AIDS, Drug Prices and Generic Drugs

Over the past decade activist pressure, the emergence of competition from generic manufacturers, and direct negotiation with pharmaceutical companies have all contributed to a dramatic drop in the price of certain drugs to treat HIV and AIDS in developing countries.

The availability of cheap antiretroviral drugs has been instrumental in treatment scale-up for resource-poor settings hard hit by the AIDS epidemic. Around 8 million people in low- and middle-income countries are currently receiving drugs to treat HIV/AIDS.¹ This would simply not have been possible without a reduction in the price of antiretrovirals drugs (ARVs).

Despite significant advances, a number of problems related to the price of HIV drugs remain. Not all drugs to treat HIV and AIDS are available at a suitably cheap price for poor countries, meaning that many of the newer, more effective drugs are only available in the West. This page looks at how the initial price reductions were achieved and the problems that many developing countries still face in accessing cheap, appropriate antiretrovirals.

back to top Reducing the price of HIV/AIDS treatment

In 1996, HAART - an effective combination therapy that delays the onset of AIDS - became available to those living with HIV in rich countries.² Within four years, death rates for people with HIV/AIDS in developed countries had dropped by 84 percent.³

At a cost of US$10,000-15,000 per person per year, these antiretroviral drugs were far too expensive for the majority of people infected with HIV in resource poor countries. Five years after HAART was introduced in the West, only 2 percent of people in developing countries were receiving the life-saving drugs.⁴ In order for treatment to reach people living with HIV in the developing world, the price of the drugs clearly needed to come down to an affordable level.

At the beginning of the new millennium there was a breakthrough in treatment provision for resource poor areas when an Indian pharmaceutical company started to produce generic antiretrovirals that were exactly the same as those made by large pharmaceutical companies, but significantly cheaper. This sparked a price war between branded and generic drug makers, which forced the large pharmaceutical companies to lower the price of their AIDS drugs. This competition, coupled with pressure from activists, organisations - such as the Clinton Foundation - and governments of poor countries with severe AIDS epidemics, dramatically reduced the price of ARVs for developing countries. By the middle of 2001, triple combination therapy was available from Indian generic manufacturers for as little as $295 per person per year.⁵

The price of antiretrovirals for low- and middle-income countries has continued to fall. Between 2004 and 2008, first-line antiretroviral regimens in lower- and middle-income countries declined by 30-68 percent. The most widely used drug combination, stavudine (d4T)+lamivudine (3TC)+nevirapine (NVP), is available for $US 64 per person per year.⁶ However, WHO recommends that countries phase out the use of stavudine (or d4T), due to the severe side effects associated with this drug.⁷

The role that generic drug production and price negotiations with multinational pharmaceutical companies played in lowering the price of antiretrovirals is discussed in more detail below.

Generic drugs

A generic drug is an identical copy (bioequivalent) of a brand name (or proprietary) drug. Generics are exactly the same as their branded counterparts in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use. The notable difference between the two is the price.

Generic drug manufacturers incur fewer costs in creating the generic drug, as they do not have to cover the expense of drug discovery, or lengthy safety and efficacy trials. Instead generic makers reverse-engineer known drug compounds. This means that generic manufacturers are able to maintain profitability while offering the drug at a much lower cost.

This is problematic for pharmaceutical companies who argue that generic copying reduces their profits and decreases the amount of money they can spend on researching and developing new antiretroviral drugs. In order for the proprietary drug makers to recoup the money they spent on drug creation, they are granted a ‘patent’ (an intellectual property right), which is an exclusive right that prevents others from making, using, selling, offering to sell, or importing their drug. The patent typically lasts for twenty years.

Legislation in favour of the pharmaceutical industries’ right to patent their drugs - TRIPS - was introduced in 1995. TRIPS - The Agreement on Trade Related Aspects of Intellectual Property Rights – introduced intellectual property law into the international trading system for the first time and applies to all members of the World Trade Organization (WTO). Because the implementation of TRIPS was to have a huge impact on generic drug production, the majority of developing countries were given a ten-year transition period in which to comply. This means that developing countries (such as India) were able to continue developing generic drugs until 2005, whilst least developed countries have until 2016.

Generic drugs, FDCs and AIDS

In 2001, Indian generic drug manufacturer, Cipla, announced that it would sell a generic copy of a triple-therapy antiretroviral for US$350 per patient per year. This had an incredible impact as the competition this generated dramatically drove down the price of HIV drugs for developing countries, thereby increasing the range of affordable options for national treatment programmes.

