Excellent Summary of Aids Drugs Dispute

[Gadfly]

The 7 May 2007 Financial Times does an excellent job of summing up the issues. I am not sure if you need a subsription to access the site, so I have quoted an excerpt (fair use) below with a few comments of my own:

 

The TRIPS agreement does not tell us how to resolve these pricing struggles. Nonetheless some signposts can help place the dispute over anti-HIV drugs in perspective.

 

First, the TRIPS treaty does not privilege developing nations in patent disputes solely because of their humanitarian motives. If a nation wants to supply cost-free medicines to its citizens, the first place it should look is to its own general revenues. Its own internal generosity does not lower the commercially reasonable price it should pay.

 

Second, any stated price does not look commercially unreasonable if it is similar to offers made to other nations, all of whom act as sole purchasers within their own countries. No nation should be able to circumvent the voluntary market solely because it doesnâ??t get the best deal possible.

 

Third, no drug company looks like an unreasonable hold-out when it has already made significant price concessions, such as those made to Thailand, where the price of an annual course of treatment for Kaletra has dropped from $2,200 to $1,000, even before the recent showdown. Bargaining abuse is not the unique preserve of nations. It can also originate in nations whose own economic houses may not be in order.

 

Fourth, nothing stops AIDS organisations or foreign governments from buying these products at a negotiated price, which can then be given out free of charge. Charity can come from anywhere, not just drug companies.

 

Fifth, Brazil and Thailand stand to reap enormous domestic benefits even if they pay negotiated prices. Recent studies put the gains from an additional year of life at well in excess of $100,000, dwarfing the cost of drugs, which in any event constitute only a small part of total treatment costs. Likewise, the price for the unrefrigerated Kaletra should rise, without increasing total costs, given its greater effectiveness and lower costs of storage and administration.

 

Sixth, the aggressive stance in Brazil and Thailand hurts AIDS patients worldwide. To be sure, price reductions in Thailand and Brazil will not lead to price increases elsewhere, since presumably Merck and Abbott already charge whatever price they think maximises the uneasy mixture between profits and good will. But if compulsory licensing schemes are proper in Brazil and Thailand, then why should everyone else not just follow suit, given the insatiable demand for lower prices?

 

Seventh, decisions like those in Brazil and Thailand cripple incentives to invest in new drugs, particularly for AIDS, for which sick people worldwide will pay the price tomorrow. What drug company will invest in new and useful products when the ensuing harsh publicity will damage its global brand? Better to stand aside and let someone else take the heat. But who will step forward?

 

In the end, the AIDS imbroglio replays a familiar morality tale: disregarding property rights in the name of human rights reduces human welfare around the globe. Even strong claims for distributional equity always come at the price of technological innovation.

 

In Thailand, the argument for compulsory licensing is even weaker. They are not only using it for AIDS drugs, but also for chronic heart conditions and rheumatism drugs.

 

The original plan was to break patents on over 30 drugs. Most of them have nothing to do with AIDS, but they would reduce costs substantially for hospitals that specialize in medical tourism.

 

Thailand's representative to the World Health Organization said the Thai government should hold Western tourists hostages if Western drug companies refuse to provide drugs to Thailand after it excercies compulsory licensing if a flu epidemic breaks out. Instead of backing off this threat, the Health Ministry and the local press are criticizing the Western press and drug companies for drawing attention to the threat (all the while failing to mention that the Thai government itself is the source of this threat).

[pe7e]

Fifth, Brazil and Thailand stand to reap enormous domestic benefits even if they pay negotiated prices. Recent studies put the gains from an additional year of (a Thais) life at well in excess of $100,000, dwarfing the cost of drugs

I don't think many AIDS infected Thais benefit the economy 100K baht a year let alone the 100K dollars claimed. Where do they come up with this crap from?

[Gadfly]

Read the quote a little closer or, better yet, remove the paranthetical you added that changes the meaning of the quoted text. The point here is that the gains of an extra year of life exceed the treatment costs.

[Gadfly]

...and you may not agree with the fifth point, but it is hard in Thailand to disagree with this point:

 

no drug company looks like an unreasonable hold-out when it has already made significant price concessions, such as those made to Thailand, where the price of an annual course of treatment for Kaletra has dropped from $2,200 to $1,000, even before the recent showdown. Bargaining abuse is not the unique preserve of nations. It can also originate in nations whose own economic houses may not be in order.

