By

Organised by Health Action International (HAI),

Medecins Sans Frontieres (MSF) and Consumer Project on Technology (CPT)

1. Introduction
2. Selection of drugs
3. Justification for selection of drugs
4. Methodology
5. Results
6. Analysis
7. Conclusions & Recommendations

1. List of drugs selected for the survey.
2. Number of brands, branded generics and generics of 16 drugs marketed in 26 countries.
3. The drug companies which innovated and introduced the 16 drugs.
4. A sample response to the drug pricing survey.
5. Retail prices of drugs protected by patents in 10 OECD, 9 African countries and Malaysia

5a. Retail prices of drugs that have recently gone out of patent protection in some countries and competitors have entered the market

5b. Retail prices of 100 units dosage forms of eight multi-source drugs. These have gone off patents for a considerable period of time and several competitors have entered the market

6. Number of countries where the originators’ proprietary brands of 16 drugs are marketed.
7. Comparison of retail prices of nine dosage forms of the originators’ proprietary brands of eight drugs in 11 developing countries.
8. The range and ratios of lowest and highest retail prices of originators’ proprietary brands and the generic equivalents of four selected generic drugs in developing countries.

8a. Comparison of the range of ratios between the lowest and the highest prices of selected drugs under different patent status in developed and developing countries.

9. Retail prices of Zantac (ranitidine) in 11 developing and developed countries.
10. Number of countries in Africa where only the originators’ proprietary brands of eleven multi-source drugs are available.
11. Comparison of the ranges of prices and average retail prices of 14 dosage forms of 12 drugs in OECD countries and countries in Africa and Asia.
12. Comparison of retail prices of six multi-source drugs in selected countries in Africa and Asia.
13. Comparison of retail prices of originators’ brands and competitors’ products of eight dosage forms of seven drugs in India.
14. Time lag between the introduction of a new drug in the world market and its introduction in India by national firms.
15. The retail prices of seven dosage forms of six drugs manufactured and marketed by Indian firms and the lowest retail prices of the same dosage forms of the originators recorded among the 28 countries surveyed. The ratio between the Indian and the originators’ price are also given.

1. Introduction

In March 1999, Health Action International (HAI), Consumer Project on Technology (CPT) and Medicins Sans Frontieres (MSF) convened a Meeting on Compulsory Licensing of Essential Medical Technologies in Geneva. The subjects discussed were AIDS, essential drugs and compulsory licensing.

The meeting gave a platform for the different stake-holders involved in pharmaceuticals to present their views on the impact of WTO/TRIPs Agreement on access to drugs in developing countries with special emphasis on drugs for HIV infection and AIDS.

Considerable evidence was put forward to show the negative impact of TRIPs Agreement on access to essential drugs. Among other provisions, TRIPs Agreement had one, which obliged WTO member states to grant patent protection for pharmaceutical products and processes for 20 years. Several developing countries must now amend their national legislation on industrial property rights to provide for pharmaceutical product patents. This would have an adverse impact on their pharmaceutical industry.

The participants at the meeting requested that HAI, CPT and MSF continue to work on these issues and explore suitable options available to member states of WTO, particularly the developing countries, to ensure accessibility and affordability of essential drugs to all who need them.

Representatives from HAI, CPT and MSF met in May 1999 to plan follow-up activities, as mandated at the March conference and decided on this conference – Increasing Access to Essential Drugs in a Globalised Economy. The planning committee identified six topics to be taken up as agenda items at the conference. Responsibility to prepare research papers on the six topics was given to selected groups. HAI was requested to prepare a paper on the impact of pharmaceutical patents on the availability and price of essential drugs.

HAI conducted a survey of retail prices of 29 dosage forms of 16 drugs in 29 countries. The objectives of the survey were to:

1. Study the impact of pharmaceutical patents on the availability and price of essential drugs.
2. Suggest solutions to ensure regular access to essential drugs in developing countries in a globalised economy with tighter intellectual property system.

