Produced by | Tiger Sniff ESG Group
Author | Zhang Xiaoyu Yuan raised interest rates
Head Figure | Visual China
This article is the 004th article in the #ESG Progress Watch#series
Key words: access to medicine
Recently, the globally recognized relatively safe and effective anti-new coronavirus oral small molecule drug nematevir/ritonavir tablets (Paxlovid) has become the focus of public attention.
The liberalization of domestic epidemic control has triggered a huge demand for medication in a short period of time. But the popularity of Paxlovid in China is fraught with difficulties. In particular, the negotiation of the national medical insurance drug list, which ended on January 8, and Pfizer's failure to pass the price negotiation, triggered a lot of discussion.
Some people question, as a multinational pharmaceutical giant, did Pfizer play an active role in the incident?
Isn't it Pfizer's basic corporate social responsibility to allow more patients to be treated with special drugs? What makes Paxlovid popularity in China seem so slow?
Paxlovid's line of social responsibility
Paxlovid was first approved in the United States in December 2021.
As early as 2020, the staff of a Pfizer production site in Ireland was tasked to quickly increase the production of Paxlovid APIs by 10 times within this year. In the project arrangement, Rui Hui internally used the keyword of the new crown vaccine business for Paxlovid: "at lightspeed", using the speed of light. This means that Paxlovid research and development, clinical trials, production preparation, and commercialization are advancing in parallel.
On November 16, 2021, Paxlovid was about to go public, and Pfizer entered into a licensing agreement with the non-profit organization "Drug Patent Pool" (MPP). Under the agreement, the Pharmaceutical Patent Pool licenses the production of generic versions of Paxlovid to qualified generic manufacturers in 95 countries without royalties. These 95 countries and territories, including all low- and lower-middle-income countries, as well as some upper-income countries, cover about 53% of the world's population.
Pfizer's efforts to improve the "accessibility" of drugs can be seen. Improving the "accessibility" of products is a consensus social responsibility in the pharmaceutical industry. This depends on whether pharmaceutical companies can use drugs in underdeveloped areas and socially disadvantaged groups at low prices. "Accessibility" is divided into two aspects: "delivery" and "affordability". It's unusual for Pfizer to license Paxlovid to MPP before it went public. Pharmaceutical companies usually wait until the new drug is profitable enough before considering "exercising social responsibility" and licensing patents to MPPs. This also confirms the words of Pfizer's ESG report: "From the beginning, Pfizer's strategy to deal with the new crown epidemic did not treat it as normal business. ”
Pfizer is a multinational pharmaceutical company that started in the United States, and Paxlovid's supply strategy is also to ensure the supply of the United States first. However, Paxlovid still suffered a shortage when it was launched in the United States, and it only began to ease in April 2022.
At this time, Paxlovid's production capacity is gradually accelerating. In April 2022, Pfizer announced a partnership with the United Nations Children's Fund (UNICEF) to deliver 4 million courses of Paxlovid to low- and middle-income countries by mid-2022.
In September, the company partnered with the Global Fund, an international aid agency in the field of medicine and health, to provide 6 million courses of Paxlovid to low- and middle-income countries.
There are 5 plates and 30 tablets in a box of Paxlovid, enough for 5 days, that is, a course of treatment. Image source: Visual China
Pfizer's cooperation with these international aid organizations usually involves Pfizer providing Paxlovid at a low price, which the aid organization buys, donates and ships to countries in need.
Overall, Paxlovid's accessibility work has been done sufficiently within the framework of the existing international regime.
MSCI, an authoritative ESG rating agency, gave Pfizer an A rating (above average) and believes that Pfizer has achieved an industry-leading level in the topic of "medical access".
The issue of accessibility, far from being solved
But if we look at Paxlovid's global distribution, or even at the current situation in China, we conclude that Paxlovid is still neither available nor affordable.
Pfizer's efforts on Paxlovid accessibility have not solved the problem.
According to figures released by CEO Aberle, the company is expected to produce 120 million courses of Paxlovid in 2022. Compared to the annual production scale of 1 billion new crown vaccines, 120 million boxes of Paxlovid is far from enough for the world.
As a result, developed countries took most of it at a high price. Paxlovid's global inequality is well undermined.
Soon after the new drug came out, the US federal government decided to purchase 10 million courses in bulk, and after finding that it was not enough, it added 10 million. Much of the rest is sold to developed regions such as Europe and Australia. In a November 2022 report, international charity Oxfam noted that only about one-quarter of Paxlovid produced in 2022 went to low- and middle-income countries. The WHO representative in Somalia has revealed that Somalia, with a population of 17 million, has received about 300 boxes of Paxlovid.
At this time, Pfizer, as a multinational pharmaceutical company and the monopoly of the special drug Paxlovid, undoubtedly shouldered the responsibility of Paxlovid in the world. However, at least in 2022, the cumulative number of confirmed cases of new crowns in the world will exceed 600 million, and this responsibility is not shouldered by Pfizer.
On January 8, China's National Health Security Administration announced that Paxlovid had failed to negotiate inclusion in the medical insurance catalog.
