GlaxoSmithKline believes slashing prices and sharing patents will help the one in six people in the world suffering from a neglected tropical disease
GlaxoSmithKline believes slashing prices and sharing patents will help the one in six people in the world suffering from a neglected tropical disease
New management like to shake things up. The word from the chief executive’s office is always about “fresh departures” and “exciting horizons”. There might even be a tinkering with corporate strategy for good measure.
Yet when the dust settles, much ends up remaining the same. Large companies are sluggish, inflexible beasts when it comes to change. That’s why institutional, low-risk investors like them so much.
Enter Andrew Witty. The chief executive of UK-based pharmaceutical company GlaxoSmithKline has ditched the standard script. He’s about change, real change. After spending a few months settling in at the helm, Witty has now sent out signals that could radically alter Big Pharma.
The subject of his attentions is not modish. It’s quite the opposite. In a speech to students at Harvard medical school, Witty laid out a three-fold plan to tackle the intransigent issue of neglected diseases in the developing world.
GSK, he pledged, would slash prices for a host of medicines, share patents for dozens of compounds and invest in health infrastructure. In the world’s 50 least developed countries, GSK will cap prices for its drugs at 25% of their cost to rich nations.
The announcement has won him plaudits across the world. The Guardian newspaper, no fan of multinational pharmaceutical companies by any means, called the move “heartening” and praised Witty for setting patents on an “ethical foundation”.
Campaigners and industry experts have applauded the breakthrough commitments in equal measure. Sophia Tickell, director of research, communications and advocacy at thinktank and consultants SustainAbility, and author of the recent report Pharma Futures, says the significance of Witty’s move should not be underestimated. “I’ve never seen anything that looks so much like a systematic response to … things that people have been asking of the pharmaceutical industry for a long time,” she says.
Victims of neglect
The praise is understandable. Neglected tropical diseases have earned their descriptive prefix for good reason. They are, by definition and in practice, neglected.
The numbers are staggering. Three million children throughout the world still die every year from vaccine-preventable diseases, most in the developing world. Less than one-third of those in need of anti-retroviral treatment globally are currently receiving it. Again, the burden falls primarily on those in the world’s least developed countries.
“We remain frustrated, as do many in the global public health community, by the slow progress,” the World Health Organisation says. WHO’s list of neglected tropical diseases cover 15 diseases, including tuberculosis, malaria, leprosy and less high-profile diseases such as trachoma, chagas and leishmaniasis.
The reason for the neglect of these diseases is pure market economics. New medicines are hugely expensive to develop. The business model of pharmaceutical companies depends on recouping their outlay on research and development by selling their end product at profit.
That model naturally excludes patients who can’t pay – the more than three billion people who live on less than $2.50 a day. The average African spends £5 a year on medicine. The figures simply do not add up for Big Pharma.
No sales means no drug development, spells out James Hickman, vice-president for external affairs at the Institute for OneWorld Health, the world’s first not-for-profit pharmaceutical company. “Tropical diseases don’t have sales and marketing teams. There’s no salesman on a bicycle pulling up to a clinic in Bihar state with the latest set of treatments,” he says bluntly.
The outcome is equally staggering. Only 10% of global health R&D is devoted to conditions that account for 90% of the global disease burden.
Getting the price right
Clearly, if the stasis concerning neglected diseases is to be overcome, an overhaul of the existing business model is needed. Pricing is a key place to start. Witty argues that price should not be “a barrier to access”.
“Because of the position LDCs [least developed countries] are in economically, we don’t expect these countries to be contributing to GSK’s R&D for future products. That’s why we’ve introduced this price limit,” explains Duncan Learmouth, GSK’s senior vice-president for corporate communications and global community partnerships.
