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Ethical Considerations in Selling Pharmaceuticals in Emerging Economies Carl H. Coleman, J.D.

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Table of Contents Acknowledgments ...................................................................................................................................... ii Summary of Key Recommendations ................................................................................................ iii Introduction .................................................................................................................................................. 1 I. Background ............................................................................................................................................... 2 II. Ethical Responsibilities of the Global Pharmaceutical Industry ....................................... 5 A. Human Rights as a Source of Ethical Obligations .......................................................... 5 B. Implications for Selling Medications in Emerging Economies ................................. 9 III. Specific Practices .............................................................................................................................. 12 A. Decisions about Entering Particular Markets ............................................................... 12 B. Breadth of Market Access ...................................................................................................... 18 C. Sales and Marketing Practices ............................................................................................. 22 IV. Areas for Further Research .......................................................................................................... 23 Appendix: Participants at Roundtable Meeting, October 6-7, 2016 .................................. 25

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Acknowledgments

This White Paper was written by Carl H. Coleman, Professor of Law, Seton Hall University School of Law, with the support of Niteesha Gupte, Assistant Professor of Law at Seton Hall through February 2017; Anthony Cocuzza, Chelsea Ott, and Erik Topp, J.D. candidates at Seton Hall; and Susy Cardoso, LL.M. candidate at Seton Hall. Professor John Jacobi provided valuable comments on a previous draft. The White Paper grew out of informal discussions with representatives of Janssen Pharmaceuticals, who approached the Center for Health & Pharmaceutical Law & Policy with a broad range of questions about ethical considerations related to corporate access to medicines strategies. Following these discussions, Janssen provided funding to the Center to convene a two-day meeting of experts and stakeholders to provide input on these questions. The meeting, which took place in October, 2016, included academics, government officials, health care providers, patient representatives, and industry representatives from nearly a dozen countries throughout Europe, Asia, Africa, and the Americas. A list of meeting participants is included in the Appendix to this White Paper. The Center is grateful to everyone who participated in the meeting for their time and expertise. However, all opinions and recommendations in this White Paper are solely those of the Center and do not necessarily reflect the views of Janssen Pharmaceuticals or the individuals who participated in the meeting. In addition, Janssen Pharmaceuticals played no role in identifying the meeting participants or any other experts and stakeholders consulted throughout this project, nor did it have any control over the content of this White Paper.

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Summary of Key Recommendations

This White Paper articulates a set of ethical expectations for international research-based pharmaceutical companies regarding the sale of medications in emerging economies, beyond mere compliance with formally adopted rules. Key recommendations include the following: •

Decisions about entering particular markets — When companies develop a new medication, they should, at a minimum, be expected to register it in all countries in which it meets the definition of an essential medicine, if it can be sold without losing money in the country and that conditions for the safe and effective use of the product can be assured. Companies should register essential medicines in emerging markets for all of the indications for which they have already been approved in the company’s primary markets.

Selling medicines through public health systems — If a country has a public health system that provides medications to patients, either directly or through reimbursement programs, companies should make every effort to sell their products through that system. In negotiating sales prices with public health systems, companies should take into account the country’s level of economic development, as well as the burden of disease and the expected value of the medication. When feasible, companies should explore alternative payment arrangements with public health systems, including strategies that tie the level of reimbursement to the volume of sales and/or the medical benefits produced.

Selling medicines to self-pay or privately insured patients — Companies that choose to market their products to self-pay or privately insured patients, without also making them broadly available through a country’s public health system, should undertake affirmative mechanisms to mitigate the risk that such practices will exacerbate social inequality. Such mechanisms could include programs to provide the medication to less wealthy segments of the population at an affordable price (through means-tested subsidies, licensing arrangements, or other mechanisms) and/or commitments to using some of the proceeds from sales of the product to support other public health initiatives. Companies that choose to provide means-tested subsidies should develop mechanisms to assess relative need fairly and accurately and ensure that subsidies are not diverted from their intended recipients to other beneficiaries.

Sales and marketing standards — In the absence of applicable national standards governing sales and marketing practices, companies should adhere to the same standards that would apply in their home jurisdictions. Even if national standards exist, they should follow their home country standards to the extent they are more stringent.

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Distribution channels — Companies should not sell medications that would be dangerous to use without a health care professional’s supervision unless they can be confident that the medication will be dispensed only upon presentation of a legitimate prescription.

Providing information to providers and patients — Companies should ensure that all information provided to health care providers about the safe use of medicines is translated accurately into the local language. Moreover, in settings with low educational levels and high rates of illiteracy, companies should provide alternative tools for communicating information about the safe use of medications to patients.

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Introduction International research-based pharmaceutical companies are increasingly selling their products in less economically developed countries, commonly referred to as “emerging economies” or “emerging markets.”1 While the introduction of new drugs in these settings has the potential to bring significant health benefits for individuals and populations, it also raises a host of difficult ethical questions. For example, in countries without universal health insurance systems, is it ethically acceptable for companies to sell their products only to the relatively small segment of the population that can afford private insurance coverage or to pay for medications out of pocket? Are there certain drugs that companies should be expected to sell in emerging markets even if they are unable to do so profitably? What ethical responsibilities do companies have in settings where, because of lax regulatory controls, individuals are able to purchase virtually any medication they want without a prescription? The purpose of this White Paper is to help companies identify and respond to these and related ethical challenges. Because our focus is on ethical considerations, we address a broader set of issues than those typically considered within the framework of “corporate compliance” programs. Our goal is to identify the specific actions that companies can be expected to engage in if they wish to be considered good corporate citizens, beyond mere compliance with formally adopted rules. One of the challenges in developing recommendations in this area is that the level of unmet medical needs in many emerging economies can be staggering to contemplate. Even for companies that are committed to using some of their resources to help overcome these problems, there are limits to how much a for-profit company can realistically be expected to do within a viable business model. Moreover, systemic problems in some countries can stymie the efforts of even the most wellintentioned companies. For example, pharmaceutical companies cannot singlehandedly overcome the challenges of weak health care systems, inadequate transportation infrastructures, or government corruption. With these caveats in mind, we have sought to articulate a set of ethical expectations that can serve as benchmarks against which companies’ actions can be measured, even while recognizing that some of these targets may be difficult to achieve in 1 The International Monetary Fund defines “emerging markets” as “[t]he capital markets of develop-

ing countries that have liberalized their financial systems to promote capital flows with nonresidents and are broadly accessible to foreign investors.” International Monetary Fund, Glossary of Selected Financial Terms (Oct. 31, 2006), http://www.imf.org/external/np/exr/glossary/showTerm.asp#97. Put more simply, the term refers to countries that are “starting from a lower base and rapidly catching up.” Tarun Khanna & Krishna G. Palepu, How to Define Emerging Markets, FORBES (May 27, 2010), http://www.forbes.com/2010/05/27/winning-in-emerging-markets-opinions-book-excerptskhanna-palepu.html.

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the short term. We begin by considering the sources of companies’ ethical responsibilities within emerging markets, as distinct from the responsibilities of national governments or the broader international community. We then provide guidance for thinking through specific ethical challenges that arise when making decisions about whether, and on what terms, to introduce a new drug into a particular setting.2

I. Background In 2016, emerging economies represented over a quarter of the global pharmaceutical market.3 Sales growth has been particularly strong in the so-called BRICMT economies (Brazil, Russia, India, China, Mexico, and Turkey), followed by “secondtier” markets throughout Latin America, Southeast Asia, Eastern Europe, and the Middle East.4 With the exception of South Africa, Egypt, Algeria, and Nigeria, African countries do not currently play a major role in global pharmaceutical sales, although the industry views the continent as an important long-term growth opportunity.5 Several factors explain pharmaceutical companies’ growing interest in emerging economies. First, with many blockbuster medicines losing their patent protection, and many high-income countries seeking to limit health care spending by imposing price controls on drugs, companies have a greater need to rely on emerging markets as an alternative revenue source.6 Second, as a result of global economic development, health insurance coverage has expanded in many emerging economies, and medications not covered by insurance have become affordable for at least a portion 2 Ethical issues related to conducting clinical trials in less economically developed countries fall out-

