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Remember the movie “Brazil?” It’s one of those surreal Terry Gilliam creations where up is down and down is up and Robert DeNiro stars as a subversive HVAC repairman. Anyway, it’s time to revisit the world’s largest Portuguese-speaking nation — and this time it’s not for fun. Have a look at what CMPI advisory board member Doug Bandow (of the Cato Institute) has to say.
The American Spectator
Bad Boys From Brazil
By Doug Bandow
Drugs offer incredible medical benefits. Everyone wants to take them. Drugs cost a lot to develop. No one wants to pay for them, as Brazil has demonstrated in preparing to steal several pharmaceutical patents.
The tension between access to existing medicines and creation of new ones is particularly stark in poor nations. The regular price of HIV/AIDS treatment regimens exceed per capita incomes in some countries.
Although activists routinely vilify the pharmaceutical companies, only their extensive R&D activities generate the products that keep tens of millions of people alive. Leading companies widely discount and donate their drugs in the Third World and work with charitable groups to build health infrastructure and distribute antiretrovirals.
No good deed goes unpunished, however. Even residents of rich countries don’t want to pay for life-saving medicines. Most industrialized states impose one or another set of price controls on drugs, blatantly free-riding on the scientific creativity of American firms.
Other states make even less pretense of respecting the property rights of U.S. drugmakers. Such as Brazil. Despite its manifold economic and social woes, it has the largest economy in Latin America, ranking 11th in the world. Per capita GDP runs about $8,100 — behind the U.S., but ten or more times that of the dozen poorest African states.
Yet Brasilia believes that other nations — or, more accurately, companies from other nations — owe it a medical free lunch. The government wants to save money in its health budget (what country does not?), so it expects to buy AIDS drugs at fire sale prices. Brazil backs up its demands by threatening to steal the makers’ patents.
International intellectual property rules allow use of compulsory licensing of patents, but only in public health emergencies. Brasilia, however, has never let juridical niceties stand in the way of forcing down drug prices.
IN 2001 BRAZIL BEGAN THE process of issuing a compulsory license for Viracept (nelfinavir), an AIDS drug, unless Hoffman-La Roche lowered the price. The company accepted a 40 percent cut on its already discounted price.
Two years later Brazil was back, demanding price cuts from Roche, again, as well as Bristol-Myers Squibb and Merck. To back its ultimatum, Brasilia threatened to confiscate the drug patents.
Brazil prepared a formal decree to authorize importation of “any generic medication in case of a national emergency or in the interest of public health.” Even more ominously, Health Minister Humberto Costa indicated that Brazil would provide discounted AIDS medications to its Latin American neighbors, opening the international floodgates.
Brasilia’s extortion caused the companies to slash the prices of their anti-AIDS drugs. The final cost of Merck’s STOCRIN ended up little above that in Sub-Saharan Africa.
Despite its debt problems, Brasilia was not broke. It simply wanted to save cash. Alexandre Grangeiro, coordinator of the Ministry of Health’s AIDS program, explained: “We need a price reduction now, because of our budget limitations.” Similarly, said Dr. Paulo Roberto Teixeira, Director of the Brazilian National STD/AIDS Programme: “In previous negotiations, we managed to get the prices of these drugs reduced, but now we want to lower the costs even further.”
Brazil is wielding the same weapon yet again. Only this time Brazilian officials are demanding that Abbott Laboratories, Gilead Sciences, and Merck turn over their knowledge through “voluntary licensing,” allowing Brazil, either through government operations or private manufacturers, to produce generic copies.
Brazil might be a major economic player, but why pay for what you can steal? “Even with recent price reductions that we obtained from drug producers, the total cost of retroviral drugs is growing in an unbearable way,” explained Jarbas Barbosa, a health ministry official. (Ironically, early in May Brazil rejected a $40 million U.S. grant for AIDS treatment in protest of the accompanying conditions.)
These are “negotiations” in name only, since Brasilia will accept only one result. Said Barbosa: “We’re interested in a fast negotiation. But if we’re obliged to use the compulsory licensing we will do so as a last resort.”
Brazil’s lower house has since voted to suspend patents for AIDS drugs. At the end of June the government announced that it was going to appropriate Abbott’s Kaletra. Brasilia announced that the company had two weeks to make a counter-offer.
Understandably, the company caved, agreeing to provide ever-increasing amounts of its drug at the amount expenditure, and to yield its technology in 2015. But these concessions were like blood in the water for sharks. Brazil’s health minister, Correio Braziliense, announced that the tentative accord wasn’t enough: “The process of a compulsory license is still ongoing and breaking the patent has not been discarded as a final alternative.”