The graph below illustrates the effect of generic competition on proprietary drug prices between 2000 and 2001. It shows the lowest world price per patient per year of triple combination therapy made up of stavudine (d4T)+lamivudine (3TC)+nevirapine (NVP).⁸

India is the largest supplier of generic ARVs to low- and middle- income countries, providing 80 percent of donor-funded ARVs to low- and middle-income countries.⁹ Brazil, Thailand and South Africa also produce a significant amount of generic drugs and a number of African nations - such as Zambia, Ghana, Tanzania, Uganda, Zimbabwe and Kenya - have developed local HIV drug manufacturing facilities.^{10 11 12 13 14} In 2008 UNAIDS reported that national governments of 94 percent of countries with generalised epidemics, and 61 percent of countries with concentrated epidemics, had national policies for using generics to promote antiretroviral access.¹⁵

The manufacture and export of generic drugs was not only a turning point in terms of the price of ARVs, but also helped to revolutionise treatment for resource-poor settings by simplifying HIV/AIDS treatment. In 2001, an Indian generic manufacturer produced a combination of three antiretrovirals (patented by different pharmaceutical companies) into a single pill, known as a fixed dose combination (FDC). This was only possible because India did not have to abide by TRIPS legislation at this time and was therefore able to ignore the patents on the drugs.

FDCs were a significant innovation as they reduce the number of pills taken each day. Because FDCs are easier to manage – for both patients and health workers – they increase adherence, thereby reducing the incidence of drug resistance. The drugs were also available in heat resistant forms, which proved extremely valuable for use in the developing world, where often there is scarce access to refrigeration facilities.

Generic antiretrovirals are now widely used to treat HIV/AIDS in the developing world. They have been integrated into many treatment programmes including PEPFAR - the President's Emergency Plan for AIDS Relief. PEPFAR, the single greatest supporter of treatment provision for HIV and AIDS in the developing world, began to distribute generic drugs through its programmes in 2004-5. Generics now account for 98 percent of the drugs procured and supplied through PEPFAR's Supply Chain Management System (SCMS), which provides antiretroviral drugs to sixteen PEPFAR supported countries.¹⁶ From 2005-2008, generic ARVs allowed PEPFAR to significantly scale up its procurement of ARV drugs, without a commensurate increase in its spending on ARVs. Over this period, the increase in the proportion spent on generics by PEPFAR from 9.2 percent to 76.4 percent resulted in more than $300 million in cost savings.¹⁷

The role that the production of generic drugs had on the distribution of treatment for developing countries cannot be underestimated. Quite simply, as Stephen Lewis, former UN Special Envoy for AIDS in Africa, has said:

"…we wouldn’t have this extraordinary run of treatment in Africa now if it weren’t for the generic drugs." ¹⁸

Pressure and negotiation with ‘Big Pharma’

In the early 2000s, large pharmaceutical companies (sometimes referred to as ‘Big Pharma’) manufacturing drugs to treat HIV/AIDS were subject to intense pressure to lower their prices. Organisations such as the Clinton foundation, Médecins Sans Frontières and (later) UNITAID, alongside AIDS activists and a number of national governments, all worked to achieve price reductions.

In May 2000, five pharmaceutical companies offered to negotiate steep cuts in the price of HIV and AIDS drugs for regions severely affected by the AIDS epidemic. Dr. Rolf Krebs, vice chairman of Boehringer Ingelheim recognised that this was ''… The first time that both the public and private sector are joining forces to implement a major change in the care of HIV/AIDS in the developing world.'' Although significant price reductions were achieved, the drugs remained prohibitively expensive for many poor countries. Dr. Peter Piot, at the time Executive Director of UNAIDS, called the negotiations ''…A promising step in a long-term process'', whilst Médecins Sans Frontières called the negotiations ''…A victory, but a small one, much like an elephant giving birth to a mouse''.¹⁹

Around the same time, the Clinton administration issued an executive order which promised that the US government would not interfere with African countries that violate American patent law to obtain cheaper antiretroviral drugs.

In 2001 Bill Clinton - following the end of his second term as US president - confirmed his commitment to HIV/AIDS drug provision when he established the William J. Clinton Foundation, containing an HIV/AIDS programme. Using the former President’s contacts and knowledge, the foundation has continually worked to increase access to HIV treatment by negotiating pricing deals with drug manufacturers and working to improve health care services in developing countries.²⁰ Médecins Sans Frontières does similar advocacy work and runs a major 'Campaign for Access to Essential Medicines'.²¹

Another significant event in drug price reduction also came in 2001 following an attempt by thirty-nine major pharmaceutical companies to prosecute the South African government for passing a law that allowed easy production and importation of generics. Big Pharma was eventually forced to back down and drop the case following a tremendous outcry from the international community including the South African government, the European Parliament and 300,000 people from over 130 countries who signed a petition against the action. One of the pharmaceutical companies involved in the case, GlaxoSmithKline, even granted permission (called a voluntary licence) to major South African generics producer Aspen, to share the rights to their drugs AZT, 3TC and the combination Combivir without charge.²² This was a significant case as it brought access to medicines for poor countries into the public consciousness.