side the scope of this White Paper. A substantial literature addressing these issues already exists. See, e.g., RICHARD CASH ET AL., CASEBOOK ON ETHICAL ISSUES IN INTERNATIONAL HEALTH RESEARCH (2009); EXPLOITATION AND DEVELOPING COUNTRIES: THE ETHICS OF CLINICAL RESEARCH (Jennifer S. Hawkins & Ezekiel J. Emanuel eds., 2008); ETHICAL ISSUES IN INTERNATIONAL BIOMEDICAL RESEARCH (James V. Lavery et al. eds., 2007); NAT’L BIOETHICS ADVISORY COMM’N, ETHICAL AND POLICY ISSUES IN INTERNATIONAL RESEARCH: CLINICAL TRIALS IN DEVELOPING COUNTRIES (2001). 3 Ajay Gautam & Xiaogang Pan, The Changing Model of Big Pharma: Impact of Key Trends, 21 DRUG DISCOVERY TODAY 379, 384 (2016). 4 Matthias Buente et al., PwC, Pharma Emerging Markets 2.0: How Emerging Markets Are Driving the Transformation of the Pharmaceutical Industry, 8 (2013), http://www.strategyand.pwc.com/media/file/Strategyand_Pharma-Emerging-Markets-2.0.pdf. 5 See id. at 16. 6 Deloitte, 2015 Global Life Sciences Outlook: Adapting in an Era of Transformation, 5 (2014), https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-HealthCare/gx-lshc-2015-life-sciences-report.pdf; MARC J. ROBERTS & MICHAEL R. REICH, THE WORLD BANK, PHARMACEUTICAL REFORM: A GUIDE TO IMPROVING PERFORMANCE AND EQUITY 40 (2011), available at http://documents.worldbank.org/curated/en/767201468168247625/pdf/646660PUB0Phar00Box 361543B00PUBLIC0.pdf. SETON HALL LAW

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of the population.7 Finally, growing prosperity and longer lifespans have led to an increase in the kind of diseases that are the focus of many pharmaceutical companies’ research and development activities, including diseases associated with ageing, such as cancer, and so-called “lifestyle” diseases, such as diabetes and hypertension.8 Despite companies’ increasing interest in emerging economies, patients in these countries still face significant barriers to access to medicines. Although many countries have made significant progress in establishing health insurance systems, comprehensive universal coverage has still not arrived in most parts of the world.9 In many countries, drugs are accessible only to the minority of patients who are able to access private insurance coverage or to pay the full cost of medications out of pocket.10 High rates of poverty11 and inequality12 mean that many medications are unaffordable for large numbers of individuals. Cost is not the only barrier to access to medicines. For example, in countries with inadequate transportation infrastructures, it can be difficult to deliver medica 7 Mihajlo Jakovljevic & Thomas E. Getzen, Growth of Global Health Spending Share in Low and Middle

Income Countries, 7 FRONTIERS IN PHARMACOLOGY 1, 2 (2016). 8 Buente et al., supra note 4 at 8. 9 The World Health Organization has created a composite coverage index, which is a weighted score reflecting coverage of eight reproductive, maternal, newborn and child health interventions along the continuum of care. The median coverage percentage is 71.5 among all countries, ranging from 89.8% coverage in Costa Rica to 27.1% coverage in Chad. The median coverage in low-income countries is 61.7%. Coverage within countries varies substantially, based on factors such as economic status and education. World Health Organization, Global Health Observatory Visualizations: Health Equity Monitor RMNCH Composite Coverage, http://apps.who.int/gho/data/view.wrapper.HEVIZ07a?lang=en&menu=hide (last visited April 20, 2017), http://www.who.int/gho/health_equity/services/rmnch_composite_coverage_index_text/en/. 10 See ED SCHOONVELD, THE PRICE OF GLOBAL HEALTH: DRUG PRICING STRATEGIES TO BALANCE PATIENT ACCESS AND THE FUNDING OF INNOVATION 14 (2d ed. 2015). In developing countries, up to 90 percent of the population purchase drugs out of pocket, “making medicines the largest family expenditure item after food.” World Health Organization, WHO Guideline on Country Pharmaceutical Pricing Policies (2015), http://apps.who.int/medicinedocs/documents/s21016en/s21016en.pdf. 11 In 2013, 10.7% of the global population lived in extreme poverty, defined as less than $1.90/day. JOSÉ CUESTA ET AL., WORLD BANK GROUP, POVERTY AND SHARED PROSPERITY 2016: TAKING ON INEQUALITY 35-6 (2016), available at https://openknowledge.worldbank.org/bitstream/handle/10986/25078/9781464809583.pdf. 12 The United Nations Development Programme’s Inequality-Adjusted Human Development Index measures the impact of inequality in a country by taking into account “not only the average achievements of a country on health, education, and income and income, but also how those achievements are distributed among its population by ‘discounting’ each dimension’s average value according to its level of inequality.” The index shows that “countries in the low human development group also tend to have higher inequality and thus larger losses in human development due to inequality.” United Nations Development Programme, Frequently Asked Questions - Inequality-Adjusted Human Development Index, http://hdr.undp.org/en/faq-page/inequality-adjusted-human-development-indexihdi#t293n107.

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tions to individuals outside of large urban centers, 13 particularly temperaturesensitive products that require continuous cold-chain storage.14 In addition, the safe and effective use of many medicines depends on the availability of complex diagnostic tests, laboratory procedures, and trained personnel, all of which are in short supply in resource-limited settings.15 All of these problems are compounded by the absence of strong pharmaceutical regulatory systems in many countries.16 For example, many countries lack effective systems for monitoring and responding to adverse drug reactions17 or for ensuring that patients are not given substandard or counterfeit drugs.18 Moreover, in countries with high levels of corruption,19 there is a significant risk that decisions about purchasing or prescribing drugs will be based on improper financial influences rather than an objective assessment of the patient’s medical needs.

13 Susan

Foster et al., Ensuring Supplies of Appropriate Drugs and Vaccines, in DISEASE CONTROL PRIORITIES IN DEVELOPING COUNTRIES 1323 (Dean T. Jamison et al., eds., 2d ed. 2006). 14 See WHO/UNICEF Joint Statement, Temperature-Sensitive Health Products in the Expanded Programme on Immunization Cold Chain (May 2015), https://www.unicef.org/health/files/EPI_cold_chain_WHO_UNICEF_joint_statement_A4_rev2_5-1415_(3).pdf. 15 See Ruth McNerney, Diagnostics for Developing Countries, 5 DIAGNOSTICS 200 (2015) (“Laboratories in developing countries are often sparsely distributed, and access may be limited by economic or geographical factors. Where they do exist clinical laboratories are often under resourced and amenities such as electrical supply and water may be unreliable. Shortage of skilled technical personnel is also a problem in some countries, particularly in rural areas.”); S. Manikandan, Are We Moving Towards a New Definition of Essential Medicines? 6 J. OF PHARMACOLOGY & PHARMACOTHERAPEUTICS 123, 123 (2015) (noting that “many of the high-cost medicines need complex, expensive diagnostic tests to define their indications and also require sophisticated monitoring methods at time,” which are frequently unavailable in low-income and middle-income countries). 16 The World Health Organization estimates that 30% of its of its 191 member states have no or minimal drug regulation in place. See Atholl Johnston & David W Holt, Substandard Drugs: A Potential Crisis for Public Health, 78 BRIT. J. CLINICAL PHARMACOLOGY 218, 232 (2013). 17 See Sten Olsson et al., Pharmacovigilance in Resource-Limited Countries, 8 EXPERT REV. CLINICAL PHARMACOLOGY 449 (2015) (noting that “very few” low- and middle-income countries have fully functional pharmacovigilance systems). 18 See Jean-Michel Caudron et al., Substandard Medicines in Resource-Poor Settings: A Problem That Can No Longer Be Ignored, 13 TROPICAL MED. & INT’L HEALTH 1062, 1068 (2008). 19 Over two-thirds of the 176 countries and territories in the 2016 Transparency International Corruption Perceptions Index fell below the midpoint of the scale of 0 (highly corrupt) to 100 (very clean), with a global average score of 43. See Transparency International, Transparency Corruption Perceptions Index, http://www.transparency.org/research/cpi/overview. Overall, emerging economies appear to have made improvements in their perceived corruption status, but are not yet on par with high-income countries. SETON HALL LAW

