Case No: 4183/98

In the matter between:





The Treatment Action Campaign
Amicus Curiae

I, the undersigned
do hereby make oath and say:

  1. I am the director of the Consumer Project on Technology (CPT) at the Center for Study of Responsive Law, a non-profit organization located in Washington, DC. My work focuses on electronic commerce and access to medical technologies. I also have responsibilities in the areas of competition policy, intellectual property and economic policy research.

  2. I am a member of the Médecins Sans Frontičres (MSF) Working Group on Research and Development for Drugs for Neglected Diseases, and co-chair of the Trans-Atlantic Consumer Dialogue (TACD) sub-group on pharmaceutical drugs. I have extensive experience dealing with intellectual property rights, medicines and pharmaceutical pricing, which is reflected in my curriculum vitae which is annexed hereto as Annex 1.

  3. The facts deposed to in this affidavit are within my personal knowledge except where I indicate otherwise. To the extent that I rely on the information received from others, I believe that such information is true and correct. I respectfully submit that I am by my training and experience duly qualified to express the views and opinions that I express in this affidavit and to access the repute, opinions and reliability of other persons to whom I refer.

  4. I have read the applicants’ answering affidavit to the affidavits filed by the amicus curiae. In particular, I have reviewed documents submitted as annexes to this answering affidavit concerning the costs of drug development and the public role in supporting drug development. I will address issues raised in these documents.

    Drug development

  5. Beginning in 1991, I have undertaken a number of studies relating to the costs of development of new drugs, the role of the United States (US) federal government in supporting new drug development, and a variety of issues relating to intellectual property rights in pharmaceutical products.

  6. Until 1992, the US Federal Drug Administration (FDA) used a three-part efficacy rating for drugs to help determine the priorities for the review of applications. An FDA classification of A was reserved for drugs that offered significant gains in therapy. Class B drugs offered modest gains in therapy, and Class C drugs offered little or no advance in therapy. The FDA also gave an E rating to drugs used to treat particularly serious illnesses, and a Class AA rating to drugs used to treat AIDS.

  7. One of my early studies involved an examination of new "priority" drugs approved by the FDA from 1987 to 1991. During this period the FDA approved 117 new molecular entities (NMEs). According to the FDA, most NMEs do not offer any significant gain in therapy over existing drugs already on the market.

  8. Out of the 117 NME's approved between 1987 and 1991, thirty were Class A, AA and/or E, indicating that they were either the most innovative (Class A) and/or were used in the treatment of the most serious diseases (Class E or AA). I used this set of drugs to examine the role of federal government expenditures on new drug development.

  9. The federal government's role in the discovery of and the pre-clinical and clinical research for each drug in the sample was investigated. The wholesale patient cost of the drug, based upon a completed treatment or one year of treatment, was also calculated.

  10. Half of the 30 drugs studied were developed with federal financial involvement at some stage of their research, with varying amounts of their research and development (R&D) performed using federal money. Of these 15 drugs, 11 drugs were developed by federally funded research at every stage, with the federal government playing a role in their discovery, pre-clinical research and clinical research.

  11. Of the 17 drugs discovered in the US, 71 per cent (12 of 17) were developed with federal funds. 11 drugs were discovered by the federal government or with money from a federal agency. These include drugs discovered "in-house"-at the National Institutes of Health (NIH), at one of the Cooperative Research Groups that work under the auspices of the Department of Health and Human Services, at Universities or non-profit research centers while working under federal grants or contracts, or discovered by a drug company while working under contract from the NIH.

  12. Half of the priority drugs (15 of 30) qualified in the US as orphan drugs, a classification that provides benefits under US law, including a seven-year marketing exclusivity provision that applies even to drugs that are off patent, plus a tax credit that pays for half the cost of clinical trials. Two-thirds of the government funded drugs (10 of 15) qualified as orphans. Eleven of the 17 drugs discovered in the US qualified as orphans.

  13. All drugs discovered by universities with federal funding were licensed on an exclusive basis.

  14. Drugs developed with federal funding were substantially more expensive than drugs developed without federally funded research. The median wholesale patient cost of priority drugs developed with government funds was US$ 4,854, nearly three times the median wholesale patient cost of US$ 1,626 for priority drugs developed without government funds.

