Surmounting Challenges: Procurement of Antiretroviral Medicines in Low- and Middle-Income Countries
Publication date: 2003
Surmounting Challenges : Procurement of Antiretroviral Medicines in Low- and Middle-Income Countries The Experience of Mdecins Sans Frontires Executive Summary Background As the price of antiretrovirals (ARVs) in low- and middle-income countries has fall- en in recent years, governments, international agencies and non-governmental organizations (NGOs) have been able to start developing treatment programmes for people living with HIV/AIDS (PLWHA). Procurement strategies are a key element in this global scaling-up process. As Mdecins Sans Frontires (MSF) was one of the first international NGOs providing ARV therapy, the World Health Organization (WHO) requested that MSF document its procurement experiences in 10 countries where it has ARV treatment programmes, so that others could benefit from what has been learnt. The importance of assisting ARV treatment programmes to procure low-cost, quality ARVs cannot be underestimated. In sub-Saharan Africa, the region hard- est-hit by the HIV virus, only one percent of the four million people in need cur- rently receives ARV therapy. While other medicines can cure the opportunistic infections caused by HIV or provide relief from symptoms, these are ultimately only temporary measures. Conversely, ARVs decrease the level of the virus in the body, reduce morbidity, prolong and improve quality of life, and prevent most opportunistic infections. MSFÕs experience shows that for numerous reasons ARV procurement is often more challenging than that of other types of essential medicines. Products are expensive and stock management is crucial to avoid disruption of treatment. Treatment protocols are diverse, and procurement systems have to respond quickly to evolving treatment regimens. Also, the limited amount of publicly available information, including the lack of quality reference standards, makes assessing the quality of generic ARVs more difficult than that of most other essential medicines - even though quality generic ARVs are being produced. Method Data collection for this report is based on MSFÕs purchasing experience over the past two years in 10 countries. Potential ARV sources, patent and registration status, prices, and distribution options have been analysed and systematically documented in each of the 10 countries - Cambodia, Cameroon, Guatemala, Honduras, Kenya, Malawi, Mozambique, South Africa, Thailand and Ukraine. Before presenting the detailed country case studies, the report looks in some detail at ARV selection, pricing and procurement issues in general, as part of the medicines management cycle. Five issues of particular importance are highlight- ed: sources (quality); registration; prices; patents; and continuous availability of medicines. Main findings An important finding from the country case studies is that procurement works best when there is a national HIV/AIDS strategy that includes ARV treatment, and that is supported by government commitment and political will. Sufficient fund- ing is crucial to implement national action plans. Another major finding is that there is no single or ideal approach to ARV pro- curement. There are several effective strategies that can result in the supply of affordable, quality ARVs. Often a combination of these procurement strategies worked well for MSF country programmes. From MSFÕs perspective, the most effective and easiest systems are either one or a combination of: strong public procurement agency (Cameroon); local drug production (Thailand); and/or dynam- ic private sector distributors (Malawi). It was also found that the following factors affected efficient procurement sys- tems at country level: limited numbers of registered ARV products (generic and originator); unclear patent status of ARV medicines; lack of generic policies; lim- ited information available about internationally publicized prices; and countriesÕ eligibility for differential prices offered by pharmaceutical companies. The ability to use generics has been one critical factor for procurement success, to allow competition and guarantee a continuous supply of ARVs. Although MSF was relatively successful in procuring ARVs in the countries described in this report, it is important to note that drug procurement continues to be a complicated and labour-intensive process, both in terms of ensuring the continuous supply of drugs in countries where projects have been begun and in starting up procurement in countries where MSF is opening new projects. Main recommendations The reportÕs main recommendations on ARV procurement highlight that for Ministries of health/national AIDS programme/policy-makers — it is important to have national HIV/AIDS treatment guidelines and ARVs included in the national list of essential medicines. Taxes, duties and mark-ups on ARVs should be low- ered or abolished by governments to avoid significant price increases that make products unaffordable. Systematically collected information on patents, and inter- national and local prices of medicines will increase price transparency and will