The Front

Pfizer vs. The Philippines

Manila — The debate over high drug prices recently hit the spotlight once again as a U.S.-based pharmaceutical giant sought to stop the Philippine government’s plans to import a cheaper version of a hypertension medicine.

Pfizer in March filed suit in local court against the Philippine International Trading Corporation (PITC) and the Bureau of Food and Drugs (BFAD), as well as two BFAD regulators, alleging patent infringement. Pfizer’s suit alleges that PITC was planning to import a cheaper version of the hypertension drug Norvasc. Pfizer alleges the Indian company that manufactures the cheaper product is not licensed by Pfizer to produce the drug.

However, PITC countered that it would import the version of Norvasc only when the patent expires in June 2007, adding that it would come from licensed producers. PITC is the lead implementing agency in the government’s importation program for pharmaceuticals, which seeks to improve public access to “high-quality branded medicines” for common, life-threatening ailments by cutting retail prices by at least half. The idea behind PITC’s program is to import drugs, legally put on the market in other countries’ markets, that are priced cheaper than they are in the Philippines.

PITC was only seeking to import a limited supply of Norvasc from the Philippines, for the purpose of getting marketing approval once Pfizer’s Filipino patent expires in 2007.

Pfizer tried to cast the suit as a health issue, stating, “Products that enter the Philippines through parallel importation may carry health risks associated with counterfeits.” However, PITC was attempting to certify the safety of the product it hoped to import in the future.

Pfizer also claimed that “Respecting patent rights ensures that Pfizer will be able to sustain its mission to innovate and bring new and better lifesaving medicines to more patients.”

The case settled in August, on terms that critics say will undermine the effectiveness of the Philippines’ import program.

The Philippines suffers from some of the highest drug prices in Asia, if not the world. Norvasc, the drug that PITC wants to import, is sold locally at 44.75 pesos per 5 milligram tablet and P74.57 per 10 milligram tablet. But Pfizer sells the same medicine in India under the brand name Amlogard at the equivalent of P5.98 per 5 milligram tablet and P8.96 per 10 milligram tablet.

The root cause of high drug prices is the dependence of the local industry on pharmaceutical multinational corporations for raw materials, technology and finished products. Even Filipino-owned drug firms depend on the multinationals for the chemicals they need to manufacture their product.

A comprehensive drug industry includes all the basic processes in manufacturing medicines, from the manufacture of raw materials and production of basic chemicals to the manufacture of finished products. In the Philippines, the process of extracting and producing raw materials from local sources is generally absent. Pharmaceutical companies are involved mainly in bulk importation of raw materials and finished goods, formulating, processing, packaging and distribution.

Many of the imported raw materials can be produced locally, but production is not viable because the country lacks an organic chemical industry that will produce the inputs. Aside from dependence on inputs, the local industry is under multinational control through licensing agreements involving technological or marketing tie-ups.

Because of this dependence and the monopoly power conferred by patents, multinational pharmaceutical companies are able to impose whatever price they want for their raw materials, chemicals and pharmaceuticals, leaving Filipino consumers little choice but to try and meet high drug prices as best they can.

In addition to the brand-name companies’ profit-taking, drug prices go up further because of the amount retailers add to the product. Retailers assign a mark-up of 5 to 30 percent on top of the officially listed ex-distributor price (which includes all expenses including distribution fees and duties).

Patenting is the ultimate secret behind high drug prices, and patents on medicines are now required for all but the world’s poorest countries under the World Trade Organization’s intellectual property agreement. Until 2005, India provided only limited patent rights for pharmaceuticals, enabling generic competition to drive down prices. To compete, brand-name companies had to lower their prices as well, which is why the Indian brand-name versions of drugs are often so much cheaper than they are in countries like the Philippines.

Under WTO rules, it is legal to import brand-name versions of drugs while they remain on patent, even without the permission of the patent holder. This practice, known as parallel importation, may lower prices because brand-name companies price their products differently in different markets. The Philippines, however, is not seeking to undertake parallel importation until products go off patent.

What the government was trying to do was much more modest. It was seeking to use another WTO flexibility — employed by the United States and most industrialized countries — to permit use of a small quantity of a patented invention to obtain marketing approval from drug regulatory agencies. Use of this “early working” provision enables competitors (or, in this case, an imported version of Pfizer’s product) to go on the market as soon as patent protection expires. Otherwise, competitors could not begin to seek market approval until a product went off patent.

Under the terms of the government settlement with Pfizer, however, BFAD agrees not to import Norvasc until its patents expire. It also agreed not to grant marketing approval for pharmaceuticals in the future until after the expiration of applicable patent terms, a practice commonly known as “linkage.” Health advocates criticize linkage on the grounds that it transforms drug regulatory agencies into patent enforcers — even though they typically do not examine (nor have the expertise to examine) the validity of the patents they are enforcing.

Left unclear in the settlement is whether the Philippines will be able to employ early working provisions in the future.

— Joseph Yu/
Third World Network Features
Joseph Yu writes for IBON Features,
in which this article first appeared.

Conflict at the Academies

The premier U.S. research organization, the quasi-governmental National Academies, is beset by conflicts of interest, according to a July report by the Washington, D.C.-based Center for Science in the Public Interest (CSPI).