1. Selection of drugs

Three groups of drugs were selected:

1. Five drugs – Ceftriaxone sodium, indinavir sulphate, lamivudine, simvastatin and zidovudine are either still under patents, coming out of patent in some countries or came off patents in certain countries (Table 1).

In the ten OECD countries, nine African countries and in Malaysia, these five drugs have a monopoly market (Table 2). In some OECD countries, more than one product is available due to co-marketing arrangements between the originator and a licensee. There were no copy products of these in any of these 20 markets. For the purpose of this survey, it is assumed that these drugs are protected by patents in these countries. Copy products of these drugs, except indinavir, are available in the markets of the other nine developing countries in Africa, Asia and Latin America.

2. Three drugs – Ciprofloxacin, fluconazole and omeprazole are either coming out of patents in some countries or have come off in certain countries. In this survey, few competitors’ products had entered the markets in the 20 countries. (Table 2a)
3. The remaining eight drugs are multisource drugs. Several competitors’ products are available in all the countries (Table 2b).

Tables 1 gives the following information for the 16 drugs:

1. The international non-proprietary name (INN) or the generic name of the drug.
2. The proprietary or brand name given by the originator.
3. The patent status:

PE – Patent expired.

PCO – Patents coming out in certain countries.

POSC – Patents came off in some countries.

SUP – Still under patent protection.

4. Indication for use.
5. Worldwide sales in US dollars in 1997.
6. Percentage change in worldwide sales between 1996 and 1997.
7. The ranking orders in 1996 and 1997 brand on worldwide sales.

Table 3 gives the firms that innovated and introduced the 16 drugs into the market.

The drug company which invented the drug – the originator.

1. Justification for the selection of the drugs

1. Simvastatin and omeprazole are the world’s top two selling drugs (Table 1). They are widely prescribed in both developed and developing countries. The two drugs are not in the WHO List of Essential Drugs.
2. Fluconazole, lamivudine and indinavir sulphate are commonly used in the management of people living with HIV/AIDS. There is a global campaign to make drugs commonly used for HIV/AIDS more accessible. These drugs are not in the WHO list of essential drugs.
3. Ranitidine, diclofenac sodium and diltiazem are listed in the national essential drugs list of several developing countries and are widely prescribed. These drugs are not in the WHO list of essential drugs.
4. The other eight drugs are in the WHO List of Essential Drugs.

1. Methodology

The list of 16 drugs (Tables 1 and 2) and detailed instructions for conducting the survey were circulated to HAI partners through the respective HAI international co-ordinators in the four regions – Africa, Asia, Europe and Latin America.

HAI partners were requested to visit and discuss with the pharmacists in a few of the leading retail outlets in the capital cities of the respective countries and check the retail prices of a few of the drugs listed; select one of the pharmacies and carry out the detailed survey as follows:

1. Ask for the availability and retail prices of the proprietary or brand name product of each drug listed (Table 1). The investigator was asked to show the pharmacist the originator of the drugs (Table 3) in places where the brand name given in the list was not available. It is not uncommon for the originator to use different brand names in different countries; for example, the originator markets ranitidine in different countries under different brand names such as Zantac, Azantac, Zantic, Zinetac, etc.
2. Find out the total number of products of each of the drug listed in table 1 available in the pharmacy. These will include the originators’ brand, branded generics and generics.
3. Record the retail prices of the originators’ brand of the package size listed in table 2. In case these package sizes were not available, to record the price and particular package size which is available.
4. When there are several products of one drug available, record the prices of the next two best selling products in addition to the proprietary brand or the top-selling product.
5. Record the prices of each package size in the national currency and convert it to US dollars using the official exchange rate.

Tables 5, 5a and 5b give the results of the survey – the retail prices in US dollars of 100 units of 29 dosage form of 16 drugs in 29 countries in July/August 1999.

