Annexure : “AG”
IN THE HIGH COURT OF SOUTH AFRICA
(TRANSVAAL PROVINCIAL DIVISION)
Case no: 4183/98
In the matter between:
PHARMACEUTICAL MANUFACTURERS’ ASSOCIATION
OF SOUTH AFRICA AND OTHERS
Applicants
and
THE PRESIDENT OF THE REPUBLIC
OF SOUTH AFRICA AND OTHERS
Respondents
and
TREATMENT ACTION CAMPAIGN (TAC)
Amicus Curiae
AFFIDAVIT
I, the undersigned:
ANDREW GRAY
Do hereby make oath and say:
1. I am a lecturer in the School of Pharmacy and Pharmacology (Division of
Pharmacy Practice) at the University of Durban-Westville. I have held this
position since 1994.
2. I am a fully qualified pharmacist and member of the South African
Pharmacy
Council.
I
have
published
extensively
on
issues
of
pharmacology as well as the role and regulation of medicines in public
health. My Curriculum Vitae (CV) is attached hereto and I submit that I am
fully qualified to make this expert submission on the promotion of generic
medicines as a policy instrument.
3. My submissions below are based to a large extent on the chapter of the
2000 SA Health Review entitled “Drug pricing – a policy conundrum”,
written by myself and T Matsebula, and published by the Health Systems
Trust. Electronic copies of the full chapter may be obtained from
<http://www.hst.org.za/sahr>.
4. In this affidavit I make reference to sources of some of my conclusions.
These documents will be made available for this Honorable Court should
they be requested.
5. In this affidavit the following issues will be addressed:
5.1. Justification for government intervention in the use and provision of
medicines;
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5.2. Use of generic medicines as a cost-saving measure;
5.3. Patient rights and generic policies.
JUSTIFICATION FOR GOVERNMENT INTERVENTION
6. Any government wishing to pursue equity as a policy goal will commit itself
to improving access to quality health care. Access may be constrained by
many factors, both geographic and economic. If economic factors
predominate, these are usually related to the costs of services. Out-ofpocket expenditure on drugs is high in many countries, and has been
quoted at being as much as 65% of total drug expenditure in sub-Saharan
Africa, 81% in Asia and less than 40% in established market economies.
“Out-of-pocket” expenses refer to those made by patients themselves,
rather than by the health system (e.g. the State, by providing free
medicine) or paid by medical insurance (e.g. reimbursed by a medical
scheme). (Velásquez G, Madrid Y, Quick JD. Health reform and drug
financing. WHO/DAP/98.3. World Health Organization, Geneva, 1998).
7. Growth in drug expenditure has been shown to have exceeded that for
other components of the health care system, particularly in Europe.
(Rosian I, Habl C, Vogler S. Pharmaceuticals: Market control in nine
European countries. Austrian Health Institute, Vienna, 1998; European
Federation
of
Pharmaceutical
Industries
and
Associations.
The
pharmaceutical industry in figures. EFPIA, Brussels, 2000 (available at
www.efpia.org/6_publ/document/In figures 2000.new.pdf)
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8. Drug prices may be considered a crucial element in determining access.
Drug costs also impact directly on many policy choices, not least choices
on whether or not to offer AIDS-related drug care in the public sector. The
Panos Institute, an international global development think-tank, has stated
that “the main reason why anti-retrovirals are not widely available in the
developing world is the price of the drugs themselves”. (Panos Institute,
Beyond Our Means? The Cost of Treating HIV/AIDS in the Developing
World. Panos Institute, London, 2000.)
9. The costs of drugs is a prime consideration in whether or not they are
included in Essential Drugs Lists, both internationally and in South Africa.
(World Health Organization 11th Model Essential Drugs List (available at
www.who.int/medicines); Gray A. An “essential” response to the issue of
access to drugs? AIDS Bulletin 2000; 9(1): 4-6; Pérez-Casas C, Berman
D, Kasper T. HIV/AIDS medicine pricing report. Setting objectives: is there
a political will? Médecins Sans Frontières, Geneva, 2000 (available at
www.msf.org/)
10. It should be stated clearly though that expenditure is a result of both unit
price and volume of consumption. Countries with recognised low prices
may not be able to keep prescribing levels under control. (e.g. Italy,
France). (Tarabusi CC, Vickery G. Globalization in the pharmaceutical
industry: Part I. Int J Health Serv 1998; 28(1): 67-105.; Tarabusi CC,
Vickery G. Globalization in the pharmaceutical industry: Part II. Int J Health
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Serv 1998; 28(2): 281-303. Bloor K, Maynard A, Freemantle N. Lessons
from international experience in controlling pharmaceutical expenditure III:
regulating industry. Br Med J 1996; 313: 33-35.)