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II. Ethical Responsibilities of the Global Pharmaceutical Industry Half a century ago, the Nobel Prize-winning economist Milton Friedman famously argued that a business’s sole responsibility is to make money for its shareholders.20 While Friedman’s views continue to attract some adherents,21 they have largely been eclipsed by a growing commitment to the idea of “corporate social responsibility.” Proponents of corporate social responsibility accept that businesses’ primary role is to make profits for their shareholders, but they argue that companies should carry out this mission in a manner that promotes broader societal values. For example, Archie Carroll argues that companies have a responsibility to adhere to “those standards, norms, or expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders’ moral rights.”22 Carroll distinguishes these expected ethical behaviors from “discretionary” or “philanthropic” activities, such as efforts to contribute “money, facilities, and employee time to humanitarian programs or purposes.”23 While communities may desire, and even expect, businesses to engage in a certain amount of philanthropy, “they do not regard the firms as unethical if they do not provide the desired level.”24 In order to operationalize the concept of corporate social responsibility, it is first necessary to define the specific “standards, norms, and expectations” that constitute ethical behavior in particular situations. The next section draws on international human rights principles as a framework for defining ethical expectations applicable to the global research-based pharmaceutical industry. The following section considers the implications of these principles for companies’ decisions about selling medications in emerging economies. A. Human Rights as a Source of Ethical Obligations The Constitution of the World Health Organization (WHO) states that “[t]he enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being.”25 Numerous international agreements reinforce this posi 20 See Milton Friedman, The Social Responsibility of Business Is to Increase its Profits, N.Y. TIMES MAG.,

Sept. 13, 1970, at 32 (arguing that, because corporate managers serve as fiduciaries of the shareholders, they must “conduct the business in accordance with [the shareholders’] desires, which generally will be [to] make as much money as possible while conforming to the basic rules of the society”). 21 See, e.g., Sumaiyya Saleem et al., Arguments against Corporate Social Responsibility, 2 IMPERIAL J. INTERDISCIPLINARY RES. 946 (2016), available at http://www.imperialjournals.com/index.php/IJIR/article/viewFile/1524/1466. 22 Archie B. Carroll, The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organized Stakeholders, 34 BUS. HORIZONS 39, 41 (1991). 23 Id. at 42. 24 Id. 25 CONSTITUTION OF THE WORLD HEALTH ORGANIZATION, 45th ed., Oct. 2006 (defining health as “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity”).

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tion by expressly affirming the existence of a human right to health.26 The United Nations (UN) Committee on Economic, Social and Cultural Rights has explicitly recognized that a core component of the human right to health is equitable access to essential medicines,27 which WHO has defined as “those drugs that satisfy the health care needs of the majority of the population.”28 WHO calls on countries to make these drugs “available within the context of functioning health care systems at all times in adequate amounts, in the appropriate dosage forms, with assured quality, and at a price the individual and the community can afford.”29 WHO regularly publishes a Model List of Essential Medicines, which is intended to be “a guide for the development of national and institutional essential medicine lists.”30 Although governments have the primary responsibility for “respecting, protecting, and fulfilling” human rights,31 non-state actors, including for-profit businesses, also bear certain human rights obligations. In 2011, the UN Human Rights Council endorsed the UN Guiding Principles on Business and Human Rights, commonly known as the “Ruggie Principles,”32 which identified two core components of businesses’ human rights responsibilities. First, businesses have a responsibility to “respect” human rights, which “essentially means not to infringe on the rights of oth 26 See,

e.g., Universal Declaration of Human Rights, G.A. Res. 217 (III) A, Art. 25 U.N. Doc. A/RES/217(III) (Dec. 10, 1948); International Covenant on Economic, Social and Cultural Rights, G.A. Res. 2200 (XXI) A, Art. 12, U.N. Doc. A/RES/2200(XI) (Jan. 3, 1976); Convention on the Elimination of All Forms of Discrimination Against Women G.A. Res. 34/180, Art. 12, U.N. Doc. 34/180 (Dec. 18, 1979); Convention on Rights of the Child, G.A. Res. 44/25, Art. 24, U.N. Doc. 44/25 (Sept. 2, 1990); International Convention on the Elimination of All Forms of Racial Discrimination, G.A. Res. 2106 (XX), Art. 5, U.N. Doc. 2106 (Dec. 21, 1965); African Charter on Human and Peoples’ Rights, Art. 16 (June 1981); Additional Protocol to the American Convention on Human Rights in the Area of Economic, Social and Cultural Rights, Art. 10 (Nov. 17, 1988) . 27 World Health Organization, Medium-Term Strategic Plan 2008–2013 and Proposed Programme Budget 2012–2013, 79 (Apr. 4, 2011), http://apps.who.int/iris/bitstream/10665/3228/1/B128_24en.pdf. According to WHO, the concept of “equity in health” is concerned with “creating equal opportunities for health and with bringing health differentials down to the lowest possible level.” World Health Organization, Health Impact Assessment, Glossary of Terms Used, available at http://www.who.int/hia/about/glos/en/ (last visited April 24, 2017). 28 World Health Organization, Essential Medicines and Health Products, http://www.who.int/medicines/services/essmedicines_def/en/ (last visited Mar. 24, 2017). 29 WHO Expert Committee, The Selection and Use of Essential Medicines ¶ 4.2, WHO Technical Report Series No. 914 (2002), http://apps.who.int/medicinedocs/pdf/s4875e/s4875e.pdf. 30 Essential Medicines and Health Products, supra note 28. 31 The Ten Principles of the UN Global Compact, Principle One: Human Rights, UNITED NATIONS GLOBAL COMPACT, https://www.unglobalcompact.org/what-is-gc/mission/principles/principle-1 (last visited Mar. 24, 2017). 32 U.N. Human Rights Office of the High Commissioner, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect, and Remedy” Framework, HR/PUB/11/04 (2011), available at http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf. SETON HALL LAW

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ers—put simply, to do no harm.”33 Second, businesses must provide a “means for those who believe they have been harmed to bring this to the attention of the company and seek remediation, without prejudice to legal channels available.”34 In addition to these core obligations, the Ruggie Principles recognized that businesses “may have additional responsibilities” when they are engaged in performing “certain public functions,”35 although it did not elaborate on what the concept of a “public function” entailed. A pair of publications by the UN Special Rapporteur on the Right to Health, Paul Hunt (the “Hunt Guidelines”), provided greater specificity on how human rights principles apply to the pharmaceutical sector. First, a 2008 report, titled “Human Rights Guidelines for Pharmaceutical Companies,” set forth 47 guidelines for pharmaceutical companies, including a duty to give “particular attention to the very poorest in all markets.”36 Second, a 2009 Annex to the report observed that companies that develop “life-saving medicines” are engaged in a “public function” that triggers additional responsibilities,37 including a duty “to take all reasonable steps to make the medicine as accessible as possible, as soon as possible, to all those in need, within a viable business model.”38 According to the Annex, these obligations stem in part from the “express and implied terms” of the patent system, which both rewards companies “for fulfilling this critically important social function” and, in exchange, “places important right-to-health responsibilities on the patent holder.”39 At the same time, the Annex suggested that these access-to-medicines obligations are not limited to patent-holding companies. Instead, “all pharmaceutical companies must do all they reasonably can to ensure that medicines are available in sufficient quantities in the countries where they are needed.”40

33 Special Representative of the Secretary-General, Promotion and Protection of all Human Rights, Civ-

il, Political, Economic, Social and Cultural Rights, Including the Right to Development, ¶ 24 (advance edited version, Apr. 7, 2008) (by John Ruggie). 34 Id. at ¶ 82. 35 Id. at ¶ 24. 36 U.N. Secretary-General, The Right to Health: Rep. of the Special Rapporteur on the Right of Everyone to the Enjoyment of the Highest Attainable Standard of Physical and Mental Health, Annex ¶ 5, U.N. Doc. A/63/263 (Aug. 11, 2008) (by Paul Hunt). 37 U.N. Secretary-General, Promotion and Protection of all Human Rights, Civil, Political, Economic, Social and Cultural Rights, Including the Right to Development: Report of the Special Rapporteur on the Right of Everyone to the Enjoyment of the Highest Attainable Standard of Health, Annex, ¶ 41 (May 5, 2009) (by Paul Hunt). 38 See id. at ¶ 39 (“Crucially, the company may not market the medicine to social group A (i.e. wealthy urban elites), with little or no attempt to reach social groups B-E. . . . While it cannot be expected to make an overall loss, the company can sometimes be expected to operate, with respect to some of its activities, on a not-for-profit basis, such as in relation to social group E (i.e. the rural poor).”). 39 Id. at ¶ 35. 40 Id. at ¶ 22.