facilitate price negotiations and improve procurement. Governments of Least Developed Countries (LDCs) — have no need to grant and enforce patents on pharmaceuticals until 2016, as stipulated in the Doha Declaration on TRIPS and Public Health, 2001. Also they can exercise their right to access low-cost medicines (compulsory licences or parallel importation), as provided for in the World Trade Organization (WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. ARV procurers — the most important task is to obtain appropriate ARV products and formulations of assured quality at the lowest price possible. Some of the key issues for successful procurement are: forecasting ARV needs accurately, having up- to-date price information and quality assessment (WHOÕs pre-qualification project) obtaining ARVs that are registered by the national drug regulatory authority (NDRA), introducing generic competition, knowing of reliable suppliers and distributors (international and national) and having guaranteed funding (e.g. from the Global Fund to Fight AIDS, Tuberculosis and Malaria). Manufacturers — manufacturers worldwide should develop fixed-dose combinations (FDCs) and paediatric formulations, as well as more user-friendly and affordable diagnostics. They should also be committed to developing and participating in a differential pricing mechanism, in WHOÕs pre-qualification project and in maintaining stocks at country level. United Nations and international agencies — a differential pricing system for newer medicines should be further explored at international level. Regional, as well as national, ARV procurement initiatives should be supported. If requested, UN and international agencies should stock ARV supplies on a countryÕs behalf. 1 MSF ARV PROGRAMMES n MSF ARV PROGRAMMES n PLANNED ARV PROGRAMMES ARV PROGRAMMES FEATURED IN THIS REPORT JULY 2003 n n South Africa Cambodia nn nn Thailand nn Malawi nn Ethiopia nnn n Kenya nn n Mozambique Cameroon nn n Ukraine n Uganda Guatemala nn n n Honduras Peru n Ecuador n Guinea n China nn Angola n n Benin n Burkina Faso n Myanmar n Indonesia n Nigeria n Chad n Laos n Burundi n Zambia n Zimbabwe Rwanda n DRC nn The following section draws together the common themes and findings from the 10 country cases. No ideal ARV procurement model was identified but analysis of the cases illustrated which factors had the most significant impact on availability and affordability of ARVs. Government HIV/AIDS strategy: The most critical factor affecting ARV procurement is a clear government commit- ment and policy to include treatment in a national HIV/AIDS strategy and secur- ing the funding for this. Next come the registration status of medicines; the patent situation and the governmentÕs approach to overcoming patent barriers; accessibility to best prices by ensuring competition including originator and generic companies; and setting up an effective mix of public/private and NGO procurement and service delivery systems that best serve treatment programmes nationwide. Political will: Whether it led to the decision to produce locally (Thailand) or to a system whereby imported drugs are made available at competitive prices (Cameroon and Malawi), national political will was a critical factor in ensuring the availability and affordability of quality selected drugs. MSFÕs procurement experience was profoundly influenced by governmentsÕ policies, whether written or implied. In some countries (Kenya and South Africa), the lack of political will led MSF to identify and apply ÒexceptionalÓ strategies. Such strategies need case-by-case government approval, and therefore have only demonstrative potential but do not significantly improve access across-the-board to patients in need. Drug registration: Having a limited number of registered generics and originator products created a serious barrier to ARV affordability and availability, this was the case in Cambodia, Guatemala, Kenya, Mozambique, South Africa and the Ukraine. Government policy regarding registration and other factors, such as the size of the market or a countryÕs wealth, played critical roles in which drugs were regis- tered. Manufacturers are not always keen to register their products in Low- and Middle- Income countries where the market remains small; for instance, in Cambodia and Mozambique few originator drugs are registered. This is true even in countries included in international offers. Therefore price offers remain ÒvirtualÓ unless temporary authorization for import and use can be attained. Governments were often ready to give MSF special authorization when drugs were not registered, which has helped to foster competition between producers. This happened in Cambodia, Guatemala, Mozambique and South Africa. Patents: In most of the 10 countries MSF had difficulty finding reliable information on the patent status of particular drugs, although some patents existed. MSF spent con- siderable time and resources hiring lawyers in various countries to analyse the national patent system and to ascertain the patent status of needed ARVs. But it is clear that some countries are using the maximum flexibility allowed under TRIPS and