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How 75 million lives could be saved (and a company can still make a profit)

Despite being immersed in the tawdry story of TB control (or lack of it) for the last ten years, we keep coming across something new that we didn’t know about this sorry disease and the efforts to control it that shocks us to the core. And with less than a week till the critically important High Level Meeting on TB at the UN we’ve just found ourselves shocked to the core once more - and this time it’s about the price-rigging of the new key anti-TB drug Bedaquiline.

Time and again we conclude that TB both reflects and tells us loud and clear about so much that is wrong with our world. So let's set out our store for this blog: according to a Report commissioned by the UK government, 75 million lives will have been prematurely lost to MDR-TB by 2050 unless something major changes (that number is about the same as the upper estimates of the total lives lost in the Second World War, by the way). Well we think that things can easily change, and we invite you to read on – after which we doubt you’ll disagree with us.

The story of Bedaquiline

So this blog is all about Bedaquiline and how it can and should be being rolled out – the first new drug that’s been approved for TB in the last fifty years. It amounted to being the answer to the desperate prayers of those clinicians at the front line who’ve been seeing so many of their DR-TB patients dying in their care. It was good news, for sure, not least because recent studies have been increasingly supportive of its use, and also because it’s now being widely used in South Africa which has such a problem with MDR-TB (dumping the previous toxic regimens that were failing their patients in the process). South Africa’s decision really isn’t surprising – because Bedaquiline’s primary use is for treating drug-resistant TB (MDR- and XDR), for which the previous second line drugs have been so expensive, requiring as much as two years of treatment, and foisting terrible side-effects on those taking them (as many as 50% reported as being left permanently deaf).

So 'good news!' so far – and the story of its development began pretty heart-warmingly too. The drug was developed by Janssen, a Belgian company founded by Paul Janssen (1926-2003) whose sister had died of TB (in other words the early research amounted to something of a personal family affair for those involved in its development).

But then Janssen was bought up by Bigger Pharma company Johnson and Johnson (J&J). Following this, it was reported that Janssen’s TB investigations went a little under the radar, though the company’s chairman, Paul Stoffels was reported to be personally supporting the work. “All together”, he reported at the time, “we came to the conclusion that, even if we didn’t earn a lot of money, we won’t lose a lot and it will make a big difference.” This is just the sort of sentiment that fills the eyes of TB activists. The apparent hope of all concerned was that hundreds of thousands of people with strains of TB that were practically untreatable might benefit (estimated at about half a million a year then and rising since).

The sky clouds over

Janssen/J&J clearly realised what they had on their hands, but Dr Stoffel’s early comments also confirm the company’s sensitivities to the tricky factor of cost – recognising that any new TB drug simply MUST be cheap (and not so profitable) if it’s going to be of any use – while the pharma industry dictates that new drugs generally aren't cheap because of the profit demanded by those who patent them (and their precious shareholders), and because of the supposed research and development costs.

Sadly the problem since then has, exactly, been the cost of the drug as marketed by J&J and particularly how the company has quietly manipulated everything associated with it to its commercial advantage (still under the same chairmanship of Paul Stoffels).

This last week, however, MSF has literally blown the gaff on what they’ve been up to.

MSF’s Open Letter

A week before the UN’s HLM on TB MSF have published an open letter to Mr Stoffels appealing to J&J to bring the cost of the drug down.[i] It carefully recounts how the drug has been rolled out in the last five years since its initial approval in 2013 – with the current total of just 25,000 patients having been so far given the drug so far (70% of whom are in South Africa ) - overall a tiny proportion of those who might have benefitted from it.

If you just read the industry press releases, it actually doesn’t look that bad: last month J&J announced that it has reduced the price of the drug to US$400 for a six month course for some selected high burden countries (down from about US$700). This looks pretty generous, doesn’t it? – but a more comprehensive review of the approval processes sadly gives us quite a different picture. This is because there have been other things associated with this drug that J&J have been masterfully manipulating to their wider commercial advantage.