Which means Abbott will have to give more or lose its patent. Then next on the target list are Gilead Sciences and Merck, with whom Brasilia is conducting Don Corleone-like “negotiations.”
THE U.S. GOVERNMENT SHOULD punish Brazil economically — “as a last resort,” of course.
Washington generally has no duty to protect the profits of American firms that operate overseas. But in this case firms have no opt out — Brazil simply says, give us your product or we will seize it, irrespective of where you conduct business.
The consequences are potentially dire. Antiretrovirals exist only because profit-minded drugmakers have invested billions of dollars in R&D. Roberto Gouvelo, a legislator from the governing Workers’ Party, complained that one AIDS drug purchased by the government costs ten times its production cost. Unfortunately, however, industry investments must cover not only the successes, but also the failures, which are many. Even larger outlays are likely to be necessary to develop a vaccine for HIV/AIDS, as well as cures for a multitude of other serious diseases.
Should countries take new medicines whenever they want to pay less, pharmaceutical manufacturers will turn their attention to less important but less risky endeavors (most notably the “me-too” drugs routinely denounced by industry critics). It would be bad enough if Brazil stole American medicines for its domestic market. But if Brasilia begins exporting generic substitutes, it could destroy pharmaceutical innovation.
Brazil’s threats highlight another problem. By artificially driving down prices, such controls increase the gap between domestic and foreign prices, creating the perception that drugmakers are treating American consumers unfairly. That, in turn, increases pressure for so-called reimportation of the very drugs being sold under foreign price controls.
Washington should attempt to educate Brasilia. India serves as a good example: once a celebrated patent-breaker, New Delhi now sees pharmaceuticals as an emerging industry and has instituted a legal regime to protect intellectual property.
The U.S. also should indicate that Brazil’s behavior risks disqualifying it from joining any free trade system including America. The de facto theft of U.S. patents is inconsistent with open access to the American market.
Since Brasilia continues to misuse patent provisions intended to resolve a health care emergency, Washington should file a complaint before the WTO. Washington should consider direct sanctions as well.
Brazil certainly does not deserve preferential access to the U.S. market under the generalized System of Preferences (GSP) program. Brasilia’s ability to export $2.5 billion worth of goods to America duty-free already is undergoing a special review while the USTR considers the effectiveness of a Brazil’s system to combat copyright privacy. The Bush administration also should use a Special 301 investigation and penalize Brazilian exports.
Moreover, Congress should empower the U.S. Trade Representative to suspend recognition of intellectual property rights for companies headquartered in countries that violate American copyrights and patents. Retaliatory sanctions obviously should be a last resort, since a trade war is in no one’s interest. But if Brazil hopes to become a significant economic power, it should stop looking at U.S.—made pharmaceuticals as a free lunch.
If people won’t pay for their medicines, drugs won’t be created. Washington must protect the intellectual property which has created a medical boon for the entire world.
Doug Bandow is a Senior Fellow at the Cato Institute.
The American health care system is undermined, underserved, and undervalued when labeling is written more for corporate liability protection than as a valuable tool for health care providers. Today, labeling includes excessive risk information and exaggerated warnings. And this has set into motion a dangerous dynamic — labeling that does not accurately communicate to either the health care professional or the patient the conditions in which any given product can be used safely and effectively. This is nothing less than a grave menace to the public health. Labeling for liability is health care terrorism.
I really wanted to link to Dr. Marcia Angell’s July 15, 2004 temper tantrum article in The New York Review of Books — but I couldn’t get permission. So, rather than infuriate you further with her dangerously slanted views, let me share a more useful debate.
Imagine American health care spending as a dollar bill divided into a hundred pennies. How many pennies do you think represent spending on prescription drugs? 60? 80? Wrong. 10 1/2. The rest (otherwise known as 85%) represent everything else — from doctor visits and hospitalization to administrative charges, and insurance.
What’s a better bargain: time spent in the hospital, or drugs that keep Americans healthy and productive? The answer is clear. Fewer cents make the most sense.
More Americans are using more prescription drugs and for good reason. New medicines are increasingly the first, most effective, and most cost efficient treatment options. Ask any doctor. Ask your doctor. Is spending on pharmaceuticals up? It is, because more drugs are being prescribed. And the result is a healthier America and a reduced burden on the American health care system.
