International Strategies for Tropical Disease Treatments - Experiences with Praziquantel - EDM Research Series No. 026
(1998; 113 pages) View the PDF document
Table of Contents
View the documentAbstract
View the documentAcknowledgments
View the documentInformation on authors
View the documentExchange rates used in the report
Open this folder and view contentsChapter 1: Policies for praziquantel*
Open this folder and view contentsChapter 2: Bayer & E. Merck: Discovery and development of praziquantel*
Open this folder and view contentsChapter 3: Shin Poong Pharmaceutical Co.: Process development in the Republic of Korea*
Open this folder and view contentsChapter 4: The Egyptian International Pharmaceutical Industries Co.: Praziquantel formulation*
Close this folderChapter 5: The international supply of praziquantel*
View the documentProducers and formulators
View the documentGlobal distribution of praziquantel
View the documentReferences
Open this folder and view contentsChapter 6: Demand for praziquantel and national distribution*
Open this folder and view contentsChapter 7: Prices and production costs of praziquantel*
View the documentOther documents in the DAP Research Series
View the documentDAP Research Series No. 26
 

Global distribution of praziquantel

Distribution to developing countries

The distribution of praziquantel to developing countries takes three forms:

• bulk sales to national governments, typically for use in schistosomiasis control programmes

• sales to bulk suppliers, including international agencies, and private and nongovernmental organizations, which then sell to national governments; and

• direct private sector sales, either through subsidiaries, or through licensees, distributors, wholesalers, and retailers.

Of these, in most developing countries, bulk sales to governments (usually through tendering) probably represent the major avenue for distribution of praziquantel. In some countries, distribution through bulk suppliers represents the main national source of praziquantel, which is then distributed through government channels (in a schistosomiasis control programme, primary health care programme, or essential drugs programme). In general, the private market is rather small for praziquantel, compared to government distribution of the product. More details on the distribution of praziquantel in developing countries are provided in Chapter 6.

Most of the competition over praziquantel distribution to developing country markets hinges on price. The higher costs of Bayer and E. Merck have created difficulties for these firms in competing with lower cost producers, including Shin Poong and the minor producers. In an attempt to overcome some cost problems, in 1994, Bayer, together with other pharmaceutical firms, formed a company named Sanavita that offers generic products (Interview No. 2). This company provides more than 180 products that are sold to Third World countries. Its products will eventually be registered in several African countries. This company also supplies praziquantel in a package with other products. A similar approach was successfully used by the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) for projects in Cambodia, Mali and Yemen.

Distribution in developed countries

Praziquantel distribution channels in developed countries differ significantly from those in developing countries. Most developed country markets are supplied by Bayer and E. Merck and their subsidiaries. This situation, however, is changing with the expiry of their patent, as more generic producers and distributors become involved in these countries. Government tenders do not represent a significant market in developed countries, except to aid agencies involved in provision to Third World countries. Private market sales are relatively limited, since schistosomiasis and other tropical diseases for which praziquantel is used as treatment are minor health problems in most developed countries. In these countries the veterinary sales of praziquantel are much larger than sales of the human product.

In developed countries, distribution of both the human and veterinary products occurs through:

• direct sales by Bayer and E. Merck to hospitals (including veterinary hospitals),
• sales to wholesale and retail pharmacies, and
• sales to food stores (for OTC veterinary products).

In the 1990s, the expiry of the praziquantel patent has led to a proliferation of smaller manufacturers in developed countries. For example, about 10-20 German companies now produce praziquantel tablets on order. The patent expiry has also led to an increase in the number of distributors of praziquantel in Germany. Consequently, there is an increasingly active and complex market for both raw materials and final product for praziquantel. Even Bayer occasionally buys from the raw material market.

Bulk suppliers for developing countries

A number of international agencies and for-profit and non-profit organizations act as bulk suppliers of praziquantel for developing countries. These include: UNICEF, the World Health Organization (WHO), the International Dispensary Association (IDA) in the Netherlands, IAPS in the Netherlands, Orbi-Pharma in Belgium, Action Medeor in Germany, ECHO in the UK, and INMED in the USA. In addition, the World Bank provides assistance for the procurement of praziquantel through long-term loans.

Table 5.2 presents a summary of the roles and activities of the bulk-supplier organizations, along with the pharmaceutical multinational companies (MNCs) and the developing countries themselves, in the global system of drug development and supply for praziquantel.

Although many of the bulk supplier organizations are public sector institutions in many ways (except the pharmaceutical MNCs and private suppliers), they publish very limited information on their pharmaceutical activities, and most of them refused to provide us with data on their praziquantel purchases (volume, sources, or prices) or national destinations, despite numerous requests by mail, telephone, and in person. Indeed, many public organizations were more secretive than the major private manufacturers of praziquantel (Bayer, E. Merck, Shin Poong, and EIPICO). Among the bulk supplier organizations, our data indicate that UNICEF, WHO, and IDA are the most important players, and that they distribute the major share of praziquantel that is provided to developing countries through bulk suppliers. The World Bank makes an important contribution in financing direct procurement by countries. Below we review the procurement and distribution strategies of UNICEF, WHO, the World Bank, and several NGOs and private organizations.