 

I wonder what country the author had in mind with that last comment?

[pe7e]

Well, I've read and re-read the quote several times, but can't come up with a different meaning from the one I originally interpreted, maybe you can explain. I suppose I could have included Brazil i.e. (a Brazillian or Thais) into the statement, but that doesn't change the meaning, since it was Thailand and Brazil the statment was about, not North America or Europe, where the 100,000 dollar figure could well apply to a significant percentage of the population.

I don't disagree with many of the other points raised in the article. I do believe civilisation as a whole, needs to come up with more imaginative ways of funding the pharma companies research programs, thereby eliminating the need to charge 1000's of dollars for medications that only cost 10's of dollars to actually produce.

[Gadfly]

I read the statment as referring to an additional year of life generally - anywhere. Since the article is about Thailand and Brazil and you focused on that part, I can now see why the statement could be misleading, but then I didn't read the statement as being limited to Brazil or Thailand the first time I read the article, in large part because I assumed any measurement about the value of an additional year of life is necessarily very speculative and approximate.

 

If you could measure this in Thailand, the value might differ and be less than US$100,000, but it would still exceed the amount of US$1,000 for this medication program. And then, of course, this goes to the cost benefit analysis Thailand needs to make about using its own funds to make this drug available to its citizens. The question about why drug companies in Western countries and the stakeholders in those companies should be compelled to subsidize making these drugs available in a country such as Thailand - which has a horrible track record when it comes to respecting the property rights of foreigners - is a whole other issue that needs to first explored.

 

I agree that there needs to be equitable means of getting AIDS medications to those who cannot afford them. But I think that has little to do with what is happening in Thailand right now. What is happening in Thailand is not about getting AIDS medications to those who would otherwise have no access. It is really about Thailand disregarding the property rights of others.

 

This same issue comes up with the proposed amendments to the Foreign Business Act. Basically, the Thai government has said they can and will compel foreigners to divest holdings - that are legal now - to Thais. This seems akin to and expropriation or nationalization of assets to me. In Thailand, all of these measures, taken together, create a very ugly pattern.

[pe7e]

I can agree with that.

[BaronTT]

Not directed at you, but the topic in general.

 

Aren't there alternative medicines that could be used? Ones that are less expensive than the ones the Thai government is forcing CL on? And medications don't work identically on everyone, so maybe the less expensive ones could be equally or even more effective on certain people.

 

(I wish the Thai government would force Mercedes Benz to sell me their cars for the cost of a Hyundai.)

 

 

[Paillote]

To put the Thai decision furter into perspective, the generic Indian version of Kaletra they want to buy costs 690$ per patient per year. That makes a saving of a mere 310$ per year, or about 30B per day. Given the Indian company have spent very little in development, 690$ should be close to production cost, which leaves Abbot with not much headroom to cover their expenses.

 

It is estimated 12000 patients in Thailand needs Kaletra. At present day only 500 is given it. If they give Kaletra to all 12000, they will save them a whopping 4 million (!) USD by using the Indian version. Who are the cynics here? I think the Thai goverment are using this to rally the voters behind them against an outside enemy. Sadly this works very well in any country...

 

Paillote

 

Btw, how come the Indians are making generic versions without anybody protesting them? Are they allowed to, or are they breaking patents as well?

[Gadfly]

To put the Thai decision furter into perspective, the generic Indian version of Kaletra they want to buy costs 690$ per patient per year. That makes a saving of a mere 310$ per year, or about 30B per day. Given the Indian company have spent very little in development, 690$ should be close to production cost, which leaves Abbot with not much headroom to cover their expenses.

 

It is estimated 12000 patients in Thailand needs Kaletra. At present day only 500 is given it. If they give Kaletra to all 12000, they will save them a whopping 4 million (!) USD by using the Indian version. Who are the cynics here? I think the Thai goverment are using this to rally the voters behind them against an outside enemy. Sadly this works very well in any country...

 

Paillote

 

Btw, how come the Indians are making generic versions without anybody protesting them? Are they allowed to, or are they breaking patents as well?

 

Good points.

 

"I think the Thai goverment are using this to rally the voters behind them against an outside enemy."

 

Sadly, I think that might be a good part of what is going on. Thailand seems to be going through a mini ice age. The people who will suffer the most from the current nonsense are the Thais themselves.

 

(Yeah, I also wondered why an Indian company is able to make this drug. Anyone know?)