strengthened in the Doha Declaration by ensuring accessibility of generic ARVs when patents were granted. Also, whether there was a govern- ment policy or not, MSF and its suppliers have had no legal problems (have never been sued or received legal threats) when using generic drugs. Generic competition: The most significant factor in lowering prices was the introduction of generic sources in a country. Prices for first-line therapy in the 10 countries ranged from US$277 ppy in Cameroon to US$867 in Guatemala. Generally prices are significantly lower for generics than then they are for even differ- entially priced originator products. South Africa provides a good example. The differen- tial price offered by originator companies for ZDV/3TC* and NVP in May 2003 was US$767 ppy, while MSF was paying US$400 for generic drugs from Brazil. In some LDCs or sub-Saharan countries generic prices have dropped to less than US$300 ppy. But countries that are not LDCs or not in sub-Saharan Africa are only getting significantly reduced prices when they have access to generics. Country cases show that generic producers are willing to charge their lowest prices in some mid- level countries, for example, Honduras, where the first-line treatment costs US$288 ppy. However, generic companies did not always make their internationally publicized prices available at country level. This was the case in Cambodia for most Cipla drugs, which forced the MSF team to import the drugs from the manufacturer. ARVs are still unaffordable for people living in developing countries. Large scale- up will depend on further price reductions. MSF estimates that with a combina- tion of large production volumes and generic competition, a price of US$50-100 ppy for triple therapy is achievable. Differential prices: In general, MSF found that it took extraordinary measures to get the published differential prices at country level. The drugs were often unregistered, unavail- able or available from local agents that were adding surcharges. But with a lot of Continued on page 4 Main findings and recommendations 2 No. Yes. No. Import fees add to costs; data exclusivity pro- vision hampers access. No. No. Lack of national AIDS plan hampers access; gener- ics only avail- able as special case. Summary of MSFÕs procurement experience in ten countries (information as of March 2003) Cambodia Cameroon Guatemala Honduras Kenya Medium HDI1, LDC2 Medium HDI Medium HDI Medium HDI Medium HDI Generics and originators imported, not locally avail- able. Local purchase through nation- al government procurement centre. Generics imported; origi- nators bought locally or regionally. Generics bought locally; originators bought region- ally. Generics imported; origi- nators bought locally. Few ARVs reg- istered; special govt authoriza- tion obtained. All govt pur- chased drugs registered, or in process. Few ARVs reg- istered; special govt authoriza- tion obtained. Data exclusivity limits access to generics. Govt informa- tion unclear; most generics registered. Originators reg- istered; gener- ics not, but some generic applications pending. No patent bar- riers. As LDC, not obliged to enforce patents before 2016. Several key ARVs patented, but govt authorizes pur- chase of gener- ics. No patent bar- riers. Govt informa- tion unclear. Most ARVs on patent; excep- tions made for NGO/mission sector. Yes. Yes. Yes. Yes. Yes. D4T/3TC/NVP US$ 350 D4T/3TC/NVP US$ 277 ZDV/3TC+EFV or ZDV/3TC+NVP US$ 867 or US$ 520 D4T/3TC/NVP US$ 426 D4T/3TC/NVP US$ 292 ZDV+ddI+LPV/r US$ 1215 ZDV+ddI+NFV US$ 4763 D4T+ddI+NFV US$ 1161 ZDV+ddI+NFV, or D4T+ddI+NFV US$ 3796 for NFV only ZDV+ddI+NFV US$ 1594 Differential prices some- times not avail- able locally; needed to con- tact companiesÕ headquarters. Yes. Access to some of the best prices internationally. Guatemala eligi- ble for few orig- inator differen- tial prices; prices often very high. Yes. Yes. No (but announced). No. No. No. No (but announced). Procurement is resource-inten- sive and com- plex. Centralized procurement strategy. Procurement is simple, effi- cient, and reli- able. Time-consum- ing negotia- tions with orig- inator firms required. Local generic agents facili- tate procure- ment. Cumbersome; special authori- zations for generics required. Main Characteristics of Procurement Level of Development Availability Registration Situation Patent Situation Generics Purchased? MSF 1st line and price (per patient/year) MSF 2nd line and Price (per patient/year) International Price Offers Available? National Production? Government Commitment? Malawi Mozambique South Africa Thailand Ukraine Low HDI, LDC Low HDI, LDC Medium HDI Medium HDI Medium HDI Generics and originators bought locally. Generics and originators bought locally through private distrib- utors. Generics not available; origi- nators bought locally. Locally pro- duced generics (GPO3) avail- able; origina- tors bought locally. A few generics imported; origi- nators usually bought locally. Generics and originators widely regis- tered. No registration system yet; special govt authorization obtained. Most origina- tors and a few generics regis- tered; special govt