In 2006 UNITAID - an international drug purchase facility - was established to ensure a stable source of funding for drugs to treat HIV/AIDS, malaria and tuberculosis. UNITAID has partnered with the Clinton Foundation's Clinton Health Access Initiative (CHAI) since 2006, negotiating with manufacturers, including generic producers, to continually lower the price of HIV drugs and supply them in over 70 developing countries. In 2009, they announced they had reduced the price of a convenient once-daily pill (combining generic drugs tenofovir, lamivudine and efavirenz) by 30 percent compared to the price they had negotiated in 2008.²³ In partnership with drug manufacturers Pfizer and Mylan, they also brought the price of a second-line therapy regimen to below $500 dollars for the first time.^{24 25} Overall, they estimated that they managed to reduce the price of leading child HIV treatment regimens by 64 percent and the price of leading adult regimens by 43 percent in lower-income countries from 2006 to 2009. In 2011, UNITAID and CHAI and the United Kingdom's Department for International Development (DFID) announced another set of negotiations had led to further reductions in pricing for a tenofovir based regimen (down to $159 per person per year, a 60 percent reduction on 2008) as well as a WHO-recommended second line drug regimen (reduced to $410 per person per year).²⁶ The price reductions secured by the partnership since 2008 are projected to save $600 million from 2011 to 2014. Through their work, UNITAID and the Clinton Foundation have encouraged more suppliers to enter into the paediatric and second-line therapy markets which have not been seen by manufacturers as lucrative markets due to constraints on patent, lower demand, and more complex production techniques.²⁷

Negotiations with Big Pharma have led to a system of ‘tiered’ pricing. Tiered pricing means that the price at which the big pharmaceutical companies sell their drugs is calculated using formulas based on average income per head, leading to lower prices in poor countries.²⁸

"Preferential pricing is the only way how we can meet both conflicting needs in the fight against AIDS. We can refinance our high research and development costs for innovative, new treatments by the established price system in industrialised countries and can offer affordable medicines to patients in poor countries who otherwise cannot afford antiretroviral medication"Alessandro Banchi, chairman of Boehringer²⁹

Although this system is beneficial to the large pharmaceutical companies, there are concerns that the system is overcomplicated and overdependent on the goodwill of the large pharmaceutical companies.

Sometimes, a country will simply override patent applications by drug manufacturers. In 2009, India rejected patent applications on two antiretroviral drugs, tenofovir and darunavir. A generically-produced version of the former drug could cost over five times less than a branded version.³⁰ The ruling also allows other countries that have rejected patents on these drugs to import generic versions from India. A representative from Médecins Sans Frontières said:

“This is a really important day for HIV patients in developing countries. The rejection of the patents on tenofovir opens up the market for new generic competitors to drive down the price of this key HIV/AIDS drug.”³¹

Later, in 2012, Indonesia's government issued compulsory licenses for a number of antiretroviral drugs, allowing local drug companies to legally bypass drug patents and make their own, cheaper versions for the treatment of HIV and Hepatitis.³²

Another initiative to achieve optimal pricing is The Global Price Reporting Mechanism (GPRM). Launched by the AIDS Medicines and Diagnostics Service (AMDS) in April 2005, the mechanism provides information on transaction prices and quantities of antiretroviral drugs in low- and middle-income countries.³³ This web-based database assists countries in selecting the most affordable drug and supplier. Formed from the information of numerous organisations the GPRM allows a national and international market price comparison. Improving the access countries have to market information widens their options whilst placing more pressure on pharmaceutical companies to reduce their pricing.

A study of this database monitored ARV transactions in over 100 countries between 2002 and 2008.³⁴ The review indicated significant differences in the prices paid for ARVs and a clear decrease in the price of ARVs over this time period, particularly for generic ARVs. This fall is believed to be associated with, among other reasons, producers of branded ARVs continuing to waiver patents and lower their prices for low income countries as well as ongoing policy formation to address market imperfections.³⁵ However, vast differences in price still exist and pressure to lower the prices of some drugs, notably protease inhibitors (PI), is still needed - particularly as the demand for second-line therapy increases.

back to top AIDS, TRIPS and second-line therapy

Since 2005, developing countries that are members of the WTO (such as India, Thailand and Brazil) have been required by TRIPS to issue patents. Obliging developing countries to comply with patent legislation has complicated the provision of HIV treatment. This is because although patents have expired on a number of first-line AIDS drugs (making them available cheaply from generic makers), patents still exist on most new and second-line medicines.

