Transcript Price of 2 nd -Line Treatment

Clinton Foundation HIV/AIDS Initiative
Pharmaceutical Services Team
Engaging the ARV Marketplace to
Optimize Outcomes for Patients
February 14, 2006
1
Summary
• By engaging both the demand-side and the supply-side of the ARV
market in 2003, CHAI was able to bring prices down. The approach
affirmed the need for countries to access low prices and the need for
suppliers to stay in business. Organizing the market with both
transformed the business of 1st-line ARVs to “low-margin, high-volume”
and has contributed to wider access to ARVs around the world.
• The relative success of price reductions and expanded access in the
last 2-3 years, however, must not mask challenges facing the market
today. High prices for 2nd-line ARVs, cost and volume pressures on 1stline ARVs, and price disparities between low and middle-income
countries represent real constraints to patient access, and CHAI is
working to address these with suppliers and purchasers.
• Critical to any effort to address these challenges – and keep the supply
of ARVs sustainable for ever larger numbers of patients – is the actions
of countries. National governments, by recognizing evolving market
dynamics, can take action today to avoid potential bottlenecks (such as
rising 1st-line prices), to accelerate time to market for affordable 2nd-line
generic ARVs, and to minimize any delay between supply of a product
and its availability to patients
2
Content
• Approach and Outcomes of Original
Pharmaceutical Agreements
• Current Challenges in the ARV
Marketplace and CHAI’s Response
• Country-level Opportunities to
Optimize Access for Patients
3
State of Treatment in 2003 vs. 2005
People on antiretroviral (ARV) treatment
Thousands
1,000
300
200
300
Latin America
50
200
500
Rest of World
Africa
End 2002 50
Mid 2005
4
Drug and Diagnostic Costs to Countries
National treatment budget
(2003 data – illustrative)
Percent
Management
Nutrition
IEC
Physical
Infrastructure
Training
Drugs (44%)
Staff
For new national treatment
programs, the relatively high
cost of drugs and diagnostics
was a key determinant to the
reach of available resources
(Despite early Global Fund
grants, the announcement of
PEPFAR (Jan 2003) and the
“3 by 5” target (Sep 2003),
resources were not unlimited)
Labs (23%)
5
Supply-side Perspective in 2003
• Limited volume (70k outside
LAC) compared to capacity
• Fragmented and unpredictable
orders
• No credible forecasting of
volumes increases over time
• Lack of prompt payment by
purchasers
Generic prices were low
relative to branded products,
but still reflected high
production costs
CHAI experience in the U.S.
confirmed that better market
dynamics drive lower costs to
manufacturers, enabling lower
prices over time
• Lack of standardized treatment
guidelines
6
CHAI Engagement with Countries
Develop
operational
plans
Forecast
demand
Support
purchasing
• Set national
treatment targets
• Model scale-up of
treatment over time
• Align policies for
procurement
• Quantify requisite
resources
• Set national
treatment guidelines
• Plan for
operations,
oversight,
milestones, etc.