11. The United Kingdom, with the highest prices in Europe, manages to keep
drug expenditure to about 10% of total health care costs. Australia is
recognised as the exception, which has managed to both curtail prices and
improve on the rationality of drug use.
12. However, in addition to the fact that drug prices are one of the key issues
determining access, government intervention is also warranted on the
basis that medicines are not ordinary articles of trade. Specifically, their
demand and supply characteristics do not follow classic market principles.
12.1.
Firstly, there is a three-tiered demand structure – with the
prescribers
(medical
practitioners
and
others)
as
the
actual
demanders, the patients as the consumers and the health care system
frequently the payer. There is often limited competition between
suppliers, especially in the case of patented products, which are more
characteristic of oligopolistic markets ie., market power is in the hands
of a small group.
12.2.
Drugs also have both positive and negative externalities (for
example, through the prevention or non-prevention of infectious
diseases). Information available to prescribers and consumers is often
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selective, unbalanced or incomplete, further demonstrating the supplydriven nature of trade in medicines.
12.3.
Finally, market forces rarely reflect true social costs and
benefits, and cannot meet social objectives such as equity.
13. The factors mentioned above, together with the apparent inability of the
industry to develop and provide needed drugs for tropical diseases in poor
countries have been called “market failure”. Attached as annexure “AG1”
is an article from the International Journal of Infectious Diseases
addressing this issue. Drugs can therefore be considered to be
“meritorious” goods, worthy of government intervention.
14. One of the key areas addressed by the new government in 1994 was
therefore to convene a Drug Policy Committee to advise on the component
parts of a new policy. Local policy is encapsulated in the 1996 National
Drug Policy. (Department of Health. National Drug Policy for South Africa.
Pretoria, 1996. (available at www.sadap.org.za)
15. The drug policy sought to “ensure the availability and accessibility of
essential drugs to all citizens”. While it sought, as a purely economic
objective, to “lower the cost of drugs in both the private and public
sectors”, it also aimed to “promote the rational use of drugs”, thus targeting
both parts of the expenditure equation. As a national development
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objective, it aimed to “support the development of the local pharmaceutical
industry and the local production of essential drugs”.
16. Specific cost containment measures that were signaled in 1996 were:
16.1.
a pricing committee, to “monitor and regulate drug prices”;
16.2.
total transparency in the pricing structure (at all points of the
distribution chain);
16.3.
a non-discriminatory pricing system;
16.4.
replacing the wholesale and retail mark-up system with one
based on a fixed professional fee;
16.5.
a database to monitor costs compared with other developing
and developed countries;
16.6.
the regulation of price increases;
16.7.
provision, in certain circumstances, of public sector stock to the
private sector (e.g. supplying lower cost drugs bought by the State to
private sector clinics in order to address a priority disease);
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16.8.
promotion of generics (multi-source pharmaceutical products,
generally cheaper than the originator’s branded products), including
generic substitution, while maintaining a negative list (a list of drugs
that could not be substituted by the pharmacist at the patient’s
request, but where the original brand would have to be supplied);
16.9.
measures to improve rational drug use, including establishing
Pharmacy and Therapeutics Committees (PTCs) in all hospitals;
16.10.
17.
control of pharmaceutical marketing practices.
In essence therefore:
17.1.
a policy to promote the use of generic medicines has a basis in
government’s obligation to intervene in an area of public life where
pure market forces are not sufficient to ensure maximal public welfare;
17.2.
where such policies are being pursued by the SA Government, they
form part of a comprehensive approach to all aspects of drug use,
targeting both price and rationality of drug use and are therefore not
arbitrary or unjustified.
USE OF GENERIC MEDICINES AS A COST-SAVING MEASURE
18. The options open to governments that do choose to intervene can be
characterised in a number of ways. They can be either direct (primarily
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legal measures that have an immediate effect on suppliers or consumers)
or indirect (usually market-related measures, which entail financial
implications for the various actors).
19.
They may either target prices themselves (supply-side measures such as
price controls, positive or negative lists, promotion of generics) or
consumption (demand-side measures such as exclusion from positive
lists, reclassification to “Over the Counter” (OTC) status, introduction of
patient co-payments, caps on pharmaceutical budgets). A positive list
includes those items that will be supplied or reimbursed, a negative list in
contrast indicates those items that will not be available to the patient.