authoriza- tion obtained. All originator and GPO generics regis- tered. Most originator and some generics regis- tered. Little patent information available. As LDC, not obliged to enforce patents before 2016. No patent bar- riers. As LDC, not obliged to enforce patents before 2016. Most ARVs on patent. Some ARVs on patent. Some ARVs on patent. Yes. Yes. Yes, by MSF under special authorization. Yes. Yes. D4T/3TC/NVP US$ 288 D4T/3TC/NVP or D4T/3TC+EFV US$ 389 or US$ 463 ZDV/3TC+EFV or ZDV/3TC+NVP US$ 1000 or US$ 400 D4T/3TC/NVP US$ 352 ZDV/3TC+NVP US$ 500 ZDV+ddI+NFV US$ 1875 ZDV+ddI+NFV Not yet pur- chased. ddI+d4T+LPV/r US$ 1203 ZDV+ddI+SQV/r US$ 3500 ddI+d4T+LPV/r Not yet pur- chased. Yes. Differential prices some- times not avail- able locally; needed to con- tact companiesÕ headquarters. Yes. Thailand eligi- ble for few orig- inator differen- tial prices. Ukraine eligible for few origina- tor differential prices. No. No. Yes (under vol- untary license). Yes (GPO). No. Yes. By regis- tering both generics and originators. Yes. By quickly author- izing imports of generics. No. Yes. No. Govt only negotiates with origina- tors. Dynamic pri- vate sector dis- tributors; but no central pro- curement agency. Not overly cumbersome; central pro- curement agency planned. Cumbersome; special authori- zations for generics required. Easy for local- ly-produced drugs; complex for originators. Somewhat dif- ficult; no local distributors for generics, and small stock for originators. Key: 1HDI: Human Development Index 2LDC: Least Developed Country 3GPO: Government Pharmaceutical Organization (public-sector drug manufacturer) 3 World Health Organization Continued from page 2 persistence, some of these problems were resolved for LDCs and sub-Saharan African countries although this is a continuous challenge. It should be noted that a number of originator companies are offering some of the best prices available internationally in LDCs and sub-Saharan Africa, as some BMS and Merck & Co products show. MSFÕs experiences in Guatemala, Honduras, Thailand and Ukraine show that in UNDP-classified Medium Human Development Countries not in sub-Saharan Africa, differential prices are not usually available. Merck & CoÕs products are the exception as the company has publicized differential prices for Medium Human Development countries. Roche now has a policy of differential prices for World Bank-classified Lower-Middle Income Countries, but only accepts orders in Basle, Switzerland, and charges transport, insurance and freight costs to the customer (up to 20% surcharge). Procurement system: Procurement systems are partly driven by a countryÕs political will to tackle the HIV/AIDS epidemic. From MSFÕs perspective, the most effective and easiest pro- curement systems are: 1) a strong public procurement agency: For instance, the Cameroon government takes full responsibility for authorizing the use of drugs of assured quality, pur- chasing through competitive bidding (tenders) and managing stock to avoid sup- ply interruption. 2) private sector distributors: Another more complicated but equally effective sys- tem is purchase through dynamic private sector distributors. MalawiÕs first-line ARV combination price is one of the lowest in the world (US$288/ppy) because of local distributorsÕ ability to act as agents of originator and generic manufactur- ers. This spares MSF or other buyers the administrative burden of importing, which is handled by the distributor. The low prices have partly been achieved by demanding that local distributors charge prices that have been publicized by the manufacturers. When surcharges were added, MSF complained to the manufactur- er as well as the local distributor. 3a) direct from manufacturers: In some cases, because ARVs were unavailable or were over-priced, MSF imported needed ARVs directly from manufacturers (Cambodia and Guatemala). This is the most difficult means of procurement, as the full burden of registration (provisional) and importation falls on the organi- zation. Also this supply line is more vulnerable because of long-delivery times and the lack of a local buffer stock. 3b) local manufacturers: Like Brazil, Thailand is an example of a country that produces ARVs locally. Local production has led to affordable, straightforward procurement of some drugs but for those that need to be imported, difficult price negotiations have been necessary. In some countries, such as Kenya and Ukraine, MSF used a dual approach, buying from both private sector distributors and importing directly from manu- facturers. This approach imposes a heavy administrative burden but does bring down medicine prices. (Note: importation is only just beginning in Ukraine). Recommendations for ministries of health/ national AIDS programmes/policy- makers: In countries where national HIV/AIDS guidelines are not yet developed, ARVs should be added to a countryÕs EML and should include specific formulations, such as double and triple FDCs and paediatric formulations. WHO treatment guidelines are good references. When drugs are in the national EML, it simpli- fies procurersÕ work in purchasing ARVs. National governments should