Table 5 gives the retail prices of 100 units in eight dosage forms of five drugs listed in table 2 – the monopoly drugs. These include the ten OECD countries and ten developing countries – Benin, Cameroon, Malawi, Malaysia, Mozambique, Nigeria, Senegal, South Africa, Togo and Zambia which give patent protection to these drugs and the remaining developing countries which do not grant patent protection. Competitors’ products of some of these drugs are available in some of the developing countries which do not provide patent protection. The competitors’ products are lower than the originators’ brands.

Table 5a gives the retail prices of 100 units of six dosage forms of three drugs listed in table 2a in 28 countries. Eritrea had not recorded any of these six dosage forms. These drugs have recently gone off patents and a few competitors have entered the market in some of the 20 countries, which grant patent protection (Table 2a).

Table 5b gives the retail prices of 100 units of 15 dosage forms of eight multi-source drugs in 29 countries. Several competitors' products are available in several countries (2b).

In tables 5a and 5b, where two retail prices are given for one dosage form in one country, the higher price is for the originators’ brand and the lower price is that of the top selling competitors’ product.

Retail prices for some dosage forms for some countries are not listed in tables 5, 5a and 5b.

This is due to the following reasons:

1. Some dosage forms were not available in the market, for example, indinavir sulphate 200 mg and zidovudine 300 mg were not available in any of the 19 developing countries. Acyclovir 200 mg was not available in any of the OECD countries.

2. Atenolol: Three strengths – 25 mg, 50 mg, 100 mg - were listed. Each of the 10 OECD countries had only one of these strengths; France and Italy were the two countries which had 100 mg whereas 14 out of the 19 developing countries had the 100 mg dosage form and five of them had in addition, the 50 mg as well. Clinical pharmacologists may be interested to study the reasons for this difference in patterns of utilization.

Tables 2, 2a and 2b indicate that in several countries there are more than one manufacturer’s product for each of the 16 drugs. However tables 5, 5a and 5b do not reflect this.

This is due to the following reasons:

1. Some respondents had given only the price of the top selling drug, usually the originator’s proprietary product although they had indicated that more than one product was available.
2. In several countries, the prices of the different competitors’ products were quite close. Therefore only a maximum of two prices are indicated.
3. Some countries had indicated several products for each drug, particularly Germany, India, Pakistan and Peru. However all these prices were very close to one another. Therefore only one price was listed in the table.
4. In all cases in tables 5, 5a & 5b, when two prices are given for one dosage form, the higher price is for the originator’s proprietary brand and the lower one that of the competitor’s product.

6. Analysis

Analysis of the data reveals the following:

1. Of the 16 drugs surveyed in 29 countries, one or more originators’ proprietary brands were available in all 28 countries except Eritrea. Table 6 gives the number of drugs marketed by the originator in the 28 countries.

The originators’ proprietary brands of all the 16 drugs are available in most of the OECD countries. Eight or more of the 16 originators’ brands are available in eight out of the 12 countries in Africa. The small samples in Asia and Latin America also shows considerable presence of the originators’ brands in these markets.

2. Multinational drug firms market their drugs at widely, different prices in different developing countries. Table 7 gives a comparison of retail prices of nine originators’ proprietary brands of eight drugs in 11 developing countries. There are wide variations in retail prices between countries ranging from 1:2 to 1:58.

The retail prices of generic equivalents do not show the very wide variations seen in proprietary drugs. Table 8 shows the range and ratios of the retail prices of the originators’ proprietary drugs and their generic equivalents in developing countries. The range for four drugs vary from 1:4 to 1:15 for generic drugs and 1:15 to 1:58 for proprietary drugs.

3. The very wide variations in retail prices among developing countries are not seen in the ten OECD countries. Table 8a compares the range of ratios between the lowest and highest prices of selected drugs under different patent status in developed and developing countries. The ratios for the monopoly drugs range from 1:1.7–1:2.2 in OECD countries and from 1:1.2–1:4 in the developing countries. This is to be expected. In the OECD countries these drugs enjoy a monopoly. In the developing countries, competing national firms did not have adequate time to enter the market and engage in price competition. Multi-source drugs show a big difference between the OECD and the developing countries. Among OECD countries the ratios range from 1:1.2-1:11.5. Among the developing countries, the ratios range from 1:1.7-1:58. This indicates that in some of the developing countries, the originators’ proprietary drugs do not face price competition, retail prices are what the markets can bear.

