[A2k] IP-Watch: Global Fund And Tiered Medicines Pricing Under Debate

Thiru Balasubramaniam thiru at keionline.org
Mon Apr 7 08:32:17 PDT 2014


Global Fund And Tiered Medicines Pricing Under DebatePublished on 7 April
2014 @ 3:37 pm

By Catherine Saez <http://www.ip-watch.org/author/catherine/>, Intellectual
Property Watch

The Global Fund to Fight AIDS, Tuberculosis and Malaria has launched an
initiative with other agencies aimed at expanding global access to health
products such as medicines. But the Fund has had some explaining to do
about the initiative, which some say could encompass a plan to allow
different prices based on national income levels.

The issue dates back to late 2013, when Global Fund Executive Director Mark
Dybul's report to the 30th Board
of the Fund (7-8 November) mentioned tiered pricing as a means to expand

A paragraph of the report entitled "tiered pricing to expand access,"
stipulated that "As part of our [Global Fund] move to better accommodate
and adjust our business model according to the different states of the
development continuum, we have developed a new multi-agency initiative to
help expand access to essential health commodities through a multi-tiered
pricing framework." The initiative, it said, is geared towards
middle-income countries. The paragraph said the initiative is co-sponsored
by the World Bank, the United Nations Development Programme (UNDP), UNICEF,
UNITAID, and the GAVI Alliance. It adds that the Global Fund will also be
actively collaborating with the World Health Organization.

The initiative would "create a blue-ribbon Task Force of leading
multidisciplinary experts, which will develop a framework for multiple
pricing - and royalty tiers for health commodities to help ensure a
sustainable marketplace and maximize availability across countries of all
income levels."

*Global Fund Denies Tiered Pricing Focus, Others Silent*

Seth Faison, head of communications for the Global Fund, told *Intellectual
Property Watch* that, "The Global Fund does not have and will not have a
tiered pricing scheme. But we are looking at a broader review of all
elements that contribute to access for countries that are transitioning to
middle income status."

Contacted about their involvement in the process, potential partners
remained silent. Nobody at UNDP was available to comment, and a
spokesperson for GAVI said it did not have anything to say on the subject.
At press time, UNICEF and the World Bank had not answered.

An official from India, meanwhile, told *Intellectual Property Watch* that
the country "has serious concerns as tiered pricing is not an appropriate
solution for ensuring access to affordable medicines." He also said it was
worrisome that governments had not been included in the process.

*Draft Documents*

A 6-page draft document<http://www.ip-watch.org/weblog/wp-content/uploads/2014/04/Global-Fund-Equitable-Access-Framework-Feb.pdf>
from the initiative, thought to be from February, analysed the current
access situation, detailed a strategy for equitable access in middle-income
countries (MICs), and plans to engage a task force of experts to develop a
global access framework. It also included an action plan, desired outcomes,
project milestones, and parameters for choosing the experts for the task

An apparent second version, dated 18 March, has appeared in an annex to an
academic analysis<http://www.ip-watch.org/weblog/wp-content/uploads/2014/03/Baker.Global-Fund%C2%B9s-Task-Force-Proposal-Get-Worse-Instead-of-Better-1.pdf>

Knowledge Ecology International (KEI) released the February draft of the
It was titled, "Equitable Access to Essential Medicines and Vaccines:
Developing a Framework for Success," which they attributed to the Global
Fund. KEI posted an analysis <http://keionline.org/node/1979> entitled,
"Resurrecting the Ghost of Høsbjør Past: Global Fund seeks to establish
global framework on tiered pricing enforced by WTO rules."

The Global Fund confirmed to *Intellectual Property Watch* that what is
thought to be the February version was a draft document that has been
circulated with partners for discussion purposes and it includes writing
from several parties.

The second draft was released by Brook Baker, a professor at Northeastern
University School of Law (US) and policy analyst for Health Gap. Baker
published it in the annex of his academic analysis, and the text has not
been confirmed by the Global Fund.

