GlaxoSmithKline cuts drug prices to 63 countries

13 October 2002. Related: Treatment access.

Graham McKerrow, HIV i-Base

GlaxoSmithKline (GSK) has announced that it has reduced the prices of its HIV medicines for more than 60 developing countries by up to a third and its anti-malarial medicines by up to 38%.

“We are today delivering on our commitment to review prices for these essential medicines for patients in 63 of the world’s poorest countries,” said Jean-Pierre Garnier, CEO of the London-based company. “We are also expanding our existing initiatives in sub-Saharan Africa to find appropriate ways to offer not-for-profit prices to core public employees such as teachers, nurses, police and fire-fighters not covered by health insurance, and to private employers who do not have their own workplace clinics.”

Campaigners welcomed the announcement but said the prices were still higher than generic drugs made in Brazil, India and Thailand.

Some commentators speculated that the cuts were linked to negotiations with the mining company Anglo American, which plans to give Aids drugs to its workforce in South Africa. Anglo American is believed to be also in discussions with generics manufacturers.

GSK has also stated it will supply these medicines at preferential prices to all projects fully financed by the Global Fund to Fight AIDS, TB and Malaria. In addition, it is seeking regulatory approval for special packaging to differentiate the preferentially-priced medicines from the same drugs sold at higher prices in rich nations.

The company said the price reductions were the result of a review of manufacturing costs and of increased economies of scale.

GSK said it sets a single, sustainable, not-for-profit, preferential price for each of its anti-retrovirals and anti-malarials to eligible customers in the Least Developed Countries and sub-Saharan Africa. Sustainable preferential pricing means setting prices at levels that meet the company costs and ensure a sustained supply of these medicines for as long as patients need them, it said in a statement.

The statement added: that since June 2001 GSK has:

• Achieved a ten-fold increase in shipments of preferentially priced Combivir to the developing world.
• Secured 115 arrangements to supply preferentially priced HIV/AIDS medicines to 42 countries, including some of the world’s poorest.
• Granted a voluntary licence to Aspen Pharmacare for the manufacture and sale of ARVs in South Africa.
• Set up pilot projects in five African countries to assess the impact of preferential pricing of a broader range of products.

Re-emphasising the need for global partnerships, Dr Garnier said: “GSK’s approach on improving access to medicines is based on partners working together to establish a sustainable framework for improved healthcare in developing countries. This framework includes pharmaceutical industry commitment to preferential pricing, as well as government support for intellectual property protection and prevention of both diversion and price-referencing of preferentially-priced medicines.

“We will continue our efforts to improve healthcare in the developing world, and strengthen our initiatives by applying lessons learned while we look for opportunities to do more,” Garnier said. “We challenge other stakeholders to expand their efforts as well, engaging in partnership, showing political will and, above all, committing significant new funding. Our ability to help improve health care and quality of life for large numbers of patients across the developing world depends on it.”

More information including details of eligible customers and Least Developed Countries appear on the GSK site at:

http://www.gsk.com

The new preferential prices of GSK’s HIV drugs

Comment

Past price reductions by pharmaceutical companies have often been limited to individual countries and have been weighed down with conditions. Price reductions on treatment for a large number of developing countries are a welcome move and finally show that the companies have abandoned the arguments they have promoted in recent years that poor people could not be treated because of a lack of medical and basic infrastructure in resource-poor settings, that ill-educated people could not handle complicated treatment regimens, and that companies could not operate markedly differential pricing structures for different countries. All these arguments have been defeated.

The key comment from the CEO of GSK, quoted above, is that his company’s approach is based on a ‘partnership’ that includes “government support for intellectual property protection and prevention of both diversion and price-referencing of preferentially-priced medicines.” In other words they want to hold onto their control of the rights to these drugs and the profits they can make from them in rich countries.

Recent developments in the global response to HIV, which were made clear and expanded at the XIV International AIDS Conference in Barcelona in July, have seriously worried the pharmaceutical companies as well as offering them an opportunity. The worry for them is the growing anarchy in the drugs market that is seeing countries produce their own generic versions of the drugs at a fraction of the price they are sold by the big pharmacos. Countries such as Kenya have cut the cost of triple combination treatment from $1,500 per patient per year to $300 and some are now setting a target of reducing that to $50.

Barcelona witnessed calls by health ministers urging governments to allow parallel imports and compulsory licences, which pave the way for the production of generics and the importation of low cost drugs regardless of the response from the companies that hold the licences for those drugs. There was also the offer by Thailand, one of the biggest producers of generics, to export the technology and know-how in the production of generics to other developing countries. At the same time local actions are developing to encourage these moves, such as the decision by South African activists to go to court to force the introduction of compulsory licences.

But while all of these developments threaten an unprecedented shake-up of the international drugs markets and the pharmaceutical companies rights over products and their profits from marketing them, the companies also see an opportunity. With the development of the Global Fund to Fight AIDS, TB and Malaria, billions of dollars are being raised to buy and provide treatment for people in poor countries. What pharmaceutical company would want to see a share of those sales go to the rivals producing generics?

Economies of scale enable companies to cut profit margins and so secure a share of this new, vast, market and protect their rights over the products. We can look forward to more companies making substantial cuts in the prices of drugs for developing countries.

Thanks to activists and generic producers, GSK and the other major manufacturers have a fight on their hands to retain control of a lucrative market. Happily, poor people should, for once, be the beneficiaries.