• Model productspecific demand
over time
• Pool donor funds
and sources of
orders to create
national demand
outlook and
purchasing process
Monitor
consumption
• Deploy tools to sites
to monitor ongoing
consumption
• Use consumption
data to update
demand forecasts
(pull not push)
7
CHAI Engagement with Suppliers
Identify
Potential
Partners
• WHO/FDA quality
benchmark
• Breadth of product
selection
Due
Diligence
• Conduct site visits at
multiple levels of
value chain
• Understand company
position in the
marketplace
• Map production
process
• Complete financial
due diligence
Model
Product
Cost
Negotiate
Price
• Un-bundle
production costs
• Develop transparent
pricing formula
• Identify major cost
drivers
• Establish scale
curve for future
cost/price
reductions
• Identify process
improvements at
each level of value
chain
• Analyze impact of
increased volume
on cost
• Identify product
development
priorities
• Continue to monitor
costs
• Identify potential for
future cost savings
8
Pharmaceutical Value Chain
26%
3%
100%
R&D
Overhead 2%
Mnfctr
17%
Tax 7%
4%
Formulation
production
(excipients,
mnfctr, packing)
Corporate
overhead,
sales &
marketing
Raw
materials
41%
Cost of active
pharmaceutical
ingredient (API)
Additional cost for
formulation manufacturer
Cost of Final
Product
9
Targets for Savings
Large reductions at the API level:
• Sourcing to low-cost API suppliers,
• Driving efficiency through scale,
• Reducing gross margin
Overhead 2%
Mnfctr
17%
Tax 7%
26%
Cost of active
pharmaceutical
ingredient (API)
100%
R&D
4%
Formulation
production
(excipients,
mnfctr, packing)
Raw
materials
41%
3%
Corporate
overhead,
sales &
marketing
Reductions in formulation costs:
• Cross-subsidization of overhead
• Reductions in margin
• Scale-based savings (very small)
Additional cost for
formulation manufacturer
Cost of Final
Product
10
ARV Price Comparison: 2003
3TC+d4T(40)+NVP
October 2003
• 9 formulations of 4 first-line
ARVs included in agreements
$562
• Prices were a 75% reduction
from patent-holders, and a
50% (or more) reduction from
the market price of generics
$384
$290
$140
Branded Generic Generic CHAI
Best Purchase List
Ceiling
1
2
3
Price
Price
Price
Price
1
2
3
• CHAI prices were FOB
ceilings for national tenders
• CHAI partner formulators:
Cipla, Ranbaxy, Hetero and
Aspen Pharmacare (and
Strides Arcolab as of 2006)
As reported by the manufacturers and by Médecins Sans Frontières (MSF) in Untangling the Web of Price Reductions
$384 was the weighted average price being offered to CHAI purchasers in October 2003.
MSF’s May 2003 guide reported the best prices offered by Cipla, Hetero and Ranbaxy as $304, $281 and $285.
13
Operational Principles for Purchasers
• Country tender process maintained
– Member Purchasers issue tenders through traditional means
– CHAI published price becomes ceiling
– CHAI monitors suppliers costs to ensure consistent pricing
• Countries incorporate strategic sourcing practices*
– Payment backed up by LC’s or other secure instruments
– Regular and aggregated orders
– Ongoing forecasting
– Expedited registration
– Use of international quality standard (WHO)
– Move towards larger and/or multi-year tenders
– Split bids per product, as appropriate
• Demonstration of secure distribution system and commitment to
comply with international and national law (IPR)
* These are explicitly specified in MOUs with purchasers in Procurement Consortium (with provision of order info)
14
Reach of Agreements After 2 Years
Access to CHAI prices
Number of countries
4x
51
People benefiting
000’s on ARVs purchased
under CHAI agreements
8x
240
13
30
January
2004
January
2006
End Q2
2004
In addition to benefit
of lower prices
through CHAI
agreements, market
prices around the
world have fallen as
other manufacturers
compete with CHAI
suppliers (and as
purchasers expect
better prices).
End Q4
2005
15
ARV Price Comparison: 2006
3TC+d4T(40)+NVP
January 2006
$562
• CHAI purchase prices have
been within 2-3% of ceilings
• CHAI prices remain lowest for
some – but not all – products
$221
$192
$144
• On average, CHAI rates are
20-30% less than market in
low-income countries
• Middle-income market rates
are still 2.5 times higher
Branded Generic Generic CHAI
Best Purchase List Purchase
Price1
Price2
Price3 Price
1
2
3
• CHAI prices are lower for
pediatric formulations
As reported by the manufacturers and by Médecins Sans Frontières (MSF) in Untangling the Web of Price Reductions
Weighted average of price being paid in middle and low-income countries, according to World Health Organization.
Average price, per MSF’s June 2005 guide, of three suppliers currently WHO prequalified (Cipla, Hetero, Ranbaxy).