Accelerated approvals

Firstly, Bedaquiline was granted ‘accelerated approval’ by the US Food and Drug Administration (FDA) in 2012. This was followed by conditional marketing authorisation for Bedaquiline which was also swiftly granted by the European Medicines Agency (EMA) in 2013. It’s noteworthy that both approvals were based on limited safety and efficacy data from a smaller-than-usual phase IIb study (normally such approvals require Phase III trials but it was seen that this drug fulfilled an unmet medical need – MDR-TB being a life-threatening disease causing a health emergency of global proportions). As such this was a public health no-brainer for the authorities concerned. In both cases, however, approvals came with the conditional requirement of conducting additional studies to confirm further clinical benefit (which have basically not been conducted since by J&J).

So far not quite so good (albeit that sadly drug companies rarely live up to their commitments in this respect). But then, in their letter, MSF pick up the scalpel in with surgical dexterity and begin to slice.

Public funding

The argument for high prices for new drugs seems reasonable at face value: companies generally have to invest millions in research and in finding the necessary trials to gain approvals (or so we’re told). It’s hardly unreasonable, therefore, for them to require a necessary payback for this as long as they can control a new drug’s manufacture and price under patent.

Well maybe, and maybe not… First of all the MSF letter describes how several of the preliminary trials were sponsored by the US National Institutes of Health/National Institute of Allergy and Infectious Diseases and the TB Alliance. In other words, the drug company itself didn’t fund all of the development costs of the drug – in fact they were largely funded by the public purse.

Furthermore, a more recent clinching phase III multi-drug trial (STREAM II) involving Bedaquiline (exactly what was required by those authorities) is currently underway, but isn’t fully funded by J&J at all - this one is sponsored by the International Union Against Tuberculosis and Lung Disease and is funded by USAID.

MSF explain: “These significant contributions [to further research following initial approvals] are financed with public and philanthropic resources and conducted as a collective effort by a TB community desperate to provide people with MDR-TB with improved treatment options.”

But there’s more.

Priority Review Vouchers and Orphan Drug Designation

J&J also earned a ‘tropical disease priority review voucher’ (PRV) for Bedaquiline. This is an incentive option which is intended to encourage pharmaceutical companies to develop drugs for tropical or neglected diseases (ones which attract tawdry attention from Big Pharma because of lack of anticipatable profit). By earning a PRV it gives a company an automatic 6-month snap review for another new drug application (four months faster than the standard review time), or alternatively it gives them an option of selling it on (pharma companies have sold tropical disease PRVs for as much as US$350 million).

In this case the company used its PRV to accelerate the review and marketing authorisation of another new drug they were developing - guselkumab (a blockbuster psoriasis drug that sells for nearly US$60,000 per patient per year in the US and is estimated to yield US$3.49 billion in sales by 2024).

So we can say that a large proportion of initial development of this desperately needed drug was funded by the public purse, and the benefits of this are being used to help maximise J&J’s profits.

But there’s more still to come because Bedaquiline was also granted ‘orphan drug designation’ (another incentive for Big Pharma to exploit if they can). In this instance J&J used it to further benefit from a 50% tax credit on qualifying clinical research and development expenditure, as well as exclusive US marketing rights for seven years.

MSF conclude on this one as follows: “Given the critical public health value of bedaquiline for the treatment of MDR-TB and given the financial windfall J&J has enjoyed as a result of its PRV, we believe J&J has a clear responsibility to do more to ensure affordable access to bedaquiline.”

Oxfam’s views on drug prices

Exit MSF (stage left), and Enter Oxfam (stage right)…

In a trenchant report (entitled ‘Prescription for Poverty – drug companies as tax dodgers, price gougers and influence peddlers’) Oxfam have just published some new research of their own explaining how certain big drug companies (J&J being one of them) use the fruits of their enormous (grotesque) profits.[ii]

Basically, they systematically stash them in overseas tax havens...

