"Procurement includes quantifying drug requirements, selecting procurement methods, managing tenders, establishing contract terms, assuring drug quality, obtaining best prices, and ensuring adherence to contract terms."
(Managing Drug Supply, 2nd edition, 1997)
3.2.1 Quantifying ARV requirements
In MSF projects, drug need is quantified by considering the initial protocols chosen, the anticipated number of monthly patient admissions and the projected need to change protocols. These forecasts are challenging for new projects because some of the elements, such as whether and when a patient's treatment should be changed, are unpredictable. Building buffer stocks helps to avoid medicine shortages and treatment interruptions.
3.2.2 MSF's procurement system
This section provides some background on MSF's general procurement policy.
Over the course of its 30 years, MSF has developed its own drug procurement system to supply its various projects worldwide. Traditionally, MSF has purchased mostly generic drugs from multiple international sources, centralizing procurement in Europe (Belgium, France and The Netherlands). This centralized system has enabled quick emergency responses especially in situations where medical infrastructure is weak or nonexistent. Part of this centralized procurement system is a quality assurance (QA) mechanism under which any products are assessed, and to which field projects report any qualityrelated problems. MSF's procurement system was traditionally supplemented by in-country procurement when there were limits on importation.
The AIDS epidemic presented MSF with a significant new challenge, and forced the organization to find in-country procurement solutions. When MSF first began using ARVs in its projects, the WHO pre-qualification project did not exist and ARVs were on patent in some of the countries where MSF worked, as well as in supply centre countries. Initially, these medicines were extremely expensive compared to others used in MSF projects.8
8 Previously, MSF had mostly handled procurement of generic drugs that were no longer on patent in most parts of the world.
Useful tools for drug selection
(See full references and web citations in the annotated bibliography in Annex 1):
• WHO Model List of Essential Medicines, 13th list April 2003.
• WHO Model Formulary. WHO, 2002.
• Scaling up antiretroviral therapy in resource-limited settings: Guidelines for a public health approach. WHO, 2002.
• Managing drug supply, 2nd edition. Management Sciences for Health, in collaboration with WHO, 1997.
These challenges led MSF to promote ARV procurement at country level in order to access lower-priced drugs for its own programmes, as well as others (MEDS in Kenya, CENAME in Cameroon; see the country cases for details) in the countries where it works.
3.2.3 Key elements to consider in ARV procurement at country level
Procurement is a complex and dynamic process. MSF constantly monitors and weighs together changes in relevant details, such as price, quality and the terms of offers, in order to arrive at the best procurement decisions.
Five issues are of particular importance: sources (quality), registration, prices, availability and patents. Each of these elements is explained in Figure 3 and text overleaf.
Figure 3: Key elements to consider in ARV procurement at country level
The steps presented in the table are interlinked and are usually taken simultaneously, not one after the other.
WHO's pre-qualification project
Launched in March 2001, the WHO pre-qualification project, a voluntary scheme open to all originator and generic manufacturers, assesses the quality of AIDS-related products, and periodically publishes a list of pre-qualified products, manufacturers and their production sites.9 The first list of pre-qualified sources of ARVs, including several generic manufacturers, was published in March 2002. It provided countries with another reliable tool to guide them in purchasing quality ARVs from lower-cost generic and research-based producers. The list will be expanded as more producers join the scheme and are subject to dossier review and site inspection. In addition, the WHO project aims to create unified standards for inspecting manufacturing sites, evaluating information on product quality specifications, and creating a single, harmonized quality system and assessment. This project has facilitated the market entry of an increasing number of good quality ARV manufacturers and suppliers.
9 Pilot Procurement, Quality and Sourcing Project: Access to HIV/AIDS Drugs of Acceptable Quality http://www.who.int/medicines/organization/qsm/activities/pilotproc/pilotproc.shtml
A. Sources (quality): The limited information available in the public domain, including the lack of reference quality standards (pharmacopoeia monographs), makes the quality assessment of generic ARVs more difficult than that of most other essential medicines. However, quality generic ARVs are being produced (see box on WHO prequalification).
MSF considers three main sources of quality assurance in deciding which drugs to use in its projects:
(1) national drug regulatory authorities (NDRAs),
(2) the WHO pre-qualification project and
(3) MSF's internal qualification system.