Table 5.2: Roles of major players in the praziquantel system for developing countries


International agencies

Developing country governments

Private suppliers (inc. NGOs)

Pharmaceutical producers

Activity

UNICEF

WHO

World Bank




Development:
discovery of new drugs & processes




X


X

Development:
clinical trials for new products


X


X


X

Procurement:
negotiations with producers

X

X


X

X


Procurement:
provision of financing



X

X



Procurement:
through int’l tenders

X



X



Procurement:
for control programmes

X



X



Procurement:
for research


X


X


X

Technical support:
for control programmes


X


X

X


Distribution:
provision of essential drugs

X



X

X

X

UNICEF

UNICEF is the most important bulk supplier of praziquantel to developing countries (other than the major producers Bayer, E. Merck, and Shin Poong). From 1985 to 1994, according to UNICEF officials, UNICEF sold approximately 5.5 million tablets of praziquantel (600 mg)-averaging about half a million tablets a year (Interview No. 6). UNICEF, however, refused to provide us with annual procurement or sales figures.

UNICEF purchases drugs through international tender, using its bulk purchasing power to obtain prices that are significantly below market prices. Through the UNICEF Supply Division in Copenhagen, Denmark, UNICEF supplies praziquantel to national schistosomiasis control programmes that it supports. In these cases, supply lists for praziquantel are prepared, based on established guidelines, in UNICEF’s country offices, and sent to the Supply Division for procurement, packing, and shipment actions (UNICEF, 1992). Complementary to its supply of praziquantel to UNICEF-assisted schistosomiasis programmes, UNICEF also supplies countries, other United Nations agencies, and third parties with praziquantel, on a cost-plus basis, through a purchasing service (Interview No. 6; UNICEF Annual Report, 1993). In this latter situation, developing country governments and third parties (mainly NGOs and non-profit organizations) provide the necessary funds (usually in advance, and preferably in a fully convertible currency) for the procurement of drugs by UNICEF on their behalf. The money paid to UNICEF by the purchasers, in these instances, is the purchase price plus a handling charge of 6 percent (UNICEF Supply Division, 1995). In an effort to support Essential Drugs and PHC programmes in developing countries, UNICEF has also established a Special Working Capital Fund which allows eligible countries to pay for praziquantel (and other essential drugs) on delivery, rather than in advance as is required for regular UNICEF purchasing services (UNICEF Supply Division, 1995). Whether through purchasing services or for UNICEF-supported programmes, UNICEF’s sales are restricted to the public and non-profit sectors, since UNICEF does not sell for the private market (Interview No. 6).

Price is an important consideration in UNICEF’s sourcing decisions for drugs, but it is not the only criterion. For quality assurance, UNICEF requires drug registration in the country of origin and drug manufacture conforming to Good Manufacturing Practice (GMP) standards. But UNICEF has no independent assessment capabilities, and relies on the recommendations, as specified in the WHO Certification Scheme on the Quality of Pharmaceutical Products Moving in International Commerce (WHO, 1994). UNICEF also relies on the services of experts from Denmark’s National Board of Health in the assessment of companies, although these experts do not undertake drug testing. Because of UNICEF’s policy on quality assurance, UNICEF has not engaged in joint procurement with private bulk purchasers (such as INMED, ECHO, etc.), and UNICEF also does not compete with these agencies on price.

UNICEF perceives its role in drug distribution to developing countries as that of an agent: procuring drugs through international competitive tenders and then selling the products to developing countries at a minimal charge (cost-plus basis), with no “manipulation” of the drug in any way (e.g., no modifications of the drug or its packaging).

UNICEF’s conservative policy on drug quality results in a risk averse procurement pattern. Due to this policy, UNICEF may ignore potential suppliers from countries where GMP standards are not strictly enforced and where quality control can vary from company to company (such as China and India). Furthermore, while UNICEF procures drugs from companies approved by WHO, there is often a time lag between a company’s initial offering of a product and WHO’s approval of its quality. These factors combine so that UNICEF does not necessarily procure at the lowest available global price.

UNICEF’s policies on procurement initially restricted purchase of praziquantel to German firms (Bayer and E. Merck), and subsequently added a firm in the Republic of Korea (Shin Poong). For a brief period of time, UNICEF reportedly did procure praziquantel from a firm in Italy, but the company involved evidently had some legal problems with its process patent, involving a possible infringement of the Bayer-E. Merck patent. UNICEF was unable to provide us with information on the nature of the patent infringement by the Italian firm. The problems with the Italian producer led UNICEF to shift to Shin Poong in the early 1990s, after Shin Poong’s product registration and patent were approved by WHO, and no evidence was found of infringements of the German patent.