ItÃ¢s also true that insurance companies have been increasing their monthly premiums — but not because prescription drugs costs are busting their budgets. That is, as they say, a lie Ã¢ but an often repeated one. Prescription drugs account for only a small part of monthly insurance-premium increases. Consider this, from 1998 to 2003, insurance companies increased their premiums by an average of $104.62 per person. During that same time period prescription-drug costs increased by $22.48. What about the other $82.14? That’s a good question. And America deserves an answer.
What about Medicaid? In 2002, prescription drugs accounted for only 11.4 percent of Medicaid spending, and from 1997 to 2002 Medicaid prescription drug increases accounted for less than 20% of the total increase in spending.
Are the majority of Americans with private health insurance spending more for drugs? Yes — because their insurance companies are paying less. In 2000, people under 65 with private health insurance paid 37.2 percent of the cost of their prescription drugs costs out of their own pockets. (Not surprisingly, this leads many Americans to believe that their increased out-of-pocket expenses is because of higher drug costs.) The truth is that the growth in prescription-drug co-payments outpaced the growth rate of prescription drug prices four to one.
This imbalance has had a devastating impact on the health of Americans and the American health care system. Out-of-control out-of-pocket expenses have caused many patients to stop using prescription drugs for controllable chronic conditions like high cholesterol, high blood pressure, ulcers and depression. The unfortunate result among patients with diabetes, asthma, and gastric acid diseases is that visits to emergency rooms have increased 17 percent and hospital stays have risen 10 percent.
ItÃ¢s not about the price of drugs Ã¢ itÃ¢s about the cost of health care. And the American pharmaceutical industry is committed to being a part of the solution. As Disraeli said, Ã¢it is easier to criticize than be correct.”
(Reprinted with permission from the Wall Street Journal, author: Miles D. White)
What is an extra year of life worth? What would you pay for a new medicine that offered it to you? I think most would answer, “A lot.” For many the answer would be, “Anything.” But what if that new medicine offered only six months? Or 90 days? Would it be worth more if those few months gave you the chance to see a grandson’s birth or a daughter’s wedding?
The fact that we get to ask these tough questions is a function of the advances we’ve made in health care. We have the ability today to save people from more diseases and previously fatal conditions than we’ve ever had. Medical science continues to advance. Life expectancy keeps growing. Quality of life keeps improving.
These innovations can be priceless for those who benefit, and for their families. Priceless, but not without a cost. Medical innovation has been one of the biggest factors in the rapid rise in U.S. health-care spending. Health care used to be inexpensive, because there was so little it could actually do. Doctors made house calls with little black bags; everything they had to offer fit into one. Today, we spend billions developing medical technologies and treatments, and we fill hospitals and pharmacies with life-saving innovations. That’s great news for patients, a category that, at one time or other, includes all of us.
Yet all this innovation has serious implications. Call it health care’s paradox of progress: Our very success in extending life presents daunting economic, political and, ultimately, ethical dilemmas. These go much deeper than current debates about reforming Medicare or allowing drug importation. They involve fundamental and, often, uncomfortable questions: Should advancing the capabilities of medical technology be our top priority? Or is access to medical care more important, so that all citizens can share in a more or less equal level of care? How long do we really want to live? And at what cost?
In short, what do we want from our health-care system? As Americans, we expect it all. We expect: (1) The highest standard of care; (2) continued innovation, and (3) broader access to new technologies at a lower cost. It’s possible to achieve two of these three goals. Which, then, can we do without? Will we accept less than optimal care? Will we accept a significant slowdown in medical progress? Will we say, implicitly or explicitly, “80 is long enough for a person to live?” — or “Sorry, we can treat your disease, but we’re not going to?”
I think most of us would answer these questions with a quick and emphatic “No!” In fact, one of the reasons we chafe under managed care plans is that we don’t like our medical care choices limited. There are those who take a different view. European and other government-run health systems — particularly the British, German, French and Canadian — keep costs down by limiting choices and restricting care.
Some critics contend that the largely private system in the U.S. is more costly and less effective than its government-run counterparts. What goes unremarked is those countries’ reliance on rationing care. They implicitly accept that a life expectancy of about 80 is enough, and that certain people with certain needs are simply on their own. They’re slower to adopt new medical innovations, and more sparing in their use.
