Glivec debate poses vital issues

Limb Jae-un
May 18, 2002

A patient dying of leukemia in a Seoul hospital was placed in a clinical trial in April 2001 as a last attempt to save his life. After taking an experimental drug for nine days, the patient was discharged healthy and is now leading a normal life and working everyday.

The drug credited with saving the man's life, Glivec (imatinib mysylate), has been the object of a year-long brawl over its price, involving Novartis AG, the Swiss pharmaceutical giant, the Korean government and health care activists. Not surprisingly, the fight has become emotional, underscoring exactly what is at stake гн life or death.

Despite the government's promise to announce a compromise decision on the pricing on Monday, the controversy seems far from over, and patients who cannot afford the treatment find their lives waning in a crossfire of charges of greed, insensitivity and ignorance.

Glivec, which is also known as Gleevec, is used to treat patients with chronic myelogenous leukemia (CML), a cancer in which the body produces too many abnormal white blood cells. CML has an incidence of 1 to 2 cases per 100,000 people a year and accounts for 15 percent to 20 percent of all adult leukemia cases. The deadly disease afflicts about 500 people in Korea each year.

The first line of treatment against CML is a transplant of the bone marrow, where white blood cells, including the cancerous ones, are produced. This treatment saves the lives of about one quarter of patients with the disease. However, most CML patients are not eligible for bone marrow transplants because a suitable donor cannot be located or the patient is too old for the technique to be effective. In the next line of treatment, interferon injections offer hope of prolonging life, not curing the disease, but it is accompanied by serious side effects. Glivec treatment is employed after the failure of interferon.

Patients CML who cannot be helped with a bone marrow transplant or interferon are at the center of the controversy. Activists ask how can a rich multinational company seek to profit from patients on their death bed. Novartis is being attacked with phrases such as "gangster company" and "greed costs lives." Novartis counters that the cost to develop a drug is astronomical and even after years of investment the odds of a new drug going into production are slim. It said Glivec's price reflects the risks and huge investment.

But some are not swayed by that argument. They point out that Novartis's net profit rose 20 percent in the first quarter to $1.09 billion as it increased its share of the global pharmaceutical market.

The Korean government approved Glivec in only 40 days after it received the go-ahead in the United States in May 2001, making Korea the third country in the world to okay the drug after Switzerland and the United States. The drug received approval from the Korean Food and Drug Administration in a period shorter than that of any other drug in Korean history.

Since the approval the struggle to set a price for the medicine has involved a flurry of requests by Seoul and refusals and counter offers by Novartis, with patients hanging on to a few threads of hope. After the government unilaterally announced it would set the price of Glivec at 17,862 won ($14) per tablet, or 2,143,440 won a month, and Novartis balked at the offer, the supply of the medicine in Korea dwindled. Novartis decided to provide the medicine free in December to patients who had been purchasing Glivec before December 2. In the spring of this year, Novartis extended the free treatment to severely ill patients who had passed unsuccessfully through the interferon stage of treatment. To date Novartis has provided 6 billion won of Glivec free to Korean patients.

Novartis Korea submitted a new reimbursement proposal, 24,050 won per tablet, or 2,886,000 won a month, to the Ministry of Health and Welfare in March, which it said is in line with the Korean pricing guidelines for innovative and patented products. Novartis also offered to pay one third of the outpatient co-payment, which is 30 percent of the total cost, for Glivec through the Novartis Patient Fund. The fund-backed plan slashed out-patients' out-of-pocket costs 80 percent to 577,200 won a month, similar to interferon therapy, Novartis said.

The price of 17,862 won proposed by the government is 65 percent of the actual ex-factory price of Glivec in Switzerland. The 65 percent is a benchmark that the government uses to calculate the public price of innovative and patented drugs. A Novartis official in the firm's Korea office said that the price of 24,050 won per tablet is an average of the public price of Glivec in the seven most advanced countries, including the United States and Japan.

The government considers anything above the ex-factory price as distribution margin, but Novartis said the distribution margin for Glivec is as low as 7 percent since the drug is sold to only a small number of CML patients. Thus, selling the medicine for 17,862 won per tablet is unacceptable since the company would incur a loss on each tablet they sell, the company said.

