Meeting with Merck & Co.

by Mark Harrington
20 April 2001

On Friday 20 April 2001, Anne-Valerie Kaninda of Médecins sans Frontières and I met with Linda M. Distlerath, Vice President for Global Health Policy and President of the Merck Company Foundation, and Jeffrey Sturchio, Executive Director, Public Affairs, Europe, Middle East & Africa Human Health, of Merck & Co. in Whitehouse Station, New Jersey. Attending by telephone from Washington, D.C. was Mark Isaac, director of public policy for the Elizabeth Glaser Pediatric AIDS Foundation.

The meeting was the result of a decision by several treatment advocacy organizations to engage the pharmaceutical industry in a dialogue about ongoing issues concerning differential pricing, intellectual property, and treatment access in developing countries. The Pfizer Foundation held such a meeting to discuss its Diflucan donation program in South Africa. Requests for meetings with Abbott, Boehringer-Ingelheim, Bristol-Myers Squibb, GlaxoSmithKline and Roche have also been made. Originally Merck wanted to meet with Ben Cheng from Project Inform, Gregg Gonsalves from Gay Men's Health Crisis, and Mark Harrington from TAG. However, both Ben and Gregg were in Kampala, Uganda, and so, with Gregg's input, we decided to invite EGPAF and MSF.

Before agreeing to the meeting with Merck (about which I spoke with Jeff Sturchio at the Oslo airport after the Høsbjør meeting), I said we would not meet unless there was a guarantee that Merck was committed to a larger meeting, with much broader community representation, including ACT UP/Philadelphia, CPT, Foundation for AIDS & Immune Research (FAIR), HealthGAP Coalition, NMAC, etc. They agreed to have "talks about talks".

On April 19, I spoke with Julie Davids and Asia Russell of AUP/Critical Path/HealthGAP. Julie rightly rebuked me for not having told the wider group about the meeting at an earlier time. This was a mistake I will not make again. Asia brought me up to date on some of the key issues relating to Merck's differential pricing structure for Brazil and other countries in the Caribbean, Central and South America.

On the ride out to Whitehouse Station, Anne-Valerie Kaninda and I reviewed The New York Times, whose lead story read "DRUG MAKERS DROP SOUTH AFRICA SUIT OVER AIDS MEDICINE / Poor Lands May Benefit / Deal May Set Precedent to Let Cheaper Treatments Reach Markets in Third World." The cover photo showed people apparently dancing in the Pretoria courthouse. It sounded like a complete capitulation by the drug companies. The Times reporter, Rachel Swarms, said that the five companies involved in the UNAIDS Accelerating Access Initiative played a key role in getting the other 34 plaintiffs to withdraw. Merck's philanthropic self-image. The meeting began around 11 a.m. at the Merck facility in Whitehouse Station. The entrance hall featured a bronze sculpture of a young boy leading a blind man with a rope. There was a display of photographs and texts about Merck's river blindness drug giveaway program. In 1987 Merck started giving away MectizanTM brand ivermectin to treat onchocerciasis in endemic regions. The program is now active in 33 countries in sub-Saharan Africa, as well as Latin America and Yemen. Apparently over 500 million tablets have been donated. Treatment with ivermectin is relatively simple, with one pill taken each year. The lobby display demonstrated how important drug companies find their giveaway programs for their own self-esteem and for their external reputation. In addition, copies of the in-house newsletter The Daily featured a cover story entitled "Join the Fight Against AIDS", giving employees information about how to join the Merck AIDS Walk New Jersey Team, which last year raised the princely sum of $3,300.

Talks about talks. As we started the meeting with Distlerath and Sturchio, I reiterated that this meeting was being held on the understanding that Merck was committed to a broader community meeting to discuss international pricing and access issues at the earliest possible time. They agreed to have the meeting in New York City sometime in the second half of May, when many NGOs will be in town because of the "informal consultation" before the UN General Assembly Special Session in June. Community organizations will choose the attendees and agenda, with input from Merck, which will arrange a space at a time which does not conflict with one of the actual pre-UNGASS meetings.