16
Content
• Approach and Outcomes of Original
Pharmaceutical Agreements
• Current Challenges in the ARV
Marketplace and CHAI’s Response
• Country-level Opportunities to
Optimize Access for Patients
17
Challenges in the ARV Marketplace
• High Price of 2nd-Line ARVs
• Pressures on Ongoing Supply of 1st-Line ARVs
• Price Disparity Across Markets
18
Current Prices of 2nd-Line ARVs
Price of 2nd-Line Treatment
(Annual cost in US$)
40x
10x
$6,000
$1,400
$140
1st Line
(Africa)
2nd Line
(Africa)
2nd Line
(Middle
Income)
Supply of 2nd-Line ARVs
(Low cost source is highlighted)
Product
Innovator
Generic
ABC
$887
$584
ddI
$279
$142
TDF
$204
N/A
LPV/r
$500
$1,500
SQV
$989
$1,022
RTV
$83
$196
ATV
TBD
N/A
IDV
$400
$217
NLF
$978
$1,217
19
CHAI Activities to Lower 2nd-Line Prices
Need
Description
CHAI Response & Role
Lower cost of
production
Current production cannot match
innovator pricing due to poor
chemistry, low yields and high price
intermediates
Build a team of experts who know
the chemistry to assist suppliers;
search for better intermediate
sourcing
Credible demand
forecasts
Toxicity and switch rates are not
known, and suppliers do not have
insight on what 2nd-line drugs are
being used
Work with WHO/UNAIDS to
estimate gross demand; with
countries to improve estimates of
2nd-line use
Simplified national
treatment guidelines
New WHO guidelines will have 36
options for combinations without
clear pros/cons in terms of cost,
availability, etc.
To assist countries and drive
volumes to the most relevant
products – CHAI will issue
“guidelines to guidelines”
Quick regulatory
approval
Once products are commercially
available, WHO approval and
national registration are additional
prerequisites to wide access
Support WHO prequalification
program to increase capacity and
efficiency; encourage prioritization
of 2nd-line products with FDA
20
Initial 2nd-Line Price Reductions
Efavirenz
Abacavir
– 50%
$479
$347
– 50%
$887
$705
– 31%
$447
$240
Middle
Income
Market
Price
Generic &
Innovator
Best List
Price
CHAI
Price
– 37%
Innovator
Best List
Price
Market
Price
CHAI
Price
21
Cost Pressures on 1st-Line ARVs
Production costs for 1st-line ARVs are rising, despite some efficiencies and
savings. Continued work is needed to maintain or lower prices.
Costs
• Rising intermediate prices
(and limited supply)
• Rising solvent prices (due to
increasing price of oil)
• Currency exchange
fluctuations
• Cost of re-listings and double
submissions (WHO & FDA)
• Increased R&D costs for
second-line products
• Stock carrying costs, interest
rate for late payments, etc.
CHAI response
Savings
• Better yields than expected
• Cheaper routes of synthesis
• Use of cheaper API for
unregulated markets
• Work on the supply
side to control prices
of solvents and
intermediates
• Work on the demand
side to encourage
practices which
control costs
22
Projected 1st-Line Demand Increases
8
6
API supply has exceeded
ART demand to date, but it is
not known whether supply of API
will keep pace with demand as
ART access increases
exponentially
2010 goal: 6–8 million
4
2006/07: 3 million
2
End 2005: 1–1.5 million
0
2002 2003 2004 2005 2006 2007 2008 2009 2010
23
Content
• Approach and Outcomes of Original
Pharmaceutical Agreements
• Current Challenges in the ARV
Marketplace and CHAI’s Response
• Country-level Opportunities to
Optimize Access for Patients
24
Country-level Opportunities
• Help Control 1st-Line ARV Costs
• Ensure Consistent 1st and 2nd-Line Protocols
• Expedite National Registration
25
Country-level Actions to Control Costs
Demand-side Action
Supply-side Impact
• Prompt payment
• Avoids interest payments to minimize
costs to formulators
• Larger and/or longer-term tenders
• Allows suppliers to plan for production –