The move builds on the company’s existing philanthropic efforts. To date, GSK has donated more than one billion albendazole treatments to stop the transmission of lymphatic filariasis in 48 countries. It has also committed to donate 50m doses of pre-pandemic H5N1 flu vaccine to the WHO’s planned stockpile facility. In 2008, the company valued its donation programmes (calculated according to industrialised retail price), in-cash social investments and other charitable projects at £124m.
Product donations are by no means the preserve of GSK. Many large pharmaceutical companies boast free-access schemes of some sort: Pfizer donates its registered drug for trachoma, Novartis for leprosy and Merck for malaria.
Pricing is not as straightforward as it seems, however. One major unresolved issue centres on granting access to the poor in middle-income countries. GSK and the other big players in the pharmaceutical industry offer discounted prices on selected drugs and vaccines in mid-level economies such as China, Egypt and Brazil. Those prices, it should be noted, still come in considerably above developing world rates.
“You can segregate markets on a country-by-country basis, but that doesn’t help you with what to do within a country where there are huge disparities in terms of wealth and availability,” Sophia Tickell points out.
The example of India is indicative. Although technically considered middle-income, more than 600 million people live below the poverty line. With the public health budget set at a mere $91 per person, most have to pay for medicines out of their own pocket. The poor majority, therefore, go without.
There’s also the question of which medicines are selected for the discounted rate. New first and second line anti-retrovirals (which HIV/Aids sufferers need to take after they develop a resistance to initial anti-retrovirals or reach dangerous toxicity levels) do not currently feature in the list. As a consequence, they continue to be priced at up to 10 times the cost of older, off-patent first line medicines.
More problematic still is the question of affordability. GSK’s prices in the developing world may now be cheap, but for millions they are still not cheap enough. The company does not shy away from that fact. “We are under no illusions that even at 25% of developed world prices, those prices are still high for the developing world,” Learmouth admits.
GSK says its revised pricing is “more or less” the price of manufacture. An obvious option is to bring down production costs. Reduced packaging and economies of scale can make a small indent. The removal of value-added taxes and import duties (something the pharmaceutical industry has long lobbied hard for) would make an even larger dent.
Another approach is to develop pricing models focused on affordability rather than unit cost. UnitAid provides one such example. Launched in 2006, the scheme places a $1 “solidarity tax” on air tickets bought in six participating countries, which include France, Brazil and the UK. The approach is projected to raise up to $500m in 2009, all of which is channelled into financing drugs for HIV/Aids, malaria and tuberculosis in developing countries.
Experiments in cross subsidies are also attracting attention. The stellar case study comes from India. For the past three decades, the Aravind Eye Hospital has operated a “Robin Hood” business model, where high-end surgical services to wealthy customers serve to subsidise surgeries for poor patients (see below).
Of course, there’s another sure-fire way of bringing down drug costs: remove the patent and permit the manufacture of cheaper generics. Historically, any discussion of patent legislation has been taboo for pharmaceutical companies. Intellectual property is the lifeblood of the industry.
Do away with patents, pharmaceutical companies say, and investment in research will grind to a halt. That will hurt not only the industry, but everyone who has a need for modern medicines.
In that context, GSK’s decision to share its relevant small molecule compounds and process patents for neglected disease medicines represents a step change. Learmouth admits that the practicalities of the “patent pool” will take time to work out. The concept at present is to create a virtual, open-source library of sorts in which researchers and other drug companies can place their own patents and access those of others.
In addition to sharing patents, GSK says it will make know-how and scientific knowledge available to its partners. A key vehicle for that will be its Tres Cantos research centre in Spain, which employs 100 scientists to develop drugs for malaria, TB and other tropical diseases.
Tickell commends the patent pool as a stimulus to research and shares GSK’s hope that the number of diseases it covers will increase. “A patent pool allows people to take promising compounds and play around with them. What might come out of that is very unpredictable,” she says.
The pool’s success will depend on other pharmaceutical companies joining in. More partners would mean more “critical mass and scale”, Learmouth says. Several of GSK’s competitors have expressed interest in the scheme, but so far none have signed up.