Price reductions for CRIXIVAN and STOCRIN in developing countries. We discussed the eligibility criteria for Merck's current three-tiered pricing structure for Crixivan brand indinavir and Stocrin brand efavirenz. They explained that eligibility for the middle- and lower-priced tiers depended on 1) whether a country had a low score on the human development index (HDI¹), which is a composite of gross national product (GNP) and other development indices issued by the UN Development Programme (UNDP) and 2) whether a country's seroprevalence was one percent or greater. 3) If seroprevalence is one percent or greater, even a middle-income country — for example, Belize, Botswana, Guatemala, Panama, Honduras, South Africa, and the Ukraine — would be eligible for the lowest prices.

• Arbitrary eligibility criteria. We questioned the arbitrariness of the criteria. A large country could have many millions infected and yet less than one percent of the population. China, India and Indonesia either already have or will soon have several million people infected -- but the proportion of population will be too small to become eligible for the lowest prices. Thus, the number of infected people does not affect the price, only the proportion. This has the irrational effect of making life "less valuable" in a large country.

• Arbitrary income differentials. In addition, relatively small differences in per capita GDP may have a large effect on a country's best available price offer. Several countries in Central America — Belize, Guatemala, and Honduras, for example — are eligible for the lowest price, while others — including Costa Rica, El Salvador, and Nicaragua — must settle for the mid-priced Brazilian scheme ($1,029/year for Crixivan and $920/year for Stocrin).

• The definition of "non-profitable prices". We also questioned the lowest current prices - $600/year for Crixivan and $500/year for Stocrin. According to corporate statements, "Merck will not profit from the sale of Crixivan and Stocrin at these prices." Yet it seems unlikely that making a small molecule like efavirenz costs as much as making a much larger one like indinavir. Sturchio said that the price was the lowest they could go, and was profit- free, but that it did not reflect only the cost of production. "What does it reflect?" After some hemming and hawing he stated that it was based on a "detailed internal analysis" including the cost of manufacturing, quality assurance, packaging and delivery to the customer. According to Kyra Lindemann's "Dear Friend" letter of April 20, "We do not disclose production and R&D costs."

• Country-level contact information. Anne-Valerie Kaninda asked whether Merck could post a list of which countries were eligible for which prices, and a list of Merck contact people in each country. Sturchio wavered, suggesting instead that MSF send him a list of their units and he would send them a list of Merck contacts in those countries.

• Availability to private sector and NGOs. Anne-Valerie asked if the price offers were available only for the public sector. No, Sturchio explained, they are also available to private sector companies and NGOs as well as public sector health care system. For example, they're in discussions with MSF about providing the drugs in Cambodia, Guatemala, and Thailand. In addition, they've been discussing providing the drugs to private sector corporations such as Debswana in Botswana, which recently announced it would provide antiretrovirals to its employees with HIV.

According to Kyra Lindemann's letter of April 20,

In eligible countries: Governments, NGOs, private employers, insurers and other organizations should contact their local Merck representative or MSD subsidiary or distributor...
In the US: Organizations, entities and stakeholders from eligible countries should contact Merck at +908.423.1000. Individuals should contact their country embassy in Washington, D.C., for assistance.

• Impact of political will. Sturchio said that in addition to the eligibility criteria listed above, a country's leadership could determine whether or not a certain price structure would be used. For example, Romania is a middle-income country with a small epidemic, but they're on the verge of providing universal treatment access to their mostly pediatric and adolescent HIV- infected population, and so for this reason Merck is giving them the lowest prices. This seems a bit of a Catch-22, since if prices are too high, a country's leadership may not consider treatment, and thus would lack the "political will".

