Wall Street Journal - February 8, 2001
Rachel Zimmerman and Jesse Pesta

The sudden offer by an Indian drug manufacturer to sell lower-priced AIDS drugs in Africa has sent a jolt through the drug industry and the international AIDS community, but many questions remain about whether or how poor countries could take advantage of it.

Dr. Y.K. Hamied, chairman and managing director of Cipla Ltd., Bombay, India, the generic-drug maker, said he will sell a combination of three AIDS drugs for $600 per patient per year to governments that want to buy the therapy. Dr. Hamied said he would lower the annual price even more, to $350 a patient, to Doctors Without Borders, an international nonprofit organization that provides medical services in the developing world. Both prices are much lower than the typical annual cost for the AIDS-drug cocktails in the U.S. and Europe, where the average cost is $10,000 to $12,000. The Cipla offer was first reported by The New York Times this week.

Dr. Hamied's offer is only a gesture at this time and in many ways is limited by a number of political and logistical factors. It isn't clear whether countries will accept the particular combination of drugs the company is offering; whether the price is low enough; who will distribute the drugs; who will provide support and testing that usually accompany such complex treatment; and how difficult cultural and political barriers to treatment will be overcome.

But Cipla's offer is still expected to shake up negotiations taking place between some African countries and the group of five big pharmaceutical companies. What is especially significant about Cipla's action is that its price appears to be even lower than a sharply-discounted price a group of drug makers is offering to nations in Africa.

The Cipla offer "changes everything," said Toby Kaspar, based in South Africa as an official of Doctors Without Borders. "Every one of those countries should use the Cipla offer to help them make a better deal with the big drug makers."

Last May, under intense pressure to lower their prices in Africa and other developing nations, five drug companies, including Merck & Co., Bristol-Myers Squibb Co., New York, and Britain's GlaxoSmithKline PLC, offered to sharply reduce the prices for their AIDS medicine to nations in sub-Saharan Africa, where the epidemic has become a human catastrophe. Negotiations with those nations have moved slowly, but three nations, Senegal, Uganda and Rwanda, have agreed with the drug makers on a set of prices for various combinations of the drugs. Only Senegal has released the negotiated prices. It has said that people in that nation can buy the drug combination for between $1,008 and $1,821 per patient per year.

The Cipla offer of $600 appears to involve a combination of drugs resembling the one priced at about $1,008 in Senegal. The higher price quoted to Senegal includes a powerful protease-inhibitor drug, such as Crixivan, sold by Merck. Cipla's offer involves three anti-AIDS medicines, but doesn't include a protease inhibitor.

Commenting on the Cipla price, Peter Mugyenyi, director of the Joint Clinical Research Centre in Kampala, Uganda said, "It's a good offer but it's still not good enough." Dr. Mugyenyi, a leading African AIDS physician and researcher, said the price of the drugs "is finally coming into the reach of top government salaries," noting that in Uganda there is no health insurance or government drug-buying program. As a result, even at $600 very few Ugandans will benefit from the offer, he said.

Moreover, the Cipla offer carries numerous qualifications. Cipla is offering to sell just three of the roughly 10 drugs commonly combined to form the so-called AIDS cocktail therapy. Those drugs are Zerit, from Bristol-Myers; Glaxo's 3TC, and the German company Boehringer-Ingelheim Gmbh's Viramune. Spokespersons at several of the large drug makers said their offer of price discounts involves more drugs and therefore provides doctors the ability to prescribe different combinations for different patients.

Guy Macdonald, a vice president at Merck, Whitehouse Station, N.J., said there remain too many variables in the Cipla offer to fully estimate its impact. "Are they going to provide it to 20 or 30 countries in Africa? Are they going to provide sustainable products? And what about quality?" Mr. Macdonald asked.

Peter Dolan, president of Bristol-Myers and soon to become chief executive, said that cutting prices isn't necessarily the answer to AIDS treatment. He noted that India hasn't solved its own burgeoning AIDS problem even though its generic-drug industry regularly ignores intellectual-property rights.

The drug makers' coalition, which also includes the World Health Organization and the United Nations AIDS program called Unaids, is offering a program of reduced prices and a promise of other support services, such as testing and counseling. The companies say negotiations have gone slowly because the deals are being forged with one country at a time. These talks, the companies said, involve sensitive political and economic issues, as well as what the drug makers may provide in financial assistance.

"We're concerned about long-term sustainability, about building an infrastructure in which patients are managed appropriately," said Nancy Pekarek, a spokeswoman for GlaxoSmithKline, which has offered to sell its combination of two drugs, AZT and 3TC, for $2 a day.

Those two drugs alone, however, still cost more than the three drugs being offered by Cipla.

The Cipla offer comes at a sensitive moment in international-trade relations involving the major drug makers. In March, 40 international drug companies are expected to go to court in South Africa to block that country from importing or making generic drugs. South Africa had passed a law several years ago to make such action legal. While major drug makers have patents for their products in some African nations, such as South Africa, in many countries the companies' products aren't patent-protected.

Several nations, including South Africa, have said they are seriously thinking about importing generic drugs by applying for a special waiver from the World Trade Organization that allows the countries, in the case of national emergencies, to bypass drug-company patents. Indeed, Mr. Hamied of Cipla said he isn't worried about violating patent law or of drawing a legal challenge from the companies. Instead, he said each country must deal with the legality of importing his products.

"I'm not a salesman, I'm not a scientist," he said. "I've made an offer. It's up to individual countries to decide, that's the way I look at it."

Ben Plumley, a Unaids staffer working on drug-access issues, said none of the agreements between the drug makers and the countries prevents the nations from exploring other options, such as buying generic versions of the AIDS drugs. "Where the legal situation allows, competition does bring down prices," Mr. Plumley said.

-- Robert Block in Johannesburg, South Africa, and Gardiner Harris in New York contributed to this article.

Write to Rachel Zimmerman at rachel.zimmerman@wsj.com and Jesse Pesta at jesse.pesta@wsj.com

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