    Cancer Drugs

  15. I have also reviewed or undertaken a number of other studies that examine the role of the federal government in the development of new pharmaceutical products. In 1993 I reviewed the role of the US government in supporting the development of cancer drugs. (Ralph Nader and James Love, "Federally Funded Pharmaceutical Inventions”, Testimony before the Special Committee on the Aging of the United States Senate, February 24, 1993.) This analysis was based upon information provided by the US National Cancer Institute (NCI).

  16. Bruce Chabner and Dale Shoemaker from NCI's Division of Cancer Treatment examined 37 cancer drugs In the April 1989 issue of the International Journal of Radiation Oncology, Biology and Physics. Based upon the publication dates of research, they concluded that 16 of the 37 cancer drugs were discovered prior to the beginning of the NCI's new drug program in 1955. Chabner and Shoemaker identified the institution that discovered the anti-tumor agent, as well as NCI's contribution to the drug's pre-clinical and clinical research. (Shoemaker and Dr. Saul Shepartz from NCI subsequently provided unpublished updated information on 16 cancer drugs that were approved for marketing after the 1989 article was written.)

  17. Of the 37 cancer drugs developed since 1955, the US federal government was directly or significantly involved in the pre-clinical development of 18 drugs. In addition, it played some role in the pre-clinical research for 10 other drugs. Thus in only nine of 37 cases was the NCI not involved at all in the pre-clinical research.

  18. When the drugs reached the stage for clinical research, NCI's role was even more pronounced-NCI played an important role in the funding of clinical research for 92 per cent of the 37 drugs (34 of the 37). (Annex 2: Table 1)

  19. A major beneficiary of the NCI program is pharmaceutical company Bristol-Myers Squibb (BMS). Among the 34 drugs that received NCI funding, BMS marketed 11. No other drug company sold more than two cancer drugs developed with NCI funds. Moreover, NCI played a decisive role in the pre-clinical research for seven of the eleven Bristol-Myers Squibb drugs, while also playing a significant role in the clinical research of all eleven drugs. Also significant is the fact that BMS was not identified as the inventor of even one of the eleven cancer drugs.

  20. In 1996, the NCI published a similar analysis of all anti-cancer drugs approved by the FDA for marketing in the US, including nine products approved before 1955. (Division of Cancer Treatment, Program Information Booklet, Fiscal Year 1995.) According to this publication, 50 of the 77 anti-cancer drugs approved were the product of NCI-sponsored Investigational New Drugs (INDs), a direct government role in supporting the clinical trials. (Annex 3: Table 2)

    Other studies

  21. I have also undertaken other studies regarding the federal government’s role in the development of orphan products, drugs for HIV/AIDS, and a number of severe illnesses.

  22. This work studying the role of the government in drug development has led to a number of related studies, focusing on issues such as the costs of drug development, the policies for commercializing publicly-funded inventions, the appropriate incentives to encourage private investment in R&D, the reasonableness of drug pricing and a range of issues relating to intellectual property rules, including but not limited to those involving patents. I will briefly address some of this research that relates to the costs of drug development.

  23. One important issue concerns the costs of conducting human use clinical trials, the most important step in moving a drug from the pre-clinical stage to commercial development. Such trials may take place when a product is licensed to a pharmaceutical company, following pre-clinical trials at a University or government laboratory.

  24. The CPT’s surveys of private firms and universities that run clinical trials for drug companies indicate that costs typically run from US$ 2,000 to US$ 7,000 per patient for phase II and III clinical trials, with US$ 3,000 to US$ 4,000 per patient typical of HIV/AIDS trials.

  25. The pharmaceutical industry claims that there are additional costs relating to the analysis and design of trials. For example, one company suggested that its internal costs were the same as the costs of outsourcing the trial itself. It is difficult to evaluate company assertions regarding internal costs of managing trials, while the costs of hiring third parties to run the trials themselves are more transparent, due to the existence of a competitive market and relatively accessible price data.