Although UNICEF is the largest bulk supplier of praziquantel, the drug does not represent a high priority for UNICEF. The total annual expenditure on all UNICEF essential drug purchases in 1992 was about US$ 61 million. An additional US$ 62 million was spent on vaccines (UNICEF Annual Report, 1993). Praziquantel constituted less than 1% of the expenditure on essential drugs and vaccines. While UNICEF recognizes schistosomiasis as a major health problem in developing countries, the agency does not include schistosomiasis treatment as a top priority in the health sector. According to a UNICEF official (Interview No. 6), investment on a single praziquantel treatment is significantly more expensive compared to immunization doses or ORS treatments for the same number of people (although no good comparative cost-effectiveness studies exist, to our knowledge). Moreover, immunization has a lifelong impact, while praziquantel has to be used repeatedly in the same population for the control of schistosomiasis. Finally, immunization, unlike schistosomiasis, represents a UNICEF priority.

WHO

Although WHO assists member countries in the formulation and implementation of schistosomiasis control programmes, it is not involved in the procurement of praziquantel for these control programmes (Interview No. 8). WHO procures relatively small amounts of praziquantel, primarily for research studies of the Special Programme for Research and Training in Tropical Diseases (TDR).

WHO’s procurement of praziquantel is much smaller than UNICEF’s scale. In 1991, WHO bought 28,000 tablets of praziquantel, while in 1992, a total of 186,000 tablets were purchased for the equivalent of US$ 72,500 from various sources (Interview No. 8). WHO did not agree to provide us with information on the prices paid for its praziquantel procurement. As for sources, over the last 10-12 years, WHO has procured praziquantel from Bayer, IDA, Medochemie Pharmaceuticals and Shin Poong.

World Bank

The World Bank has provided assistance in the form of long-term loans at concessional rates for the purchase of praziquantel by several developing countries. This assistance has occurred as part of grants for health projects (e.g., schistosomiasis control or infectious disease control programmes), and in loans linked to irrigation projects (Interview No. 7). Details of the World Bank’s involvement in the distribution of praziquantel as part of national schistosomiasis control programmes are provided in Chapter 6, with a brief summary below.

Countries that have received assistance for praziquantel procurement include: Cameroon, China, Egypt, Ivory Coast, Kenya, Malawi, Nigeria, Philippines, Senegal, Tanzania and Zambia. Of these, China, Egypt, and the Philippines comprise more than 90% of all World Bank-supported purchases of praziquantel.

The World Bank has standard procedures for the procurement of pharmaceuticals using World Bank loans or grants. For example, countries using World Bank loans to procure praziquantel must submit tender documents to the World Bank for review and obtain a “no-objection” certification. Further, the countries are required to publicize the tenders widely, including the placement of advertisements in at least seven international journals and newspapers. Details of the procedures to be followed are provided in a document entitled “Standard Bidding Documents for Procurement of Pharmaceuticals and Vaccines” published by the World Bank (World Bank, 1993).

Our study calculated, for the first time, the relative contributions made by UNICEF, WHO, and the World Bank to the total spending on praziquantel purchases by these international agencies, as shown in Table 5.3 below. The table highlights the dominant role played by the World Bank in the procurement of praziquantel by developing countries, in comparison to the other two international agencies.

Table 5.3: International agency spending on praziquantel

International agency

Annual spending (US$) on praziquantel procurement

Proportion of total spending by international agencies

UNICEF

1.80 million

30.7%

WHO

0.07 million

1.2%

World Bank

4.00 million

68.1%

TOTAL

5.87 million

100.0%

Note: Based on spending in 1992-1993 or average yearly spending.

NGOs and private organizations

Various private organizations produce or formulate praziquantel or purchase the drug in bulk and sell the drug to developing countries. Examples of these organizations are: IDA and IAPS in the Netherlands, Orbi-Pharma in Belgium, Action Medeor in Germany, ECHO in the UK, and INMED in the USA. Other than IDA, these organizations purchase praziquantel in bulk, but their shares of the total bulk procurement are likely to be comparatively small.

These organizations procure praziquantel from numerous producers and formulators, with price as the primary criterion for selecting the source. With some exceptions (e.g., Action Medeor), considerations of drug quality and adherence to patent laws are usually secondary to price. For example, Orbi-Pharma in Belgium-which has supplied praziquantel to several countries in Africa, including Burundi, Equatorial Guinea and Zaire - procures the drug from two generic producers, namely Athlone Labs in Ireland, and Pharmachemic in Belgium.