* * *
But while we may disagree with some of their conclusions, at least they have asked the tough questions and made the hard choices that a society must. We have shown little or no willingness to even ask ourselves the real questions, let alone do the work to reach a consensus on potential answers that will work for our society. This includes those of us in the business of medical innovation: We must acknowledge that our innovations and their success in treating people pose a dilemma — the more medical innovation extends, improves, and saves lives, the more health-care and other social costs rise.
As a result, we must start to analyze the value to society of innovations. This kind of evaluation is new for us. It also will add time, complexity and cost to our clinical trials. But it will help us make the right decisions. In the past, a cancer compound that extended life only 90 days would have been aggressively pursued, licensed and marketed. In the future, there will be some challenging questions around whether or not the gain provided is worth the cost of development and treatment. These are tough questions. But they’re the ones we must grapple with to produce the answers we really need.
Mr. White, chairman and CEO of Abbott, is former chairman of the Pharmaceutical Research and Manufacturers of America.
There’s an apt Japanese proverb that bears repeating — “Don’t fix the blame. Fix the problem.” Unfortunately, yesterday’s FDA-bashing in the House of Representatives wasn’t about making things better — it was about making headlines. Could the FDA do a better job on drug safety? Of course. The goal is to always make things better, to move forward, to find new and innovative ways to advance the public health. But that would take more money and more authority — both of which must come from Congressional legislation — and neither of which is pending. Unfortunately there’s no shortage of posturing. Guilty parties: Representatives Rosa DeLauro and Maurice Hinchey.
The real problem is that industry and FDA have done such a terrific job ensuring that drugs are safe and effective that the American public views “safe” as meaning “100% safe.” It’s certainly flattering, but it will forever be a path rather than a destination. For those calling on FDA to do a “better” job, four words: show me the money.
According to a new Wall Street Journal/Harris Interactive poll, a majority of Americans support a proposal to limit direct-to-consumer advertising of new prescription drugs when they first come to market. Thirty-five percent of those polled say they would favor a mandatory ban of advertising for the new drugs, and another 16% support a voluntary ban, according to the online poll of 2,207 U.S. adults.
What’s more important is that the public seems to be losing faith in the FDA’s ability to properly oversee DTC. According to the same poll, there is little confidence among Americans that the FDA is ensuring the accuracy of prescription drug advertising. Thirty-five percent of those polled say the FDA is doing an excellent or good job of monitoring drug advertising, while 61% feel it is doing a fair or poor job. And their not half wrong.
Part of the solution (apart from more funding) is for the FDA to put some “science” into the “social science” of DTC regulation. FDA needs a solid benchmark study to serve as a foundation for the agency’s final policy decision; a social-scientific protocol, a quantitative research project composed of structured, closed-ended questions and a sample size representative of the U.S. population with regard to geography, race, gender, age, and the treatment/disease of interest. A study armed with questions that would provide insight into the most effective ways to communicate risks in ways that are understood by the reader. A study that would provide a social science-based regulatory framework, potential templates, metrics and, most importantly, add predictability to the DDMAC review process.
If we want the public to trust FDA’s expertise in regulating drug advertising and marketing communications, some solid science would certainly help.
According to an AP story I saw this morning, “the new class of sleep aids promises an advertising war. Some industry watchers say the coming ad blitz for the emerging class of longer-term sleep aids such as Sepracor’s Lunesta could rival the ad campaign associated with erectile dysfunction drugs.” I certainly hope that there have been some lessons learned. While ads for sleep aids won’t offend people the way some ED promotions have, there is still the very real threat that an orgy of advertising will further stoke the anti-DTC fire. I hope that long-term thinking is not in short supply and that these new commercials will lean more towards a disease-awareness creative strategy. Otherwise we’ll have a new definition of “D’s, “Dems,” and … “Doze.”
After too much bloviating and posturing and delay, all I can say is —IT’S ABOUT TIME that Dr. Crawford has been confirmed as FDA Commissioner. Sid Wolfe has already said that Les will be “the worst Commissioner ever,” making Les Dr. Wolfe’s most recent “worst Commissioner ever.” And that bodes well, because Sid’s last worst was Mark McClellan. The most exciting thing about last evening’s debate was how Senators Kennedy, Hatch, and Enzi triple-teamed Senator Grassley and set the man from Iowa straight on what authorities FDA has and doesn’t have — as well as what committee has authority over the agency. Well done gentlemen. Lester, excelsior.