All the same, the potential is enormous. One organisation that appreciates that is the Institute of One World Health. With a team of top scientists (and savvy lawyers), the institute has developed a strong record for taking off-patent compounds and developing new drugs.
The institute is currently looking to roll out its Paromomycin product for the treatment of visceral leishmaniasis in India after successful phase III clinical trials. Paromomycin is an aminoglycoside antibiotic that was initially used in the US to treat intestinal parasites.
“The question is understanding how you move technology forward and open up more opportunities for its use rather than leaving it sitting on the shelf,” Hickman explains.
GSK’s commitment will not alter the fundamental process of drug development. Bringing a drug to market for a neglected disease requires a delicate partnership approach. Funders, academics, non-profit groups and commercial companies need to work together. Each has its own agenda and bias, making such partnerships difficult to manage.
Though the rules of R&D might not change, the pace should. Hickman argues: “We rely on influence-based partnerships and relationship management. That’s the nature of the business. All those things will still matter, but what GSK is proposing means that the timeline could now be much shorter.”
The appetite in the pharmaceutical industry for product development partnerships has increased dramatically in recent years. The role of intergovernmental agencies such as WHO, as well as significant funders such as the Gates Foundation and the Wellcome Trust, has been instrumental in promoting this greater willingness to work together.
While partnerships “are at best difficult”, pharmaceutical companies acknowledge their importance, according to Brenda Colatrella, executive director of corporate responsibility and global policy at Merck.
“Partnerships are one of the best mechanisms to address some of the very challenging and complex health issues that we are facing because no single entity is equipped to do this alone,” she says.
Even so, the patent pool concept still faces challenges. The issue of what is – and what is not – included has already resurfaced. Campaign groups such as Oxfam are demanding that patents be lifted for the latest HIV anti-retrovirals. The introduction of generic manufacturers for older first-line anti-retrovirals reduced the annual price for HIV/Aids treatment from about $10,000 to about $80 per person, argues Rohit Malpani, spokesman for Oxfam USA.
“Ultimately, for least developed countries it’s only generic competition that’s going to get prices [for the latest anti-retrovirals] down to an affordable level,” Malpani says.
The question of market incentives is a second potential bottleneck. Because neglected diseases have no market, companies have nothing to lose by giving away existing patents. Yet some compounds for neglected diseases can potentially be used to create other applications for conditions in the developed world.
“If you give away the whole patent, it’s gone, including the commercial indication. That fact will limit the number of drugs that will go into the pool,” says Paul Herrling, head of corporate research at Novartis.
Can’t even give it away
Pricing and patents are critical pieces of the puzzle. But even if every drug were free and off-patent, people in the developing world would still die of treatable diseases such as trachoma and lymphatic filariasis. After all, 90% of the WHO’s list of 500 essential medicines are not patented.
The problem comes down to lack of health infrastructure in the world’s poorest countries. There are too few hospitals and clinics, not enough nurses and health workers and precious little public awareness.
To meet this challenge, GSK has committed to reinvest 20% of the profit it makes selling medicines in the least-developed countries in infrastructure projects. Again, the details remain to be worked out, but Learmouth says the investments will be “incremental” and “additional” to what the company is already doing.
He cites GSK’s training of 500 midwives in Vietnam and 300 community nurses in Chenai as examples of the type of projects the company will aim to scale up.
As with drug development, improving health infrastructure prospers or fails on the strength of cross-sectoral partnerships. Local ownership is especially vital. Merck, for example, has been donating its Mectizan malaria drug for more than 20 years. Only when the drug was put in the hands of community health workers and its delivery customised to the needs of each local community, however, did coverage ratios begin to increase dramatically.
Pfizer is also experimenting with alternative healthcare delivery models for the developing world. Last year, the US pharmaceutical company teamed up with Grameen Health, a social enterprise in Bangladesh, to analyse ways to expand its low-cost, small-scale healthcare delivery and insurance programmes.
