Global Fund and tiered medicines pricing under debate

Catherine Saez
April 7, 2014, 10:42 p.m.

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 Meeting [pdf] of the Fund (7-8 November) mentioned tiered pricing as a means to expand access.

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.”

On 7-8 April, UNITAID and the WHO are hosting an invite-only “2014 HIV Market Forum” in Geneva, in which one one of the subjects is tiered pricing. Attendees include key players in the discussion, such as Dybul and representatives of advocacy groups, academics and others.

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 [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 force.

An apparent second version, dated 18 March, has appeared in an annex to an academic analysis [pdf].

Knowledge Ecology International (KEI) released the February draft of the document. 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 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 WTO.

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 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 by 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 Progress, 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 medicines operations of GlaxoSmithKline and 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 vaccines.”

“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 advocates.

After Dybul’s report to the 30th Board Meeting of the Global Fund, civil society reacted strongly against the initiative (IPW, Public Health, 10 December 2013). Médecins Sans Frontières (MSF, Doctors without Borders) published a paper on 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 blog warning against “a potential retreat from the time-tested pro-generic policies.”

Another example was a 2011 study [pdf] 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 webpage.

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 accountability.”

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.

Source: Intellectual Property Watch