Brazil: rapid action to increase access
Decisions about which drugs or sources to use are about striking a balance between risks and benefits. With thousands of patients waiting for ARV treatment in Brazil in the mid 1990s, each month of delay meant more lives lost. The Brazilian authorities considered that the benefits in lives saved outweighed the limited quality risks of producing ARVs locally. They registered products which met well-defined national quality criteria, with the goal of establishing the bio-equivalency and bio-availability of these medicines in the short-term. It should be noted however, that such decisions can only be taken by NDRAs of individual countries.
MSF relies on the assessment of NDRAs, which are ultimately responsible for drugs used in the country, and its projects only use drugs that have been authorized by relevant national authorities. Secondly, MSF refers to the WHO list of pre-qualified drugs (see box).
However, to supply its projects, MSF may consider products and producers that are not yet included on the WHO list of pre-qualified products. For example, MSF treatment protocols use fixed-dose ARVs that are not yet pre-qualified by WHO, such as d4T/3TC/NVP. Decisions like this are based on MSF's own internal assessments, the third source of quality assurance used by MSF. These entail MSF pharmacists and external experts conducting a qualification process based on an assessment of both product dossiers and manufacturing sites10 on an ongoing basis. MSF does not grant blanket qualification for all the drugs that a given manufacturer produces; rather, each drug must be individually qualified. For example, MSF will not simply qualify Company A, but rather may qualify Company A's Drug X, but not its Drug Y.
10 MSF refers to WHO Good Manufacturing Practice (GMP) standards.
B. Registration status: Registration is granted by a country's NDRA for a given medicine from a given manufacturer, after the medicine has been evaluated on the basis of its efficacy, safety and quality. Once a drug has been registered, it can be marketed in the country. The NDRA is ultimately responsible for approving the use of any drug in its country. However, if MSF found a selected product was not registered, it asked for temporary authorization to import and use the drug and urged the company to apply for registration. Special drug-by-drug, import-by-import authorization requires extra time and administrative work. A more efficient and sustainable solution - and indeed the ultimate goal - is for the manufacturer to obtain registration for its product in the country.
Finally, it should be emphasized that registration of a drug is quite distinct from a patent on a drug, although it is a common mistake to confuse or equate the two. If a manufacturer's drug - whether generic or innovator - is deemed safe, efficacious and of quality, then an NDRA may choose to register it, whether or not there is a patent on the molecule in the country. Similarly, a patent office may grant a patent on the drug, even if the originator firm has not registered that drug in the country. In MSF's experience, governments have been hesitant to register a generic drug if there is a patent on it in the country, even if the generic version meets all the requirements for registration. (For additional information see the section below on patents).
Differential pricing and the paradox of Middle-Income Countries
While nearly all Least Developed and sub-Saharan countries are eligible for differential pricing from originator companies, the system is far more haphazard for those developing countries not included in the LDCs category. Only Merck and Roche have publicized prices for some of these countries: Merck's prices are valid for the United Nations Development Programme's (UNDP's) Medium Human Development Countries, and Roche has discounts for Lower-Middle Income countries, as defined by the World Bank. Also, the eligibility criteria and conditions attached to the price offers make the purchase of these drugs quite complex. For example, private institutions are often excluded from the offers, and sometimes programmes have to be certified by a third-party before discounts will be granted. Middle-Income Countries may find it simpler to deal with generic companies, because all developing countries are able to access their offers.
C. Prices: When gathering price information, MSF compares local and international prices from both originator and generic manufacturers. In-country distributors often did not offer the prices or discounts publicized internationally by generic or originator companies. Frequently, in order to access the best price, MSF had to contact the companies' headquarters directly, either to arrange for better prices with the local distributor, or to import directly from headquarters.
Also, price offers often came with other requirements or conditions, such as eligibility criteria for a country or type of institution; transport and insurance costs (incoterms); and/or minimal quantities stipulated to obtain the price offer. See more on conditions of offers in box opposite.
In situations where there is more than one quality source, tenders among manufacturers are a useful tool for fostering further competition, particularly with large quantity purchases. It should be noted that buying drugs once from an originator company does not preclude the buyer from also purchasing generic versions of that same drug, or from using generic prices as a bargaining tool.
