Market opportunity for key secondline products

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University-based approaches to ensuring access to
medicines

• Universities Allied for Essential Medicines
• University of Pennsylvania
• September 30, 2006

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Caveats

• Striking the balance between complexity and
  accessibility
• Stop me!
• HIV exceptionalism

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Defining the problem

• Adequate drugs and diagnostics simply do not
  exist for many neglected diseases
• Even where drugs and diagnostics do exist, prices
  in developing countries are often out of reach
  when the market is not competitive
• Even where prices are affordable, other barriers
  to delivery exist (human resources,
  infrastructure, management capacity)

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Price Disparity Across Markets
1st-Line ARVs
2nd-Line ARVs
3,560
3,540
1,930
1,580
540
480
390
840
Middle-Income Countries
705
460
330
270
300
Low-Income Countries
250
120
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Consequences for developing countries
World Health Organization. http//www.who.int/med
icines/services/essmedicines_def/en/
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ARV Price Comparison 3TCd4T(40)NVP
January 2006
October 2003
562
562
290
192
Branded Best Price
Generic List Price
Branded Best Price
Generic List Price
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Effect of generic competition on market prices
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Other problems associated with originator market
exclusivity

• Untimely product launch
• Heat-stable LPV/r
• Tenofovir
• Unreliability of supply in single-source
  situations
• Barriers to innovation

Pricing is not the sole concern with respect to
patent-protected market exclusivity do not
equate access with low prices
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Features of generic competition
Economics (cost advantages, competition)
Innovation (eg, FDCs, pediatric formulations)
Quality


Generic competition produces superior outcomes
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Potential university role in promoting generic
competition

• Increasing rates of university patenting and
  licensing post-Bayh-Dole roughly two-fold
  increase 1993-2003
• 4 of top 10-12 antiretroviral compounds were
  developed at universities (d4T, 3TC, FTC, ABC)
• Recent report found that 15 of the 21 drugs with
  the most therapeutic impact emerged from
  university research
• Out-licensing to biotech pharmaceutical
  companies for downstream development creates
  moment of opportunity

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Case study Emory Univ. and Emtricitabine/Tenofovi
r

• Case study will be presented in greater detail
  tomorrow
• Emory developed Emtricitabine (FTC) and licensed
  the compound to Gilead for development
• Gilead linked FTC with Tenofovir (TDF) in a
  fixed-dose combination called Truvada that proved
  very successful
• Gilead and Royalty Pharma recently bought Emorys
  rights to royalty stream for 525 million

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TDF/FTC Under-realized potential
Price comparison

• TDF is a wonder drug
• - Low toxicity
• - Potentially dominant 2nd line drug in
  near term
• - Potentially dominant 1st line drug in
  medium term
• - Potentially widely used prophylactic in long
  term
• Unbridled generic competition is essential for
  TDF ( FTC) to realize full potential

370
190
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Potential generic
Leading first line regimen
Originator
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Current situation in the TDF market

• Possibility of patent protection in key countries
  such as
• India
• Brazil
• China
• Patent opposition in India
• Gilead voluntary licenses to Indian suppliers but
  with restrictions

Pricing will not be as low as is achievable due
to restrictions, in market where every
matters Yet this outcome represents close to the
best possible outcome in absence of ex ante
university-pharma agreement
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Potential university approaches

• Description of possible approaches
• Rely on potential for government march-in
• Address access concerns and seek exceptions
  post-launch and only upon activist pressure (as
  with d4T)
• University non-patenting in Low and Middle Income
  (LMI) countries
• Potential ex ante agreements with licesee (pharma
  or biotech)
• Equitable Access License (to be discussed)
• Fair pricing provisions
• Provisions stipulating voluntary license program
  meeting certain minimum standards
• Other means of retaining some discretion for
  licensees?

Ex post
Ex ante
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Equitable Access License (EAL) overview

• Basic idea Means of maintaining open door for
  robust generic competition
• Deals with three basic hurdles patent,
  regulatory/data, and production capacity
• Major benefits include simplicity and ease of
  administration, maximum flexibility for generic
  producers, and wide coverage
• Leaves relatively little discretion to university
  or licensee self-executing rights, covers all
  LMIs, no eligibility (eg, quality) restrictions
  on suppliers, etc.

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EAL schematic Cross-license and grant-back
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EAL schematic Notification
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EAL schematic Notifier improvements
4. Royalties flow to university and licensee
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Objections to the EAL

• Known and suspected objections
• Lost revenue
• Lack of leverage/lost deals if individual
  universities adopt EAL alone big disincentives
  to first movers
• Anti-trust concerns if universities move toward
  EAL in concert
• EAL-specific concerns
• Lack of discretion over licensed suppliers
• Lack of discretion over companies
• Limited discretion re license terms
• Usual concerns about generic production as
  general matter
• Parallel importation
• Quality and legal liability concerns

Universities
Pharma
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Changing strategic considerations for pharma
Initial perspectives
Emerging perspectives

• Parallel importation poses severe risk to sales
  in developed nations
• Substantial risk of legal liability if generic
  producers/licensees sell poor-quality product
  that produces adverse clinical events
• Fear of cost transparency
• Revenue loss will compromise RD
• Public pressure to reduce prices via generics in
  LMIs can be withstood
• Excess manufacturing capacity can be allocated to
  developing world demand
• No benefit to be gained from licensing to generics

• Little empirical evidence of widespread parallel
  importation
• Increasing confidence in quality standards among
  leading Indian generic manufacturers, coupled
  with expanded WHO and FDA quality assurance
• Costs have become quite transparent, at least in
  HIV/AIDS sphere, with only modest increase in
  public pressure on pricing in developed nations
• Disingenuous claim from beginning
• High levels of public pressure on pricing in
  LMIs, and generic competition difficult to avert
  entirely
• Little desire to invest in new manufacturing
  capacity to serve rapidly growing low-margin
  developing world demand
• Potential strategic benefits to voluntary
  licensing new sources of intermediates/API, and
  significant potential for grant-backs of process
  improvements