…and as a result, these four corporate giants appear to deprive the United States of $2.3 billion annually and deny other advanced economies of $1.4 billion. Of particular note, they also deprive the cash-strapped governments of developing countries of an estimated $112 million every year—money which Oxfam suggest could be spent in these same countries on vaccines, midwives, or rural clinics, or otherwise weakening these governments’ ability to invest in their own health research.

“As if this weren’t enough” Oxfam add, “the corporations mount massive lobbying operations to give price gouging and tax dodging a veneer of legitimacy. Their influence peddling is most blatant in the United States, where the pharmaceutical industry outspends all others on lobbying. But it is equally pernicious in developing countries, where the companies have won sweetheart deals that lower their taxes and divert scarce public health dollars to pay for their high-priced products—and where they deploy the clout of the US government to protect their profits.”

This is no fantasy: currently the White House is unquestionably in Big Pharma’s pocket – publicly arguing that the U.S. tax payer is being ripped off by the global prices many American-developed drugs are sold at, when the truth is that U.S tax payer is being directly ripped off by the companies themselves.

Four Big Pharma companies (one of which was J&J) come in Oxfam’s spotlight in their report. Collectively they were found to be posting their profits in eight advanced economies with profits averaging just 7%, while in seven developing countries their posted profits averaged an even more frugal (and unbelievable) 5%. But wait (and take a deep breath) because globally these same corporations reported annual global profits of up to 30%. So how come? Where are these higher profits posted? Sadly, they were posted in tax havens: Oxfam report that these four companies posted “skyrocketing” 31% profit margins in four countries that charge low or no corporate tax rates.

Furthermore, at the end of 2016, these same four companies investigated by Oxfam held an astonishing US$352 billion offshore. But even that’s not all. According to Oxfam, J&J may also have underpaid US $55 million in taxes in developing countries every year between 2013 and 2015 (with J&J being by far the worst of the four in this respect). Let’s not forget that it’s these same countries that generally carry the highest burden of TB and are most in need of the benefits of Bedaquiline (in other words, in Paul Stoffels own words – where Bedaquiline really could make “a big difference”).

Okay, so US$55 million may be small change to a big pharma company, but here’s what Oxfam reckon it could have been used for in these same countries that the tax wasn’t paid in: enough to buy HPV vaccines for more than 5 million girls, about one-third of the girls born in 2016 in the seven developing countries Oxfam examined.

So how much Bedaquiline could US$55 million pay for?

How much does Bedaquiline really cost?

To answer this we turn to research conducted by Andrew Hill and colleagues from Imperial College London, Howard University, Washington, Chelsea and Westminster Hospital, and Liverpool University.[iii] These authors have figured out what the real production costs for second line TB drugs might be using the samer methodology previously developed to calculate the cost of antiretrovirals and hepatitis C and B drugs. (And please bear in mind that it was this same methodology that helped bring the prices of these drugs down out of the stratosphere and see HIV drugs deployed in Africa).

The target prices for Bedaquiline were calculated by analysing its chemical synthesis, the costs of the raw materials used and of its production and packaging costs and then adding profit margins.

They calculated two target prices – one of which was lower and the other one higher. The lower price was estimated using production costs of 1 US cent per pill for formulation, 10 US cents per month for packaging and adding 10% as a reasonable profit margin. The higher target price used 4 US cents per pill for formulation, 35 US cents for packaging and a higher 50% profit margin.

So here’s what the came up with regarding Bedaquiline: the target price per month of treatment with the drug was US$8.80 (lower) and US$16.40 (higher), making a price for a six month course of costing US$52.80 (lower) and US$98.40 (higher). At the time a six month course of Bedaquiline was being sold on a tiered pricing schedule of US$4,532 (high-income countries), US$453 (middle income countries) and $136 (low income-income countries) respectively, so from any perspective you can see that J&J were intending to make a lot of money out of this drug that Dr Stoffels originally said “even if we don’t make a lot of money, we won’t lose a lot, and it could make a big difference”.

