“Corruption & Pharmceuticals”–World Bank/ Blocking Generics–Peter Rost / WashPost

The World Health Organization states that "essential medicines save lives and improve health when they are available, affordable, of assured quality and properly used." Unfortunately, global inequities in access to pharmaceuticals are pervasive because of poverty, high drug prices, infrastructure, and corruption.

On April 6, 2006, the Health, Nutrition, and Population division of The World Bank, held a seminar in Washington focusing on  “Corruption and Pharmaceuticals: Strengthening Good Governance.”

A slide presentation acknowledges that the “corruption and pharmaceuticals is becoming a “mainstream” topic;” that the pharmaceutical system is susceptible to corruption; and that access to medicines is often a life and death issue:

Despite international aid and a plethora of programs devoted to improving global pharmaceutical access, there is a morally concerning drug gap
About 2 billion people or one-third of the global population lack regular access to medicines

WHO estimates that by improving access to essential medicines (and vaccines) about 10 million lives per year could be saved
Corruption contributes to the drug gap

Corruption in any one of the critical decision points in the pharmaceutical system can be detrimental to a country’s ability to improve the health of its population
Typically the poor in developing countries are most susceptible to its detrimental effects
Good governance is a sine qua non for ensuring good access to essential medicines for the population
The sale of pharmaceutical products is lucrative
Final customers more vulnerable to opportunism than other products
Pharmaceutical suppliers (drug manufacturers, importers, wholesalers, pharmacists) are profit maximizers  
But sometimes profit maximization breaches legal norms and professional ethical norms

The only two global case examples of pharmaceutical corporate corrupt practices  cited are:
“A pharmaceutical manufacturer in Brazil was found to be manufacturing sub-standard contraceptive drugs,” and “In June 2004, the New York State Attorney General’s Office accused GlaxoSmithKline of fraud by concealing information to physicians about the adverse impact of the anti-depressant Paxil® (paroxetine) when prescribed for depression in children and adolescents.”

See: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTHEALTHNUTRITIONANDPOPULATION/EXTHSD/0
,,contentMDK:20865049~pagePK:210058~piPK:210062~theSitePK:376793,00.html
   (need to copy and paste entire url)

The Washington Post reports (below) that brand-name drug companies are “cutting deals” with generic manufacturers to prevent lower priced drugs from competing with their high priced drugs whose patents after 20 years have expired. Such deal cutting results in price fixing that cheats consumers of lower price in a competitive free market.  PhRMA, it appears, prevailed in two federal appeals court rulings last year “that rejected Federal Trade Commission actions that since the late 1990s had prevented brand-name companies from paying their rivals to drop patent challenges.”

Whereas the World Bank focuses on pharmaceutical-government corruption in Costa Rica, Nigeria, Azerbaijan, Albania, Dr. Peter Rost, former vice-president of Pfizer, focuses on corrupt practices in the U.S. in a column titled, “The White House. The Drug Industry. Genocide.” 

Dr. Rost reveals that some years ago, the drug industry had been warned by financial analysts that unless new drugs are developed, industry’s revenues will dry up. Though the industry kept the dire prediction from Wall Street—lest stocks go down in price—the prediction is confirmed by IMS Health, industry’s research firm.

IMS estimates prescription drugs worth $121.5 billion will come off patent between 2006 and 2011. That’s half of U.S. drug sales.

Industry’s response to the projected loss in revenues is to negotiate secret deals with various nations to keep cheaper generics from the market, and keeping life-saving medicines out of reach of dying populations. Citing an article in the International Herald Tribune accusing the pharmaceutical industry and its collaborators in the White House of pushing bilateral and regional trade agreements in which poor countries are forced to enact "superpatents" that prolong U.S. drug makers’ monopolies and limit the circumstances under which the patents can be broken.

Dr. Rost writes: “When a life-saving industry cheats, people may die. When the White House, through bullying, helps the cheaters, the result may be genocide.”

See: Dr. Peter Rost: The White House. The Drug Industry. Genocide.  
Mon Apr 24,  http://www.huffingtonpost.com/dr-peter-rost/the-white-house-the-drug_b_19678.html

Of note, many of the reforms recommended at the World Bank seminar aimed at underdeveloped countries are applicable to pharmaceutical corruption in the U.S.