GSK admits it has much to do in the coming months to translate its commitments into practice. Witty’s next challenge is to ensure that begins to happen. The overall strategy, however, appears both logical and bold.
For the moment, the company is enjoying the reputational benefits that come with first-mover status. That optimism could turn sour if results are slow in coming.
The real onus to act lies on the remainder of the industry. Clinging to old arguments over intellectual property protection will no longer wash. The invitation to join GSK’s patent pool is there and waiting. As with neglected diseases, it is increasingly hard to ignore.
In their own words
“We never want to be seen just as a ‘western’ company.” Andrew Witty, chief executive, GSK
“Price cannot be a barrier to access. So we need to get the price right and we need to work with the international community to mobilise the resources to pay for it and the infrastructure needed to deliver, not least to remote communities.” Andrew Witty, chief executive, GSK
“GSK’s efforts in this context can help us from losing ground. It’s important that people keep stepping forward as it would be easy to step back.” James Hickman, vice-president for external affairs, the Institute for OneWorld Health
“With little political voice, neglected tropical diseases have a low profile and status in public health priorities. Lack of reliable statistics and unpronounceable names of diseases have all hampered efforts to bring them out of the shadows.” Lorenzo Savioli, director of the department of control of neglected tropical diseases, WHO
“There’s a need for awareness and advocacy. It’s a multifaceted set of problems that need to be sought after, some of which are in the scope of what we as a pharmaceutical company can do, and others are beyond our scope.” Mark Feinberg, vice-president for policy, public health and medical affairs at Merck Vaccines and Infectious Diseases
“It’s not necessarily even the availability or price of vaccines that’s the sole determinant of access. It’s the confluence of factors of having affordable vaccines, effective infrastructure and advocacy of the disease.” Mark Feinberg, vice-president for policy, public health and medical affairs at Merck Vaccines and Infectious Diseases
“Generic producers are able to produce at lower costs as they have greater economies of scale. Multinational companies have a different pricing and cost structure that makes it harder for them to produce medicines at rock bottom prices.” Rohit Malpani, Oxfam USA
“GSK is saying that all its medicines relate to public health. That’s a big deal.” Rohit Malpani, Oxfam USA
Making health affordable: Aravind Eye Hospital
Aravind Eye Hospital performs more than 260,000 surgeries and handles more than two million outpatient visits a year, making it the largest provider of eye care in the world.
The company, which operates five eye hospitals in India, has developed a ground-breaking pricing model that enables it to treat patients who don’t have the money to pay. The model rests on charging wealthy customers market rates for complex surgeries, and then using this revenue to finance treatments for poor patients.
To keep costs to a minimum, Aravind operates what could be termed an “assembly line surgery model”, with multiple beds in each room and an average patient stay of half a day. All employees are equipped with mobile personal digital assistants to ensure maximum efficiency.
In addition, low-cost intraocular lenses and other ophthalmic supplies produced by Aurolab (Aravind’s manufacturing arm) are used in more than 100 developing countries.
The for-profit model generated revenues of $20m in 2007-08, with costs of some $10m.
Case study: Novartis’s research into neglected diseases
The early pipeline for new drug therapies for neglected diseases currently stretches to more than 60 projects, many of which are in early clinical testing. However, the cost of developing these therapies becomes incrementally more expensive as the process goes on.
About $1bn a year is required to progress with the current research pipeline, according to Paul Herrling, head of corporate research at Novartis. That represents considerably more than the current levels of donor funding and corporate philanthropy put together.
“The danger is that having developed this early pipeline, we will run out of money for its full development,” Herrling says, summarising the so-called “last mile” effect.
Novartis is therefore proposing the creation of a global R&D fund focused on developing drugs for the world’s neglected diseases. Public and private organisations would pay into the fund, which would be managed by an experienced panel of medical experts.
