ANNEXURE JMB
AFFIDAVIT BY JONATHAN MICHAEL BERGER: PRICING TABLES AND
CALCULATIONS OF ESTIMATED ECONOMIC VALUE
I, the undersigned
JONATHAN MICHAEL BERGER
do hereby solemnly affirm and say:
1.
I am a researcher in the Law and Treatment Access Unit of the AIDS Law
Project, based at the Centre for Applied Legal Studies at the University of the
Witwatersrand, Johannesburg. I hold the degrees of B Arch, LL.B and LL.M.
My masters thesis explores the relationship between international trade law,
domestic constitutional law and access to treatment for HIV/AIDS. In particular,
the thesis explores the extent of regulatory flexibility permitted by the World
Trade Organisation’s Agreement on Trade-related Aspects of Intellectual
Property Rights (TRIPS).
2.
The facts deposed to in this affidavit are within my personal knowledge except
where I indicate otherwise. To the extent that I rely on the information received
from others, I believe that such information is true and correct.
3.
The purpose of this affidavit is twofold. First, the affidavit explains the methods
adopted in compiling the prices referred to in Tables 1, 2 and 3 of the Statement
of Complaint.
Second, the affidavit explains the methods adopted in
determining estimates for the “economic value” of each antiretroviral drug (ARV)
that is the subject of the complaint.
2
4.
Wherever prices have been converted from US dollars (US$) to South African
rands (ZAR) and vice versa, an exchange rate of US$1 = ZAR10.50 has been
used.
Table 1: ADULT FORMULATIONS PER TABLET/CAPSULE
5.
In respect of each product in Table 1, four prices are given.
Column 1—price sold to private sector
6.
The prices in Column 1 are the latest available prices (in South African rands
(ZAR) and exclusive of value-added tax (VAT)) charged by the respondents
through their local companies to the private sector in South Africa, based on
prices obtained from GSK and Boehringer themselves. In this regard, see the
price lists attached hereto marked Annexure JMB1 and Annexure JMB2
respectively. Only the relevant pages of the Boehringer price lists are annexed.
7.
The prices given for Retrovir®, 3TC® and Combivir® in the GlaxoSmithKline
Pharmaceuticals Price List (Annexure JMB1) are for a 30 days’ supply of the
relevant ARV (60 tablets) taken as part of highly active antiretroviral therapy
(HAART) and exclusive of VAT. The prices of GSK ARVs in Column 1 of Table
1 are the prices per tablet or capsule of the particular ARV concerned, being the
price given by GSK divided by 60. The unit of a single tablet or capsule has
been used to provide a convenient standard of comparison and because I am
not aware whether the standard packaging in units of 60 tablets or capsules is
used without exception.
8.
The price given for Viramune® in the Boehringer ARV Price Comparison
spreadsheet (Annexure JMB2) is for a 30 days’ supply of the ARV (60 tablets)
taken as part of HAART and is inclusive of VAT.
The price for nevirapine
(Viramune®) in Column 1 of Table 1 is the price per tablet, being the price given
by Boehringer, less VAT, divided by 60.
Column 2—international best price offer (branded product)
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9.
The prices in Column 2 are the latest available international best price offers (in
US dollars (US$)) for developing countries made by GSK and BoehringerIngelheim internationally, based on prices obtained from the Medecins Sans
Frontieres (MSF) study entitled “Untangling the Web of Price Reductions: a
Pricing Guide for the Purchase of ARVs for Developing Countries” (June 2002,
2nd edition) (MSF study) and a recent press statement issued by GSK on 5
September 2002 (the GSK press statement). Copies of the study and the press
statement will be annexed to the Statement of Complaint as Annexure G and
Annexure H respectively.
10.
The prices given in the GSK press statement are the prices per patient for a
single day’s supply of the relevant ARV taken as part of HAART, exclusive of
any relevant taxes (p3 of Annexure H). The prices for GSK ARVs in Column 2
of Table 1 are the prices per tablet or capsule of the particular ARV concerned,
being the price given in the GSK press statement divided by 2 (daily dose of
each ARV concerned is 1 tablet taken twice daily).
11.
The prices given for ARVs in the MSF study are prices per patient for a year’s
supply of the relevant ARV taken as part of HAART, exclusive of any relevant
taxes. The price for nevirapine (Viramune®) in Column 2 of Table 1 is the price
per tablet, being the price given in the MSF study divided by the daily dosage
requirement (1 tablet twice daily) and the number of days in a year (365). (p8 of
Annexure G)
Column 3—international best price offer (WHO pre-qualified generic)
12.