The Canadian Minister of Health, Ujjal Dosanjh just announced that he’s introducing legislation that will, for all intents and purposes, end the charade of “Canada-only” drug importation. Now those who want to import will have to turn elsewhere — and where they’re looking is to Europe. Well, I’ve just returned from Europe and they’ve got a lot of problems over there. One of them is that profiteers masquerading as pharmacists are selling unsafe, unregulated, mislabeled, repacked, and co-mingled drugs to unsuspecting consumers. In Europe the cause of this malaise is known as parallel trade. Here at home we know it as drug re-importation. Unfortunately, the consequences of this “drug shuffle” are inconvenient for some American politicians and so they parse the truth. That’s bad medicine.
Senators Byron Dorgan (D, ND) and David Vitter (R, LA) have both introduced bills that would allow for drug importation from certain nations within the European Union. But they’re confused. They don’t seem to understand (or they choose not to admit) that you can’t cherry-pick drugs from just one or two of the 25 European Union nations. Senators Dorgan and Vitter may only want drugs from Great Britain or France, but that’s impossible — because that’s the law. According to the Treaty of Rome, parallel trade is completely legal and Articles 30 and 36 prohibit manufacturers from managing their European supply chains in their own or patients’ interests. Sorry Senators, the truth is inconvenient.
Last year 140 million individual drug packages were parallel imported throughout the European Union — and a wholesaler repackaged each and every one. This means that, literally, parallel traders open 140 million packets of drugs, remove their contents and repackage them. But these parallel profiteers are in the moneymaking business, not the safety business. And mistakes happen. For example, new labels incorrectly state the dosage strength; the new label says the box contains tablets, but inside are capsules; the expiration date and batch numbers on the medicine boxes don’t match the actual batch and dates of expiration of the medicines inside; and patient information materials are often in the wrong language or are out of date. Oops.
This means that drugs purchased from a British pharmacy to an unknowing American consumer (or a blissfully ignorant United States Senator) could come from European Union nations such as Greece, Latvia, Poland, Malta, Cyprus, or Estonia. In fact, parallel traded medicines account for about 20% (one in five) of all prescriptions filled by British pharmacies, the same pharmacies so highly touted by Senators Dorgan and Vitter and Governors Pawlenty (MN), Blagojevich (IL) and Doyle (WI). In the EU there is no requirement to record the batch numbers of parallel imported medicines, so if a batch of medicines originally intended for sale in Greece is recalled, tracing where the entire batch has gone (for example, from Athens to London through Canada to Indianapolis) is impossible. Caveat Emptor is bad health care practice and even worse health care policy. Safety cannot be compromised, even if the truth is inconvenient.
There is evidence linking parallel importation with the growing threat of counterfeits. In August 2004 counterfeit medicines were found in the legitimate British supply chain after a patient complained of a crumbling tablet. The UK’s Medicines and Healthcare products Regulatory Agency (MHRA) issued an immediate alert. Only days later, the MHRA had to issue another alert after a different counterfeit medicine was found in Great Britain’s legitimate supply chain. Pharmaceutish Weekblad, a respected pharmacy journal in the Netherlands, recently reported that counterfeit medicines found in the Netherlands at the end of last year entered the legitimate supply chain through parallel importers. Stubborn facts.
The World Health Organization (WHO) estimates that 8-10% of the global medicine supply chain is counterfeit — rising to 25% or higher in some countries. The largest counterfeit market with close proximity to the EU free trade zone is Russia, where the generally accepted estimate is that 12% of drugs are counterfeit. Now that the Baltic nations of Latvia, Lithuania, and Estonia have joined the European Union, WHO has warned that an increase in the risks of counterfeits entering the EU supply chain is “obvious.” Facts are stubborn things.
According to Sue Mitchell, editor of the British journal Epilepsy Today, “The parallel trade in medication is damaging people’s health and, at worse, putting lives at risk. Strong words, but when the discussion of the parallel importing of medication seems to revolve primarily around money, the reality of patient experience goes unheard all too often.” Senator Dorgan, Senator Vitter Ã¢ my 18-year old son has epilepsy. Please pay attention to the facts.
The issue of more and ever more black box warnings, beyond any individual therapy or class, is whether the pendulum has swung too far — and it seems as though that’s a real possibility. It’s crucial for FDA — and for those who are irresponsibly calling for “100% safety” — to realize that pronouncements made in the heat of political debate have serious and deliterious impact on not only the scientific debate, but also on the lives of real people outside the Beltway. Further, as labels become increasingly muddled with more and more warnings, fewer and fewer physicians and patients will pay them any heed. Label fatigue is a real threat to the public health.