  26. According to the Pharmaceutical Research Manufacturers’ Association (PhRMA) 2000 Annual Industry Profile, the research-based pharmaceutical industry claims to have spent 81.6 per cent of its US R&D budget on the development of new knowledge, products and services, and 28.3 percent of its US R&D expenditures on Phase I, II and III clinical trials. Based upon these data, the expenditures on Phase I, II and III clinical trials represent about 35 per cent of US expenditures on the development of new knowledge, products and services.

  27. PhRMA estimates that the cost of preparing FDA regulatory applications is 4.4 per cent of US domestic R&D expenditures, or about 15.5 percent of what the companies claim they spend on clinical trials. According to PhRMA, the sum of the costs of Phase I, II and III clinical trials and the costs of preparing the regulatory applications is about 40 per cent of expenditures on new information, products and services.

  28. CPT has examined a variety of independent sources of data of costs of clinical trials, including the NCI’s data on its funding for the (DCP) Cooperative Group Treatment clinical trials from 1993 to 1999. According to this data, the average cost of a clinical trial was US$ 170, 000 in 1993 and US$ 311, 000 in 1999. The cost per enrolled patient was US$ 3,861 in 1993, rising to US$ 6,202 in 1999. These numbers are consistent with the data CPT has obtained from its surveys of profit and non-profit institutions that run clinical trials for third parties.

    Orphan Drugs

  29. The US Orphan Drug Act provides for a tax credit of 50 percent of the costs of conducting US clinical trials, a significant government subsidy granted to the research-based pharmaceutical industry. An orphan drug is any drug that caters for a population of 200,000 or fewer patients in the US.

  30. This tax credit was first in effect from 1982 to 1994. Among the HIV/AIDS drugs to receive an orphan designation and FDA approval for marketing during this period were Zidovudine (AZT), marketed as Retrovir by Glaxo-SmithKline, and Zalcitabine (ddC), marketed as Hivid by Hoffmann-La Roche. AZT received an orphan designation in July 1985 and FDA marketing approval in March 1987; ddC received an orphan designation in June 1988 and FDA marketing approval in June 1992.

  31. Under the Orphan Drug Act, the orphan designation is given for an indication. Thus any one drug may receive more than one orphan designation, or be approved for use for both orphan and non-orphan uses. The credit also applies to new uses for existing products, such as the orphan designation for the use of Epogen for HIV/AIDS, or Taxol to treat AIDS-related Kaposi's sarcoma.

  32. According to the most recent data from the FDA, there have been 1,084 orphan designations since the program began. Of the 1,084 orphan designations, some 20 per cent (218 of the 1,084) have received FDA marketing approval. This is roughly the same approval rate as is the case for all drugs that enter Phase I human use testing in the US. Of these 1,084 orphan designations, 74 were for treatment of HIV/AIDS. Of these, 24 per cent (18 of 74) have received FDA marketing approval.

  33. In a 1997 study, the CPT examined the period of 1983 through 1993, the first and last full years of the first tax credit. During this period, 93 orphan products were approved for marketing. According to US Internal Revenue Service (IRS), pharmaceutical companies received US$ 106.9 million in tax credits during that same period. In order to obtain these credits, companies reported direct expenditure on clinical trials of $213.8 million. On a per approval basis, the companies were thus only reporting clinical trial expenditures of $2.3 million per product, half of which was subsidized by the federal government via the tax credit. (Annex 4: Table 3)

  34. One expects some lag time between the beginning of the tax credit and the drug approvals, so CPT looked at the results beginning in 1989, the seventh year of the tax credit program, until 1993. During this five-year period, 60 orphan products were approved, while tax credits of US$ 86.6 million were taken, or about US$ 2.9 million per approved drug. This amount was fairly consistent from year to year. In 1995 dollars, the amount expended on human-use clinical trials from 1989 to 1993 was $3.2 million per approved product. It is important to note that these numbers reflect risk, in that the credit is available for all of the products in testing, regardless of whether or not the FDA approves marketing of the product. Indeed, it is reasonable to assume that at any given time there are five times as many products in testing as approved, based upon the fact that there have been 1,084 orphan designations and 218 orphan product marketing approvals.

