increases in the number of chronically sick people. Their care and maintenance ultimately proves unsustainable for both donors and affected governments. Table 10 is by no means a precise projection. Yet, even if it is off by 50 percent, the magnitude still calls into question the ability of donors and recipient governments alike to continue funding one disease that will consume more than one half of all Official Development Assistance (ODA) today. This scenario is indicative of the macroeconomic studies that need to be conducted by other organizations, such as the IMF and World Bank. Such studies can aid international agencies to understand the larger medical infrastructure and societal costs inherent in chronic AIDS patient care. But more than desk studies are needed. The vast resources required for drug-resistant patients signals again the importance of developing a vaccine for AIDS. Since tuberculosis is a significant factor in all AIDS mortality, there should be renewed attention to tuberculosis prevention and treatment efforts as a least cost intervention to drugresistant AIDS patient care. In the absence of either development, then there needs to be more research and development on the application of a single dose, once weekly or monthly ARV regimen with a sustained viral suppression rate and fewer minor or serious consequences. Disbursements and Absorptive Capacity On April 14, 2005 the World Bank released a research paper on the effectiveness of global health partnerships. As shown in the chart below, while GFATM had $1 billion in commitments by 2004, its disbursement rate fell from $400 million in 2002 to less than $100 million by the end of 2004. (Table 11) The Bank made a point of commenting that when it made a disbursement, this meant that implementation activities were set in motion. But a disbursement by the GFATM did not always translate into implementation. Table 11. GFATM Commitments and Disbursements, 2002-2004 Commitments ($millions) 2002 810 2003 605 2004 1000 Source: Uma Lele33 Year Disbursements ($millions) 400 200 < 100 HUDSON INSTITUTE 16 The Full Cost of HIV/AIDS Treatment The World Bank itself had commitments for HIV/AIDS, tuberculosis and malaria of approximately $450 million in 2003, but had disbursed less than $200 million in that year. In 2004 $210 million was disbursed, though it had $400 million in commitments for that year. There are many reasons why disbursements lag behind the commitment of funds. These include lack of management staff at the field level, availability of health personnel, storage and distribution capacities, and sufficient diagnostic services relative to the number of patients requiring treatment services. In many cases, a lack of one component can be greater than the whole as it either slows or stops disbursement entirely. The GFATM has many different levels of disbursement before resources actually reach one AIDS patient. And, once these resources actually result in implementation, in the case of the GFATM and PEPFAR, they initiate the first round of activities that are often the easiest to do. Field reporting requirements to justify movement to renewed funding in the second round can consume inordinate amounts of management time at the expense of patient care. This inadvertently slows down disbursement rates. On March 11, 2005 a Commission Chaired by Prime Minister Tony Blair released Our Common Interest: Report on the Commission for Africa. As host for the next G8 meeting, scheduled for Gleneagles, Scotland in July 2005, the Prime Minister is offering this Report as a means to generate more than a doubling of ODA to Africa. The issue of sustainability has long been the bedrock of development assistance, the sine qua non of justification for increased aid flows. But the Report now dismisses this principle, saying that the “confusing language of sustainability is an increasingly inappropriate guidance on the allocation of resource transfers.” It goes on to say that the focus instead should be “on a country’s capacity to utilize resources effectively for poverty reduction and growth.”34 If absorptive capacity is the new goalpost for aid flows, then it may result in institutional constraints on vastly increased flows. When reviewing aid monies just for HIV/AIDS, the IMF had serious concerns. In its July 2004 IMF Survey, it found: • • • There are macroeconomic risks associated with large grant flows—including high inflation, which retards growth and acts like a tax especially on the poor; Real appreciation of the currency, which can hinder the rural poor from exporting commodities vital to their livelihood; Rising domestic interest rates that can squeeze social spending by raising public debt service payments. This assessment was made after reviewing HIV/AIDS flows of $5 billion in 2003 and $8 billion in 2004, while estimating a rise to $20 billion by 2008. The IMF believes these increases represent an enormous opportunity to intensify the fight against AIDS and to strengthen health systems in general, but cautions, “such rapid increases in external funding can pose serious challenges for countries seeking to absorb the added resources. If not confronted, they could not only compromise the expected health benefits