20.
Policy options have been described as resulting in either a total control
situation (as in Ecuador and Honduras), a mixed system (as in Canada), a
situation of monitored freedom (as in Brazil) or total freedom (as in the
US). (Sarmiento AZ. Alternative pricing policies in the Americas.
WHO/DAP/95.6. World Health Organization, Geneva, 1995).
21. Significantly, resorts to price control are more common in developed than
in developing countries, even though price sensitivity might be greater in
countries with poorer social security systems.
22. The promotion of generics has long been supported by the World Health
Organisation (WHO), and is mentioned in every policy analysis or model
policy document produced by that body. While always contested by those
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with vested interests, it cannot be said to be peculiar to South Africa’s
approach.
23. Attached as annexure “AG2” is a pricing comparison of a range of offpatent medicines, based on information drawn from the Ethical Pricing
List. For a range of medicines, some of which are used in the treatment of
HIV-related
opportunistic
differences
between
infections,
off-patent
it
indicates
significant
price
name
medicines
and
brand
interchangeable multi-source generic alternatives.
24. Thus the policy of generic substitution cannot be said to be an arbitrary
choice of this government.
25. In essence, generic promotion policies seek to:
25.1.
improve the rationality of drug prescribing, by limiting the use of
confusing trade names in both education and practice (preferring
instead to use internationally recognised non-proprietary or generic
names);
25.2.
limit the impact of marketing activities by manufacturers, without
necessarily totally denying them the use of the trademark concerned;
25.3.
increase the potential for competition between manufacturers of
products considered equivalent.
10- -
26. The policy option may take a number of forms, depending on the degree to
which the legislating authority wishes to intervene. These can be
considered to be a continuum, with varying degrees of acceptability to
each party:
27. in the most restrictive form, which still pertains in South Africa under
current law, substitution of a product by a pharmacist is proscribed unless
the prescriber has chosen to use a generic or non-proprietary name in
prescribing that item (e.g. writing a prescription for paracetamol, without
stating the trade name). In essence therefore, all power resides in the
hands of the prescriber. Any change requires that a new prescription be
issued, even if verbally by the prescriber (e.g. on request of the pharmacist
or patient). Having such a system is really a “non-policy”. That it should
change has long been recognised, not only by the current government.
27.1.
In 1986, the Browne Commission report on Health Services
went even further, suggesting that substitution of “therapeutically
equivalent medicines” on a positive list to be identified by the MCC, be
introduced. (Final Report of the Commission of Inquiry into Health
Services (Browne Commission). March 1986)
27.2.
To an extent this area of practice is also governed by the so-
called “Ethical Rules” to which pharmacists are subject. An attempt to
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change the rule in question was also made in 1989, but failed in the
face of opposition.
28. An intermediate form would be to allow substitution within limits set by the
legislation, but to continue to allow prescriptions to be legally written using
trade names and products to be labelled as such. It is a form of this option
that is included in Act 90 of 1997, and which was clearly signalled by the
1996 National Drug Policy. Again, two broad variations are possible.
29. A less interventionist option would entail optional substitution by the
pharmacist. A more interventionist approach would be to mandate
substitution were this approved by the regulatory authority for that product.
The SA option is a mid-point, where mandatory offer of substitution is well
guarded by rights accorded the prescriber (to mark the item “do not
substitute”), the regulatory authority (to publish a “non-substitutable list”)
and the patient (to refuse the offer), with the additional caveat that any
substitution must result in a cost saving.
30. To do less is again almost tantamount to a non-policy, as it can hardly be
construed as “promoting” the use of generics. In addition, as trade names
continue to be recognised and are valid for prescribing, they retain some
force in the market.
31. The most interventionist options have been used in a number of countries,
albeit with vehement opposition from manufacturers of branded products.
12- -
This can take one or both of two forms. On the one hand, restrictions may
be placed on the legality of trade names in prescribing (mandatory generic
prescribing). On the other, the use of trade names in labelling products
and promoting their sale is proscribed. It is these options that can be seen
as severely limiting the trademark rights of manufacturers. However, they
are not being used in the Act in question.
32. In essence therefore:
32.1.
Generic policies are widely promoted by the World Health
Organisation, and have been adopted in many countries, including in
the United States of America. Attached as annexure “AG 3” is a report
of the United States Congressional Budget Office, that indicates that in
one year alone, 1994, substituting generic for brand-name drugs
saved consumers “roughly $8 billion to $10 billion (at retail prices).”