  35. The Orphan Drug tax credit data surprised many people who had believed that industry outlays on development costs were substantially larger. In addition, many of the orphan drugs were aggressively priced. For example, Ceredase (used to treat Gaucher's disease) was priced at more than US$ 500,000 for a year of treatment. There were also bitter controversies over the pricing of AZT and other drugs as the research-based pharmaceutical industry had claimed that it was incurring huge costs in the development of these drugs.

  36. There was also considerable confusion over a series of studies of drug development costs that were based upon the work of Joseph DiMasi and his colleagues. These included a 1991 study that estimated the cost of new drug development at $231 million (Joseph DiMasi et al., "Costs of innovation in pharmaceutical industry," Journal of Health Economics 10 (1991)) and a series of upward revisions of his 1991 estimates, including one by the US Office of Technology Assessment in 1993 that gave (as an upper bound) US$ 359 million as the cost of developing a new chemical entity. (1993, the Office of Technology Assessment, Pharmaceutical R&D; Costs, Risks, and Rewards, OTA-H-522, GPO stock #052-003-01315-1, NTIS order #PB93-163376) and later estimates of a half billion or more by the Boston Consulting Group and others.

  37. There were several misunderstandings regarding the estimates based upon DiMasi's work. The US$ 231 to US$ 500 million figures were estimates of the costs of doing both the early discovery and pre-clinical work, the clinical trials and FDA regulatory approval. For many drugs, the US government paid for either the pre-clinical or the clinical work. In those cases, the companies' costs were lower.

  38. In addition, these figures were largely based upon adjustments for both risk and huge cost of capital assumptions, and not actual expenditures on R&D. Few policy makers, journalists or analysts bothered to make the distinctions. The cost of capital assumptions were also controversial. The highest estimates were based upon extremely aggressive estimates of the capital costs, as high as 15 per cent plus inflation for some estimates, and this was on top of the adjustments to compensate for R&D failures. As illustrated in tables 4 and 5, the "cost" (in 1998 dollars) of drug development in the DiMasi work was US$ 155 million in outlays. If one used a 15 per cent (real) cost of capital, there was an additional US$ 347 million for financing costs, which was 69 per cent of the total cost of US$ 502 million. (Annex 5: Tables 4 and 5)

  39. As is discussed below, the high capital cost was also based upon assumptions of very long lead times for development, something that does not reflect either recent industry experience, or historical data on AIDS drugs.

  40. The Orphan Drug Tax Credit data also called into question the reasonableness of data reported on out-of-pocket expenditures on clinical testing in the DiMasi study, averaged (in 1995 dollars) at about US$ 55 million per approved product. As mentioned above, total industry outlays on clinical testing (for both successful and unsuccessful products) was only US$ 213 million for all 93 product approvals in the first full 11 years of the Orphan Drug Tax Credit program. Even if one takes account of the fact that the orphan approvals sometimes included more than one designation for the same drug, the large discrepancy remains. On a per approval basis, the Orphan Drug outlays on clinical were less than 6 per cent of the DiMasi estimates. (Annex 6: Table 6)

  41. Writing on behalf of PhRMA in the Marketletter, Jeffrey C. Warren sought to explain the difference between the orphan drug tax credit data and the DiMasi study:
    The difference in data is easily explained. Clinical trials for orphan drug candidates nearly always involve far fewer patients. The reason, of course, is there are fewer patients available with rare diseases and they are often geographically dispersed. Also, it is clear that FDA applies a more lenient standard to approval of orphan drugs, in some cases, granting approval on the basis of existing literature.
  42. The PhRMA response addressed one important issue: that there are huge differences between the costs of development of different products. In addition, it was an important admission that some drugs are quite inexpensive to develop, a fact rarely acknowledged in policy debates.

  43. There were additional explanations for the differences between the DiMasi data and the orphan drug tax credit data. Among them were that the DiMasi data may have overstated industry expenditures, either due to an overemphasis on costly projects or industry reports of inflated numbers for expenditures. These are both plausible results, as it was well known to the industry participants that the study was prepared to bolster claims that development costs were high in order to influence policy on issues such as pricing and patent extensions.

  44. As noted above, the other major issue concerns the US federal government‘s role in paying for clinical trials on new drugs. Many of the drugs that receive an orphan designation are for severe illnesses, including many products for cancer and AIDS. The US government role in direct funding of clinical trials is extensive for a number of severe illnesses.