but also May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 17 endanger longer-term political support.”35 The donor community and its partners in recipient countries have never before faced the triple dilemma of high dollar commitments and constrained disbursement levels against finite absorptive capacity rates. Effectively managing this triple threat may be as daunting a task as is the global fight against AIDS, tuberculosis and malaria. Conclusion There have been several transitions within the global health community in preventing and treating HIV/ AIDS. Initially, the policy of the WHO was to conduct only prevention and education programs. Finally, in April 2002, WHO put antiretroviral drugs on its Essential Medicines List for the first time. This led to the inappropriate conclusion among many in the international donor community that the price of those drugs constituted the main barrier to access for the poor. Forgotten was the fact that patented manufacturers had been cooperating with UN agencies since May 2000 by offering products at or below manufacturing costs. Until the Hudson Institute completed a comparative study in May 2004 between the price of patented and copy drugs, there was a firm and consistent belief that the former was more expensive than the latter. This second edition of comparative pricing shows that patented drugs are often in the same price range, if not cheaper, than the copy drugs. We are now in the advent of another transition, one with far deeper consequences for access than prices. This transition will determine whether donor and recipient governments alike can sustain the early momentum and complete an undertaking, the magnitude of which has never before been attempted in human history. Coping with the HIV/AIDS pandemic remains a daunting task for the global health community. As this second edition of the Hudson White Paper on access to medicines has shown, the issues extend far beyond the price of AIDS medicines alone. Our paper again illustrates that the prices of patented drugs are either less expensive or fall within the price range of copy drugs, with the exception of one drug, nevirapine, which is provided by the company free of charge for maternal to child transmission programs. Thus, price is not a rate-limiting factor as we first demonstrated in our White Paper of May 2004. As compared with other barriers—high tariffs and taxes, counterfeiting, trade diversion, drug resistance, and absorptive capacity—its significance is neglible. Patients seeking safe and efficacious treatment for HIV/AIDS have many factors to contend with regarding access. These warrant more attention by the global health community than in the past. The barriers are related to the larger problems of poverty, lack of transparency and drug enforcement capabilities in governments, and weak healthcare infrastructure. The resolution of these problems requires buy-in and leadership from developing countries in particular. The singular emphasis on price has had consequences already. Institutions like the WHO have compromised the safety and efficacy of HIV/AIDS treatment by promoting “cheaper” drugs of indeterminate quality. Poor patients of developing countries depend on WHO’s system to uphold high standards. Yet, its HUDSON INSTITUTE 18 The Full Cost of HIV/AIDS Treatment system of pre-qualification is misleading as WHO has issued a disclaimer on the safety and efficacy of the drugs it has listed. Moreover, this ignores WHO’s principle of informed consent for all patients. The effects of using potentially substandard medicines will incur long-term costs due to drug resistance. The state of HIV/AIDS treatment presents a formidable challenge, since the long-term costs are such a high percentage of current ODA levels. Nevertheless, the world cannot abandon its commitment to assist developing countries in the ways that it can. The past approach, however, has failed to consider obstacles from within developing countries themselves and the full scale costs associated with the chronic care of this disease. It is time to leave rhetoric and ideology aside and fully recognize and deal with the actual causes of poor access to ARV medicines. May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 19 Glossary: ARV – Anti-retroviral EU – European Union FDA – United States Food and Drug Administration FDC – Fixed Dose Combination Drug GFATM – Global Fund for HIV/AIDS, Tuberculosis, and Malaria HIV/AIDS – Human Immunodeficiency Virus/Acquired Immunodeficiency Syndrome IFPMA – International Federation of Pharmaceutical Manufacturers Association IMF- International Monetary Fund MCC - Medicines Control Council (South African Drug Regulatory Authority) MSF- Medicins Sans Frontieres NGO- Non-Governmental Organization ODA – Official Development Assistance PEPFAR – President’s Emergency Plan for HIV/AIDS Relief UK – United Kingdom WHO – World Health Organization WTO – World Trade Organization VAT – Value-Added Tax HUDSON INSTITUTE 20 The Full Cost of HIV/AIDS Treatment Endnotes 1 Medecins Sans Frontieres, Untangling the Web of Price Reductions: A Price Guide for the Purchase of ARVs for Developing Countries, 6th edition, April 19, 2004. pp. 11-14. Available online at http://www.accessmed-msf.org/documents/ untanglingtheweb6.pdf 2 Adelman et al., “Myths and Realities on Prices of AIDS Drugs,” Hudson Institute, May 2004. 