In addition to competition, negotiation with producers and distributors can also yield price reductions. The lowest prices offered internationally should always be used as a basis for negotiations with companies at national level. In some countries, MSF was able to get even better prices than those offered internationally by negotiating with the distributor. For example, while Cipla's best international price on the FDC d4T/3TC/NVP is US$304, MSF buys this drug for US$288 in Malawi and US$277 in Cameroon. Providing forecasts about future drug needs to suppliers can also bring down prices because the unpredictability of orders is a challenge for them. However, during the start-up phase of a treatment programme, it is difficult to anticipate the exact long-term needs because of unanswered questions about increasing numbers of patients, changes of protocols, and when patients will need to switch to a second-line treatment.
Increasing the volume of purchases through pooled medicine procurement, nationally, regionally or internationally helps decrease prices further. Cameroon is a recent example of a country which has managed to bring down prices of ARVs with the help of centralized procurement involving competition between generic and originator companies.
D. Availability: When no public procurement agency was supplying ARVs at country level, MSF attempted to find a local or regional private distributor for each needed drug. In many countries, distributors were not in place for most ARVs and MSF assisted manufacturers in creating new distribution channels. When ARV distribution is just beginning in a country, it is essential to give manufacturers and local agents advance warnings about needs.
E. Patent status: MSF looks for the selected drug's patent status by checking first with the national patent office. This can be timeconsuming for various reasons. Some patent offices are not equipped with computers or local databases containing all patent information and some patent information may need to be translated etc. Patent searches are seldom free of charge and may be very expensive, depending on the country.
MSF also checks information in international patent databases. However, some countries, such as Guatemala and Thailand, are not included in these databases.
What is a patent?
A patent is an exclusive right granted to the inventor of a medicine to prevent others from making, marketing and using the invention. There are limitations on and exceptions to patent rights that can be used to help procurement agencies and authorities to access less expensive, generic versions of a patented product. It is important to note that there are no international patents: they are granted on a country-to-country basis, and sometimes on a regional basis. The duration is typically 20 years from the filing of the patent application, but this term may vary. For various reasons it is common that products are patented in certain countries but not in others. There might be more than one patent on one medicine. Not all patents that have been granted are necessarily valid. For example some countries' patent law does not allow the granting of new use patents or patents on combinations of existing medicines. Yet at times such patents are granted even though the law does not allow it. In Thailand, AIDS activists challenged the validity of a BMS patent on ddI and won the case in October 2002. The judgement has been appealed by the company.
Patent information may also be available from regional patent offices, such as the African Regional Industrial Property Organization (ARIPO), the African Organization of Intellectual Property (OAPI), or the World Intellectual Property Organization (WIPO).
In a landmark case in April 2001, 39 drug companies dropped their lawsuit challenging South Africa's Medicines Act. This case spurred an international debate on intellectual property and access to medicines, including discussions inside the WTO. Later that year, WTO Members adopted a declaration that "the TRIPS Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all". It was becoming clear that developing countries could take a number of legal measures to gain access to low-cost medicines, including generic versions of ARVs that are patent protected.
Once a search has been completed and no patent has been found on the drug in the country, there is no legal barrier to importing a generic. If there is a patent on the drug in the country, it is worth verifying whether the patent is valid. Also, there may be legal procedures that would enable the use of generics, such as government use or compulsory licensing clauses in the intellectual property legislation. For more information about the patent status of specific drugs in particular countries, see the country cases in this report and "Drug patents under the spotlight - sharing practical knowledge about pharmaceutical patents", another MSF report (2003).
The 2001 World Trade Organization (WTO) Doha Declaration re-affirmed countries' rights to use provisions in the TRIPS Agreement to protect public health and promote access to medicines.
It should be noted that even LDCs that are WTO members are under no obligation to grant patents for pharmaceuticals or enforce patents that have already been granted until at least 2016. This special extension of the TRIPS transitional period for pharmaceutical products was provided in paragraph 7 of the Doha Declaration on TRIPS and Public Health. In practice this means patents should not be a barrier to purchasing or producing generic versions of medicines.
In some cases the patent holder has decided not to take action against generic versions of ARVs. For example, Roche has pledged that it will not take action against generic versions of its ARV medications where Roche holds the patent in sub-Saharan Africa and in countries on the United Nations list of LDCs.11
11 Roche's "Global Initiatives in Caring"; Commitment to access, see http://www.roche-hiv.com/Roche_Template.cfm?link= InitiativesinCaring