  45. In some years, a significant number of new chemical entities are designated as orphan drugs. In 1999, for example, seven new chemical entities (NCEs) were designated as orphan products. In July 2000 Thiru Balasubramaniam reviewed the US FDA approvals for new chemical entities, profiling all seven of the NCEs that had received an FDA orphan designation.

  46. According to the Balasubramaniam analysis, the average number of patients in clinical trials cited by the US FDA in the marketing approval review for the seven NCE orphan products was 588 patients. (Annex 7: Table 7) As noted above, CPT’s surveys indicate the costs of outsourcing clinical trials is typically in the range of US$ 2,000 to US$ 7,000 per patient. Using this range of costs, the average cost for the seven 1999 NCE orphan drugs is estimated at US$ 1.1 to US$ 4.1 million for the trials cited in the FDA approval letter. The companies were eligible to receive a 50 percent tax credit for the costs of the trials, substantially lowering their costs. It is important to note that the US government does not receive any intellectual property rights or pricing concessions for its tax credit benefits.

  47. The US $1.1 to US$ 4.1 million figures for outlays on clinical trials do not include the costs of failures. The risk of failure decreases at each stage of development. Thus approximately one in five drugs entering Phase I trials are approved for marketing, approximately one in two entering Phase II are approved, and approximately 70 per cent of drugs in Phase III trials are approved.

  48. In his 1991 study, DiMasi "capitalized" clinical trials for the risk of failure, which roughly doubled (added 124 per cent) the estimates of out of pocket expenses. Using the DiMasi 2.24 multiplier, one could express the costs for clinical trials for the 1999 NCE orphan products as US$ 2.6 to US $9.2 million per approval, which would include the costs of failures but not the benefits of government tax credits or grants.

  49. On 5 April 2001, Michael Palmedo reviewed the most recently available data from the US IRS on the Orphan Drug Tax Credit. In 1997 (the most recent full year when the credit was in effect), companies claimed expenditures of US$ 122.8 million on clinical research on orphan products, receiving tax credits of US$ 61.4 million. During this period there were 19 new marketing approvals for orphan products (compared to 21 from the previous year).

  50. On a per approval basis, this amounts to US$ 6.5 million in industry expenditures before tax credits. As indicated above, this is broader category than NCEs, as it includes separate approvals for different indications, including new indications for drugs already on the market. As noted above, this also includes the costs of failures. The 1997 data is also consistent with the estimates of the costs of the 1997 NCE orphan approvals.

    HIV/AIDS drugs

  51. I recently compared the size of HIV clinical trials (cited in the FDA approval) to data for three classes of drugs (anti-hypertension, anti-microbial and non-steroidal anti-inflammatory drugs) from a 1993 US Office of Technology Assessment (OTA) estimate of the mean enrollment in clinical trials prior to an FDA NDA. According to the 1993 OTA report, the mean enrollment for clinical trials for these three products ranged from 2,485 to 3,575 patients (depending upon the drug class) for the period 1986 to 1990. (Annex 8: Table 8)

  52. In September 2000, the CPT studied the mean number of patients referenced in the FDA NDA for three classes of antiretroviral drugs, including Nucleoside Analogue Reverse Transcriptase Inhibitors (NARTI), Protease Inhibitors (PI) and Non-Nucleoside Reverse Transcriptase Inhibitors (NNRTI). (Annex 9: Table 9).

  53. For the NARTI products, the industry role was fairly limited. Industry-only trials were limited to an average of only 409 patients, which amounted to only 11 percent of the OTA newer estimate of patients in non-steroidal anti-inflammatory drugs, for example. Even if one takes the highest of the three AIDS drug categories (the NNRTIs) and ignores government sponsorship of trials altogether, the mean number of patients is only 1,310, which amounts to only 41 per cent of the unweighted average of the three OTA drug categories. When one looks at all 14 HIV drugs, the average number of patients in company-only sponsored trials was only 750, about 24 per cent of the OTA three drug average.