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Some commentators have suggested that the Hunt guidelines might go too far in ascribing responsibilities to businesses that more properly belong to national governments. Suerie Moon, for example, argues that some of the Hunt guidelines fall under the state’s obligation to “protect” or “fulfill” human rights, including those that call on firms to ensure the affordability of medicines by providing discounts, licenses, and product donations.41 She expresses concern that “conflating the responsibilities of state and non-state actors risks detracting attention away from state obligations, making it easier for governments to shirk their own obligations.”42 In contrast, in a presentation delivered at the October 2016 meeting held as part of this project, Professor Alex John London43 suggested that the duties of state and non-state actors are not necessarily distinct. He argued that states may seek to satisfy some of their human rights obligations — including the duty to provide access to essential medicines — by relying on the market, subject to a system of regulation designed to align private interests with human rights goals. Pharmaceutical companies that produce essential medicines can therefore be seen as a critical component of the government’s strategy for fulfilling its own human rights obligations. According to London, these companies should be free to aggressively pursue profits only insofar as doing so does not undermine the human rights functions the state relies on them to perform. London further argued that, in the absence of regulatory frameworks that adequately align companies’ commercial interests with human rights objectives, companies that produce essential medicines assume some responsibility for promoting human rights themselves. He suggested that pharmaceutical companies would fail to respect their role as instruments in the state’s pursuit of human rights if they exploit public systems for their own private benefit. For example, because states have a human rights obligation to create health systems that meet the health needs of all persons equitably, companies can be criticized if they exploit such systems to selectively favor the interests of certain subgroups, such as the wealthy. London’s approach echoes Florencia Luna’s description of pharmaceutical companies as “non-ideal” bearers of human rights obligations. According to Luna, while national governments are the “ideal responsible agents” for promoting human rights, governments are not always willing or able to comply with their duties. “In an imperfect world with extreme conditions and scarcity,” she argues, “non-ideal agents” assume obligations to fill in the gap. Non-ideal agents, in Luna’s framework, 41 Suerie Moon, Respecting the Right to Access to Medicines: Implications of the UN Guiding Principles

on Business and Human Rights for the Pharmaceutical Industry, 15 HEALTH & HUM. RTS. 32 (2013). 42 Id. at 37. 43 Professor of Philosophy and Director of the Center for Ethics and Policy, Carnegie Mellon University. SETON HALL LAW

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are entities that are “related in some relevant way” to the populations at need and that “can make a reasonable difference without harming or destroying themselves.” She argues that “[t]his is the case with major pharmaceutical companies regarding global health,” given that providing medicines to people in need “is, at best, a slight sacrifice” for them.44 B. Implications for Selling Medications in Emerging Economies The commentators discussed above make a compelling case that pharmaceutical companies have ethical responsibilities that go beyond simply promoting shareholder welfare. At a minimum, these responsibilities include the core obligations articulated in the Ruggie Principles, which call on companies to respect human rights and be accountable for violations. Respecting human rights is largely a negative requirement to avoid actions that “undermin[e] the state’s efforts to protect its population’s right to health,” such as “lobb[ying] to undermine flexibilities in patent rules or other cost-containment policies necessary to ensure widespread population access to a medicine.”45 It may also require companies to take certain positive actions, such as adopting human rights policies or complying with transparency requirements.46 We are also persuaded that patent-holding pharmaceutical companies have additional ethical responsibilities, particularly when they are engaged in producing essential medicines. As the Hunt Guidelines emphasize, patents are rewards for discovery that come with implicit conditions.47 In light of the state’s own human rights obligation to promote access to essential medicines, it is reasonable to view one of these conditions as a commitment to take steps to make such medications available on an equitable basis. As London argues, one way that countries fulfill their human rights obligations is, in essence, by delegating certain functions to market participants. In the case of pharmaceuticals, the award of a patent can be seen as the mechanism by which this delegation of responsibilities occurs. The case for requiring patent-holders to provide equitable access to essential medicines is strongest as applied to persons within the borders of the patent 44 Florencía Luna, Responsibility in Public Health, in GLOBAL ETHICS FOR LEADERSHIP: VALUES AND VIRTUES

LIFE 111, 126 (Christoph Stückelberger et al. eds., 2016), available at http://www.globethics.net/documents/4289936/13403236/GE_Global_13_web.pdf/b5588b856471-4125-8d2f-39b0caf9e3ba. 45 Moon, supra note 41, at 37. 46 Joo-Young Lee & Paul Hunt, Human Rights Responsibilities of Pharmaceutical Companies in Relation to Access to Medicines, 40 J.L. MED. & ETHICS 220 (2012); see also Hunt, supra note 37, at ¶ 28. 47 See Hunt, supra note 37, at ¶ 41 (“[T]here is an agreement between society and the patent holder of a life-saving medicine that grants privileges to, and places responsibilities on, the patent holder. The crucial right-to-health responsibility is to take all reasonable steps to make the medicine as accessible as possible, as soon as possible, to all those in need, within a viable business model.”). FOR

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granting jurisdiction. However, we do not believe that companies’ ethical obligations should be defined in such a limited way. Instead, the award of patent protection for an essential medicine in the industry’s primary markets should be seen as triggering a duty to make reasonable efforts to make the product equitably available wherever it is needed, even outside the borders of the patent-granting jurisdictions. Such an approach is justified by the principle of global solidarity that underlies the entire system of international human rights.48 For example, the UN Committee on Economic, Social and Cultural Rights states that, “[d]epending on the availability of resources, States should facilitate access to essential health facilities, goods and services in other countries, wherever possible, and provide the necessary aid when required.”49 This international perspective is also reflected in the 1994 Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which incorporates a variety of flexibilities that permit less economically developed countries to limit or even override pharmaceutical patents for public health purposes.50 In accepting these flexibilities, the international community has implicitly recognized that the benefits companies receive from patent protection in high-income countries justify limitations on their ability to pursue profits in other parts of the world. This does not mean that companies have an absolute duty to make their products available to every patient who might need them, regardless of feasibility or cost. As the Hunt Guidelines emphasize, pharmaceutical companies have a duty to provide reasonable access to essential medicines “within a viable business model.”51 In the discussion below, we consider the implications of this standard for companies’ decisions about whether, and under what terms, to sell essential medications in particular markets.52

48 Office of the U.N. High Commissioner for Human Rights & World Health Organization, The Right to

Health: Fact Sheet No. 31, 23 (2008), available at http://www.ohchr.org/Documents/Publications/Factsheet31.pdf; see also U.N. Charter arts. 55-56 (explaining that all members will take action individually and as a part of the U.N. to bring about conditions that will lead to stability). 49 U.N. Committee on Economic, Social and Cultural Rights, General Comment No. 14, The Right to the Highest Attainable Standard of Health (Art. 12 of the Covenant), ¶ 39, U.N. Doc. E/C.12/2000/4 (Aug. 11, 2000). 50 Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299; see also World Trade Organization, Declaration on the TRIPS Agreement and Public Health, Nov. 14, 2001, WT/MIN(01)/DEC/2, 41 I.L.M. (2002) (the “Doha Declaration”). 51 Hunt, supra note 37, at ¶ 41; see also Luna, supra note 44, at 125-26 (noting that agents’ responsibilities depend on their ability to make an impact “without harming or destroying themselves”). 52 See infra, Part III. SETON HALL LAW

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A few pharmaceutical companies have already committed to refrain from filing for patents53 and/or enforcing already-existing patents54 in low-income countries. While we support these policies, we do not believe that such actions, in themselves, are sufficient to fulfill companies’ obligation to make reasonable efforts to provide equitable access to essential medicines wherever they are needed. First, the fact that a company chooses not to patent a drug in a particular country does not mean that generic versions of the drug will automatically materialize.55 Someone still needs to undertake the expensive and time-consuming process of seeking regulatory approval of the medication, without which generic sales in the country will still be impossible. Second, even if generic sales are legally authorized, there needs to be a manufacturer willing and able to produce the drug and sell it in the particular market. Moreover, it is important not to overstate the significance of patents on access to medicines. Ninety-five percent of the drugs on WHO’s essential medicines list are not patented,56 yet many patients in low- and middle-income countries still do not have reliable access to these drugs. In some cases, this is because even generics are priced too high to be affordable in many countries. This is particularly true for difficult-to-manufacture drugs that may be available only from a single supplier.57 In other cases, the non-price barriers to access discussed above58 result in limited ac 53 For example, Merck does not file patents in any low income country as defined by the World Bank.