This is problematic as newer antiretroviral drugs are generally less toxic, easier to take and more effective at fighting HIV. They are often needed when a patient has to change their antiretroviral regime due to toxicity or resistance. Drugs used to combat resistance are called second-line drugs and although the number of people in need of second-line drugs is expected to increase, these drugs remain on average six times more expensive than drugs commonly used for first line regimens.³⁶

TRIPS has stifled the generic competition that drove the price of first generation antiretrovirals down, causing huge disparities in the price of first- and second-line ARVs. In 2009 the median cost of the most commonly used second-line regime (lamivudine+tenofovir+ritonavir-boosted lopinavir) was US$554 in low-income countries, US$692 in lower-middle-income countries, and US$601 in upper-middle-income countries per person per year.³⁷ The vastly more expensive second-line drugs mean that, despite very few people taking them, they still account for a large proportion of the overall drug expenditure. In Brazil, for example, the Ministry of Health currently spends 80 percent of its budget on imported patented drugs, even though they represent only a small proportion of drugs used.³⁸

The consequence of TRIPS is that the new, better drugs are only available in countries that have the capacity to cover the high cost. Poor countries are forced to wait until their patent expires or the proprietary prices are forced down. The access gap between people in wealthy and developing countries has angered many, who feel that TRIPS further exacerbates difficulties in supplying antiretroviral drugs to poor countries and puts the profit margins of the large pharmaceuticals before public health. It is felt that if the capacity to provide generic effective, yet cheap anti-HIV treatment to the developing world exists, then it is immoral not to allow the production of drugs that will save millions of lives.

"We're starting from zero again… by the time generic competition kicks in for the newer drugs, millions of people will have died unnecessarily.” MSF campaign for access to essential medicines³⁹

In light of these concerns, the WTO proposed two means by which generic versions of drugs under patents may be produced.

“We're starting from zero again…by the time generic competition kicks in for the newer drugs, millions of people will have died unnecessarily.“

MSF campaign for access to essential medicines⁴⁰

The first is called ‘voluntary licensing’. A government, an individual, or an organisation can request a voluntary license from a patent holder (usually a large pharmaceutical company) to allow generic drugs to be supplied during a public health emergency, either through imports or by local production. A number of voluntary licenses have been granted to date including a licence granted by Merck for South African generic producer Aspen Pharmacare to produce efavirenz.⁴¹ The drawback of voluntary licenses is that they depend on the goodwill of the patent holder, and can be lengthy to negotiate.

The second option, ‘compulsory licensing’, is discussed below.

Compulsory licensing

Legally a country can get around TRIPS patent enforcement by issuing a compulsory licence. A compulsory licence is a government licence that enables someone other than the patent holder to copy patented products and processes without fear of prosecution. Governments can issue them if a patent owner abuses their rights by, for example, failing to offer their product on the market, or offering it at a price that is too high for potential buyers to afford. Normally, to copy drugs for this reason, the generic company has to negotiate with the original manufacturer to agree royalties (money paid to the patent holder to make up for the loss of profit exclusivity). However, following the 2001 Doha agreement a country can issue a compulsory licence for a drug that treats a disease causing a severe health emergency in that country without royalties being paid.⁴²

Although in theory compulsory licensing offers a legal solution to patent protection for HIV/AIDS treatment, in practice it is difficult to exploit for the following reasons:

• Generic manufacturers are limited to producing only the quantities predefined in each compulsory licence. This curbs the large-scale production that is required to deliver drugs cheaply.
• Certain large pharmaceutical companies have demonstrated that countries that issue compulsory licences may face repercussions (see below).
• It was ruled that licences should be granted ‘predominantly’ to supply the ‘domestic market’, making it difficult for poor countries lacking technological capabilities to access generic drugs manufactured abroad.

This final point was a particular point of contention for those concerned with providing ARVs to the developing world as it was felt that this effectively penalised the world’s poorest countries that were already struggling to roll out HIV treatment.

The World Trade Organization (WTO) therefore issued the so-called ‘paragraph 6 waiver’ which allows members who are unable to produce pharmaceuticals at home and are suffering a serious health crisis to import generics from other nations under compulsory licences (providing exported drugs are not part of a commercial or industrial policy of the exporting country).⁴³

Despite endorsement by the WTO, because of its complicated nature, compulsory licensing has been used very little by low- and middle-income countries. In fact, to date Thailand provides an excellent example of why other countries have been reluctant to follow suit.

