Global Insight Perspective | |
Significance | The Thai industry body PReMA yesterday announced its suspicions that another 11 drugs will be part of the government’s compulsory licensing scheme, alongside the three already targeted—efavirenz, clopidogrel and liponavir/ritonavir. |
Implications | Thailand is targeting the best-selling drugs on the market—cancer, antibiotic and cholesterol drugs—and although a list of the products is not available, Global Insight suspects that the world’s best-selling drug, Pfizer’s Lipitor (atorvastatin), may be subjected to compulsory licensing. |
Outlook | Thailand’s strategy is the most radical of the bunch, but recent activity in Indonesia, the Philippines, India and South Korea is putting Big Pharma in an increasingly uncomfortable position in Asia. Global Insight is noting an increasingly zero-tolerance posturing and language amongst Asian governments seeking to cut costs and increase access to affordable treatments. |
More Compulsory Licensing: Possibly Lipitor?
Thailand’s drug industry body, the Pharmaceutical Research and Manufacturers’ Association (PReMA), yesterday announced that it believes that the Public Health Ministry will expand its compulsory licensing strategy to 14 drugs. When contacted by Global Insight, PReMA president Teera Chakajnarodom confirmed that this includes the previously announced drugs—Merck & Co’s (U.S.) HIV/AIDS drugs Sustiva (efavirenz), announced in November, as well as those announced last month: Abbott’s (U.S.) protease inhibitor Kaletra (lopinavir/ritonavir), and, more significantly, Sanofi-Aventis’s (France) anticoagulant Plavix (clopidogrel).
It was the compulsory licensing of the latter that raised eyebrows across the world—it was generally welcomed by activist groups and grassroots organisations, but met with dismay and caution by the drug industry and the World Health Organization (WHO), respectively. Although there are provisions for compulsory licensing, these were previously confined to “crisis” situations of infectious diseases such as HIV/AIDS. Plavix treats a chronic illness, and Thailand’s decision has very little to do with public health emergencies, and much more to do with pure economics and developing its domestic generics industry—the new military-installed government now runs a free public health system, and is simply not willing to invest the financial resources to uphold it. It would appear that there now is no limit to the potential drugs targeted for compulsory licensing—any branded drug is under threat.
After last month’s decision, it was widely rumoured that more would be on the way. The Public Health Ministry has remained quiet on this front, and indeed indicated earlier this week that there would be no more compulsory licensing—however, it adopted a similar position back in November (which is why the Plavix/Kaletra decision was something of a surprise), and Teera indicated to Global Insight that PReMA cannot “underestimate the situation”. The drug industry in Thailand only found out about the previous compulsory licensing through the media, and it appears that yesterday’s PReMA statement is partially designed to force the Public Health Ministry to react.
Teera noted that the organisation has sought clarification from various ministries, including the Commerce Ministry (which holds jurisdiction over pricing controls), without much success. It proceeded into lower levels of government, from whence it found out about the plans for another 11 compulsory licences. Naturally, there is still no confirmation from the Health Ministry, but PReMA decided to take, in the words of Teera, “drastic action” in order to try to prompt and extract a second announcement from the ministry.
Thus, the announcement of 14 drugs subjected to compulsory licensing should be taken within this context, and the actual policy that the ministry is formulating may alter substantively. However, Teera confirmed to Global Insight that the “list” of 11 new drugs includes some of the main products on Thailand’s pricing list (available here): a best-selling antibiotic, top-selling oncology drug, and the biggest-selling drug in the world. With reference to the latter, it would therefore seem that Pfizer’s cholesterol drug Lipitor (atorvastatin) is being targeted by the government. This coincides with Ranbaxy’s (India) decision to launch generic Lipitor in Denmark. Potentially, the other targeted drugs could prove to be Janssen-Cilag’s (U.S.) anaemia drug Eprex/NeoRecormon (epoetin alfa) and GlaxoSmithKline’s (U.K.) antibiotic Augmentin (amoxicillin/clavulanate).
Asian Unrest
Elsewhere, in another hotspot, the Philippine International Trading Corp (PITC), the main purchaser of pharmaceuticals in the Philippines, has announced that it is planning to increase its parallel imports by more than threefold. By March, its procurement budget for drugs will increase from 115 million pesos (US$2.4 million) to 400 million pesos—the parallel imports will target 70 drugs, up from 30 currently. The drugs will be funnelled into the government-subsidised, cut-price pharmacy network that is currently being built up across the country—it currently consists of 1,200 pharmacies. The industry here is also embroiled in a major dispute with the government, as Pfizer sued the PITC for violating its patent of hypertension drug Norvasc (amlodipine). This case is still pending, with a resolution expected mid-year.
Meanwhile, the Indonesian National Institute for Health Research and Development today defended its decision to cease sending samples of the H5N1 avian influenza (“bird ‘flu”) virus to the WHO. The institution has signed a preliminary pact with U.S. biopharmaceutical Baxter to secure potential bird ‘flu vaccines below market price, as it maintains that Indonesia, which is the centre of the pandemic, will not be able to afford commercialised vaccines. However, the deal means that Indonesia will not provide samples to any institution unless it can guarantee that they will not be used for commercial purposes. Thus, public-private partnerships, which have formed an important role in the development of a clearer picture of the bird ‘flu virus, are rendered impotent. It will disrupt virus-sharing programmes, including that in place at the WHO, where such guarantees have not been made.
Big Pharma is also facing major opposition in bigger markets such as South Korea and India. The former is implementing a positive reimbursement list and developing new mechanisms of controlling drug prices, including price cuts, that will disproportionately affect foreign drug-makers. In India, Novartis (Switzerland) is embroiled in a dispute with the government over the intellectual property surrounding cancer drug Glivec/Gleevec (imatinib) in a case that bears some of the hallmarks of, and has many implications for, the dispute in Thailand. India was the home of the best-selling generics in the world, but the new patent law there means that countries such as Thailand and the Philippines are looking elsewhere (particularly to Pakistan) for international compulsory licences and parallel imports.
Outlook and Implications
The compulsory licensing in Thailand is partially designed to replace the lack of regulatory control on the pricing of drugs in the country—products sold through hospitals and clinics are uncontrolled. Indeed, retail prices in public hospitals are usually within a 15% corridor of hospital purchase prices. The only price control mechanisms are ad hoc bargaining related to collective procurement, as well as intermittent price ceilings set by the Ministry of Commerce. The main problem with the compulsory licences, however, is that the industry has been entirely sidelined from the process—while Merck and Abbott have now initiated contact with the government to discuss the prices of Sustiva and Kaletra, this has been done after the fact. The government will still be obliged to provide royalties to the companies at a time when the latest measures have entirely disrupted its relationship with the industry.
For the drug industry, the danger is that compulsory licensing in effect becomes a valid form of cost containment, a de facto pricing and reimbursement (P&R) measure that entirely sidelines the core meaning of intellectual property (IP). Certainly, other governments, particularly in Asia, will be looking closely at developments in Thailand—the country has regularly been used as a model for national HIV/AIDS programmes and there is no reason to suspect that it would not be used as a model for compulsory licensing. Many Asian markets have showed double-digit pharma growth over the past few years in a consistent sign of recovery after the slowdown in the late 1990s, but with the governments bearing a significant part of the costs for this, the strategies being pursued to curtail the growth are becoming increasingly severe—as a result Big Pharma is suffering both in terms of image and finance.
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