32.2.
As included in the Medicines and Related Substances Control
Amendment Act of 1997 (as was intended in legislation passed by the
previous government but never implemented), they are neither
arbitrary nor excessive but represent a mid-point in the policy
continuum, one which gives adequate recognition to manufacturer’s
commercial rights while nonetheless being sufficient for government to
fulfill its obligation to intervene in an area of legitimate concern.
13- -
32.3.
Generic competition per se is one of the few areas in which
classic market forces can be brought to bear on drug prices.
PATIENT RIGHTS AND GENERIC POLICIES
33. One of the defining characteristics of modern medical practice has been a
gradual movement away from paternalistic practices (“your doctor knows
best”) to practices that more fully acknowledged and protected the right of
patient autonomy. This movement has informed not only medical practice,
but also that of other related professions, notably pharmacists. As
encapsulated in the practice philosophy of “Pharmaceutical Care”, it has
been codified in the amended Pharmacy Act.
34. It is therefore worthwhile considering to what extent current legal
restrictions on
generic substitution
reflect
out-moded paternalistic
practices, and conversely, to what extent the proposed measures indicate
an intention to advance patient rights.
35. The current practice places all rights in the hands of the prescriber. This
has in the past been justified by the need for technical knowledge, the
ability to choose an appropriate drug but also an acceptable manufacturer,
in order to maximise the chance of reaching the desired therapeutic
outcome. It is clear that the patient is given very little say in the matter,
based on a paternalistic assumption of the patient’s ability to contribute to
the decision in a meaningful way.
14- -
36. However, this also presupposes that no other party to the therapeutic
process has the ability to add value. In particular, it ignores the potential
role of the pharmacist, who by virtue of her/his training is better positioned
than the prescriber to assess the technical quality of alternative sources of
the desired active drug.
37. The measure, as included in the Act, instead involves all three parties in
the decision. Crucially, for the first time it acknowledges the right of the
patient to have a say in the matter.
38. The right to participate in decisions about one’s own health and health
care is a human right. This right has been increasingly recognised in South
African law, not least in the Choice on Termination of Pregnancy Act.
39. However, the right is also not without balance – the section recognises the
right of the prescriber to refuse substitution (which would, preferably, have
been discussed with the patient), and adds the weight of the Medicines
Control Council in assessing the technical merits of substitution. It also, in
accordance with modern practice and in line with the NDP, recognises the
ability of the pharmacist to provide appropriate technical advice to the
patient.
15- -
40. In essence, therefore the mandatory offer of generic substitution ensures
the maximal involvement of all parties in making a drug choice, and
implicitly recognises patients’ rights to choice.
CONCLUSION
41. Generic policies have long been regarded as appropriate interventions for
governments to contemplate, despite often vehement opposition from
vested interests. The options available to governments run the gamut from
total rejection of commercial rights to graduated intervention.
42. Those instruments chosen by the South African government are
reasonable, indicate a balanced appreciation of the rights of all parties and
are not excessive when viewed in the context of the full continuum of
options that have been used. In addition, they significantly advance
individual patient rights. In this regard they also contribute to the National
Drug Policy’s objective of greater patient involvement in rational drug use.
________________________
DEPONENT
SIGNED
AND
SWORN
TO
BEFORE
_____________________________________________
16- -
ME
AT
ON
THIS
THE 9TH DAY OF APRIL 2001, THE DEPONENT HAVING
ACKNOWLEDGED THAT HE KNOWS AND UNDERSTANDS THE
CONTENTS OF THIS AFFIDAVIT, THAT HE HAS NO OBJECTION
TO TAKING THE PRESCRIBED OATH AND THAT HE CONSIDERS
THE SAME AS BINDING ON HIS CONSCIENCE.
________________________
COMMISSIONER OF OATHS
17- -
Annexure “AG 2”
PRICE COMPARISON OF OFF-PATENT MEDICINES
The table below compares the prices of competing off-patent medicines. The
table shows that for many important medicines, the formerly patented drug is
significantly more expensive than its generic competitors.
All prices have been obtained from the electronic format of the Ethical Pricing
List (Blue Book) as of 28 March 2001 published by Pharmaceutical Printers
and Publishers.
Not all generic competitors are compared with the formerly patented
medicine. The cheapest generic medicine under each category is not
necessarily the cheapest generic available.