Thailand has issued a number of compulsory licences for antiretroviral drugs including Merck & Co.’s Sustiva® (efavirenz) in 2006 and Abbott’s Kaletra® (a combination of lopinavir & ritonavir) in 2007.^{44 45} Abbott – which is the tenth largest pharmaceutical company in the world - was angered that Thailand had ‘ignor[ed] the patent system’ and retaliated by announcing that it would not be applying for licences to sell seven of its newest products in Thailand (one of which was a new once-a-day heat resistant form of Kaletra® which would have been extremely useful in the hot Thai climate).⁴⁶ Thailand has since been repeatedly placed on a US Trade Representative 'priority watch list' of countries seen to be committing intellectual property piracy.^{47 48} Although this has been detrimental for Thailand, it has helped to reduce the price of Kaletra by half in many developing countries.⁴⁹ In August 2010, the Thai government extended compulsory licensing for Efavirenz and Kaletra until their patents expire (January 2012 for Efavirenz and December 2016 for Kaletra).⁵⁰

Brazil issued a compulsory license to produce a lower-cost, generic version of Merck's antiretroviral Efavirenz in 2007. Recognising the repercussions that Brazil may face, President Luiz Inacio Lula da Silva said:

Between our trade and our health, we have chosen to look after our health."⁵¹

Despite the WTO permitting production of certain ARVs under some conditions, there remain other barriers to their manufacture and distribution. In February 2009 a shipment of second-line generic ARV drugs was confiscated by Dutch customs authorities. The 49kg of abacavir sulfate tablets produced by an Indian company, Aurobindo, were bound for a treatment programme in Nigeria. The tablets were later released but the seizure highlighted tensions between the European Union’s rules on intellectual property rights and World Trade Organization rules concerning the production of generic medicines.⁵²

back to top The way forward

For the moment, most people that need antiretrovirals in the developing world are on first-line therapy. However, as treatment becomes more widespread, people stay on treatment for longer and resistance increases, the high price of second-line drugs is becoming a major issue. Addressing this issue will become increasingly important to ensure the most cost-effective use of available resources and the sustainability of treatment programmes.

Some countries, such as Thailand, Brazil and India have found innovative ways of securing cheaper second-line drugs. But the problem is that these options are limited to countries with political clout and financial stability and autonomy. As is all too often the case, it is the poorest countries already struggling to manage their HIV epidemics that are the least likely to benefit from the current system.

Some have suggested that the only way forward is to abolish the TRIPS system for medicines altogether, and replace it with an alternative form of remuneration and reward for innovative research and development. However as this is unlikely, an alternative solution needs to be found.

One initiative created by UNITAID in 2009 is the “patent pool".⁵³ The objective of the pool is to hold licences on various patented medicines, which generic companies can then produce at a lower cost for poor countries.⁵⁴ The production of generic versions of antiretrovirals can then be more easily negotiated and therefore faster and more efficient. The first patent holder to license an ARV drug to the patent pool was the National Institutes of Health for the drug darunavir.⁵⁵

Then in July 2011, the pharmaceutical giant Gilead agreed to license four separate antiretroviral drugs and one combination drug to the pool.⁵⁶ Three of these were 'pipeline products', meaning they are still in clinical development. However, their inclusion in the license agreement means that they will be far more widely available when they come onto the market than they would have been if they had not been included. In response to Gilead's decision, the chair of UNITAID stated..."This is an historic day and a good day for people living with HIV/AIDS in developing countries."⁵⁷ Although a promising step, the Medicines Patent Pool will require the voluntary participation of other large pharmaceuticals as well to have sustained impact. 

In October 2011, Aurobindo Pharma and MedChem, became the first producers of generic antiretroviral drugs to join the Medecines Patent Pool. Under the new agreement, the pharmaceutical companies are licensed to produce a number of generic antiretroviral drugs, which should lead to these antiretrovirals becoming cheaper and easier to access.⁵⁸ Then, in early 2013, in a move that will go a long way towards improving access to treatment among children, ViiV Healthcare, added a paediatric formulation of the antiretroviral drug abacavir to the patent pool, with negotiations around further licenses on the horizon.⁵⁹

Prices of ARVs have been driven down substantially over the years, allowing millions of people to live with the virus. However, greater effort, cooperation and innovation is needed to achieve universal access to affordable life saving HIV treatment.

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References back to top

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