Merck & Co., Inc., Public Policy Statement: Intellectual Property and Access to Medicines in the Developing World 1, 3 (Apr. 2016), available at https://www.merck.com/about/views-andpositions/FINAL%20Public%20Policy%20Statement%20%20Access%20to%20Medicines%20April%202016.pdf. In 2016, GlaxoSmithKline announced that it “will not file for patent protection in Least Developed Countries (LDCs) and Low Income Countries (LICs).” In Lower Middle Income Countries, the company will file for patents but seek licensing agreements to allow generic versions to be produced upon payment of a “small royalty.” GSK Press Release, GSK Expands Graduated Approach to Patents and Intellectual Property to Widen Access to Medicines in the World’s Poorest Countries (Mar. 31, 2016), available at https://us.gsk.com/enus/media/press-releases/2016/gsk-expands-graduated-approach-to-patents-and-intellectualproperty-to-widen-access-to-medicines-in-the-world-s-poorest-countries/. 54 For example, Novartis does not enforce patents in least developed countries, as defined by the United Nations. See Novartis, Innovative Pricing, https://www.novartis.com/about-us/corporateresponsibility/expanding-access-healthcare/innovative-pricing (last visited Mar. 27, 2017). 55 See Klaus Michael Leisinger et al., Improving Access to Medicines in Low and Middle Income Countries: Corporate Responsibilities in Context, 5 S. MED REV. 3, 5 (2012), available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3606933/pdf/smr-05-003.pdf (noting that “lack of patents does not guarantee that generic medicines are available or acceptable” in low-income countries). 56 See Steve Brachmann & Gene Quinn, 95 Percent of WHO’s Essential Medicines Are Off-Patent, IPWATCHDOG (Sept. 12, 2016), http://www.ipwatchdog.com/2016/09/12/essential-medicines-offpatent/id=72542/. 57 See Christine Livoti, HIV Drugs to be Uniquely Shielded from Generic Pricing Pressure in Public Payer Scheme, FINANCIAL TIMES, Feb. 28, 2013, available at http://www.ft.com/cms/s/2/286774b4-81be11e2-b050-00144feabdc0.html?ft_site=falcon&desktop=true#axzz4SXsHjtzW. 58 See supra, text accompanying notes 13-15.

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cess to medicines even when generics could be made available at an affordable price. Whether or not a drug falls under the definition of an essential medicine, once a company has made a decision to sell the drug in a particular market, it must ensure that the manner in which it does so respects human rights principles. One way that introducing a new medication could undermine these principles is by placing burdens on limited resources, including health care facilities, equipment, or trained medical personnel. For example, resources needed to administer a new drug safely and effectively might be taken from other existing uses that provide greater public health benefits. Similarly, a drug might lead to iatrogenic injuries for which patients seek treatment in already overburdened public health facilities.59 More generally, making a drug available only to certain groups, such as the wealthy or politically connected, can contribute to the general problem of social inequality, which has been correlated with a wide range of problems independent of a country’s absolute level of wealth.60 In the discussion below, we offer suggestions for actions companies can take to mitigate these unintended consequences.

III. Specific Practices A. Decisions about Entering Particular Markets The first step in making a drug available in a country is to seek marketing authorization (also known as “registration”) of the drug with national regulatory authorities. In the previous section, we argued that the award of patent protection for an essential medicine in the industry’s primary markets trigger a duty to make reasonable efforts to make the product equitably available wherever it is needed. Thus, companies should make reasonable efforts to register new a drug in all countries in which the drug meets the definition of an essential medicine. In determining whether a particular product constitutes an essential medicine in a particular setting, companies should rely on countries’ own determinations as expressed in their national essential medicines lists. In addition to reflecting the diseases prevalent in each country and relevant characteristics about the local population, nationally developed lists can take into account characteristics such as “the 59 See

generally Johannes P. Mouton et al., Adverse Drug Reactions Causing Admission to Medical Wards: A Cross-Sectional Survey at 4 Hospitals in South Africa, 95 MEDICINE 1 (2016). 60 See KATE PICKETT & RICHARD WILKINSON, THE SPIRIT LEVEL: WHY MORE EQUAL SOCIETIES ALMOST ALWAYS DO BETTER (2009) (explaining that eleven different health and social problems — physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being, outcomes — are significantly worse in more unequal countries); see also The Equality Trust, Impacts, https://www.equalitytrust.org.uk/aboutinequality/impacts (last visited Apr. 10, 2017) (observing that “[i]n more equal societies people live longer, are less likely to be mentally ill or obese and there are lower rates of infant mortality”). SETON HALL LAW

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structure of the health care system, the number of trained pharmacists and physicians, the capacity of the drug regulatory authority, the way in which pharmaceuticals are distributed, or the level of funding available for pharmaceuticals.”61 Ideally, companies should register essential medicines for all of the indications for which they have already been approved in the company’s primary markets. Doing so can help facilitate broad access to the drug, particularly in countries with public health systems that limit reimbursement to uses of the drug that have been specifically approved.62 In arguing that companies have a duty to make reasonable efforts to register medications wherever they are essential, we do not mean to imply that ethical issues are irrelevant to decisions about registration of non-essential medicines. Although decisions about registering non-essential medicines do not directly raise human rights considerations,63 it is important to recognize that the category of “nonessential medicines” is not monolithic. While some medicines are not essential because they provide minimal health benefits, others may be considered non-essential because their health benefits — while substantial — do not “satisfy the health care needs of the majority of the population.”64 If a drug can avert serious harm to a population subgroup, and no comparable interventions are available from other sources, companies should consider treating the drug as equivalent to an essential medicine in making decisions about where to seek registration, even if the drug does not appear on countries’ essential medicines lists. A duty to make reasonable efforts to register a product does not entail an absolute obligation to seek registration at all costs. As the Hunt Guidelines state, pharmaceutical companies have a duty to provide reasonable access to essential medi 61 Graham

Dukes, National Medicine Policy, in MDS-3: MANAGING ACCESS TO MEDICINES AND HEALTH TECHNOLOGIES (3rd ed. 2012) at 4.2-.4, available at http://apps.who.int/medicinedocs/documents/s19577en/s19577en.pdf. 62 At the October 2016 meeting held as part of this project, one participant raised an example of a drug that had been registered in a particular country for a specific indication, but was then found to be effective for other uses. The public health system would not provide reimbursement for these other uses unless the company sought regulatory approval for the new indication, which had already been approved in other countries. However, because the drug was already off patent and a generic version was available at a cheaper price, the originator company had no financial incentive to apply for approval. Some participants suggested that, as an ethical matter, it would be reasonable to request the company to seek approval for the new indication under these circumstances because (1) without coverage in the public system, many patients would not be able to afford the medication; (2) no entity other than the company was in a position to seek registration for the expanded indication; and (3) the costs of seeking an expanded indication should not be significant, as the expanded indication had already been approved in other jurisdictions. However, there would need to be consideration on a case-by-case basis of the costs of gaining and maintaining marketing approval for this new indication. 63 See supra note 26. 64 WHO Expert Committee, supra note 29, at ¶ 4.2.

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cines “within a viable business model.”65 If it will be impossible to sell a drug in a particular country at a business-viable price, registering the drug in that country should be considered a discretionary act of philanthropy, rather than fulfillment of a minimum ethical expectation. The difficult question is determining what constitutes a “business viable price” for an essential medicine in the context of a less economically developed country. In general, businesses set their prices at a level higher than the actual costs of production, in order to earn a return on their investment. Pharmaceutical companies typically characterize this return as a “reward for innovation” and argue that it compensates them for the high risks inherent in the drug discovery process.66 While the appropriate amount of this reward is a matter of substantial debate,67 it seems clear that asking companies to forego the reward entirely would not represent a “viable business model,” as it would remove any incentive for companies to invest resources in the development of new drugs. However, the viability of the pharmaceutical business model does not depend on companies’ ability to earn a reward for innovation each and every time they sell one of their products. As long as companies can earn a reasonable return on investment when they sell their products in the high-income countries that make up their primary markets, there is nothing preventing them from also selling their products in less economically developed countries at a price closer to their costs. In fact, there is substantial evidence that it is possible for pharmaceutical companies to provide considerable price reductions on many medicines within a viable business model. For example, in Brazil, South Africa, and Thailand, a combination of court decisions, governmental pressure, and generic competition have led to dramatic price reduc-

65 Hunt, supra note 37, at ¶¶ 37, 41; see also Luna, supra note 44, at 125-26. 66 See Emily Saadj & Greg White, Rewarding Innovation in Drug Development, 7 AM. HEALTH & DRUG

