Latin America Takes on Big Pharma

By Thomas Andrew O’Keefe*

Colorful pills in capsule form and tablet form

Generic pills / Shutterstock / Creative Commons

For the past decade, Latin America has attempted to reduce the prices of high-cost medications through either joint negotiations, pooled procurement, or both, but so far with limited success.  The incentive for reducing prices is that all Latin American countries have national health care systems, and in some cases (such as Colombia and Uruguay) are legally obligated to provide their citizens with any required medication free of charge and regardless of cost.

  • In the bigger countries, such as Brazil and Mexico, the prices for certain pharmaceutical products and medical devices for public-sector purchase at the federal, state, and even municipal level are negotiated by a single governmental entity. Argentina, Chile, and Mexico also have mechanisms for pooled procurement of public-sector health-related purchases at all levels of government.  Given its huge internal market, Brazil also unilaterally caps prices on medications and threatens to issue compulsory licenses to extract concessions from pharmaceutical multinationals.

Latin American countries have also tried turning to sub-regional mechanisms to protect themselves from excessively high prices, albeit with meager results.

  • The Central American Integration System (SICA) has the most active regional mechanism to negotiate the prices of high-cost drugs and medical devices. The governments of Belize, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama have authorized the Council of Central American Ministers of Health (COMISCA) to negotiate lower prices on their behalf.  Those medications and devices that obtain a reduction are then acquired by the public sector utilizing each government’s procurement procedures.  By negotiating as a bloc, the SICA countries report total savings of about US$60 million on dozens of products since the initiative began in 2010.
  • In late 2015, MERCOSUR launched a mechanism to negotiate prices for both the full and associate member states. Since those 12 countries coincided with UNASUR’s membership, that entity was given a supporting role to create a continental data bank of pharmaceutical prices paid by each member government that would be used to support the MERCOSUR negotiations.  That data bank proved to be ineffective, however, as not all countries submitted the required information and the methodologies for determining prices was inconsistent.  To date, MERCOSUR has only obtained price reductions for one HIV medication, manufactured by an Indian firm eager to establish a market presence in South America, and reportedly for an immunosuppressive drug used after organ transplants to lower the risk of rejection.  Reduction offers by Gilead for its Hepatitis C cure have, so far, been rejected by the MERCOSUR governments as inadequate.

MERCOSUR’s limited achievements appear to have encouraged individual countries to press on alone.  Colombia, while initially supporting the MERCOSUR initiative as an associate member, eventually established its own national mechanism to negotiate prices, and in July 2017 announced that it had obtained cost savings of up to 90 percent for three Hepatitis C treatments.  MERCOSUR’s sparse track record also helps to explain why Chile’s Minister of Health announced in October 2018 that his country, Argentina, Colombia, and Peru would utilize the Strategic Fund of the Pan American Health Organization (PAHO) to purchase 10 state-of-the art cancer treatments.  Because of PAHO’s annual bulk purchases, it is often able to obtain significant price reductions from pre-qualified manufacturers and suppliers that are then passed on to member governments.  Member states facing a public health emergency can also make purchases without cash in hand, as the Strategic Fund will extend a short-term loan at no interest.  In the future, the Latin American countries are likely to pragmatically utilize a range of options in trying to contain the rising costs of new medications that include both national and regional mechanisms as well as PAHO’s Strategic Fund.  The challenge will be to avoid Big Pharma “red lining” the region and excluding it from accessing the most innovative medical cures such as gene therapies that can fetch a million-dollar price tag per treatment.

February 19, 2019

* Thomas Andrew O’Keefe is president of New York City-based Mercosur Consulting Group, Ltd. and a lecturer at Stanford University.  He is the author of Bush II, Obama, and the Decline of U.S. Hegemony in the Western Hemisphere (New York: Routledge, 2018).

Zika Challenges Mount

By Rachel Nadelman* and Fulton Armstrong

Scientists and Zika

Photo Credit: Pan American Health Organization / Creative Commons / Flickr

While scientists struggle to confirm their theories over the link between the Zika virus and the dread health conditions it apparently causes, national and regional leaders face the monumental task of addressing popular anxiety that’s spreading faster than the virus itself.  The Health Minister in Brazil – site of the largest outbreak of microcephaly – has said he is “absolutely sure” that the virus is causing women to give birth to babies with the condition, characterized by abnormally small heads and serious developmental deficits.  The head of the World Health Organization’s emergency response team said last week (2/19) that the “virus is considered guilty until proven innocent,” but that it will take four to six months to even potentially be sure.  In the meantime, other questions are emerging:

  • Argentine scientists calling themselves “Physicians in the Crop-Sprayed Villages” suspect that the outbreak has been caused by pesticides. They note that thousands of Zika-infected pregnant women in Colombia – where the larvicide pyriproxyfen has not been added to drinking water as in Brazil – have delivered normal babies.  El Salvador, also hard hit by Zika, has not reported Zika-related microcephaly cases.  Other scientific authorities, including the U.S. National Academy of Sciences, question the evidence for this theory, and the later arrival of the disease in these countries means the consequences for infected expectant mothers cannot be fully determined.  Research is ongoing.
  • In lowland Colombia, along the Caribbean Coast, the virus is being blamed for an outbreak of Guillain-Barre syndrome, when victims’ immune systems damage nerve cells and cause pain, weakness, sometimes paralysis, and even death. Scientists are investigating.
  • Mental health experts say the Zika virus closely resembles some infectious agents that have been linked to autism, bipolar disorder, and schizophrenia. They can’t confirm their suspicions.
  • Entomologists and climatologists are warning that global warming will accelerate the spread of Zika and other diseases transmitted by the mosquito Aedes aegypti, which thrives in warmer, more humid environments. They caution that the number of people currently exposed to the mosquito, roughly 4 billion, will grow steadily.  Evidence is inconclusive.
  • Other theories include that the birth defects are caused by genetically modified mosquitoes released by a British company in Brazil to combat dengue; and by vaccinations given to pregnant women to prevent rubella and pertussis. But doctors and scientists have so far rejected each one.

