The Wall Street Journal - March 15, 2001
Michael Waldholz and Rachel Zimmerman

Saying it wants to stimulate a vigorous international response to the AIDS crisis in Africa, Bristol-Myers Squibb Co. is offering to sell its two HIV medicines to poor nations on the continent at just below the drugs' cost, the first time any drug maker has made such a proposal.

The New York pharmaceutical giant says it will sell its AIDS drug Zerit for 15 cents a day, or $54 a patient for a year's worth of therapy. That price is about one-fifth the already discounted amount Bristol-Myers began charging in Africa for Zerit since last summer. Zerit sells in the U.S. and Europe for about $3,589 per patient per year.

Bristol-Myers officials also say the company won't use its patent on Zerit in South Africa to block that country's efforts to buy less expensive versions of the drug from generic makers in India. In fact, Bristol-Myers is publicly acknowledging that it has almost no patent protection for its AIDS drugs in sub-Saharan Africa. It has a Zerit patent only in South Africa. And it has no patent for Videx in any sub-Saharan country. That means that right now any nation or medical center in the region could legally buy generic copies of those drugs if it chose to make such an effort.

Bristol-Myers's announcement follows an offer from Merck & Co. last week to sell two of its AIDS drugs at cost, or at about 45% to 55% less than the discounted price it offered last year. It also comes on the heels of significant price reductions by two Indian generic-drug makers.

"Our goal here is to energize a groundswell of action that needs to be undertaken if we are going to do any good in fighting this terrible problem in Africa," says John L. McGoldrick, executive vice president of Bristol-Myers.

In recent weeks, activists have stepped up their pressure on drug companies to make AIDS drugs more affordable in the sub-Sahara, where 26 million of the world's 35 million HIV-infected people live.

Mr. McGoldrick says his company is frustrated that a round of reduced price offers made by Bristol-Myers, Merck and three other drug companies last May hasn't yet had much impact in Africa. So far only four countries -- Rwanda, Ivory Coast, Uganda and Senegal -- have accepted the new prices offered last year.

Bristol-Myers is taking the latest step, Mr. McGoldrick says, because "we want to do our part." But, he adds: "African governments and donor governments in Europe, Japan and the U.S. must join with the U.N. organizations, pharmaceutical companies, nongovernmental organizations and others to address this human tragedy."

The Bristol-Myers executive echoed statements made last week by Merck officials. By bringing prices down about as low as they believe they can go, both companies hope to trigger a response by wealthy nations and others that might subsidize the costs of the drugs.

Even at the newly reduced prices, the drug therapy will remain far beyond the economic reach of most in Africa. Bristol-Myers says that as part of its new proposal, it will sell Zerit and Videx for a combined price of $1 a day, or $365 a year. But those two drugs must still be combined with a third to complete the AIDS regimen. Merck's new reduced price for its drug Crixivan is $600 a year, and its new price for Stocrin is $500 a year. Adding either of those drugs to Bristol-Myers's two medicines will bring the annual price of a three-drug regimen in Africa to about $865 to $965. If, instead, Bristol-Myers's two drugs are combined with Viramune, a drug from Germany's Boehringer-Ingelheim GmbH that costs about $438 a year, the annual price of a three-drug combination will be $803.

Those prices are still slightly higher than an offer made in February by drug-maker Cipla Ltd. of Bombay, India, to sell a different combination of three AIDS drugs in Africa for $600. Suddenly, with the new round of price cuts from Merck, Bristol-Myers, Cipla and another Indian company, Hetero International Ltd., a pricing battle seems to be emerging in Africa. Indeed, Bristol-Myers's new price for Zerit undercuts by $16 a year the price Cipla is offering for its version of the same drug.

Some drug companies worry that selling at sharply reduced prices in Africa may lead to a black market for the drugs in the U.S. But Bristol-Myers says it isn't overly concerned about that at present.

In any case, it is unclear if the new prices will get to people in Africa quickly, or at all, unless employers and governments in the region and wealthy donors from abroad begin subsidizing some of the drugs' costs. "It's pretty dramatic, a major, major step forward," says Harvard economist Jeffrey Sachs of the new price reductions. But Mr. Sachs, who has been aggressively lobbying the U.S. government and others to commit large resources to the AIDS problem in Africa, adds: "The limiting factor is international donor support to help buy these drugs at the discount and to provide training to make these drugs effective."

Indeed, it isn't even clear whether many of the African nations are prepared to take advantage of the new drug prices. The president of Botswana said this week that the lowered prices may make it possible for his country, using donations and its own funds, to begin offering drugs to those who want them. But the government of South Africa, where four million people are infected with HIV, has yet to meet with drug makers to discuss the discounts offered last May. It had arranged for such a meeting for the end of this month, but it was canceled because of scheduling conflicts. Meanwhile, South African officials say they are skeptical of the drug makers' sincerity, especially because 39 drug companies, including Bristol and Merck, are suing the government to block it from buying generic versions of patented drugs.

In an interview, Ayanda Ntsaluba, director general of South Africa's health ministry, said that while he doesn't "doubt the good intentions of Merck," he was "suspicious" of the recent offer because he first heard about it in press reports rather than from the company.

Meanwhile, two drug companies -- Boehringer-Ingelheim and Roche Holding AG -- that joined in the offer to reduce prices last May have been reluctant to join Merck and Bristol-Myers in a new series of price reductions. John Wecker, program coordinator for Boehringer-Ingelheim's drug-access program, says the company's current annual price for Viramune represents a 90% reduction from its price in the U.S. and the company doesn't plan further cuts. But he says talks are under way to see if such cuts might be possible.

And while Roche was part of the group that promised to cut its drug prices last May, it offered a set of reduced prices only recently. On Feb. 27, Roche sent a letter to UNAIDS, the U.N. agency coordinating AIDS activities, announcing "improved conditions" related to the cost of two of its AIDS medicines, Viracept and Fortovase, to take effect March 1. It claims to have cut the price in half for Fortovase and reduced the price of Viracept by 15%, but that reduction is only available as a rebate. In addition, those prices, while lower than those charged in the U.S., are still way above what is affordable in Africa or what Merck is charging for its similar drug, Crixivan.

-- Robert Block contributed to this article.

Write to Michael Waldholz at michael.waldholz@wsj.com and Rachel Zimmerman at rachel.zimmerman@wsj.com

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