5. One would expect developing countries to make available low-priced generics of multi-source drugs. But in some countries in Africa, there are monopoly markets for multi-source drugs. Table 10 gives the number of countries in Africa where only the originators’ proprietary brands of 11 drugs are marketed exclusively. These are all multi-source drugs and competitors’ products are available in the world market.

Table 10 – Number of countries in Africa where only the originators’ proprietary brands of 11 multi-source drugs are exclusively marketed

Generic name of drug	Number of countries in Africa. Total number: 11*
Acyclovir	4
Atenolol	3
Captopril	3
Ciprofloxacin	1
Diclofenac	2
Diltiazam	4
Fluconazole	6
Metformin	6
Nifedipine	1
Omeprazole	3
Ranitidine	3

* Eritrea is not included. Only four of the 29 dosage forms of drugs surveyed were available in Eritrea.

 

6. Of the sample of drugs surveyed, the average retail prices of some of the proprietary drugs are higher in the developing countries of Africa compared to much more affluent OECD countries. Table 11 gives the comparison of the range of prices and the average of 14 dosage forms of 12 drugs in OECD, African and Asian countries.

• The average prices of six of the dosage forms are higher in African countries than in the much more affluent countries.
• The highest prices of 11 of the 14 dosage forms have been recorded in African countries.
• The ratios of the lowest to highest retail prices of the 14 dosage forms vary from:

• The small variations in the ratios between the lowest and highest prices of these dosage forms in OECD countries may be due to reasons including the following:
• Co-marketing arrangements among manufacturers;
• Parallel importing;
• Reference pricing; and
• Drug pricing policies.
• The average prices are all lowest in Asia.
• The average prices in Africa are much higher than in Asia. However comparison of the average prices of six multi-source drugs in three African countries with those in Asia show that the African countries have recorded lower average prices for four of the six drugs (Table 12). It is therefore possible for countries in Africa to make low priced essential drugs available. 

7. Monopoly markets thrive in the absence of competition. Left to themselves without competition, the multinational drug companies will keep up the high prices wherever they can and up to as long as they can as shown in tables 7, 8 and 11.

Price competition is the best way to bring down monopoly prices. This is best illustrated in table 13 which compares the retail prices of originators proprietary brands and Indian competitors’ products.

Price competition has forced the multinationals to bring down their prices to compete with the Indian manufacturers. When faced with competition, multinationals will not leave the market. They will lower their prices and stay on to compete with the nationals.

The best way to compete is to produce the drug at very low costs. It takes few years for national manufacturers to copy products and enter the market.

Table 14 gives an indication of the time lag between the introduction of a new drug in the world market and its introduction in India by national firms. It has taken about two to four years for an Indian firm to produce a new drug by reverse engineering.

It may take several years, after a drug is introduced in the market to capture a sizeable share, and reduce production costs to levels much lower than the originators. Table 15 illustrates this. It gives the retail prices of three dosage forms of three drugs still under patent protection and four dosage forms of 3 multi-source drugs.

Two prices are given:

1. Retail prices in India.
2. The lowest retail prices of the originators’ brands of the same seven dosage forms recorded among the other 28 countries.

The three drugs still under patent protection would have been introduced into the world market later than the three multi-source drugs. The Indian firms’ competing products for these three drugs would, therefore, have been in the market for shorter period compared to the three multi-source drugs.

The shorter period would not have given Indian firms adequate time to capture a sizeable market share, increase production volume lower production costs and effectively compete in prices. The Indian firms were able to market these drugs at about two to four times cheaper than the lowest prices of the originators’ proprietary drug recorded among the other 28 countries surveyed. On the other hand the Indian prices for the multi-source drugs were about 12 to 19 times cheaper than the lowest prices of the originators’ proprietary drugs recorded among the 28 countries surveyed. The Indian manufacturers had adequate time to capture considerable market share, increase production volume, lower production costs and offer low-priced drugs to consumers.