  54. To get an estimate of the amount invested in these trials, I have used a per patient cost of US$ 3,000 to US$10,000 to illustrate the low and high end of estimates of expenditures on trials for HIV drugs, with separate numbers for the trials sponsored by industry alone and the total, which includes trials sponsored or co-sponsored by the US federal government. The range of costs is US$ 2.3 to US$ 7.5 million for the industry-only trials, and US$ 3.7 to US$ 12.2 million for all trials combined. (Annex 10: Table 10) This does not reflect the benefits for the orphan drug tax credit, which may cover as much as half the private sector costs of some trials.

  55. Another issue with HIV drugs is the period to market. The procedures for HIV drug development are typically fast track, and the time for development is fairly short. In a June 2000 study of 14 HIV antiretroviral drugs, Balasubramaniam found that the average period between filing a patent and FDA marketing approval was only 4.4 years. (Annex 11: Table 11) Further evidence of the shorter approval time for HIV drugs is found in the work of DiMasi’s colleagues Dr. Kenneth Kaitin and Elaine Healy (The Drug Approvals of 1996, 1997 and 1998: Drug Development Trends in the User Fee Era. Drug Information Journal, Vol. 34, pp. 1-14, 2000).

  56. Kaitlin and Healy find that FDA approval times have significantly decreased in recent years, and that for HIV drugs, the average period for clinical trials and FDA regulatory approval was 50.3 months, from start to finish (or 4.2 years), very close to the 4.4 years between filing for a patent and FDA approval. In his landmark and often quoted 1991 study, DiMasi estimated the period from pre-clinical to FDA approval to be 11.8 years, and the time from the beginning of the clinical stage to FDA approval to be 8.2 years, nearly double the estimate by Kaitin and Healy for HIV drugs. This difference is huge, because at a 15 per cent discount rate (a number used for the higher estimates of drug development costs), an extra four years of development time increases costs by 75 percent.

  57. Table 12 provides details on the US government role in the development of 14 HIV drugs, and Table 13 provides additional information regarding the US government’s support in the development of new drugs. (Annexes 12 and 13)

  58. The report by Janice Reichert and Chistopher-Paul Milne (annex D29 to the applicants’ answering affidavit to the affidavits filed by the amicus curiae) illustrates one of the common fallacies with regard to comparisons of the government and private contributions to drug development. The paper purports to comment on a report by the US Joint Economic Committee report on the NIH role in new drug development, which is attached to this affidavit. (Annex 14)

  59. Reichert and Milne make the express claim that government outlays on new drug development are small for particular drugs when compared to the huge US$ 231 million expended by the research-pharmaceutical industry. The problem with this analysis is that it provides adjustments to the industry outlays for capital costs and risks of failures, while simultaneously failing to make the same analysis for government investments in drugs.

  60. Thus, for example, BMS recently argued that the US government's outlays of more than US$ 30 million for Taxol are not important, because BMS must have paid for the remaining US$ 500 million to US$ 1 billion it claims is spent on drug development. This is despite the fact that BMS did not invent Taxol, nor did it sponsor even one of the clinical trials used for the first approval of the drug. Had the government contributions been evaluated in the same supercharged way that the industry counts its own dollars, the story would have been particularly different.

  61. It is also interesting to note that the applicants’ answering affidavit to the affidavits filed by the amicus curiae quotes a 1999 survey for the America Society for Clinical Oncology that found that pharmaceutical companies paid US$ 2,500 per patient for cancer trials. CPT’s estimates are higher, based upon the NCI reports that it spends (most recently) US$ 6,200 per patient on cancer trials. At either number, it is clear that the costs of the trials for most cancer drugs are millions but not hundreds of millions of dollars.

  62. It is also useful to make reference to an interesting and relevant discussion of the relative roles on the public and private sector in drug development, as reflected in a 28 September 1989 letter from NIH and Duke University scientists to the New York Times.
    New York Times, September 28, 1989
    Credit Government Scientists With Developing Anti-AIDS Drug

    To the Editor:

    The Sept. 16 letter from T.E. Haigler Jr., president of the Burroughs Wellcome Company, was astonishing in both substance and tone. Mr. Haigler asserts that azidothymidine, or AZT, was essentially discovered and developed entirely by Burroughs Wellcome with no substantive role from Government scientists and Government-supported research. This will be a surprise to the many men and women who have devoted their lives to working for the viral cancer program and developmental therapeutics program of the National Institutes of Health over the last 25 years.