3 FDA/Center for Drug Evaluation and Research, “What are Generic Drugs?” last updated May 3, 2005. Available online at http://www.fda.gov/cder/ogd/#Introduction 4 Announcement: Removal of Antiretroviral Products from the WHO List of Pre-qualified Medicines, Information and Guidance for Regulatory Bodies, National AIDS Programmes, Doctors and Patients, WHO Geneva, September 1, 2004. 5 US Department of Health and Human Services, Guidance for Industry Fixed Dose Combination and Co-Packaged Drug Products for Treatment of HIV, Draft Guidance, Washington DC, 2004. p. 13. Guidance 6 Medecins Sans Frontieres, Untangling the Web of Price Reductions: A Price Guide for the Purchase of ARVs for Developing Countries, February, 2005. p. 4. Available online at http://www.accessmed-msf.org/documents/untanglingtheweb%207.pdf 7 Ibid. pp.10-12. 8 Ibid. 9 Libby Levison., Policy and programming options for reducing the procurement costs of essential medicines in developing countries, Concentration Paper, 2003. p. 7 Available online at: http://dcc2.bumc.bu.edu/richardl/IH820/Resource_materials/ Web_Resources/Levison-hiddencosts.pdf 10 Ibid. p. 7 11 European Commission, Working document on developing countriesʼ duties and taxes on essential medicines used in the treatment of the major communicable diseases, European Commission, Directorate-General for Trade, 2003. p. 6. Available online at: http://europa.eu.int/comm/trade/issues/global/medecine/docs/wtosub_100303.pdf 12 Ibid. p. 3. 13 Ibid. 14 Ibid. 15 Levison, Libby and Richard Laing, ‘The hidden costs of essential medicines’, WHO, Essential Drugs Monitor, Issue No. 33, 2003. p. 21. Available online at: http://www.who.int/medicines/library/monitor/33/EDM33_20-21_Hidden_e.pdf 16 Ibid. 17 Ibid. 18 Roger Bate et al. “Taxed to Death,” AEI-Brookings Joint Center for Regulatory Studies, April 2005. p. 11. 19Sacha Baggili, “East African Governments Urged to Exempt ARVs from Tax Levy,” World Markets Analysis, April 1, 2005 20 Ibid. 21WHO, “Substandard and counterfeit medicines” November 2003. Available online at http://www.who.int/mediacentre/factsheets/fs275/en/ 22 Jacques Bandouy, Conference presentation Good Intentions – Bad Drugs, World Bank. March 10, 2005. 23 E. Wondemagegnehu, “Counterfeit and substandard drugs in Myanmar and Vietnam” WHO/EDM/QSM/99.3. WHO, Counterfeit Geneva, 1999. 24 Liza Gibson, “Drug regulators study global treaty to tackle counterfeit drugs,” British Medical Journal Volume 328, Number 486 February 28, 2004. 25 Liza Gibson, “Counterfeits of impotence drug appear in the United Kingdom,” British Medical Journal Volume 329, Number 532 September 4, 2004. 26 Clive Cookson, “Procedure to tackle drugs fraud passes test,” the Financial Times, March 14, 2005 p. 4. 27 MSF, Untangling the Web of Price Reductions, pp. 8-12. One ARV listed by MSF, saquinavir/ritonavir was omitted since MSF does not differentiate at what price it is made available by both the innovator and non-innovator companies. 28 Debrework Zewdie et al., AIDS: Resistance and Adherence, Vol. 18, Supplement 3, World Bank, Washington, DC., June 3, 2004. 29 Robert Redfield, Presentation to the Childrenʼs AIDS Fund, Washington DC, May 10, 2004. 30 Robert Redfield, Presentation, Global Antiretroviral Therapy: Opening Thought, Abuja, Nigeria. May 4, 2004. Thought May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 21 31 Medecins Sans Frontieres, MSF AIDS Treatment Experience: Rapid Expansion, Emerging Challenges: Briefing Document, July 2004. p. 6. 32 The calculation of medical infrastructure costs at 4 times the total product price is based on World Bank and South African government estimations. In South Africa’s Operational Plan for Comprehensive HIV and AIDS Care, Management and Treatment, the price of AIDS drugs will consume 23 percent of the entire budget. The remainder is for staff, laboratory testing, nutrition, health system upgrading, program management, capital investment, recurrent costs, and research. This would translate roughly into a 1:4 ratio of price to medical care costs. The World Bank estimates total price and medical infrastructure costs at $620 per person per year, with the price of ARVs at $140 per person/per year although no ARVs have ever been sold at this price. Nevertheless, between the South African and World Bank estimates, we can estimate a ratio of 1:4 (AIDS drug price vs. medical care infrastructure costs). 33 Uma Lele, Presentation, The Effectiveness of Global Health Partnerships: Findings and Lessons from a World Bank Evaluation of Global Health Programs World Bank, Washington DC, April 14, 2005. 34Commission for Africa, Our Common Interest: Report of the Commission for Africa, March, 2005. 35 Peter Heller et al., “Sizable Boost in HIV/AIDS Assistance Will Challenge Low Income Countries” IMF Survey, IMF, July 12, 2004. p. 202. HUDSON INSTITUTE 22 The Full Cost of HIV/AIDS Treatment May 2005 By Carol C. Adelman, Jeremiah Norris, and S. Jean Weicher 23 HUDSON Hudson Institute • 1015 15th Street, NW, Sixth Floor • Washington, DC 20005 Phone: (202) 974-2400 • www.hudson.org INSTITUTE