The prices in Column 3 are the latest available international best price offers (in
US$) by generic pharmaceutical manufacturers of equivalents that have been
pre-qualified by the World Health Organisation (WHO), based on prices
obtained from the MSF study. The concept of WHO pre-qualification of ARVs is
dealt with in the Statement of Complaint.
4
13.
The price of each ARV in Column 3 of Table 1 is the price per tablet or capsule,
being the price given in the MSF study divided by the daily dosage requirement
(1 tablet twice daily) and the number of days in a year (365). (p7, 8 and 10 of
Annexure G)
Column 4—international best price offer (generic)
14.
The prices in Column 4 are the latest available international best price offers (in
US$) by generic pharmaceutical manufacturers producing generic equivalents
of the ARVs concerned, based on prices obtained from the MSF study.
15.
The price of each ARV in Column 4 of Table 1 is the price per tablet or capsule,
being the price given in the MSF study divided by the daily dosage requirement
(1 tablet twice daily) and the number of days in a year (365). (p7,8 and 10 of
Annexure G)
Table 2: PAEDIATRIC FORMULATIONS PER 100ML
16.
In respect of each product in Table 2, two prices are given.
Column 1—price sold to private sector
17.
The prices in Column 1 are the latest available prices (in ZAR and exclusive of
VAT) charged by the respondents through their local companies to the private
sector in South Africa, based on prices obtained from GSK and Boehringer
themselves.
18.
The prices given for Retrovir® syrup and 3TC® oral solution in the
GlaxoSmithKline Pharmaceuticals Price List (Annexure JMB1) are for 200ml
and 240ml packs respectively. The prices of GSK ARVs in Column 1 of Table 2
are the prices per 100ml of the particular ARV concerned, being the prices given
by GSK in respect of Retrovir® syrup and 3TC® oral solution divided by 2 and
2.4 respectively. The unit of 100ml was used to provide a convenient standard
for comparison. The various paediatric products are not packaged uniformly.
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Column 2—international best price offer (WHO pre-qualified generic)
19.
The prices in Column 2 are the latest available international best price offers (in
US$) by a generic pharmaceutical manufacturer of products that have been prequalified by the WHO, based on prices obtained directly from Cipla-Medpro
(Pty) Ltd (Cipla-Medpro), a South-African based generic pharmaceutical
company that has entered into a commercial relationship with Cipla Limited, an
Indian generic manufacturer of generic ARVs.
In this regard, see the
communication from Mr Jerome Smith of Cipla-Medpro, attached hereto marked
Annexure JMB3.
20.
The price of each ARV in Column 2 of Table 2 is the price per 100ml of the
relevant paediatric formulation, as provided by Cipla-Medpro.
Table 3: ANNUAL COSTS PER ADULT OR CHILD
21.
The prices given in Table 3 are the annual costs per adult or child of using a
particular ARV as part of HAART, calculated according to the recommended
daily doses contained in a WHO document entitled “Scaling-up Antiretroviral
Therapy in resource Limited Settings: Guidelines for a Public Health Approach”
(22 April 2002), a copy of which is attached to the Statement of Complaint
marked Annexure J.
22.
In respect of adult treatment, the prices in Columns 1 to 4 of Table 3 are
multiplied by the recommended daily dosages and the number of days in a year
to come to an annual figure.
23.
In respect of paediatric treatment, the calculation of an annual figure is
somewhat more complex.
23.1. According to the WHO guidelines, the daily dosage requirement of
AZT for children between the ages of 4 weeks and 13 years is
180mg/m2/dose twice daily.
The body surface area (in m 2) is
calculated as follows: square root of (height in centimetres ×
6
weight in kilograms ÷ 3600). In the case of an average 3-year-old
girl child of height 94cm and weight 14kg (see “Clinical Growth
Charts” National Center for Health Statistics and “2 to 20 years:
Girls, Stature-for-age and Weight-for-age percentiles” attached
hereto marked Annexure JMB4 and JMB5 respectively), body
surface area is 0.605m2. Thus the daily dosage requirement of an
average 3-year-old girl child is 180 × 0.605 × 2 = 217.8mg.
23.2. The strength of AZT solution is 50mg/5ml, requiring 21.78ml of
AZT solution per day. On the basis that 22ml of AZT solution is
needed per day, 8030ml of solution is required per average 3year-old girl child per year as part of HAART. The costs for AZT
solution in Table 2 are therefore multiplied by 80.3 (as the prices
given are for 100ml of solution) to arrive at an annual figure.
23.3. According to the WHO guidelines, the daily dosage requirement of
lamivudine for children older than 30 days and weighing less than
60kg is 4mg/kg/dose twice daily.