BENEFITS 373 (2014), available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4268767/. Despite recent legislative efforts to compel pharmaceutical companies to disclose the actual costs of developing, manufacturing, and selling medications, see, e.g., Rachel Sachs, Pharmaceutical Transparency Bills: Targeting Disclosures Purposefully, BILL OF HEALTH (Apr. 13, 2016), http://blogs.harvard.edu/billofhealth/2016/04/13/pharmaceutical-transparency-bills-targetingdisclosures-purposefully/, the extent to which drug prices reflect actual costs versus rewards for innovation remains difficult to determine. See Ed Silverman, Drug Firms Need to Explain the Prices, STAT (Sept. 20, 2015), https://www.statnews.com/pharmalot/2015/09/29/drug-firms-need-toexplain-the-prices/. 67 In an effort to move past this debate, WHO recently launched an effort “to develop a fair pricing model that can affordably deliver the medicines needed by patients while keeping companies interested in developing new and better treatments and producing generic treatments.” Marie-Paule Kieny, A Comprehensive and Fair Solution to the Price of Medicines, WHO MEDIA CENTRE (July 5, 2016), http://www.who.int/mediacentre/commentaries/fair-price-medicines/en/. SETON HALL LAW

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tions for many innovative medicines,68 presumably without forcing companies to sell their products at a loss. We do not mean to suggest that it would be unethical for companies to seek some amount of profit on sales of essential medications in emerging markets, provided this can be done without jeopardizing access to the product throughout the population. However, the fact that it might not be possible to earn a profit on an essential medicine in a particular country does not absolve patent-holding companies of their ethical responsibility to enter that market. Rather, companies should be expected to register a new drug in all countries in which the drug meets the definition of an essential medication unless the company cannot reasonably expect to sell the drug at a price sufficient to recover their actual costs. Of course, even under this approach, some drugs may still be too expensive to sell in very low-income settings. This is because the full costs of making a drug available in a country includes not only the marginal cost of producing additional units but also ancillary costs along the entire supply chain, including expenses associated with maintaining marketing authorization, providing medical information to prescribers, and engaging in ongoing safety monitoring of the product. When all of these costs are taken into account, the break-even price might still be out of reach in some parts of the world. Some might argue that, if a company has developed a life-saving medication for which no alternatives exist, and the medication is urgently needed in a country that cannot even afford to pay the break-even price, it would not be too much to ask the company to sell the drug in the country even if doing so would involve some amount of financial loss. In other words, there are those who might disagree with Archie Carroll’s claim, discussed above,69 that a firm cannot be criticized as unethical solely because it chooses not to engage in philanthropy. Indeed, at least for medicines targeting conditions that are prevalent in both rich and poor countries, it is questionable whether setting prices below cost in low-income countries should even be regarded as “philanthropy,” given that companies can simply make up these costs by charging higher prices in wealthier markets. 70 By way of comparison, utility com 68 See David

Henry & Andrew Searles, Pharmaceutical Pricing Policy, MDS-3: MANAGING ACCESS TO MEDICINES AND HEALTH TECHNOLOGIES Sec. 9.10 (3rd ed. 2012), available at http://apps.who.int/medicinedocs/documents/s19585en/s19585en.pdf. 69 See Carroll, supra note 22. 70 The World Health Organization has distinguished between three types of diseases based on their relative impact on rich and poor countries. Type I diseases, such as measles and diabetes, are “incident in both rich and poor countries, with larger number of vulnerable populations in each.” Type II diseases, such as HIV and tuberculosis, are “incident in both rich and poor countries, but with a substantial proportion of the cases in the poor countries.” Type III diseases, such as African sleeping sickness and African river blindness, are “overwhelmingly or exclusively incident in the developing countries.” World Health Organization, Commission on Intellectual Property Rights, Innovation, and Public Health, Public Health, Innovation, and Intellectual Property Rights 12-13 (2006). Cost-shifting

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panies are expected to provide services to needy customers at a price below actual costs,71 but we do not consider utilities to be engaged in philanthropy as long as their total return (on high- and low-income customers combined) is positive. Of course, utilities are different from pharmaceutical companies because they are typically subject to centralized price controls and are required to provide services to persons at all levels of income. However, the analogy is instructive because it demonstrates that, when it is possible to engage in cost-shifting among different market segments, characterizing price discounts as philanthropy does not necessarily make sense. Nevertheless, in setting a minimum ethical expectation, we believe it is appropriate to distinguish between situations in which companies can make essential medicines available in a country without losing any money in that market, and situations in which making the medicine available would require the company to spend more in a particular country than it will generate in sales. In the former situation, we have no hesitation concluding that it would be unethical for a company to stay out of the country simply because it is unlikely to be able to earn a profit. However, an ethical assessment of a company’s decision not to spend more than it earns in a particular country would require a more context-specific analysis that takes into account the actual costs, benefits, and alternatives at stake. Companies cannot be expected to lower their prices in less economically developed countries without the cooperation of other international actors. For example, one way that national health systems in some high-income countries attempt to control drug costs is by setting prices for drugs based on comparisons to prices charged in other countries (a practice known as “international reference pricing”).72 Companies will understandably be reluctant to lower prices for essential drugs in less economically developed countries if high-income countries will then insist on similar price reductions for their own national health systems. In order to fulfill their own human rights obligations to promote global access to medicines,73 high-income is most likely to be feasible for medicines related to Type I diseases. It will be more difficult for medicines related to Type II diseases, and probably impossible for medicines related to Type III diseases. 71 See generally Maren Mahoney & Michael O’Boyle, ASU Energy Policy Innovation Council, A National Survey of Electric and Gas Utility Rate Structures for Low-Income Customers (Sept. 18, 2013), https://energypolicy.asu.edu/wp-content/uploads/2013/12/National-Survey-of-Low-IncomeUtility-Rates.pdf (explaining that many utility companies discount the cost of services for low-income families). 72 All European Union and European Free Trade Association countries except Sweden and the United Kingdom use international reference pricing in some capacity. See European Federation of Pharmaceutical Industries and Associations, Principles for Application of International Reference Pricing Systems (June 2014), http://www.efpia.eu/uploads/Principles_for_application_of_international_reference_pricing_systems _June_2014_Position_Paper.pdf. 73 See Hunt, supra note 37. SETON HALL LAW

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countries that engage in international reference pricing should therefore limit their price comparisons to peer countries with similar economic and social characteristics. Similarly, there is a danger that the availability of low-priced essential medicines in less economically developed countries will lead to product diversion, with cheaper medications eventually leaking back into high-income markets.74 To some extent, companies can minimize these risks through technological measures, such as the use of distinctive packaging on products intended for sale at lower prices in less economically developed markets.75 High-income countries can also reduce this problem by enacting laws and policies designed to combat the unauthorized importation of essential medicines from low- and middle-income countries. Finally, in addition to pricing considerations, decisions about whether to register a drug in a particular country should also take into account whether it will be possible to ensure safe and effective use of the product. As noted above, some drugs require complex diagnostic tests or ongoing monitoring, which may not realistically be available in certain parts of the world. For example, many innovative cancer treatments require services that are rare in many low- and middle-income countries.76 Companies should not be expected to register a new drug in a country if the basic preconditions for safe and effective use of the drug cannot be assured.

74 See Sumner La Croix & Ming Liu, Patents and Access to Essential Medicines, 2 FRONTIERS ECON. &

GLOBALIZATION 423, 453, available at http://www.economics.hawaii.edu/sumnerfiles/lacroixliupatentdrugs2008.pdf. 75 Other examples include “differentiated packaging, language variations, or market-specific dosages.” Id. at 435. The World Trade Organization already requires such practices for medications made pursuant to its so-called “Paragraph 6 System,” which authorizes countries to issue compulsory licenses in order to export generic medicines to other countries that lack the capacity to produce the medicines themselves. See World Trade Organization General Council, Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, Doc. WT/L/540 (Sept. 1, 2003), available at https://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm (“Products manufactured under the [compulsory] license shall be clearly identified as being produced under the system set out in this Decision through specific labelling or marking. Suppliers should distinguish such products through special packaging and/or special colouring/shaping of the products themselves, provided that such distinction is feasible and does not have a significant impact on price.).” 76 See Susan Horton & Cindy L. Gauvreau, Cancer in Low- and Middle-Income Countries: An Economic Overview, in CANCER: DISEASE CONTROL PRIORITIES 263 (Hellen Gelband et al., 3rd ed. 2015), available at https://www.ncbi.nlm.nih.gov/books/NBK343628/pdf/Bookshelf_NBK343628.pdf; see also Jane Robertson et al., Essential Medicines for Cancer: WHO Recommendations and National Priorities, 94 BULL. WORLD HEALTH ORG. 735 (2016) (noting that “[t]he delivery of effective cancer services is complex and requires substantial investment in health facilities and technologies and trained health workers who are able to provide care of good quality”).

