AEGiS-WSJ: BEIJING -- Drug Makers Are Unlikely to Cut Prices of AIDS Medicines in U.S.

Drug Makers Are Unlikely to Cut Prices of AIDS Medicines in U.S.

The Wall Street Journal - March 23, 2001
Robert Gavin and Andrew Caffrey

Now that pharmaceuticals companies have slashed the price of AIDS drugs in Africa, can U.S. patients expect similar drops in the price of their life-sustaining medicine?

Don't count on it, say insurers, state health officials and advocates for people infected with HIV. One big reason: Using Africa's AIDS epidemic as leverage to lower U.S. prices could discourage drug manufacturers from further humanitarian initiatives in impoverished nations.

"Many of us don't want to create a situation where the drug companies weasel out of their responsibility in the developing world by saying, 'Oh there's going to be lots of pressure in the United States and we'll lose money,' " says Ronald Johnson, associate executive director of the Gay Men's Health Crisis Inc., a New York advocacy group.

In addition, under federal law states have little flexibility to push for larger discounts and they can't restrict access to approved drugs just because they deem them too expensive. And because of patent protections, the drug companies don't face the same competitive pressures from generics to lower prices in the U.S. as they do in Africa, where nearly 75% of the world's 35 million HIV-infected people live. Last week, Bristol-Myers Squibb Co. of New York announced it would sell two of its HIV medicines below cost in poor African nations. That closely followed an announcement by Merck & Co. of Whitehouse Station, N.J., which said it would slash already-discounted prices there by as much as 55%. The result of these discounts: African AIDS patients can undergo some drug treatment regimens at just over 10% of the cost of the same treatment in the U.S.

But Jeff Trewhitt, a spokesman for the Pharmaceutical Research and Manufacturers of America, an industry trade association based in Washington, says, "You are talking about prices that have been dramatically lowered. If we were to dramatically lower prices like that throughout the world, it would be extremely difficult to generate the money needed for research and development."

The savings potential, for states anyway, isn't that compelling: The cost of AIDS drugs to Medicaid programs is already discounted and is dwarfed by expenditures for other treatments, most notably for mental-health ailments.

Kaiser Permanente, the nation's largest not-for-profit health plan known for aggressively using its market clout to squeeze discounts from manufacturers, won't exploit the African situation as an "opportunity" to get lower prices, says Sharon Levine, associate executive director of the Permanente Medical Group of Northern California, an affiliate of Kaiser Permanente. "AIDS drugs in Africa are a unique situation," says Dr. Levine, acting as spokeswoman for the HMO. "These are impoverished nations that can't afford the lifesaving drugs."

State health officials agree. But, they concede, they wouldn't mind if drug manufacturers gave them better deals -- particularly in states with relatively large HIV-infected populations. For example, New York state spends about $244 million a year on AIDS drugs, about 11% of its annual $2.2 billion in pharmaceutical costs.

"New York state doesn't expect to get the same treatment as Africa -- that's humanitarian relief," says Kristine Smith, a spokeswoman for the New York Health Department. "However, given the enormous amount of HIV drugs we buy, we think [drug companies] should be giving us bigger discounts."

But state health officials have relatively little leverage. State Medicaid programs, for example, are able to demand rebates, or discounts from drug companies because of their large purchasing power and best-price law. But because of federal law, states have limited ability to push for larger discounts and are prevented from barring access to FDA-approved medicines that the states deem too expensive.

Meantime, state health officials are working with AIDS activists to get drug companies to charge less. They scored a victory last year, when they convinced Bristol-Myers Squibb to cut its markup in half -- to 20% from 40% -- on Videx EC, a new formulation of Videx, an antiretroviral drug, says Martin Delaney, a founding director of Project Inform, a San Francisco-based AIDS information and advocacy group. Bristol declined to comment specifically on the Videx situation. "We consider that is part of our pricing strategy," said John Kouten, a company spokesman. Mr. Kouten added, however, that the drug maker offers a discount of about 18% to state AIDS programs.

But the AIDS drug prices cuts in Africa aren't expected to accelerate such efforts. "We're happy to fight for lower prices, but not based on what's happening in international markets," says Mr. Delaney. "If we pay back the industry for doing the right thing in developing nations by demanding reductions [in the U.S.] we're going to kill the goose that lays the golden egg."

Write to Robert Gavin at robert.gavin@wsj.com and Andrew Caffrey at andrew.caffrey@wsj.com

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