An employee of a multinational pharmaceutical company told Tiger Sniff that regardless of Pfizer's final bid, Pfizer did not lower Paxlovid to a price acceptable to the health insurance bureau, which should be constrained by the global pricing strategy followed by the company. Bid too low and affect the promotion of the product in other parts of the world.
Previously, Pfizer officially disclosed that Paxlovid's pricing is graded according to the level of national income, and high, medium-high, middle, low-middle, and low-income countries correspond to different prices. Among them, prices in high- and upper-middle-income countries are public: Pfizer gives $530/treatment to high-income countries and $250/course to upper-middle-income countries; Prices in middle-income countries and below are "non-profit prices".
From the current information, Paxlovid sells at the lowest price of 1,890 yuan in various channels in China, roughly approaching the standard of $250 (about 1,700 yuan) per box in middle- and high-income countries. No matter how much Pfizer is willing to make concessions for the size of China's market in the confidential negotiations (the so-called "volume for price"), it is still clearly far from the expectations of the health insurance bureau. According to Pfizer's disclosure on January 9, the expected price of the Health Insurance Administration belongs to the level of low- and middle-income countries.
In short, there is no hope for a price reduction for the time being. However, at present, the main problem of Paxlovid in the country is not expensive, but out of stock.
Some patients can't buy it even if they have money. Local health insurance responded to the superior documents and paid Paxlovid temporarily until March 31 this year, and lucky patients can get Paxlovid for about 200 yuan. But even in large hospitals in first-tier cities, Paxlovid has a very limited inventory, limited daily supply, only prescribed to patients who need it very much, and the prescription of drugs requires the signature of hospital leaders.
China's current situation is also consistent in various developing countries: Paxlovid cannot be bought, and cannot afford it. Pfizer's work on accessibility falls far short of the expectations of global stakeholders.
Why is it still out of stock
The problem of Paxlovid being out of reach is rooted in production constraints.
In this regard, the international community hopes that Paxlovid can be produced in more foundry companies, or that generic drugs can achieve large-scale production as soon as possible.
However, due to various objective conditions, the expansion of Paxlovid and its generic drugs will take several months.
According to official Pfizer experts, the production of Paxlovid is like building blocks, each component is first manufactured in a different part of the world, and then assembled in one place, and the manufacturer involves more than 20 locations in more than 10 countries. Pfizer executives said that there is no time to build a separate factory to produce Paxlovid, the chemical reaction of the drug takes several days to occur at a controlled temperature and pressure, and it takes three months to complete the initial building blocks, in addition to the time for the manufacture of the main components of the drug, the packaging of the drug plus transportation and quality testing, the cycle time is still 7 months after the shortened.
Similarly, although Pfizer authorized the production of Paxlovid generics in November 2021, it was not until a year later, on December 26, 2022, that the first generic drug certified by WHO (WHO-PQ, which is a prerequisite for the drug to join various international assistance programs) appeared. Affected by raw materials, supply chain and other factors, it may take longer for generic drugs to be rolled out in low- and middle-income countries in large quantities.
Pfizer has also established cooperation with Chinese companies, but it has not yet seen results.
According to publicly available information, Pfizer has at least five cooperative foundries in China, namely Huahai Pharmaceutical, Fosun Pharma, Shanghai Disano, Propharma and Jiuzhou Pharmaceutical. Among them, Huahai Pharmaceutical disclosed that it will produce Paxlovid; Other companies are qualified to produce generic drugs. However, these companies are still doing preliminary preparations and have not started production.
Screenshot of investor interaction with Huahai Pharmaceutical, one of Paxlovid Chinese manufacturers. "Localization is being promoted" means that production has not yet begun. Image source: SSE Interactive
China Pharmaceutical is Paxlovid's import and commercial operation agent in China. At present, the company's investor Q&A interface is also full of inquiries about out-of-stock issues. But Chinese medicine hasn't responded much.
Image source: SSE Interactive
Will the supply improve?
On January 9, US time, Pfizer CEO Aberle responded to this. He mentioned that the company had earlier planned to achieve local production of Paxlovid in China by the end of 2023. Today, Pfizer and Chinese foundries are stepping up their efforts to advance the Paxlovid localization project. Optimistic estimates suggest that Paxlovid may be expanded in China within three to four months.
Before Paxlovid is localized in China, "we are shipping as much Paxlovid as possible to China, and our production line is stepping up to build up this part of the supply capacity," Aberle said Jan. 9.
Why don't you want to cut prices
Why can't Paxlovid be cheaper?
Some more radical international organizations (such as Oxfam) and observers have accused Pfizer of using Paxlovid to generate human "disaster money". How much of Pfizer's "disaster wealth" is there?
According to Pfizer's financial report for the third quarter of 2022, the sales of the new crown oral drug Paxlovid reached $7.514 billion during the period, and in the first three quarters of 2022, Pfizer's revenue from the new crown oral drug reached $17.199 billion. The 2022 revenue guidance for Paxlovid, an oral coronavirus drug, is $22 billion.