achieving better pricing on intermediates
and avoiding stock-carrying costs
• Reliance on international quality
standard and ongoing accountability
on API sourcing
• Avoids predatory pricing by suppliers who
sell lower-quality products (cheaper to
make)
• Splitting awards to tenders for
specific, high-volume products
• Ensures competition so a few products in
a few high-volume countries do not
determine market
• Conducting and sharing ongoing,
consumption-based forecasting
• Enables API suppliers to plan for medium
and long-term capacity needs
26
Possible Revision to 1st-Line WHO Protocol
d4T
- or AZT
or
+
3TC
- or FTC
+
NVP
- or EFV
ABC
- or TDF
Triple NRTI alternative
Though this yields 24 choices of three-drug regimens, we do not anticipate
consumption patterns to change because the 20 new variations are costprohibitive (averaging $570, or 2-4 times the price of current 1st line with NVP)
27
Likely Revised 1st-Line Regimens
REGIMEN
PRICE (US$)
d4T
3TC
NVP
140
AZT
3TC
NVP
240
d4T
3TC
EFV
430
AZT
3TC
EFV
540
TDF
FTC
EFV
665
TDF
FTC
NVP
375
ABC
3TC
NVP
705
ABC
3TC
EFV
995
TDF
3TC
NVP
325
TDF
3TC
NVP
325
AZT
FTC
NVP
310
d4T
FTC
NVP
210
ABC
FTC
NVP
755
AZT
FTC
EFV
600
d4T
FTC
EFV
500
ABC
FTC
EFV
1045
AZT
3TC
ABC
785
AZT
3TC
TDF
405
AZT
FTC
ABC
835
AZT
FTC
TDF
455
d4T
3TC
ABC
685
d4T
3TC
TDF
305
d4T
FTC
ABC
735
d4T
FTC
TDF
355
Current protocols will remain
dominant, with more EFV for TB
patients if the price comes down
TDF+FTC+EFV FDC is possible
and may be used as alternative
ABC will be saved for 2nd Line
Many combinations combine
once and twice daily dosing and
will not be favored due to this
reason as well as high prices
Countries are unlikely to adopt
triple NRTI regimens in the
absence of specific toxicities or
more attractive prices
28
Likely Revised 2nd-Line Regimens*
TDF
- or ddI
+
ABC
- or AZT**
+
LPV/r
- or SQV/r
- or ATV/r
The average best price of these 12 possibilities is $1,320 today (with a range from
$780 to $1,860). LPV/r is cheaper than SQV/r and will remain so. ATV/r pricing
has not yet been announced. Protease-inhibitors with ritonavir require cold-chain,
but a heat-stable version of LPV/r will be available beginning in 2006.
ABC, ddI, LPV/r and TDF will be dominant. Countries should revise protocols
quickly to adjust demand forecasts. Also, the pace of registration of generic forms
of these products will be critical to realizing lower prices, when available.
* These 12 possibilities are the most likely of 36 variations
** AZT can be used + or – 3TC
29
Steps to Expedite Product Availability
Action
CHAI role
1. Supplier R&D should focus
on key products, and
regulatory submission
made as soon as possible
CHAI is focusing supplier R&D on EFV,
TDF, ABC, ddI, LPV/r and ATV/r and is
providing assistance if possible to prepare
submissions
2. International regulatory
review should be quick
and donor policy flexible to
procure new products
CHAI and WHO are working together to
raise more resources for prequalification
and begin prequalification for diagnostics;
CHAI has worked with GFATM to develop
and document its new procurement policy
3. Purchasers can expedite
registration based on
WHO or FDA approval and
ensure national law
leverages donor flexibility
CHAI is encouraging suppliers to submit
dossiers identical to WHO/FDA submission
and pay registration fees
30
Balance with NDRA Strengthening
Need for Quick
Access to ARVs
• Expedite national registration
based on WHO and/or FDA
approval (and submission of
identical dossier, with B/E
data and same API-source)
Health Systems
Strengthening
• Continue to charge fee for
product registration
• Seek donor funding for
NDRA and NQCL
strengthening
• Seek WHO support for
NDRA strengthening
(including participation in
prequalification project)
31