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B. Breadth of Market Access

In the previous section, we argued that companies should be expected to register a drug in an emerging market if it meets the definition of an essential medicine in that setting, if it can be sold without losing money in the country, and if conditions for the safe and effective use of the product can be assured. Companies might also choose to sell non-essential medicines in emerging markets if they determine that doing so represents a valuable business opportunity. In either case, once a company has chosen to introduce a particular product into a country, they must consider whether the drug can be made available equitably throughout the population. In the case of essential medicines, the duty to consider these distributional consequences stems from the human rights obligation to ensure that essential medicines will be made “as accessible as possible, as soon as possible, to all those in need.”77 While companies do not have the same human rights-based obligation to ensure equitable access to non-essential medicines, they should still consider distributional issues in order to ensure that their actions do not cause harm by exacerbating social inequality.78 In general, if a country has a public health system that provides medications to patients, either directly or through reimbursement programs, companies should make every effort to sell their products through that system. Doing so is the best way to provide broad access to the medication throughout the country in a sustainable manner. This is especially important for essential medicines, but it is also desirable for other medicines that satisfy important health care needs for particular segments of the population. In negotiating sales prices with public health systems, companies should take into account the country’s level of economic development, as well as the burden of disease and the expected value of the medication.79 In addition to being ethically relevant, companies have an economic incentive to consider these factors, as they provide evidence of the country’s ability and willingness to pay particular prices.80 77 See Hunt, supra note 37, at ¶ 37. 78 See supra, text accompanying note 60. 79 Cf. Suerie Moon et al., Development Assistance for Health: Quantitative Allocation Criteria and Con-

tribution Norms 15 (Chatham House, Centre on Global Health Security Working Group on Financing Paper No. 3, Feb. 1, 2014), available at https://www.chathamhouse.org/publications/papers/view/197643 (finding that, in determining how to allocate resources to improve health in low- and middle-income countries, donor organizations typically focus on countries’ level of economic need and the potential effectiveness of interventions, but they may also consider factors such as whether a country’s need “is due to unfavourable circumstances, i.e., factors over which the government or the people exert little or no control”). 80 Companies are becoming more open to differential pricing, despite earlier unwillingness to deviate substantially from U.S. prices. Willingness is largely based on countries’ price elasticity of demand; profits are maximized when price is set at its optimal level in each country. See SCHOONVELD, supra

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When feasible, companies should explore alternative payment arrangements with public health systems, including price-volume arrangements 81 and/or pricing mechanisms that tie the level of reimbursement to the medical benefits produced.82 If a drug will not be made broadly available through a public health system (whether because such a system does not exist or because it is unable or unwilling to purchase the drug at a business-viable price), companies may seek to market the drug to self-pay or privately insured patients. In some cases, this may be the only realistic option for selling a product, particularly in countries without welldeveloped public health systems. While such an approach is not ideal, it should not be considered inherently unethical. Precluding such practices would mean that drugs not provided through a country’s public health system would not be made available to anyone in the country, an outcome that could deprive private-pay patients of access to important drugs. In general, medications that have been proven to be safe and effective should not be withheld from patients who could benefit from them solely because it may not be possible to benefit all patients in need. Nevertheless, selling medications exclusively to self-pay or privately insured patients presents significant ethical challenges. By increasing the treatment options available to the wealthy without also increasing the options available to the poor, such an approach will necessarily exacerbate existing inequalities in access to health care. Moreover, as noted above, new drugs can give rise to iatrogenic injuries that may require treatment in the public health system, which would cause further harm by taking away resources that could have been devoted to other public health purposes.83 At some point, the availability of lucrative drug-based treatments may even lead some health care professionals to abandon the public system entirely, so that they can devote more of their energies to private-pay patients. In light of these risks, companies that choose to market their products to self-pay or private-pay patients, without also making them broadly available through a country’s public health system, assume a responsibility to undertake affirmative mechanisms to mitigate these potential negative consequences. One way they might do this is to institute programs to provide the drug to less wealthy segments of the population at an affordable price. For example, companies might provide means note 10, at 206-7; see also Surie Moon et al., A Win-Win Solution?: A Critical Analysis of Tiered Pricing to Improve Access to Medicines in Developing Countries, 7 GLOBALIZATION AND HEALTH 2 (2011). 81 Organisation for Economic Co-operation and Development, OECD Health Policy Study: Pharmaceutical Pricing Policies in a Global Market 111 (2008), http://apps.who.int/medicinedocs/documents/s19834en/s19834en.pdf (defining price-volume agreements as arrangements in which a pharmaceutical company charges a price “based on the total value of sales, rather than on a per-unit price basis”). 82 See generally Jakub Adamski et al., Risk Sharing Arrangements for Pharmaceuticals: Potential Considerations and Recommendations for European Payers, 10 BMC HEALTH SERVICES RES. 153 (2010). 83 See generally, Mouton et al, supra note 59.

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tested subsidies that patients can use to obtain the drug for reduced or no cost, with the amount of the subsidy based on patients’ ability to pay. We recognize that intra-country price tiering raises challenging logistical issues84 and is likely to prove unfeasible without assistance from the government. Moreover, subsidies may not reach all segments of the population, particularly patients in geographically remote areas. Systems would need to be developed to assess relative need fairly and accurately, and distribution channels would need to be carefully managed to ensure that subsidies are not diverted from their intended recipients to other beneficiaries. Measures to prevent abuse of such systems are particularly important in countries with high levels of corruption. Another strategy for making drugs more broadly available would be to enter into a licensing arrangement with a local manufacturer that permits the manufacturer to market the same drug in a generic version at a significantly lower price.85 (In countries that lack local manufacturing capacity, an alternative might be for the company to market a lower-cost version of the drug itself under a different brand name.) However, the effectiveness of this strategy depends on the disease type and market size. It is most likely to work for drugs that can be sold in high volumes at low profit margins. It is least likely to work for drugs that have significant non-price barriers, limited markets, or are difficult to manufacture, where the introduction of a generic alternative might not lead to a substantial reduction in price. For some drugs, neither of these strategies may be a viable option, due to structural, non-price barriers that prevent safe and effective use of the medication in certain segments of the population. For example, in rural areas that lack access to basic health facilities, it might not be possible to ensure the ongoing monitoring necessary for the safe use of some products, even if they are provided at an affordable price. Wherever possible, companies should work with governments and local stakeholders to explore the feasibility of overcoming these barriers. For example, in some situations, it may be possible to rely on non-physician providers to monitor patients, or to monitor patients remotely through mobile technology. Companies should also use their negotiating power with governments to lobby for measures to address infrastructure gaps that inhibit access to medicines, such as the absence of roads in 84 See Owain D. Williams et al., Cautionary Notes on a Global Tiered Pricing Framework for Medicines,

105 AM. J. PUB. HEALTH 1290, 1292 (2015) (noting that creating a framework that could identify different market segments within a country would likely require “a very granular process, possibly requiring rich data on in-country income and factors (e.g., local disease burden and rates of out-ofpocket payment) to enable calculation of ability-to-pay based on income and price sensitivity,” and concluding that it might not be possible “to adequately ensure that the framework’s prices do not prove to be regressive for the poor and progressive for the rich”). 85 See Moon, supra note 80, at 10 (noting that licensing agreements may increase generic competition thereby helping to keep prices low). SETON HALL LAW

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remote rural areas. However, even with these efforts, it must be recognized that, in some cases, companies may have no realistic means to make certain products equitably available to the entire population, even if they are willing to make substantial concessions on price.86 Programs designed to make medications available to all segments of the population at an affordable price are not the only way that companies can reduce the inequities resulting from selling drugs to self-pay and privately insured patients. Another option would be to use some of the proceeds from sales of the product to support other public health initiatives. For example, companies might dedicate a portion of a drug’s sales revenue to efforts to provide access to essential medicines in lowincome communities. Alternatively, they might choose to fund other public health initiatives, such as the construction of health facilities or the purchase of needed diagnostic equipment. Such programs might be instituted in addition to, or in some cases instead of, mechanisms to make the drug more broadly available. In choosing a strategy for mitigating the potential negative consequences of selling drugs primarily to a country’s wealthy population, companies should work collaboratively with governments and other local stakeholders. The choice of strategy should also be guided by the nature of the particular drug. For essential medicines, particularly those that are insufficiently supported by the country’s public health system, it will generally be preferable to make efforts to ensure that the drug is made broadly available to all segments of the population, through the use of meanstested subsidies, licensing arrangements, or other mechanisms. Using some of the proceeds from sales of the drug to support other public health initiatives can complement these efforts but should not replace them entirely. By contrast, for drugs that do not have a major public health impact, efforts to promote broad population access may not be the best use of resources. For example, consider a company that seeks to market a new antidepressant that contains the same active ingredient as a medication already available in generic form but that is available in a more convenient once-a-week dosage. While such a drug might provide a meaningful benefit to certain individuals, it cannot reasonably be characterized as filling a pressing public health need. Therefore, rather than seeking to ensure broad access to the medication among all segments of the population, it might be preferable to use some of the proceeds from sales of the product to finance programs to provide essential health care services. 86 See David J. Olson, Drug Companies Test Out New Strategies for Improving Access in Poor Countries

HUMANOSPHERE (Nov. 25, 2016), http://www.humanosphere.org/global-health/2016/11/drugcompanies-test-new-strategies-improving-access-poor-countries/ (“The cost of drugs is a barrier to the poor in the developing world, although it may not be the biggest access problem in countries like Ethiopia that lack much capacity to deliver medicines at any price.”).