consider fast-track registration of originator and generic ARVS, especially when drug/suppliers have been pre-qualified by WHO. Governments should lower or abolish taxes, duties and wholesaler and dis- penser mark-ups on ARVs, to ensure that the prices obtained through competi- tion or differential pricing mechanisms are not being increased prohibitively. Governments should work more effectively with national and regional patent offices to increase information on the patent status of ARVs. LDCs should take advantage of the fact that under the terms of the Doha Declaration they do not need to grant or enforce patents on pharmaceuticals until 2016. Subject to certain safeguards and limitations, governments can exercise their right to issue compulsory licences on patents on public health grounds. This provision is made under the WTO TRIPS Agreement. Recommendations for ARV procurers: The procurement agent should endeavour to make the best clinical choice of ARVs of assured quality at the lowest available price. The lesson learned on registration is that buyers should advocate full registra- tion rather than rely on special authorizations wherever possible. Pressure may have to be applied on both manufacturers or their representatives and NDRAs to achieve this. Procurers need not assume that patents are barriers if generic products are available in-country. In actual practice it may be possible to purchase generic versions of drugs which are theoretically patented. If publicized originator or generic prices are unavailable from local or regional subsidiaries or agents, it is advisable to contact the company headquarters, which will often provide information about prices and conditions. Procurers should insist that the companyÕs global offers are respected by local agents. To access the best possible prices and avoid shortages, it is important to plan drug requirements as far in advance as possible. Suppliers should also receive this information in advance, even if actual orders are placed at a later date, as quantities can always be adjusted if necessary. If the government procurement agency in the country does not supply ARVs, it might be possible to get local importers or agents to stock them locally, rather than being forced to buy ARVs direct from each supplier. Manufacturers some- times ask local buyers to recommend agents to represent their products if they do not yet have distributors. When national procurement agencies are supplying ARVs, customers can demand that they use generic competition rather than negotiation. Customers can help by supplying these agencies with information on sources and prices. The Global Fund will cover medicines approved by local regulatory authorities even if they are not yet pre-qualified by WHO and therefore countries need not limit their use of generics to pre-qualified drugs. Currently the Global FundÕs intention is to continue this policy until the end of 200426. Recommendations for manufacturers: As part of the global commitment to scaling up access to treatment, manufac- turers should support the development of FDCs, paediatric formulations and user-friendly, affordable diagnostics that will enable simplification of treatment. Manufacturers should participate in the development of differential pricing and join WHOÕs pre-qualification project through expressions of interest. Recommendations for UN and other international agencies: A differential pricing system for new drugs that are not available in generic forms should be explored internationally. This is particularly important for Òmid-levelÓ countries that are still often faced with prices that put needed drugs out of reach. International agencies should also support regional ARV procurement initiatives. Since national procurement agencies can work effectively, the international community should support countriesÕ efforts to expand national procurement agenciesÕ capacity to procure, distribute and manage stocks of ARVs. On behalf of countries, international procurement agencies (UN and non-profit) should consider stocking a full range of generic and originator ARVs, in coun- tries that cannot build procurement capacity easily. Pooled procurement would also increase volumes, and so decrease prices. Recommendations for NGOs: NGOs should work together to avoid duplication of effort and maximize their contribution to global scaling up of ARV treatment. Collaboration with govern- ments is particularly important when encountering problems. MMddeecciinnss SSaannss FFrroonnttiirreess Campaign for Access to Essential Medicines Rue de Lausanne 78 CP 116 CH-1211 Geneva 21 Switzerland Tel. ++41-(0)22-8498 405 Fax ++41-(0)22-8498 404 www.accessmed-msf.org WWoorrlldd HHeeaalltthh OOrrggaanniizzaattiioonn Department of Essential Drugs and Medicines Policy Avenue Appia 20 CH-1211 Geneva 27 Switzerland Tel. ++41-(0)22-7913 834 Fax ++41-(0)22-7914 167 www.who.int/medicines UUNNAAIIDDSS SSeeccrreettaarriiaatt Department of Social Mobilization and Information Avenue Appia 20 CH-1211 Geneva 27 Switzerland Tel. ++41-(0)22-7913 666 Fax ++41-(0)22-7914 187 www.unaids.org 4
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