Major foreign pharmaceutical firms and the Korean government have battled over the pricing of several other essential drugs. Herceptine, developed by Roche, is used to treat breast cancer and was approved last year by domestic authorities. It is scheduled to be prescribed beginning in September, but the price is still a point of contention. Other high-cost therapeutics have passed government hurdles and are sold in Korea, including Taxol and Xelodar, which are used for cancer treatment. Taxol treatment can cost patients as much as 1 million won per month, depending on the type of cancer, and Xelodar costs 500,000 won per cycle, about 21 days.

But activists direct most of their rage at Novartis. The coalition for the Right to Access Glivec in Korea and the Korea Federation of Activist Fighting for Health Rights, say 17,862 won, not to mention 24,050 won, is still too high for each pill. They are also skeptical about Novartis regarding the proposal to pay one third of co-payments. "We cannot trust them. Novartis can suspend the funding at anytime," said Byeon Hye-jean, an executive with the federation.

Civic groups say that charging the same price in Korea as charged in the richest countries is unfair considering that per capita GDP is a lot higher in those countries. They accuse Novartis of trying to charge 30 times the production cost. The civic groups estimated the per-tablet cost to be 845 won based on the patented materials from which Glivec is made.

Novartis responded that research and development costs and expenses from clinical trials were not included in the groups' estimated cost, which they said reflected the cost of only raw materials. The Novartis official said estimating the development costs for a single drug is difficult because many drugs, including Glivec, are being researched and developed simultaneously by many scientists who share the same laboratories.

"It normally takes 10 to 15 years to develop a single drug and costs run into the hundreds of billion won, with the chance of commercialization as low as one out of 10,000," Han Hee-youl, an official at Korea Pharmaceutical Manufacturers Association said.

Researchers at Tufts University in Boston reported last year that a study of 10 different multinational companies showed the average cost of developing a single drug was $820 million, or 1.05 trillion won. The researchers attributed most of the increase to the rising costs of clinical trials.

Novartis started research on Glivec in the 1990s, but the research on substances used for Glivec began in the 1980s, the Novartis official said. The civic groups' claim Glivec is the product of public research and development efforts, though all the research took place outside Korea. The activists say that although Novartis launched the project to find a chemical that inhibits the activities of cancer cells in 1993, the history of research related to Glivec goes back to 1960 when two Philadelphia doctors reported the Philadelphia chromosome, which has been observed in all CML cases. "Without all the efforts to find a new material that inhibits cancer cells, chemical STI571 could not have been developed," the coalition said in the report, referring to the first designation for Glivec.

Observers say one of things that precipitated the impasse is that Korea approved Glivec in an unusually short period of time. "Korea is not a country that gives approval on a drug very fast," the Novartis official said. "When the government set the price of Glivec, it only referred to the price of Glivec in Switzerland, and the hasty pricing decision by the government, urged by patient demand, led to disagreements between Novartis and the government."

Another problem lies in the co-payment system, under which patients must pay for the 30 percent of the price regardless of the seriousness of diseases or whether the drug is a simple digestive or a vital therapeutic.

"There are no co-payment systems in most developed countries, including Britain," the Novartis official said.

"Korea has the lowest percentage of GDP invested in health care and the highest out-of-pocket payment rate for health care services among member nations of the Organization for Economic Cooperation and Development. Korean national health insurance is far from a social security system that plays a role as the real protector from disease and poverty," the coalition said in the report.

The debate took a new twist in January, when the civic groups filed for waving the license granted Glivec in Korea, which would eventually lead to the revocation of Novartis's patents in Korea and allow domestic firms to produce Glivec cheaply. "We could produce Glivec at one third or one tenth the price if we could buy the raw material at the wholesale price," the coalition said in the report.?

Under the Trade Related Intellectual Property Rights act, patents for drugs, including the ingredients for the drugs and manufacturing procedures, are protected for up to 20 years. Novartis' patent on Glivec is scheduled to expire in 2013.

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