Nearly one in five scientists serving on National Academies panels — convened to answer specific sets of questions — has direct financial ties to companies or industry groups with a direct stake in the outcome of the panel’s study, according to the CSPI report. Approximately 43 percent of the 320 scientists on the 21 committees reviewed by CSPI had some ties to industry or potential conflict of interest in the five years prior to the committee’s formation.

The CSPI report also concludes that industry viewpoints are vastly over-represented compared to public interest perspectives. More than seven times as many scientists who have demonstrated pro-industry positions as those identified with environmental or public interest groups served on committees.

The National Academies are made up of the National Academy of Sciences, the Institute of Medicine, the National Academy of Engineering and the National Research Council (collectively, NAS).

The high level of conflicts of interest, and the imbalance of views on committees, raise questions about NAS compliance with the Federal Advisory Committee Act (FACA), according to CSPI. FACA amendments created specifically for the NAS in 1997 state that “the Academy shall make its best efforts to ensure that no individual appointed to serve on a committee has a conflict of interest that is relevant to the functions performed, unless such conflict is promptly and publicly disclosed and the Academy determines that the conflict is unavoidable.”

Amid a string of examples, the CSPI report raises questions about the current definition of conflict of interest employed by the National Academies, as well as illuminating various instances where NAS apparently finds itself in breach of the FACA guidelines.

Take the case of David Bellinger, who recently served on a NAS panel on “Nutrient Relationships in Seafood: Selections to Balance Benefits and Risks.” Bellinger was included on the committee despite the fact that he had, just months prior, received funding from the National Fisheries Institute and United States Tuna Foundation to complete a study on the same issue. That study, perhaps not surprisingly, concluded that for pregnant women the benefits of consuming fish and the omega-3 polyunsaturated fatty acids that they represent far outweigh the dangers posed by possible mercury exposure. Bellinger then served on the NAS committee despite his financial relationship to the fishing and tuna industry. Notably, no disclosure of Bellinger’s industry funding was made at the provisional meeting of the panel nor on the NAS website.

The NAS defended its choice of Bellinger, saying that because his work with the U.S. Tuna Foundation and National Fisheries Institute ended before he was employed by NAS, the relationship does not represent a conflict of interest.

In other notable examples of actual or potential conflicts, CSPI reports:

• The 16-member “Food Marketing and the Diets of Children and Youth” committee, which issued its report in 2006, included at least seven individuals with direct ties to the food, media and advertising/marketing industries, all of which had a direct stake in the study’s contents.
• In March 2005, the Institute of Medicine selected Richard Hynes of the Massachusetts Institute of Technology to chair a committee developing “Guidelines for Human Embryonic Stem Cell Research.” Hynes is a member of the scientific resource board for Genentech, a biotechnology firm with extensive research capacity in stem cells and stem cell-related fields. According to NAS staff, Hynes’ tie to Genentech was not considered a conflict of interest because the topic involved bioethics questions that would have “no differential on industry.”
• Ten of 11 members of an NAS panel that reviewed the Department of Energy’s Carbon Sequestration Program had ties to petroleum, energy, or chemical industries. Few of those conflicts of interest were disclosed to the public.

“The NAS does an abysmal job at disclosure,” says study co-author and director of CSPI’s Integrity in Science Project Merrill Goozner.

The majority of the conflicts of interest discovered by CSPI were not found on the NAS website (where all conflict of interest disclosures are to be posted, according to NAS policy), but revealed through CSPI’s independent research.

“The NAS [also] has a very narrow definition of what constitutes conflict of interest,” complains Goozner. “In short, it says that if the financial arrangement ended yesterday, today you don’t have a conflict of interest.” The case of David C. Bellinger and the fishing industry highlights the weakness of this approach, he suggests.

The CSPI report was not warmly received at the National Academies.

In a press statement, NAS lambasted the report as “wrong and misleading.”

“Contrary to CSPI’s claims,” according to the statement, “there are no direct or undisclosed conflicts of interest on the 21 National Academies’ study committees they selected. We carefully screen for potential ‘conflicts of interest’ on study committees, impose a rigorous study process that includes independent peer review, and comply with all requirements of” FACA.

NAS says that its current system does root out conflicts. Candidates are often deemed unfit through self-disclosure, according to an NAS spokesperson. “Either through public comments or through committee members’ own disclosures, we do find conflicts and committee members resign or are not appointed. Sometimes it is the public comments that led us there, and sometimes it is the scientists themselves.”

CSPI’s definition of potential conflicts of interest is unreasonable, according to NAS, because it includes ties to industry groups, even if they had no relationship to the committee’s topic. According to the NAS statement, “CSPI’s redefinition [of conflict of interest] would likely make it impossible to recruit study committees with the appropriate breadth of experience, expertise and balance of perspective, all of which are critical to the informed, objective study of complex issues in national science and health policy.”

But the broad definition that the NAS references is the one that CSPI used only to establish “potential” conflicts of interest — the cases where it called for more balance on committees. For the nearly one-in-five cases where it alleged actual conflicts of interest, the CSPI report defined direct conflicts of interest as financial ties to a company or industry within the last five years that are relevant to the committee topic.

—Allison Cook