Re: Quality Control
Develop transparent, effective and uniform law and regulations for drug registration
Ensure adequate quality control capacity or capacity to adequately review registration documents
Educate professionals and public to identify registered drugs
Disseminate information on internet
Market surveillance and random batch testing

Re: Drug selection
Clear criteria for selection and pricing
Drug selection criteria should be based on international standards as set out by WHO
List based on WHO EDL
Committee membership available publicly
Professional and public scrutiny including the regular reporting to the media of drug selection meetings
Public posting of methodologies used and results obtained/decisions made

Procurement procedures must be transparent, follow formal written procedures throughout the process and use explicit criteria to award contracts to reduce the risk of corruption
Announced closing date should be strictly adhered to
Information on tender process and results should be made available to all participants and published
Supplier selection justified and monitored
Written records should be kept of all bids received
Procurement office should be required to report regularly on key procurement performance indicators
Tight and regular communication and reporting between every level of the system

Where possible use information systems to monitor physician prescription patterns
Impose serious penalties for breaches of legal and ethical standards
Regulate industry interaction with prescribers through explicit criteria that limit industry gifts and payments

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http://www.washingtonpost.com/wp-dyn/content/article/2006/04/24/AR2006042401508_pf.html
Drug Firms’ Deals Allowing Exclusivity
Makers of Generics Being Paid to Drop Patent Challenges, FTC Review Finds
By Marc Kaufman
Washington Post Staff Writer
Tuesday, April 25, 2006; A12

Brand-name drug companies have resumed the practice of slowing the sale of cheaper generic competitors by cutting deals that result in paying millions of dollars to makers of generic drugs while consumers continue to pay brand-name prices.

The agreements follow two federal appeals court rulings last year that rejected Federal Trade Commission actions that since the late 1990s had prevented brand-name companies from paying their rivals to drop patent challenges.

An FTC analysis found at least seven such agreements so far in fiscal 2006, with three in 2005. Before that, no generic companies had been paid to drop their patent challenges for years.

Speaking yesterday in Philadelphia, FTC Commissioner Jon Leibowitz said that if the appeals court decisions remain in force, rival drugmakers will have "carte blanche to avoid competition and share resulting profits." He said the commission had agreed to ask the Supreme Court to overturn one of the lower-court decisions.

"Until recently, payments by brand-name companies to generics were the exception, but now they’re the rule," he said in an interview after his speech. "They appear to be a new way to do business, and that’s very troubling. Hopefully the Supreme Court will take our case and reverse."

Generic drugs, which generally cost a fraction of the brand-name original, come to the market after the product’s 20-year patent expires. The law and business practices governing patents can be complicated, however, and many generics become available only after successful court challenges.

Leibowitz said that when brand-name and generic companies agree to end their patent litigation, both generally benefit but the public suffers. The agreements allow the branded companies to maintain their patent exclusivity for longer periods, while the generic company receives money for, in effect, dropping its challenge. The generic companies also often enter into agreements to produce lower-priced versions of the brand-name company’s drug at a predetermined date — far in the future.

The two organizations that represent the industries — the Pharmaceutical Research and Manufacturers of America and the Generic Pharmaceutical Association — declined to comment yesterday on the FTC report and the commissioner’s comments.

In his speech to the In-House Counsel’s Forum on Pharmaceutical Antitrust, Leibowitz gave several examples of the kind of agreements the FTC finds problematic.

Earlier this year, he said, Cephalon Inc. made deals to get four generic companies to drop challenges to its patents on the sleep-disorder drug Provigil. All four generics agreed to stay out of the market until 2011, and together they will receive licensing payments of $136 million from Cephalon.

Also this year, the two makers of the blood thinner Plavix (Bristol-Myers Squibb Co. and Sanofi-Aventis) agreed to pay a generic challenger to defer its entry to the market until November 2011 in exchange for dropping its patent challenge.

Drug companies began entering into these agreements in the 1990s, but the FTC concluded they were unfair to consumers and anti-competitive and the agency successfully challenged them.

Its position was undercut last year when judges in the U.S. Court of Appeals for the 11th Circuit concluded that the FTC had overstepped its authority when it blocked a complicated agreement between Schering-Plough Corp. and Upsher-Smith Laboratories Inc. involving the drug K-Dur 20, used to treat high blood pressure and congestive heart disease. The FTC had said that the generic company was essentially paid to drop its patent challenge, but the judges said the two companies had an acceptable agreement under which deals were completed.

The FTC has appealed to the Supreme Court.
More than 53 percent of prescriptions are now filled with generic drugs, and that percentage is expected to climb as employers and government programs seek to control health costs. Because generics are so much cheaper, they account for only about 12 percent of drug purchases.

© 2006 The Washington Post Company

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