    We (associated with the National Cancer Institute and Duke University) make this statement as co-authors of the first publications describing AZT as a drug for treatment of acquired immune deficiency syndrome (Mitsuya, et al., Proceedings of the National Academy of Sciences, 1985, and Yarchoan, et al., The Lancet, 1986). There are few drugs now approved in this country that owe more to Government-sponsored research. In the interest of brevity, perhaps this point can be summarized most efficiently by stating what Mr. Haigler's company did not do.

    • The company did not perform the first synthesis of AZT. This was done by Dr. Jerome Horowitz at the Michigan Cancer Foundation in 1964, using a Government grant.
    • The company did not conceive or provide the first demonstration of an effect against animal retroviruses. This was done by Wolfram Ostertag at the Max Planck Institute in 1974, using a mouse retrovirus in a test tube. Mr. Haigler's implication that his staff “discovered" the antiretroviral potential of AZT in 1984 is noteworthy. What he did not say was that his staff repeated the Ostertag mouse experiments. You cannot discover" something published by someone else 10 years earlier.
    • The company specifically did not develop or provide the first application of the technology for determining whether a drug like AZT can suppress live AIDS virus in human cells, nor did it develop the technology to determine at what concentration such an effect might be achieved in humans. Moreover, it was not first to administer AZT to a human being with AIDS, nor did it perform the first clinical pharmacology studies in patients. It also did not perform the immunological and virological studies necessary to infer that the drug might work, and was therefore worth pursuing in further studies.

    All of these were accomplished by the staff of the National Cancer Institute working with staff at Duke University. These scientists did not work for the Burroughs Wellcome Company. They were doing investigator-initiated research, which required resources and reprogramming from other important projects, in response to a public health emergency.

    Indeed, one of the key obstacles to the development of AZT was that Burroughs Wellcome did not work with live AIDS virus nor wish to receive samples from AIDS patients.

    In a number of specific ways, Government scientists made it possible to take a drug in the public domain with no medical use and make it a practical reality as a new therapy for AIDS. It is unlikely that any drug company could have found a better partner than the Government in developing a new product. We believe that the development of this drug in a record two years, start to finish, would have been impossible without the substantive commitment of Government scientists and Government technology. It does not serve anyone's interests to nullify the importance of Government-sponsored research in solving problems of American public health.

    Bethesda, Md., Sept. 20, 1989

    Global benefits of generic competition in Brazil

  63. The PMA includes in its submissions references to the Brazil government decision to purchase antiretroviral from generic suppliers. One important factor that is not discussed in the PMA and IFPMA commentaries concerns the dramatic impact of these purchases on the global market for the raw materials for HIV drugs. I have obtained from the competitive industry price data for the past three years for the active ingredients for four HIV drugs. These data are presented in Table 14. Note the fall in prices during the period when Brazil began to increase its purchases of generic HIV drugs. AZT, a product that had been off patent in many large markets for several years, fell modestly from US$ 800 to US$ 650 per kilo. For the other three drugs the price decreases were very dramatic. For 3TC, the prices fell from US$ 10,000 per kilo to US$ 750. For d4T, a drug invented at Yale University on a US government grant, the price decrease was US$10,000 to US$ 1,000. For Nevirapine, the price decrease was US$ 10,000 per kilo to $1,500 per kilo. Virtually all of the least expensive three drug HIV cocktails use one or more of these products. The Brazil decision to purchase drugs from the competitive market has benefited not only Brazil consumers but also consumers in India, Sub-Saharan Africa and other Latin America countries. The recent announcements by CIPLA, Hetro and Aurobindo of three drug HIV cocktails priced at less than $1 per day are a direct consequence of the larger global market for the active ingredients for HIV drugs, which is driven by the Brazil government's purchases. The market entry by generic suppliers has provided policy makers with independent information regarding the true costs of drug manufacturing costs, and led to a global reassessment of the feasibility of providing treatments to millions of HIV infected persons.


    Thus sworn to and signed before me at ____________________________ on this ________ day of April 2001.