The proposed fund would aim to overcome two major hurdles in the drug development process. The first relates to risk. The major expense during research comes from failures. Most funding schemes, such as the US Food and Drug Administration’s voucher system or the G8’s Advanced Marketing Commitment, only reward companies for the creation of successful compounds. The risk, therefore, remains entirely with the originator. This acts as a huge disincentive for pharmaceutical companies to invest in the field of neglected diseases, Herrling argues.
To get over that hurdle, Novartis proposes that the fund takes a drug through to the next phase of its development. This would not only spread the risk, but it would also ensure that investment is not be allocated to products that are not viable.
In addition, the drug developer gives an exclusive licence to the proposed fund for the neglected disease in question. However, the company retains the right to use that compound for non-neglected diseases in the industrialised world. In doing so, the originator still has a financial incentive.
Novartis is currently talking with governments, other global pharmaceutical companies and international health funders to get the fund off the ground.
Case study: Merck in Nicaragua
There is often a delay between the registration of a drug in an industrialised country and its distribution in the developing world. Intervals of 10 to 12 years are commonplace.
In the case of its rotavirus vaccine, Rotateq, Merck sought to demonstrate that a newly registered drug could be implemented quickly.
In 2006, the US company struck a partnership with the ministry of health in Nicaragua to vaccinate every child born over a three-year period with Rotateq. The successful project marks the first time that a vaccine was introduced in a developing country during the same year it was first licensed in a developed country.
Merck will work with international public health organisations to improve surveillance of the rotavirus disease, as well as providing training and support for vaccine distribution and administration.
At the end of the three-year project, Merck will make Rotateq available to the government of Nicaragua, at prices considerably lower than those in the industrialised world. The company hopes that the case study will provide a precedent for other poor countries to fast-track drug implementation.
“It’s an example where with concerted effort and effective partnership one can narrow the historic gap in terms of introducing a new vaccine in a developing country,” says Mark Feinberg, vice-president for policy, public health and medical affairs at Merck Vaccines and Infectious Diseases.
Neglected diseases – facts
· Three million children around the world die every year from vaccine preventable diseases, equivalent to six children every minute.
· Around one billion people – one-sixth of the world’s population – suffer from one or more neglected tropical diseases.
· Four million healthcare workers are needed to fill the gap in developing countries, including management professionals and support workers as well as medical specialists such as doctors and nurses.
· Malaria is the leading cause of mortality in children under five in Africa and constitutes 10% of the continent’s overall disease burden.
· Trachoma, an infectious disease of the eye, affects 63 million people. About 8 million people are visually impaired or blind as a result of trachoma. Globally, the disease results in an estimated $2.9bn in lost productivity per year.
· Across the globe, only one in five people with HIV/Aids receives the medicines they need.
· An estimated $6bn-$10bn will be required over the next 10 years to develop the pipeline of projects for neglected diseases towards registration.
· Only 10% of global health R&D is devoted to conditions accounting for 90% of the global disease burden
Sources: WHO, United Nations and The International Federation of Pharmaceutical Manufacturers & Associations
What are neglected tropical diseases?
Neglected tropical diseases are a symptom of poverty and disadvantage. Those most affected are the poorest populations often living in remote, rural areas, urban slums or in conflict zones. Conflict situations or natural disasters aggravate conditions that are conducive to the spread of these diseases.
Most are parasitic diseases, spread by insects ranging from mosquitoes, blackflies, and snails to sandflies, tsetse flies, the assassin bug, and so-called flies of filth. Others are spread by contaminated water and soil infested with the eggs of worms.
The World Health Organisation’s list of neglected diseases: Buruli ulcer, Chagas disease, dengue, dracunculiasis (guinea-worm disease), fascioliasis, human African trypanosomiasis, leishmaniasis, leprosy, lymphatic filariasis, neglected zoonotic diseases, onchocerciasis, schistosomiasis, soil transmitted helminthiasis, Trachoma and yaws.