In the Netherlands, IDA works with the Dutch Government and Dutch development aid, provides praziquantel (and other drugs) to many NGOs, and also bids on tenders issued by developing countries. IDA is a private non-profit foundation, with an annual turnover of about US$ 60 million in 1991. IDA has two warehouses in the Netherlands, and is subject to the full control and inspection of the Dutch government, similar to any other Dutch wholesale organization. IDA’s facilities in the Netherlands have been fully inspected and approved for both Good Manufacturing Practices and Good Distribution Practices. IDA procures active raw materials on the international market, and then formulates its own praziquantel tablets in IDA’s subsidiary in Malta, Pharmamed. According to IDA, its praziquantel active ingredients are procured only from sources that meet international pharmacopoeial specifications, but the foundation refused to disclose the source and origin of its raw materials, “for economical reasons” (den Besten, April 1996). According to other agencies, IDA has reportedly procured raw materials and praziquantel tablets from Bayer, Shin Poong, and Chinese producers. Among private organizations, IDA is probably the biggest supplier of praziquantel (after the major producers and UNICEF) to developing countries and also to international agencies, such as WHO. But we could not confirm this statement, since IDA refused to provide us with data on its praziquantel production, purchases, or distribution.

One example of a smaller NGO involved in pharmaceutical procurement for Third World countries is Action Medeor in Germany. This NGO has a warehouse, with an annual turnover of US$ 14 million, through which it can supply packages of small amounts of drugs and other supplies (Interview No. 1). Medeor ships praziquantel in its own containers of 250 tablets of 600 mg. The tablets are made to order for Medeor by 7-8 small contract pharmaceutical firms, with raw ingredients purchased by Medeor on the world market. For example, Medeor has purchased praziquantel raw materials from Pharmamed, the IDA subsidiary in Malta. Medeor is subject to German pharmaceutical laws and regulations, which apparently is a requirement for any German organization that imports raw materials.

Medeor previously purchased Biltricide from Bayer, but this proved too expensive. Before the expiration of the Biltricide patent, Medeor entered into price negotiations with Bayer, but was unable to obtain concessions; it therefore switched suppliers on the expiry of the patent. Praziquantel constitutes a relatively small part of Medeor’s supplies, although its expenditure of US$ 75,000 on the product is relatively important in terms of Medeor’s drug budget. In 1993 Medeor mailed 728 containers with 250 tablets of 600 mg, and in 1994, it mailed 754 containers. Medeor sells Biltricide at approximately US$ 0.88 per tablet and generic praziquantel at about US$ 0.25 per tablet.

German law restricts Medeor’s activities in several ways. Medeor has a special license that allows it to have raw materials made into tablets and to ship tablets overseas, but the tablets cannot be sold in the German market. These overseas shipments, however, must meet German GMP requirements, which increases the costs of formulators and distributors such as Medeor, and raises the price that purchasers in developing countries pay for a drug like praziquantel. The restrictions also open up opportunities for competitors who can avoid strict quality standards and can ship directly by placing their formulating and distributing facilities outside of Europe.

Conclusions

The key lessons emerging from this analysis of the global supply of praziquantel may be summarized as follows:

• The 1985 entry of Shin Poong Pharmaceutical Company into the global praziquantel market has had a major impact on market structure. Shin Poong has gained market shares almost continuously over time, at the expense of the original producers of praziquantel, Bayer and E. Merck. In the early 1990s, Shin Poong became the world’s largest producer of praziquantel, responsible for 55% of global production in 1993.

• The expiry of the Bayer/E. Merck praziquantel patent in various countries, between 1989 and 1994, is the second notable event in the market history of praziquantel. The patent expiry has resulted in the emergence of a growing number of generic producers and formulators, mostly based in Europe, and has created an increasingly competitive market for praziquantel.

• In the near future, it is unlikely that Bayer and E. Merck will expand their production capacity for praziquantel significantly, for several reasons: because of the higher cost structure of their production process, because of the marketing effort that would be required, because their request for a sales guarantee from international agencies is not likely to be met, and because the availability of an effective vaccine in the near future seems likely and would have a major impact on the market for praziquantel.

• The distribution channels for praziquantel in developed and developing countries differ significantly from each other. Sales to developing countries are concentrated in the public sector, through national and international tendering, while sales in developed countries are dominated by the private sector and the veterinary market.

• Various international agencies and for-profit and non-profit organizations play important roles as bulk suppliers of praziquantel to developing countries.

• Among international agencies, according to expenditure figures, the World Bank plays a dominant role in financing praziquantel procurement, UNICEF plays a major role in selling the drug on a cost-plus basis, and WHO plays a minor role in providing technical assistance related to praziquantel (although WHO provides technical assistance for essential drugs programmes, which include praziquantel). Little coordination occurs among the three international agencies on activities related to praziquantel.

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