Thus the daily dosage
requirement of an average 3-year-old girl child weighing 14kg is 4
× 14 × 2 = 112mg.
23.4. The strength of lamivudine solution is 10mg/ml, requiring 11.2ml of
AZT solution per day.
On the basis that 12ml of lamivudine
solution is needed per day, 4380ml of solution is required per
average 3-year-old girl child per year as part of HAART.
The
costs for lamivudine solution in Table 2 are therefore multiplied by
43.8 (as the prices given are for 100ml of solution) to arrive at an
annual figure.
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ESTIMATING “ECONOMIC VALUE”
Retrovir®
24.
As explained in the Statement of Complaint, assumptions most favourable to the
respondents have been used in estimating the “economic values” of the
respective branded ARVs.
25.
The estimated “economic value” of Retrovir® has been calculated taking into
consideration the following components: 14.85% of sales attributed to research
and development (R&D) and 16.2% of sales attributed to profit margin, together
amounting to 31.05% of sales.
26.
Thus estimated “economic value” can be calculated as follows:
economic value = manufacturing costs + (0.3105 × economic value)
economic value – (0.3105 × economic value) = manufacturing costs
(1 - 0.3105) × economic value = manufacturing costs
0.6895 × economic value = manufacturing costs
economic value = manufacturing costs ÷ 0.6895
economic value = 1.45 × manufacturing costs
3TC®
27.
The estimated “economic value” of 3TCr® has been calculated taking into
consideration the following components: 14.85% of sales attributed to R&D,
16.2% of sales attributed to profit margin and 14% of sales attributed to
licensing fees, together amounting to 45.05% of sales.
28.
Thus estimated “economic value” can be calculated as follows:
economic value = manufacturing costs + (0.4505 × economic value)
economic value – (0.4505 × economic value) = manufacturing costs
(1 - 0.4505) × economic value = manufacturing costs
8
0.5495 × economic value = manufacturing costs
economic value = manufacturing costs ÷ 0.5495
economic value = 1.82 × manufacturing costs
Combivir®
29.
The estimated “economic value” of Combivir® has been calculated taking into
consideration the following components: 14.85% of sales attributed to R&D and
16.2% of sales attributed to profit margin.
In addition, in respect of the
lamivudine component of Combivir®, 14% of sales are attributed to licensing
fees.
30.
The value of the lamivudine component is calculated according to the value of
the estimated manufacturing cost of lamivudine as a percentage of the value of
the estimated manufacturing costs of AZT and lamivudine taken together. In
other words, the cost per 150mg tablet of lamivudine (R1,46—Column 3 of
Table 1) is divided by the sum of the cost per 150mg lamivudine tablet added to
the cost per 300mg tablet of AZT (R2,59—Column 3 of Table 1), giving a value
of the lamivudine component of Combivir® at 36%.
31.
Thus in addition to the 14.85% of sales attributed to research and development
(R&D) and 16.2% of sales attributed to profit margin, the calculation of
estimated “economic value” includes 36% of 14% licensing fees, or 5.04%,
together amounting to 36.09% of sales.
32.
Thus estimated “economic value” can be calculated as follows:
economic value = manufacturing costs + (0.3609 × economic value)
economic value – (0.3609 × economic value) = manufacturing costs
(1 - 0.3609) × economic value = manufacturing costs
0.6391 × economic value = manufacturing costs
economic value = manufacturing costs ÷ 0.6391
economic value = 1.56 × manufacturing costs
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Viramune®
33.
The estimated “economic value” of Viramune® has been calculated taking into
consideration the following components: 15.2% of sales attributed to research
and development (R&D) and 16.2% of sales attributed to profit margin, together
amounting to 31.4% of sales.
34.
Thus estimated “economic value” can be calculated as follows:
economic value = manufacturing costs + (0.314 × economic value)
economic value – (0.314 × economic value) = manufacturing costs
(1 - 0.314) × economic value = manufacturing costs
0.686 × economic value = manufacturing costs
economic value = manufacturing costs ÷ 0.686
economic value = 1.46 × manufacturing costs
____________________________
JONATHAN MICHAEL BERGER
SIGNED AND AFFIRMED BEFORE ME AT JOHANNESBURG ON THIS THE 18 th DAY OF
SEPTEMBER 2002, THE DEPONENT HAVING ACKNOWLEDGED THAT HE KNOWS AND
UNDERSTANDS THE CONTENTS OF THIS AFFIDAVIT, THAT HE HAS NO OBJECTION
TO TAKING THE PRESCRIBED SOLEMN AFFIRMATION AND THAT HE CONSIDERS
THE SAME AS BINDING ON HIS CONSCIENCE.
________________________
COMMISSIONER OF OATHS