Accelerating Access Initiative (AAI). This is the now notorious five-company initiative announced with great fanfare by BIPI, BMS, GSK, Merck, Roche, WHO and UNAIDS on 17 May 2001. So far agreements have been made by up to four companies — Roche has yet to make, or at least to announce, a single discount for a single drug for a single country — in six countries (Cameroon, Côte d'Ivoire, Mali, Rwanda, Senegal and Uganda). "We need to accelerate the [Accelerating Access] Initiative," said Sturchio. They are said to be coordinating the negotiations with the French FSTI initiative. Progress remains agonizingly slow. In addition to the previously glacial price negotiations, there are questions of drug regulatory approval, customs and excise taxes, infrastructure and training, and all the other usual suspects in delaying meaningful treatment access. But the fact remains that even the current price reductions will not reach millions of people unless billions of dollars of donor aid are provided to the poor countries to purchase drug, train health care workers, and develop infrastructure.

Botswana Comprehensive HIV/AIDS Partnership. At Durban last July, Merck and the Gates Foundation announced a five-year, $100 million collaboration ($50 million each) to provide a comprehensive program of HIV prevention, care, treatment, and social support to the Republic of Botswana, where one third of the adult population of about 1.5 million is infected with HIV. We asked what progress had been made since the announcement.

Linda Distlerath explained that the Botswanan government, the Gates Foundation, the Harvard AIDS Institute, and Merck, have established a needs assessment and planning process which is now underway. (Unilever is also involved somehow.)

Boehringer-Ingelheim has offered free nevirapine (just for MTCT), and Merck is offering free Crixivan and Stocrin (in addition to the $10 million/year).

The President of Botswana has expressed ambitious goals (treatment for all who need it by the end of 2001). The country has established a national AIDS coordinating agency, with a coordinator, Dr. Banu Khan, who works for the Ministry of Health. The program will eventually include voluntary testing and counseling, expansion of laboratory capacity, nevirapine to interrupt mother-to-child transmission, health care worker training, and OI and antiretroviral therapy.

However, infrastructure is a big problem. Until recently there was just a single HIV testing facility in Botswana. There is a chronic shortage of health care personnel. The country lacks a medical school, but has a nursing school. Last year, 70 of the graduating nurses emigrated to the United Kingdom, where there is a nursing shortage. There is a shortage of labs, technical expertise, clinics, nurses, and doctors. Clearly the process of setting up the Botswana program has been more difficult than anticipated, and as yet, it appears, no one has received treatment as a result of the initiative.

South Africa. We discussed the resolution on April 19 of the PMA of South Africa vs. President of South Africa lawsuit over the Medicines Control Act of 1997. They showed us the "Joint Statement of Understanding between the Republic of South Africa and the Applicants" signed by the PMA of South Africa and the office of President Mbeki. Key provisions of the statement include an agreement that:

... The Ministry of Health shall invite a working party from the pharmaceutical industry, and also request members of the public, to consult with the government in relation to the regulations currently in development and other measures as may be necessary that will implement and give effect to the Medicines and Related Substances Control Amendment Act, Act 90 of 1997, including Section 15 C thereof...

In addition, the government reiterated its commitment to honor the TRIPS, although this was a pro forma gesture since both the 1997 act and South Africa's consistent position since 1997 have been consistent with TRIPS and other international trade agreements.

Merck made it clear that its lowest prices are on offer to Botswana, Namibia, and South Africa due to their high incidence rates, but it was far from clear whether the government of South Africa would take the next step to undertake negotiations to implement treatment programs (indeed, even the pilot, 18 site nevirapine for MTCT program has yet to become fully operational).

Brazil/US WTO dispute. We asked them, now that the South Africa lawsuit was out of the way, to ask the US Trade Representative (USTR) to drop the US complaint against Brazil at the WTO. They said the issue in Brazil was local working (article 68), not compulsory licensing for a national emergency or "other circumstances of extreme urgency" 71) (see "Meeting at the U.S. Trade Representative's Office on U.S. Trade Policy on Drugs for HIV/AIDS," http://www.aidsinfonyc.org/tag/activism/trade.html).

This distinction between the local working clause and the compulsory licensing clause of the Brazilian patent law is also made by the USTR. However, we asked if local working was the issue, why they picked Brazil, pharmaceutical patents, and AIDS drugs, when they could have picked another country, or another industry, or another set of products. [In Høsbjør, Norway, Brazil's Paulo Teixeira made the point that Brazil needs the ability to exercise either clause of its patent law in case the US administration changes its policy on the use by a country of TRIPS-compliant measures to provide drugs for HIV/AIDS and other serious or life-threatening conditions.]

