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3 March 2016

How the “free market“ in vaccines is neither free nor fair

It seems to be the job of politicians and corporate spin-doctors not to help force change, but to explain why change can’t happen; why this sickening reality must be allowed to prevail; and why the fight against microbial resistance must carry on being hampered by limited access to vaccines.

By Benedict Cooper

Take a look at the World Health Assembly’s action plan on tackling the barriers to global vaccination, and time and time again, the almighty dollar comes up.

The resolution, passed by all 193 countries present at the Assembly last summer, raises deep concerns about the “increased financial burden of new vaccines”; that “many low- and middle-income countries may not have the opportunity to access newer and improved vaccines, particularly because of the costs related to the procurement and introduction of these vaccines”; and that “globally immunization coverage has increased only marginally since the late 2000s”.

Behind the resolution, on the floor of the Assembly, apparently the language wasn’t so polite. Delegates from almost 60 countries spoke out vituperatively against the high prices of vaccines as being the main culprits for the sickening lingering of killer diseases, and urged the global community to act.

Take pneumonia. It is the biggest cause of childhood death under the age of five globally, claiming the lives of almost one million children each year – one every 35 seconds – yet in 2016 70 per cent of all the world’s children remain unprotected. The reasons why are complex and many, but humanitarian agency Médecins Sans Frontières (MSF) says that it can name one for sure: the cost of vaccinations is prohibitively high.

The life-saving pneumococcal conjugate vaccine (PCV) is big business. And the entire market, worth $30bn to date, is sewn up by just two companies: Pfizer and GlaxoSmithKline. For Pfizer that’s a cool $6.245bn in the last financial year, $17m per day; for British company GSK a more modest £1m per day, with total sales of £381m ($546m) last year, up 5 per cent year-on-year, according to its preliminary results for 2015. That and the total revenues GSK makes from all vaccines – £3.65bn in the last financial year – rather puts into context the £37.6m fine it has just been given by the Competition and Markets Authority here in the UK for making ‘pay-for-delay’ payments to competitors to postpone the introduction of rival anti-depressants to the market.

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Exactly what these companies charge to supply the drugs to governments is shrouded in corporate secrecy, but what is known is that the lowest price they do sell the life-saving vaccine at is $10 per child – to vaccinate one child requires three doses. We know that because that’s the price negotiated by Gavi, the Vaccine Alliance set up by the Bill & Melinda Gates Foundation to deliver vaccinations to a list of 57 countries currently eligible for their help. With eligibility based on economic need, it would figure that the poorest countries are covered by Gavi, which can supply PCV at the lowest possible price, and with time a solution should be in sight, right?

Not according to MSF. The aid agency says the whole business of selling PCV is monopolistic, secretive and ineffective, and it is challenging both companies to reduce the price across the board to $5 per child for all developing countries, regardless of Gavi status, and to all humanitarian organisations. A campaign and petition, A Fair Shot, has been launched after what MSF vaccines policy adviser Kate Elder describes as “five years of frustrating talks” with GSK and Pfizer, which have refused to budge on the price, reveal what they charge to countries not covered by Gavi or, incredibly, extend the cheapest prices to MSF to deliver treatment. And as Elder tells me, even achieving this would be something of a hollow victory, given that arguably the pre-discount price is way too high to begin with. “Even that $10 price for a child is too much,” she says. “The Gavi price is still expensive when you compare it to other traditional vaccines where there is actual competition in the market.”

Even what we do know about the Gavi agreement isn’t exactly heart-warming. The price is part of an “innovative funding mechanism” known as the Advance Market Commitment (AMC), by which the companies receive between $3.30 and $7 per dose ($10-$21 per child). In cases where they receive the lower $3.30 rate this is then topped up from a ‘special donor pot’, described by Dr Manica Balasegaram, executive director of MSF’s Access Campaign, as a “big subsidy for pharma”, taking the real amount to $21 anyway. And while Gavi has had some undeniable victories in negotiating lower prices, it hasn’t been able to challenge the pneumonia monopoly to open up the market.

But Elder says that focussing on Gavi is to see only half the issue – the real problem is the prohibitive costs of the vaccines for non-Gavi eligible countries and aid agencies. “We can’t get access to the Gavi rate even though we’re working in the field,” she tells me. “We’re calling on both companies to reduce the price to $5 per child. We’ve been going through this for years, and it’s not just us; governments are getting frustrated too.”

Pfizer and GSK are happy to talk about the discounts they provide to Gavi. In fact the former was keen to stress that “later this year, 2016, we expect to reduce this further to $3.10 a dose for the multi-dose vial, to all Gavi eligible and graduated countries”. Less of a priority is to discuss the prices they are charging to countries not on the eligible list, some of which are in dire humanitarian straits, such as Syria, Iraq, Jordan and Lebanon. In fact they don’t have to – that’s part of the problem.

Neither company was willing to give me a breakdown of their international sales by Gavi-price and non-Gavi price, or the prices they charge to non-Gavi countries. Pfizer, by far the dominant player globally, does the bulk of its $6,245bn PCV sales domestically in the US, with $2.2bn of sales going to the rest of the world. And around 80 per cent of all of GSK’s sales of pneumonia vaccines go to developing countries – i.e. all countries outside Europe, the USA and Japan. In both cases these include sales to Gavi countries on the agreed price, but we don’t know what proportion.