So let’s go back to that US$55 million that J&J have screwed developing countries out of and ask: how many courses of Bedaquiline might that add up to (using the lower target price which preserves a 10% profit margin for the country. And here's the answer: it adds up to a little over one million courses at US$52.8 a course (still giving J&J 10% profit).

In fact it looks like they could use this sum of money that is ripped-off developing countries to supply the drug to all the estimated MDR-TB cases worldwide - even without the profit maargin!

Did you read that right? Yes, because there are currently estimated to be roughly 600,000 MDR-TB cases occurring annually worldwide – so J&J could supply Bedaquiline to all of them with ease and still make a profit with the windfall from tax evasion (just in the developing countries, not considering for a minute the profit from incentive manipulation, evasion in high income countries or the money stashed offshore).

The system that facilitates this

Meanwhile, let’s remind ourselves for a minute what this insanity is all about: it's the result of a system that has been designed to help innovate the development of new drugs for neglected diseases (one of which is a disease which has been so neglected that, while curable in most cases, it’s returned to being the world’s most lethal infectious killer and is the only drug-resistant disease so far that is infectious by being airborne). What's more, this same system has only so far ‘innovated’ the production of two new drugs for this disease in the last fifty years (and please don’t get us started on Delaminid , the other drug..).

Pretty much all evidence suggests that these companies (including J&J/Janssen) are flagrantly exploiting this supposedly innovative system at the singular expense of those who should have been benefiting from these drugs, and they've been doing so for over five years now.

And J&J appear to be continuing to flaunt it in our faces. Last month, Janssen/J&J proclaimed a significant reduction in the price of a six-month course of Bedaquiline – from $750 down to $400 when it’s purchased through the Stop TB Partnership’s Global Drug Facility (GDF). The GDF is another innovative system - a global procurement mechanism. And yet we’ve just seen that the drug can be sold profitably at a price that is as little as an eighth of this 'reduced' amount!

Here's a bunch of quotes from Janssen that simply aren’t coherent with how the company has been gaming this drug (all from the company’s PR):

Paul Stoffels: “Multidrug-resistant tuberculosis is a complex public health problem. We feel we have a responsibility to work together with others in the TB community in order to tackle this challenge.”

Adrian Thomas, M.D., Janssen’s Vice President of Global Market Access: “We are committed to enhancing access to medicines through public-private partnerships, differentiated pricing and responsible use and distribution of medicines. We believe that the collaboration with the Stop TB Partnership’s Global Drug Facility [GDF] is a good example of how we can contribute to the collective global access response for public health medicines.”

Wim Parys, M.D., R&D Head, Global Public Health at Janssen: “Our goal is to work with the GDF to facilitate access while ensuring appropriate use of medicines.”

Janssen/J&J and the GDF

What really worries us (and we write this with genuine trepidation given what it implies) is that these statements are apparently so terrifyingly belied by the visible realities. This is also because we know that J&J/Janssen are also represented on the Board of the Stop TB Partnership (in fact they’re the only representative from the Private Sector).[iv] This may superficially seem a good idea (given that a private-public partnership mix is seen as being a vital part of the solution to the TB crisis), but given that StopTB is a key player in the campaign to bring this disease back in control, and given that StopTB itself hosts the Global Drug Facility (GDF) (the global procurement mechanism designed to minimise the financial burden of treating MDR-TB) we can’t help but wonder whether even the doughty Stop TB are being gamed here.

Is this not the case when just last month Janssen announce their 'reduction' for the price of a six-month course of Bedaquiline (from US$750 down to US$400 if purchased through the GDF) when they could sell this drug for an eighth of the price and still make a profit?

Please feel free to make up your own mind (or indeed tell us whether we've got this wrong), but (as we said at the start) we remain more certain that ever that TB control (or the lack of it) tells us loud and clear about so much that is wrong with our world if we only dare or care to see what is in front of our eyes.

So we hope that this is exactly what the leaders of our world will do at the UN on 26th, next week, see what is in front of our eyes, realise what TB tells us all about our world and its iniquities, and then do something about it.





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