The later version has the title is "Equitable Access to Basic Medicines,
Vaccines and Diagnostics: Towards a Framework for Success [3/18/14]." In
this version, the title added the word "Basic." The paragraph on tiered
pricing is entitled, "No systematic global framework on tiered pricing for
essential health commodities to respond to the access dilemma." This
version drops the reference to MICs in the title, but still refers to MICs
in the paragraph.

*Civil Society Concerns*

Members of civil society have raised concern that the text favours tiered
pricing, and contains other worrisome language.

In particular, the February version of the text included a paragraph
indicating that the framework "will have lasting influence and will be
considered by the G20 [20 top economies], the World Trade Organization
(WTO), or other relevant institutions...." Some observers noted the absence
of a mention of the WHO or other global health agencies. The document
further hints at an enforcement mechanism for the framework, mentioning the

The version released by Baker no longer included that mention. It just
mentioned that the task force will conduct formal outreach towards
institutions such as the G20 and the WTO "that may have interest in the
ultimate framework proposed."

In his analysis, Baker notes that the objectives of the task force to be
established by the Global Fund are "less tiered-pricing centric, but tiered
pricing is still hard-wired in as the single solution that the proponents
continue to champion." This view is shared by several civil society sources.

Several strategies are being considered in the draft documents.

The summary of the version released by Baker mentions that, "Based on
economic and development analysis, as well as on a principle of tradeoffs -
such a framework would identify and consider a range of access strategies
acceptable to Development Partners, Multilateral Institutions, Bilateral
donors, the Governments of affected countries, Civil Society and Industry."

It goes on to say that strategies that might be considered "include
licensing, technology transfers, royalties, Advanced Market Commitments,
creating conditions for both innovator and generic competition, and a
framework for tiered pricing; all buoyed by a firm understanding of each
relevant market, policy and regulatory processes, and country environments."

"Therefore," it says, "a number of Development Partners (GAVI12, GFATM13,
The World Bank, UNDP14, UNICEF and UNITAID) are engaging a Task Force of
leading experts from the public, private and NGO sectors, to respond to the
access challenge in MICs"

*Support for Tiered Pricing*

A WHO definition <http://www.who.int/trade/glossary/story002/en/> on
"Differential pricing (sometimes also called tiered pricing)," states: "The
sale of the same good to different buyers at different prices, with the aim
of improving the affordability of drugs while generating revenue for the
pharmaceutical industry. Differential pricing has reduced the cost of many
anti-retroviral HIV/AIDS therapies by up to 90% in low-income countries,
although they continue to be sold at market price in developed countries.
There are concerns that differential pricing will result in product
diversion, with cheaper drugs leaking back into wealthy countries."

The same WHO page adds that "The terms "differential", "tiered",
"preferential", "discounted pricing", and "market segmentation" are also
used to describe the practice of charging lower prices in different
markets. "They do not necessarily result in affordability or equitable
access to a product."

According to a paper<http://www.pharmtech.com/pharmtech/In+the+Field/Global-Healthcare-on-the-Ground-Differential-Prici/ArticleStandard/Article/detail/698545>
PharmTech, an information source from a group called Pharmaceutical
Technology and Pharmaceutical Technology Europe, "Many companies use tiered
pricing models, also known as differential pricing, for the distribution of
their pharmaceutical products." The paper says that the strategy of
differential pricing "largely took off in 2000 with the launch of the
Accelerating Access Initiative (AAI), a collaboration of global regulatory
bodies, United Nations (UN) agencies, and the pharmaceutical industry."

According to a website called Global Health
the agencies participating in the AAI in 2000 were: UNAIDS, WHO, UNICEF,
the UN Population Fund (UNFPA), the World Bank and seven research-based
pharmaceutical companies (Abbott, Boehringer Ingelheim, Bristol-Myers
Squibb, Merck & Co., Inc., Roche, Tibotec (an affiliate of Johnson &
Johnson) and ViiV Healthcare, which combines the HIV medicine operations of
GlaxoSmithKline, Pfizer.

