PHA-Exch> Global Access to Medicines Bulletin: (2)

[Claudio Schuftan]

From: robert weissman rob at essential.org

Essential Action's
Global Access to Medicines Bulletin
Issue No. 2, February 14, 2008

Whenever developing countries seek to improve access to essential
medicines by hastening the introduction of generic competition and
reducing prices, they invariably must confront a single overriding
claim: their actions will undermine incentives for research and
development (R&D) of important new drugs.

"PhRMA is deeply troubled by the recent trend toward the issuance of
compulsory licenses for pharmaceutical products," said Billy Tauzin,
President and CEO of PhRMA, the U.S. pharmaceutical companies' trade
association, in 2007.Tauzin's statement followed Thailand's decision to
import significantly cheaper generic versions of three life-saving drugs
and Brazil's decision to use the generic version of a key treatment for
HIV/AIDS. "This misguided focus on short-term 'budget fixes' could come
at a far greater long-term cost, potentially limiting important
incentives for research and development that are necessary to positively
impact the lives of millions of patients worldwide."[1]

It is expensive to develop new drugs, but not nearly as costly as the
pharmaceutical industry suggests.

Pharma R&D by the Numbers

Numerous independent studies and investigations[2] show that the world's
largest drug companies' R&D spending claims are misleading and
overblown, and that they spend much more on marketing than on R&D for
new products. These findings undermine the pharmaceutical industry's
repeated assertion that high drug prices are justified by the cost of
research, and that generic competition in the developing world will
undermine the industry's ability to develop new treatments.

Although PhRMA asserts that U.S. brand-name pharmaceutical companies
invest more in R&D than marketing, independent investigators reach
different conclusions. A January 2008 article, published in the
peer-reviewed journal PLoS, concluded that U.S. drug companies spent
almost twice as much on marketing as on R&D.[3] Researchers Marc-Andre
Gagnon and Joel Lexchin of York University in Toronto, found that U.S.
companies spent 24.4% of their U.S. sales on marketing and 13.4% on R&D
in 2004. U.S. sales that year totaled US$235.4 billion. Gagnon and
Lexchin based their findings on data and estimates drawn from industry
sources.

"These numbers clearly show how much promotion predominates over R&D in
the pharmaceutical industry, contrary to the industry's claim," wrote
Gagnon and Lexchin. "[This] confirms the public image of a
marketing-driven industry and provides an important argument to petition
in favor of transforming the workings of the industry in the direction
of more research and less promotion."

And while companies argue that high drug prices are necessary to cover
the cost of R&D - implying that companies make only modest profits after
the cost of R&D is paid for - pharmaceuticals remain one of the world's
most profitable industries. The industry's 2006 return on investment was
19.6 percent, according to Fortune, second only to the oil and mining
industry.[4] Pharmaceuticals almost always rank in the top three
industry sectors by this measure.

Current R&D incentives often result in limited health benefits as well
as high prices

The investments that Big Pharma does make in R&D are driven by market
demand, not public health need. One result is a surplus of "me-too"
drugs, treatments that are similar to existing products and offer
limited therapeutic benefits over existing medicines.

When new drugs are submitted to the U.S. Food and Drug Administration
(FDA) for marketing approval, the agency classifies them as meriting
either "priority review" (conferred for drugs that offer "major advances
in treatment, or provide a treatment where no adequate therapy exists")
or "standard review" (applied to a drug that offers "at most, only minor
improvement over existing marketed therapies"). Only about one third of
FDA approvals are "priority."[5]

Other reviews find that only about one in ten new drugs offer
substantial therapeutic gains:

* Between 1999 and 2004, 122 new active substances were introduced into
Canada. Only 10 percent were designated as major therapeutic advances or
breakthrough products, according to a report by the Patented Medicine
Prices Review Board of Canada.[6]

* Since 1981, Prescrire, a leading review offering independent
comparative information on drugs and other therapeutic interventions has
been evaluating new drugs and new indications for older drugs. By 2003,
it had done almost 2900 such assessments and found that only 11 percent
of medications constituted substantial advances.[7]

Developing country markets only a fraction of Pharma's sales

Big Pharma is very concerned about developing country markets, where
drug sales are growing at a faster clip than in rich countries. However,
it remains the case that developing countries represent only a small
fraction of Big Pharma's revenues. Developing country markets account
for less than 13 percent of global pharmaceutical sales, according to
IMS Health. Slightly more than 1 percent of sales are attributed to
Sub-Saharan Africa, the world's poorest region.[8]

Any lost revenue from developing countries therefore by definition can
only have a limited impact on Big Pharma's capacity to undertake R&D.

The limited contribution that developing countries are now making to
Pharma's R&D budget opens the possibility of exploring new methods of
funding R&D.[9] Developing countries should be able to pay a fair share
of drug development costs through means other than high drug prices
unaffordable to most people in those countries.

Web links:
[1]www.phrma.org/news_room/press_releases/phrma%3a_compulsory_licensing_trend_dangerous/
[2] www.cptech.org/ip/health/econ/rndcosts.html
[3]http://medicine.plosjournals.org/perlserv/?request=getdocument&doi=
10.1371%2Fjournal.pmed.0050001&ct=1
[4]http://money.cnn.com/magazines/fortune/fortune500/2007/performers/industries/return_on_revenues/index.html

[5] www.fda.gov/oashi/fast.html
[6] www.pmprb-cepmb.gc.ca/english/view.asp?x=653&all=true
[7] www.prescrire.org/
[8]
www.imshealth.com/ims/portal/front/articleC/0,2777,6599_80528184_80528215,00.html

[9] www.who.int/phi/en/


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