Time is, therefore, crucial in introducing generic equivalents of essential drugs soon after a new drugs are put into the market, so that they can enter into price competition well before the originators secure brand loyalty to their products by skillful promotion. Many of the Africa countries surveyed had only the originators’ proprietary brand forms of the majority of the eight multi-source drugs, while lower priced generic equivalents were available in the African market. It will be in the interests of public health to have low-priced drugs available in the market in every developing country. This is very critical since one of the criteria developing countries use for selecting drugs into their national lists of essential drugs is the price of drugs. High costs drugs, for example, some of the new anti-retroviral drugs for the treatment of HIV/AIDS, are not included in the lists of essential drugs in many developing countries, because of their high prices.

The following conclusions and recommendations follow from an examination and analysis of the data obtained in this survey:

• Proprietary brand forms of all 16 drugs are marketed in almost all the ten OECD countries and most of the developing countries.
• Proprietary brand forms of several of the multi-source drugs surveyed are the only products available in many of the African countries enjoying a monopoly market, although low priced generic equivalents, are available in Africa.

The most striking feature in this survey are the following:

• The higher prices of proprietary drugs in the developing countries of Africa, Asia and Latin America compared to prices in the 10 OECD countries. The retail prices of 15 out of the 18 dosage forms of eleven drugs for which comparable data are available are all higher in the developing countries than in the OECD countries.
• There is a very wide variation of retail prices in the countries surveyed. But there were significant differences:

1. The variation in the retail prices of proprietary drugs are much wider (range: 1:22-1:58). Than the variation in prices of generic equivalents (range 1:4-1:15).
2. The variation in the retail prices of multi-source drugs in developing countries (range 1:1.7-1:58) are much wider than the variations in OECD countries (range 1:2-1:11.5)

It is assumed that market forces promote competition.

It should therefore follow that in a free market, competition will result in lowering and more importantly levelling of the prices. This appears to be so, in the OECD countries and to a certain extent in the generic drugs market in the developing countries.

The smaller variation in retail drug prices in OECD may be due, among others, to the following:

• Co-marketing arrangement by manufacturers;
• Parallel importing;
• Reference pricing; and
• Drug pricing policies.

The wide variation in prices of proprietary drugs seem to suggest that the guiding principle which the drug industry seems to adopt in fixing prices is to set the limits according to what the market can bear. Profit maximisation seems to be the only objective.

There is evidence that competition is possible in the pharmaceutical market. Data from India proves this. When competitors introduce their products, the originators will lower their prices and compete with the national firms. They will not withdraw from the market.

It is important to introduce generic competitors as early as possible to prevent the originators having time to secure brand loyalty to their products by skillful promotion.

There is a time lag between the introduction of a drug in the world market and a competitor to get his/her product into the home market. It takes further time to capture adequate market share so as to increase production, lower costs and compete with the originator. The Indian data on retail prices of three drugs recently introduced and others which were introduced much earlier, illustrate this phenomenon and underscores the need for national policies on intellectual property system with provisions to enable national firms to initiate production of new drugs as early as possible.

Indian firms were able to do this by a process of reverse engineering. This was possible because the Indian national legislation on patents did not provide patent protection for products.

However with TRIPs Agreement taking effect, all member states of the WTO should provide patent protection for products and processes for 20 years.

The only way national firms can initiate production is by compulsory licensing which is allowed in the TRIPs Agreement.

Only a few of the advanced developing countries can use compulsory licensing to manufacture new drugs.

A vast majority of developing countries do not have any facilities for production of pharmaceuticals.

These countries depend on imports of raw materials and finished products. These countries can have access to lower priced drugs produced in the more advanced developing countries or by generic manufacturers in some developed countries only by parallel importing. This is also allowed in the TRIPs Agreement.

Compulsory licensing and parallel imports are two provisions which should be in all national legislations on intellectual property rights. This will enable developing countries regular access to good quality essential drugs at affordable prices.