This has led to improvements in Pfizer's financial sustainability.
Before 2021, Pfizer's leverage ratio remained above 2 times for many years, and it was as high as 2.7 times in 2019. However, the benefits from coronavirus vaccines and oral drugs have made the company's leverage ratio quickly reduce to 1.0 times in 2022. Leverage halved as the company's revenue doubled year-on-year in 2022. The decline in leverage means, of course, an increase in the financial sustainability of the company.
Drug R&D spending accounts for a large portion of revenue and often requires high prices or sufficient margins to sustain sustainable product innovation.
The sustainability of the company's finances and R&D justifies Pfizer's pursuit of profits.
But even so, in the stock market since 2022, Pfizer is not a very good growth stock. A big part of this is that investors don't see COVID-related profits as sustainable. Recently, investors are looking forward to Paxlovid's further market performance, which is a major potential positive for the continued growth of Pfizer's share price.
Pfizer's stock market performance in the past year, image source: Google Finance
Investors want Paxlovid to continue to make money, while patients, the third world, and international organizations in the field of health care want companies to give up Paxlovid profits as much as possible to benefit low-income people around the world. The positions of shareholders and stakeholders are almost diametrically opposed – and this has become the fundamental contradiction Pfizer faces on the issue of Paxlovid pricing.
For now, Pfizer is actually in an awkward position where both sides are not satisfied. If you want to really solve the problem, you may not be able to count on Pfizer.
The way out of the accessibility dilemma lies outside Pfizer
Optimistically, Pfizer's "insistence" on price has given global pharmaceutical companies a lot of room for the development of anti-new crown drugs.
As Oxfam argues in the report, an important reason for the high price of new crown oral drugs and the uneven distribution of the world is the "Pfizer monopoly". Pfizer may have made some social responsibility efforts, but the ultimate solution is to rely on global market competition to increase supply, reduce prices, and achieve fuller access to new crown oral drugs.
According to the Cortellis database, as of the third quarter of 2022, there are 294 oral new crown drugs under development worldwide, a total of 7 have been marketed, 51 in the third clinical stage, 75 in the second clinical stage, 24 in the first clinical stage, and 96 in the preclinical stage.
On November 22, 2022, Shionogi Pharmaceutical announced that the emergency use authorization of the new crown oral drug Ensitrelvir has been approved by the Japan Medicines and Medical Devices Agency (PMDA) for people over 12 years old with new crown infection, and the scope of application is wider.
Immediately afterwards, Shanghai Pharmaceutical announced in December that Shanghai Pharmaceutical Holdings and Ping An Shionogi signed an "Import Distribution Agreement" for the import of the anti-new coronavirus oral drug Ensitrelvir, and Shanghai Pharmaceutical Holdings will serve as the exclusive importer and distributor of Ensitrelvir's imports in Chinese mainland; At the same time, Shanghai Pharmaceutical and Ping An Shionogi signed the "Strategic Cooperation Framework Agreement" on a wider range of new drugs and generic drug products at a more far-reaching cooperation level, becoming another new crown oral drug that is about to enter the Chinese market.
There are also some domestic drugs on the way.
On the evening of January 9, the pharmaceutical company Guangshengtang released a clinical research summary report of the anti-new coronavirus oral small molecule innovative drug "Taizhongding", the results showed that Taizhongding has superior anti-new coronavirus efficacy, and the nucleic acid conversion time of new crown patients is significantly better than that of the positive control Paxlovid and placebo control, and the safety and tolerability are good. At present, "Taizhongding" is undergoing phase II/III clinical trials.
Prior to this, on December 29, Junshi Biologics published a paper online in the journal New England Medicine, summarizing the phase III clinical research results of the company's new crown oral drug VV116. According to the paper, VV116 has a efficacy that is not inferior to Paxlovid.
In terms of accessibility, in the "Diagnosis and Treatment Plan for Novel Coronavirus Infection (Trial Version 10)", in addition to Paxlovid, monoravir capsules and azvudine tablets are also included in the anti-new coronavirus treatment. After negotiation, azvudine tablets have been included in medical insurance, the previous price was 270 yuan / bottle, 540 yuan / treatment, the price should be lower after shortlisted. According to Fosun Pharma, at present, Azvudine tablets have completed medical insurance in 31 provinces across the country, and have now covered more than 2,000 hospitals across the country.
Competition in the market has intensified, and Paxlovid already has some competitors, or at least there are more options for coronavirus treatment. Each side has more than one card in their hands.
So, what's next?
First of all, I hope that the tight supply situation of Paxlovid in the country will gradually ease in the near future.
Medicare paid Paxlovid provisionally until March 31 of this year. At that time, Paxlovid may soon start local production in China to fully guarantee local supply. Meanwhile, according to Aberle's disclosure, negotiations on Paxlovid prices continue.
From China's standpoint, more varieties of oral drugs are on the market, which is expected to break Paxlovid's high-price monopoly. On the one hand, this gives patients more treatment options, and on the other hand, it can also be used as a bargaining chip to further drive down the price of Paxlovid in negotiations.
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