This version of the Blue Book used to obtain this data can be made available
to the Court..
Explanation of Columns:
1. Name of Medicine: The scientific name for a medicine is written in bold,
followed by the brand-names. The formerly patented medicine (or
medicines) is italicised and is the first brand-name listed under each
scientific name. The name of the manufacturer appears in parenthesis
along side the brand-name, unless the brand-name is prefixed with the
manufacturer’s name.
2. Dosage: This refers to the dosage of the active ingredient in one unit,
usually a capsule or tablet, but other measurements are used for
ointments, creams, syrups, suspensions, aerosols and inhalants.
18- -
3. Package Size: This is usually the number of capsules or tablets sold per
package, but also the weight of medicines sold as ointments or creams.
For Beclometasone, refill packets of the same size are compared. Similar
package sizes are compared so that bulk discounted packages are not
unfairly compared against small packages.
4. Trade Price: This is the price at which the medicine is sold by
pharmaceutical companies to dispensers. This does not take into account
discounts or other incentives, perverse or otherwise.
5. Retail Price: This is the maximum price at which a dispenser should sell
the medicine to a customer. It includes VAT. The Blue Book calculates this
as the Trade Price multiplied by 1.5 (dispensing mark-up) multiplied by
1.14 (VAT).
6.
Price Per Unit: This is usually the Trade Price divided by the Package
Size. It represents the cost of one capsule or tablet. In the case of
ointments, creams, syrups, suspensions, aerosols and inhalants this has
been set equal to the trade price, because only equivalent size packages
are considered.
19- -
Name of Medicine
Dosage
Zovirax (GSK)
Lovire (Ranbaxy)
Cyclivex (Aspen)
400mg
400mg
400mg
Package
Size
Trade Price Retail Price
Price Per Unit
Acyclovir
56
56
70
827.29
306.84
304.12
1414.67
524.7
520.05
14.77
5.48
4.34
92.31
49.7
157.86
84.99
92.31
49.7
525.96
75.60
899.39
129.28
5.26
0.76
Beclometasone
Becotide (Sekmed – prev. GSK)
Clenil (Rolab)
50mcg
50mcg
Refill
Refill
Cotrimoxazole (Double Strength package size between 100 and 250)
Bactrim (Roche)
960mg
100
Rolab Co-trimoxazole
960mg
100
Cotrimoxazole (Double Strength package size = 10)
Bactrim (Roche)
960mg
Septran (GSK)
960mg
Purbac (Aspen)
960mg
10
10
10
55.3
33.01
8.5
94.56
56.45
14.54
5.53
3.30
0.85
Cotrimoxazole (Single Strength package size = 20)
Bactrim (Roche)
480mg
Septran (GSK)
480mg
Rolab Co-trimoxazole
480mg
Purbac (Aspen)
480mg
20
20
20
20
55.64
34.94
9.61
8.89
95.14
59.75
16.43
15.2
2.78
1.75
0.48
0.44
50ml
50ml
50ml
Syrup
Suspension
Suspension
29.05
18.02
6.31
49.68
30.81
10.79
29.05
18.02
6.31
20mg
20mg
20mg
20mg
20mg
30
30
30
28
30
261.36
189.54
128.87
98.8
99.43
446.93
324.11
220.37
168.95
170.03
8.71
6.32
4.3
3.53
3.31
Cotrimoxazole (Suspension/Syrup)
Bactrim (Roche)
Septran (GSK)
Purbac (Aspen)
Fluoxetine
Prozac (Lilly) (tab)
Prozac (Lilly) (cap)
Apo-Fluoxetine (cap) (Aspen)
Lilly-Fluoxetine (cap)
Rolab-Fluoxetine (cap)
Loperamide
2mg
6
14.02
23.97
2.34
Betaperamide (Restan)
2mg
10
18.9
32.32
1.89
Maxolon (Pharmaco)
Metalon (Caps Pharm) (cap)
10mg
10mg
100
100
69.99
23.05
119.68
39.42
0.70
0.23
Nystatin (cream)
Mycostatin (BMS)
Nystacid (Aspen)
100.000u/g
100.000u/g
15g
15g
32.29
19.82
55.22
33.89
32.29
19.82
Imodium (Janssen-Con)
Metoclopramide
20- -
Paracetamol
Panado (Restan)
Painamol (Be-tabs)
500mg
500mg
100
100
21- -
30.26
9.28
51.74
15.87
0.30
0.09