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Companies can demonstrate their commitment to addressing the ethical implications of their marketing practices by being transparent about their choice of strategy and their rationale for choosing it. For example, before launching a new product in a particular country, companies might undertake a formal social impact assessment that details which segments of the population are likely to face barriers to access and the steps the company intends to take to respond to these barriers. C. Sales and Marketing Practices In all countries, when drugs are marketed directly to health care professionals or other purchasers, there is a potential for undue influence on prescribing and/or outright corruption. In the high-income countries that make up pharmaceutical companies’ primary markets, an elaborate set of laws, regulations, and industry codes exists to mitigate these risks.87 While similar rules have been put in place in some emerging economies,88 significant regulatory gaps remain in many countries. Moreover, even when laws, regulations, or industry codes are adopted, enforcement may be limited or even non-existent. Companies should not exploit the absence of effective oversight to engage in practices in emerging economies that would not be acceptable in their own home countries. Instead, in the absence of applicable national standards, they should adhere to the same standards that would apply in their home jurisdictions. Moreover, even if national standards exist, they should follow their home country standards to the extent they are more stringent. Particular challenges arise in countries that lack effective systems for ensuring that medications are dispensed only in accordance with their approved labeling requirements. At the October 2016 meeting held as part of this project, some participants noted that, in some countries, especially in sub-Saharan Africa, consumers can walk into “medicines shops� and buy almost any medicine without a prescription. They simply need to explain their symptoms, after which they will be offered a number of different brands at various prices. In some cases, they may purchase just a few capsules or tablets of a drug rather than a full course of treatment. Such an

87 See generally Jeffrey Francer et al., Ethical Pharmaceutical Promotion and Communications World-

wide: Codes and Regulations, 9 PHIL., ETHICS, & HUMAN. IN MED. 1 (2014) (surveying the legislative, regulatory, and code-based controls governing the international pharmaceutical industry). 88 See id. at 3 (noting that China, India, and South Africa are developing codes that mirror their European counterparts); see also Association of Research-Based Pharmaceutical Companies, AIFD Code of Good Promotional Practice and Good Communication (5.2 ed. Feb. 20, 2015), available at http://transparency.efpia.eu/countries/download/32/document/aifd-turkey-code-ofpractice_5_2_20150220.pdf. SETON HALL LAW

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approach can do more harm than good. It is particularly dangerous in the case of antibiotics, as it can contribute to the development of drug-resistant strains.89 Companies should not sell medications that would be dangerous to use without a health care professional’s supervision unless they can be confident that the medication will be dispensed only upon presentation of a legitimate prescription. In some cases, this may require distributing the drug in the context of a specialized, government-supported health-care delivery system. For example, some countries have sought to control the emergence of drug-resistant tuberculosis by limiting the sale of tuberculosis drugs to government-run pharmacies.90 Finally, an important responsibility of pharmaceutical representatives is providing information to health care professionals about the safe use of medications, both through written information (including the package insert) and orally. Companies should ensure that all such information is translated accurately into the local language. Moreover, in settings with low educational levels and high rates of illiteracy, companies should provide alternative tools for communicating information about the safe use of medications to patients, such as pictographs or audio recordings. This is particularly important for medications that involve complex dosing requirements or that have potentially serious drug interactions.

IV. Areas for Further Research This White Paper has offered several recommendations to pharmaceutical companies with respect to the sale of new medications in less economically developed countries. The effective implementation of these recommendations will require further research and discussion. Potential areas for future research include the following: •

Determining the extent to which drugs on countries’ essential medicines lists are actually available and used by different population groups, especially inexpensive off-patent drugs for which price is not the primary barrier to access

Identifying specific non-price barriers to access to medicines and assessing the efficacy of potential measures to address them (e.g., methods for providing diagnostic testing and monitoring to patients in geographically remote areas)

89 See Iruka N. Okeke et al., Socioeconomic and Behavioral Factors Leading to Acquired Bacterial Re-

sistance to Antibiotics in Developing Countries, 5 EMERGING INFECTIOUS DISEASES 18, 19-20 (1999), available at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2627681/pdf/10081668.pdf. 90 See Timothy Sullivan & Yanis Ben Amor, Global Introduction of New Multidrug-Resistant Tuberculosis Drugs—Balancing Regulation with Urgent Patient Needs, 22 EMERGING INFECTIOUS DISEASES (March 2016), https://wwwnc.cdc.gov/eid/article/22/3/15-1228_article#r13.

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Compiling examples of intra-country differential pricing strategies and evaluating the extent to which they have been successful at promoting equitable access to essential medicines

Understanding how patients actually obtain medicines in particular regions (e.g., through pharmacies, “medicines shops,” or directly through health care providers), with a particular focus on medicines that pose significant risks when they are improperly used

Evaluating the kind of information patients receive about safe use of the medicines and the extent to which they understand it

Exploring stakeholders’ views about the underlying principles that should guide companies’ access to medicines strategies; for example, whether it is generally accepted that the costs of providing free or low-cost medicines to low-income populations should be offset by charging higher prices to those who can afford to pay more

The Center will continue to work with interested stakeholders to explore these and related policy questions.

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Appendix Participants at Roundtable Meeting, October 6-7, 2016

Academia 1. Calvin Ho Assistant Professor, Centre for Biomedical Ethics, University of Singapore, CoHead, WHO Collaborating Centre for Bioethics (Singapore) 2. Jillian Clare Kohler Professor, Leslie Dan Faculty of Pharmacy, Munk School of Global Affairs & Dalla Lana School of Public Health, University of Toronto; Director, WHO Collaborating Centre for Governance, Accountability and Transparency for the Pharmaceutical Sector (Canada) 3. Alex John London Professor of Philosophy, Director, Center for Ethics and Policy, Carnegie Mellon University (USA) 4. Jennifer Miller Assistant Professor, Division of Medical Ethics, New York University (USA) Government 5. Yot Teerawattananon Health Intervention and Technology Assessment Program, Thai Ministry of Health (Thailand) 6. Madeleine Valera Undersecretary of Health, Philippine Department of Health (Philippines) Nonprofit 7. Ruth Lopert Deputy Director, Pharmaceutical Policy & Strategy, Pharmaceuticals & Health Technologies Group, Management Sciences for Health (USA)

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Health Care Providers

8. Abul Faiz Professor of Medicine, Sir Sallimullah Medical College (Bangladesh) 9. Miguel Jorge Associate Professor of Psychiatry, Federal University of São-Paulo; Director, Brazilian Medical Association; Chair, Socio-Medical Affairs Committee, World Medical Association (Brazil) 10. Alwyn Mwinga CEO, Zambia AIDS Related Tuberculosis Project (Zambia) 11. Sayedur Rahman Professor of Pharmacology, Bangabandhu Sheikh Mujib Medical University (Bangladesh) Patient Representatives 12. Jolanta Bilinska Chair, International Society of Patient Organizations (Poland) 13. Hussain Jafri Secretary General, Alzheimer’s Pakistan (Pakistan) Industry 14. Patrizia Carlevaro GenomSys Board Member (Switzerland) 15. Fiona Dunbar Vice President, Global Medical Affairs, Janssen (Canada) 16. Dell Kingsford Smith Vice President, Global Market Access, Emerging Healthcare Systems, Janssen (USA) 17. Nazeem Mohamed CEO, Kampala Pharmaceuticals (Uganda) Presentations by Videoconference 18. Danny Edwards Research Programme Manager, Access to Medicines Foundation (Netherlands) 19. Trudo Lemmens Professor and Scholl Chair in Health Law & Policy, University of Toronto Faculty of Law (Canada)

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Ethical Considerations in Selling Pharmaceuticals in Emerging Economies  

This White Paper articulates a set of ethical expectations for international research-based pharmaceutical companies regarding the sale of m...

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