Quoting “commercial sensitivities and anti-competition rules”, GSK told me that “Gavi sales are a part of this but we do not break our sales down to that extent”. Pfizer was equally vague on the fine details, saying, “We employ a tiered pricing policy that allows us to provide lower prices to the most resource limited countries while relying on other countries whose economic standing enables them to pay more to do so”. Both companies pointed to the “tiered pricing” policies by which they sell to governments, but not what those tiered prices are.

Which leaves an unknown number of countries and aid agencies being charged an unknown price for a vital vaccine. And Elder says that in this tenebrous world of corporate secrecy, a “free for all” market exists. When MSF has bought PCV from GSK in the past it’s been at $21 per child; the prices quoted by Pfizer, from between $45-$108 per child, have been too expensive to even think about. Getting access to the discounted rates is a vital priority for MSF and others, and perhaps inevitably there is a clash of opinions over exactly what this means. In a statement for this article, GSK said that in 2014 it “entered into a three-year agreement to supply Synflorix vaccine” to the agency, providing MSF with a “guaranteed supply of vaccines as a nominal/non-profit price”. But that’s not how MSF sees it, and in its own statement at the time, described the agreements as a “de-facto donation” rather than a sustainable agreement.

If it were just the treatment of pneumonia at stake it would be serious enough. But MSF says the prevention of access to drugs like PCV is having an alarming knock-on effect with untold consequences. Around the world, diseases are evolving. New strains of antibiotic-resistant bacteria are emerging, effectively nullifying existing antibiotics leaving humans totally vulnerable to once treatable conditions. And with so few new drugs being developed – the World Economic Forum says that there have been “no (as yet) successful discoveries of new classes of antibiotics since 1987” – a potential crisis could be unfolding.

Leaving aside the debate as to why so few antibiotics have been developed, what is certain is that replacing cure with prevention, i.e. with vaccines, would at least temper the problem. But without full access to vaccines, doctors resort to cure rather than prevention, requiring antibiotics as a starting point. Antibiotics are much cheaper than immunisation, and in many parts of the world the latter is outweighing the former as a solution, increasing the use of antibiotics and, in turn, the resistance by bacteria to them.

Such is the severity of the situation that Western governments have called for action.  In July 2014 David Cameron called for a full review into the problem. Appointing economist Jim O’Neill – now Baron O’Neill of Gatley – to head up the AMR Review and report back with solutions, Cameron said: “If we fail to act, we are looking at an almost unthinkable scenario where antibiotics no longer work and we are cast back into the dark ages of medicine where treatable infections and injuries will kill once again.”

That report was earlier this month, and it contained some stark statements that could have come straight from the World Health Assembly resolution. Urging the international community to treat “access to and uptake of vaccination” as a key priority in fighting antimicrobial resistance, the report said that “the prohibitive prices of new vaccines for low and middle-income countries mean that vaccine coverage is often the lowest in places where the disease burden is highest.”

The link between the high prices for vaccines and the threat of antimicrobial resistance might not have been immediately apparent to David Cameron when he asked O’Neill to get to work. But his report certainly isn’t the first publication to make it. So I wonder, given how desperately worried the Prime Minster is about the “unthinkable scenario” of antimicrobial resistance, whether any of this came up when he hosted the then GSK chairman Sir Christopher Gent at Chequers, or when Gent’s donations to the Conservative Party – £154,400 worth to date – were pouring in?

The link certainly wasn’t made by GSK in a statement issued on the day of Gent’s departure as chairman in May 2015, in response to an MSF report highlighting the prohibitive prices of vaccines. In it GSK stressed once again that, “for Gavi-eligible countries, we are providing this vaccine at a deeply discounted price. At this level, we are able to just cover our costs”.

But of course, we don’t know the total value or proportion of sales carried out “at this level”. And this certainly doesn’t solve the problem highlighted in O’Neill’s report, that the major challenge is “the sustainability and affordability of vaccines for the growing number of emerging economies which are ‘graduating’ from eligibility for development aid and Gavi support”. In other words, even if the $10 per child that Gavi-eligible countries are charged were reasonable, the real problem is the “free for all” market that Elder says rules everywhere else.

There are two possible ways that this situation is going to change. Either the drugs companies bow to pressure, reduce prices of their own volition – or at least extend the discounted prices for PCV to more aid agencies – or market forces will dictate change. There are a few drugs companies in the development stage of PCV, promising to deliver it at a much cheaper price, which would likely force GSK and Pfizer down as well. The bad news is that the most advanced of those products is not likely to be on the market until 2019 at the very earliest.

So even if the new cheaper drug does come onto the market in 2019, at the current rate another three million children will have died of a treatable disease. It seems to be the job of politicians and corporate spin-doctors not to help force change, but to explain why change can’t happen; why this sickening reality must be allowed to prevail; and why the fight against microbial resistance must carry on being hampered by limited access to vaccines. The sad fact is they’re right: as long as market forces and the almighty dollar reign, change is a distant prospect.

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