Mario Ottiglio, director for public affairs and global health policy at the
International Federation of Pharmaceutical Manufacturers and Associations
(IFPMA), told *Intellectual Property Watch* that "tiered pricing is one
effective and sustainable way in which pharmaceutical companies,
independently from each other, help improve access to medicines and

"Our members opted for tiered pricing in several cases, particularly for
antiretroviral treatments for HIV/AIDS and vaccines," Ottiglio said. "To be
successful, these approaches need to thrive in strengthened health systems
where funding, demand and infrastructure are reliable."

*Doubts about Tiered Pricing*

However, tiered pricing has been called into question by public health

After Dybul's report to the 30th Board Meeting of the Global Fund, civil
society reacted strongly against the initiative
Public Health, 10 December
Médecins Sans Frontières (MSF, Doctors without Borders) published a
2 December. And Suerie Moon (research director and co-chair of the Forum on
Global Governance for Health, Harvard Global Health Institute and Harvard
School of Public Health) wrote a
against "a potential retreat from the time-tested pro-generic policies."

Another example was a 2011
co-authored by Moon, Elodie Jambert (MSF), Michelle Childs (MSF), and Tido
von Schoen-Angerer (MSF) entitled, "A win-win solution?: A critical
analysis of tiered pricing to improve access to medicines in developing
countries," and posted as a resource on a WHO resource

The study found that although tiered pricing had received widespread
support from industry, policymakers, civil society and academics, "evidence
and experience suggest that, in practice, tiered pricing has a number of
significant drawbacks." In particular, the study said, "tiered pricing does
not necessarily imply that a price is equitable or affordable; rather, it
simply means that different prices are charged to different segments of the
market for the same product."

"The business case for tiered pricing is strong," the authors said. "When
markets can be separated, adapting the product price to the consumer's
willingness or ability to pay is a profit-maximizing strategy."

"In comparison, when markets are sufficiently large and multiple sources of
production exist, robust competition has consistently proven across
different therapeutic areas to result in lower prices," they said. "Second,
no clear international norm has been established for setting price tiers,
nor is there a simple or satisfactory way to allocate payment for R&D costs
across various developing countries."

"Tiered pricing policies give too little decision-making power to
governments," the authors said. "Rather, tiered pricing leaves this
important issue almost entirely in the

hands of private companies over which populations have few means to demand

They concluded that tiered pricing should be considered as a temporary
solution in markets with very small volumes or "highly uncertain," such as
drug-resistant tuberculosis, and multisource production capacity is lacking.

*MSF Takes Stance on Potential Framework*

"MSF has several issues with both the process of the initiative, and the
content of the proposed framework," an MSF source told *Intellectual
Property Watch* recently.

"The discussion on how to increase access to medicines and vaccines for
patients living in middle-income countries is long overdue and very
important for MSF," she said. "However, the discussions should be lead by
member states, be open to public input and take place in institutions with
a wider mandate like the WHO."

"The concern is that the framework imagined by the Global Fund favours
tiered-pricing as the main solution. The framework should be looking at a
broad variety of different tools," she pointed out. It is "completely
inappropriate" that global health agencies join in an industry effort to
promote tiered pricing, she said, "rather than trying to ensure that all
options options to facilitate affordable prices for all are on the table
for governments and patients to use."

Middle-income country patients are increasingly faced with a double burden
of disease and high prices, she said, as they are affected by communicable
as well as non-communicable diseases. They also are losing funding support
from traditional global health donors. Those countries are now increasingly
requested to contribute as donors, she said.

Competition is a much better tool than tiered pricing, she said, as it also
invigorates a much-needed innovation to better respond to the needs of
patients. Tiered pricing does not address the barrier that the current IP
system creates to develop fixed-dose paediatric drug combinations and other
innovation needs, the MSF source said.

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