Pharmaceutical Executive Europe - November/December 2007 - (Page 29) Pharmaceutical Executive Europe Nov/Dec 2007 World Health 29 foreign drug companies will lose patent rights in Brazil if they have not started local production of the drug within three years. The US government complained to the World Trade Organization and the case led to a vote in the UN Human Rights Commission. The Commission called on all nations to refrain from any measure that would limit access to medical technologies used for pandemics such as HIV/AIDS. The US government later withdrew the case. Earlier this year Thailand announced that it was going to issue compulsory licensing for a number of antiretrovirals, including Abbott’s Kaletra, as well as for products such as blood thinning drugs. Abbott threatened to withdraw all products from the Thai market but the World Health Organization intervened; as a result, the list price of Kaletra was reduced to $1000 (less than the cost of the generic version) per year, compared to $2200 before the intervention. Again, the research-based industry lost the battle. The other noteworthy aspect of this case is that the threat of compulsory licensing is no longer limited to HIV-related drugs but is now spilling over into other therapeutic areas. Governments are morally obliged to provide drug access for the whole population, particularly when the drugs are life-saving. What happens when a substantial proportion of the population, those that lie between the very poor and the very rich, have no access to a life-saving drug and a company refuses to lower the price? The gap will be filled, often by the generics industry (Figure 1); it may be addressed through compulsory licensing (as seen in the cases of Thailand and Brazil), or there will be an interpretation of patent rights that allows for generic competition, as is the case with Novartis in India. While governments may also have local trade reasons for this licensing (they may, for example, wish to build their own drug industries), lack of access is clearly the driving factor. It is unlikely that pharma will ever win these battles with governments; companies may be handing over future markets to the generics industry. So what can companies do in emerging markets? First of all, there is a need to build relationships with governments and try to understand some of the public health issues that governments face in these growing populations. There are healthcare infrastructure issues and difficulties in reaching rural and poor patients. Companies should be seen as partners in addressing the needs of such patients, rather than as “the enemy.” Secondly, most will remember the old common sense principle of charging what the market can bear. Using a differentiated set of prices based on different income levels within each market is a well-known principle in other industries, so why not use it in the pharmaceutical industry? Figure 1: Accessibility of life saving drugs based on price–volume ratio. Price Market scales e tiv ea s cr gie r te s o ra ric s st ne s Ge cce a Unmet needs Donations Infrastructure barrier Patients Figure 2: Model showing number of patients accessing a given drug at different price levels Not “business as usual” The examples above illustrate how difficult it has been for the research-based industry to do business in emerging economies. And yet this is where the future lies. Pharmaceutical markets in Europe and the US have limited growth potential because of government ceilings on health expenditure. Future market growth will be in Asia and Latin America, where purchasing power and populations are growing. However, it cannot be business as usual in these emerging markets. Most pharma companies have traditionally refused to lower their (list) prices, but some have given donations to these countries. There remains a large middle segment of these populations that cannot afford full price, that is not covered by social reimbursement and that is not poor enough to qualify for humanitarian donations. This ‘middle ground’ vacuum is a potential customer base that is capable of generating relevant sales — but not at the full price. 2000 price per month in $ 1500 Low-income economies (e.g. Ethiopia) Lower-middle-income economies (e.g. Ecuador) Upper-middle-income economies (e.g. Malaysia) 1000 500 20 0 20 40 60 80 % of patient reached
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.