We also pointed out that US pressure against Brazil was temporally associated with the visit to Brazil of then-Commerce Secretary Daley and Merck chairman Ray Gilmartin in early 2000³. Sturchio demurred, saying that the CEO/Commerce Dept. visit was simply a routine US trade promotion tour; however, an article from the Folha de São Paulo from 12 February 2000 does not support this:

The Trade State Secretary , William Daley, will ask the Brazilian government to derogate the decree on patents (October 6th, 1999), written by the M. of Health, Dr. José Serra, which did not please the US pharmaceutical industry may be the newest conflict between both countries. Daley, who traveled to South America yesterday night, in an official visit, expressed in a talk to students that he will raise, in his talks with the Brazilian authorities 'serious concerns related to some provisions on the patents laws (Brazilian).' An assistant, Bernard Carreau, explained to the Folha de São Paulo, that these provisions are in a decree which, while regulating an article in the patents law, allowed the compulsory licensing of products in cases of 'national emergency or public interest'. According to Folha, the US pharmaceutical industry fears that the decree gives to the M. of Health the power to consider abusive prices for drugs a case of 'public interest', which would justify the compulsory obtention of patents for the emergency production of medicines. In his trip to Brazil, Daley will be accompanied by the world President of the pharmaceutical giant Merck, Raymond Gilmartin, and Pfizer's vice-president for Latin America, Ian Read...." (Marcio Aith, Patent laws can generate conflict with US [in Portuguese], Folha de São Paulo, 12 February 2000.)

It looks as though the original trip in February 2000 was about compulsory licensing and, as the pressure on industry grew over the course of the year, either industry or the USTR (or both) decided to shift the case on tactical grounds to the local working clause. In any case, we said, the Brazil case was likely to be another PR disaster for industry, and Merck should ask the USTR and Merck's colleagues in PhRMA to drop the case. Towards the end of the meeting, Sturchio asked me if he could attend and be a panelist on GMHC's planned forum on Brazil's treatment program scheduled for before the UNGASS. I gave him Gregg Gonsalves' phone number at work.

Real world obstacles to access. The original agenda for the meeting was to have included a discussion of obstacles such as taxes, customs, distribution, health capacity, infrastructure, national funding and leadership. We had already alluded to these issues previously as we discussed Botswana, Brazil, Romania, and South Africa. Now there was little time and we deferred a detailed discussion of these topics. Clearly industry would like some attention paid to non-price obstacles to access, and those obstacles are not going away anytime soon.

Mobilizing US government/international assistance. We had some final discussion of "the Fund" which everyone from Gro Harlem Brundtland of the WHO to Jeffrey Sachs of Harvard has begun talking about as though it were a done deal. In the views of some, it will be the HIV/AIDS prevention, care, treatment and support fund; in the view of others, the HIV/AIDS, TB, malaria, and other tropical infectious diseases fund.

In any case, we agreed that it would be good if both industry and NGOs supported the provision by donor nations and agencies of massive resources for such a fund. However, we disagreed as to how drugs would be provided for the Fund. We asked them about their opinion on voluntary licenses, a global public tender, with the award(s) going to the best-quality, best-price provider(s), regardless of patent status in individual countries. They oppose this. We said we will simply have to agree to disagree on this point — BUT THAT THIS DISAGREEMENT SHOULD NOT BE ALLOWED TO GET IN THE WAY OF CREATING A LARGE DONOR FUND FOR HIV/AIDS PREVENTION, CARE, AND TREATMENT, along with health care infrastructure development and the prevention or treatment of tuberculosis, malaria, and childhood diseases such as respiratory and gastrointestinal infections.

Follow-up. As noted above, the follow-up from this meeting will be a larger meeting to be held in New York during May 2001, sometime just before or after the "informal NGO consultation" which UNAIDS is having prior to the UNGASS. While Merck will have input, the agenda and participants for the follow-up meeting will be organized by the community.