Regional organizations and governments are taking whatever actions they can while awaiting more conclusive science.  Briefing the OAS, the Assistant Director of the Pan American Health Organization called on countries to “to mobilize to eliminate mosquito breeding sites in every corner where they may be” and pledged PAHO’s support to do so.  Brazil has formed special teams to travel around the country to rigorously quantify cases of Zika and possible links with microcephaly.  U.S. President Obama has asked Congress for US$1.9 billion and approval to reprogram funds left over from Ebola eradication efforts to deal with Zika in Latin America and the United States.  Cuban President Raúl Castro has mobilized 9,000 troops and police to spray neighborhoods and eliminate standing water in which the mosquitoes breed.

The “epidemic,” as some leaders are calling it, will be difficult to respond to even after scientists certify the mosquito-virus link.  Solving the mystery of the higher concentration of microcephaly cases in Brazil, or linked to Brazil, will also be essential to developing an effective public health response.  Eradicating all mosquitos would be a monumental undertaking – further complicated by the fact that the history of pesticides shows equal or even greater risks to citizen health when used widely.  The Aedes mosquito sucks the blood of both rich and poor, but population density and weak infrastructure — allowing for stagnant water – makes lower-income communities much more vulnerable.  Focusing on the mosquito may not be enough, moreover, because there are early indications that Zika can be sexually transmitted.  Traces of Zika have been found in breast milk, but the implications remain unclear.  Such questions fuel popular panic, increasing the risk that governments will make rash decisions that could have  profound costs.

February 26, 2016

* Rachel Nadelman is a PhD candidate in International Relations at the School of International Service.  Her dissertation research focuses on El Salvador’s decision to leave its gold resources unmined.

Ignoring MERCOSUR and UNASUR at Your Peril

By Thomas Andrew O’Keefe*

Mercosur map

Participating countries in MERCOSUR. Image Credit: Immanuel Giel (modified) / Wikimedia / Creative Commons

Pundits who dismiss MERCOSUR and the Union of South American Nations (UNASUR) as failed attempts at Latin American economic integration should look again.  MERCOSUR has presided over an explosion in intra-regional trade among its four original member states (Argentina, Brazil, Paraguay, and Uruguay) from just over US$ 5 billion at its launch in 1991 to US$ 43 billion by 2014.  UNASUR, for its part, is credited with thwarting a coup attempt against Evo Morales in 2008 and putting a damper on continental arms races.

  • MERCOSUR and UNASUR member countries have taken additional important steps toward convergence since 2014, when MERCOSUR’s highest governing body adopted “CMC Decision 32,” which allows initiatives pursued by either collective to be binding on both if they arise from a set of goals and objectives common to both. The document reaffirms the UNASUR founding treaty stipulation that “South American integration shall be achieved through an innovative process that includes all of the achievements and advances by the processes of MERCOSUR and CAN [Andean Community].”  Chile has spearheaded this effort as a means of reducing duplication of efforts, and is also attempting to bridge ideological differences between the Pacific Alliance (Chile, Colombia, Mexico, and Peru) and MERCOSUR to further build Latin American unity.

Given the relentless negative assessment of both integration projects, multinational pharmaceutical companies were caught off guard when MERCOSUR and UNASUR forced them late last year to make substantial price cuts for public-sector purchases of Darunavir, an antiretroviral to combat HIV-AIDS, as well as Sofosbuvir, used with other medications to treat Hepatitis C.  Both drugs are on the World Health Organization’s List of Essential Medicines.  As a result of CMC Decision 32/14, the Ministers of Health of all the South American nations met in Montevideo on September 11, 2015, and launched a joint MERCOSUR/UNASUR committee to negotiate with multinational pharmaceutical companies on the prices for bulk purchases of certain high-priced drugs.  The committee, made up of representatives from each government’s agency responsible for purchasing medicines, won major price cuts last November – a steep reduction for Darunavir from Hetero Labs as well as lower prices with Gilead for Sofosbuvir.  The new costs were premised on the lowest amount charged to any one of the member governments, and enabled Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir.  The South American governments as a whole are expected to save US$ 20 million in 2016 on purchases of this anti-retroviral.  A proposed 14 percent reduction in the cost of the combination Sofosbuvir-Ledispaver drug for Hepatitis C – if accepted by the MERCOSUR/UNASUR committee – would enable further savings.

The South American governments have their eyes set on several additional high-priced medications, with a particular focus on drugs used to treat cancer.  In order to aid the committee’s work, UNASUR is creating a data bank of the prices charged by the multinationals for specified medicines purchased by the public health sector in each member state.  The fact that the purchases are made jointly through the Pan American Health Organization’s already existing Strategic Fund opens the possibility that countries in Central America and the Caribbean can benefit as well.  It also means that all these countries can access the Fund’s capital account and do not need to have the cash in hand to acquire medications required to address public health emergencies.  MERCOSUR and UNASUR – often dismissed as ineffective – are demonstrating that integration produces tangible results.

February 11, 2016

* Thomas Andrew O’Keefe is President of San Francisco-based Mercosur Consulting Group, Ltd. and is former chair of Western Hemisphere Area Studies at the U.S. State Department’s Foreign Service Institute (2011-15).

Correction: Due to an editing error, an earlier version of this post mistakenly stated that “a 14 percent reduction in the cost of its combination Sofosbuvir-Ledispaver drug for Hepatitis C will enable Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir.”  The outcomes of the cost negotiations for the two medications are unconnected.