Investigation of the pharmaceutical sector reveals a 170 million BRL shortfall and cancer patients are left without treatment

Brazil's Federal Prosecution Service (Ministério Público Federal - MPF) and the Federal Audit Court (Tribunal de Contas da União - TCU) investigate public purchases of medication produced by the Swiss company Roche and point out losses to 11 states and the federal government due to possible overprice
By Diego Junqueira

Facing breast cancer for six years, retired nurse Joyce Guimarães is unmoved. When she started treatment with a drug that she could get for free at Brazil’s publicly funded healthcare system (SUS), she started to feel more motivated. But the ampoule disappeared from the shelves between November 2018 and March 2019. That was when Guimarães discovered that if he wanted to continue the treatment, she would have to pay 12,000 BRL (US$ 4,000) per bottle. “Why is it so expensive?” she asks, who receives a retirement pension of 1,300 BRL (US$ 326).

Guimarães spent four months without herceptin, manufactured by the Swiss multinational Roche, because of a partnership signed by the manufacturer with the Ministry of Health and the public laboratory Tecpar in Paraná. Shortages are “recurring” in Belém (Pará), says the patient. But it got worse after the Federal Audit Court (TCU) paralyzed the agreement on suspicion of overpricing in sales to the federal government. The estimated loss is 61 million BRL (US$ 15,2 million).

In another lawsuit, Roche is accused by the Federal Prosecution Service of the Federal District of causing losses of 107 million BRL (US$ 27 million) to 11 Brazilian states – also on suspicion of overpricing of the medicine.

In both cases, investigations focus on the pharmaceutical industry’s lack of transparent pricing policy. The case of herceptin is emblematic because it reveals strategies in the sector to leverage profits in negotiations with the government. Which, this time, contributed to leaving patients without treatment in the Public Healthcare System, SUS.

The federal government and states are the largest Brazilian buyers of herceptin, whose active ingredient is trastuzumab, a reference against one of the most serious types of breast cancer and offered free of charge by SUS since 2013. Roche monopolizes the drug trade through millionaire contracts, earning 25 billion BRL (US$ 6,2 billion) in 2018 alone. The price of the ampoule today goes from 900 BRL to 12,000 BRL (US$ 225 to US$ 3,000) in Brazil, which makes it difficult to know its real value.

The expectation was that the drug would become cheaper in 2017, after a competing version arrived in Brazil. But this did not happen. With a threatened monopoly, Roche entered into a partnership with the federal government to produce the drug in the country together with Tecpar and Axis, a private laboratory in Rio de Janeiro State. As long as the technology transfer lasted, Roche would have guaranteed at least 40% of the SUS market.

The agreement took place under the PDPs (Partnership for Productive Development); a policy created in 2009 that provides for technology transfer from private companies to Brazilian public laboratories to empower Brazilian industry, increase national production of advanced medicines and lower their prices.

But the partnership between Roche and Tecpar, instead of reducing the price of the medicine, as usually happens with PDPs, caused the ministry to pay 37% more than it had previously paid (1,293 BRL against 939 BRL per ampoule). The purchase raised suspicions with TCU, which is investigating a possible loss of 61 million BRL (US$ 15.2 million) in this 222 million BRL (US$ 55.6 million) contract. The inspection agency intervened and stopped payments, demanding explanations from Tecpar and the ministry on the reasons for the price increase.

The Minister’s influence

The Court of Auditors’ suspicions went beyond overpricing. The backstage of the partnership reveals signs of political influence and the non-compliance with the PDP Legal Framework, which provides for analysis of each agreement by two ministry commissions, which did not happen.

Tecpar’s project with Roche was approved by the former Health Minister, Congressman Ricardo Barros (PP-PR), in record time: only one week, while the average processing time is six months. The former management also predicted an investment of 82 million BRL (US$ 20.5 million) for Tecpar to produce the ampoule in Maringá (PR), the political stronghold of the politician.

Barros denies that he favored Tecpar. “There was no privilege that has not been given to other public laboratories,” the former minister told Repórter Brasil. “PDP policy suffers a lot of political influence”, he adds. He states that the Tecpar project did not go through two commissions because it was an ongoing partnership. However, until 2017, Tecpar and Roche were not part of the PDPs in force at the time for the product.

Tecpar claims that it charged the Ministry of Health more expensive to invest the extra gain (61 million BRL/US$ 15.2 million) in the three partner companies and in the “technology transfer” activities. The Office of the General Attorney (Advocacia-Geral da União – AGU) raised suspicions of illegality and recommended the suspension of the agreement, which was provisionally accepted by the TCU. The case continues without a final decision.
Ricardo Barros (left) signs agreement between Ministry of Health, Tecpar and Roche (Aug/07/017 – Reproduction/Tecpar)

Untreated patients

After the suspension of the partnership and an emergency purchase at the end of 2018, the Ministry of Health opened a tender to buy 435 thousand ampoules and supply SUS by January 2020, a contract of almost 400 million BRL (US$ 100 million). Axis and Roche, however, tried to block the bid. The objective was to prevent the generic version manufacturer, Libbs, from entering the public tender. But the request was not accepted by the ministry: postponed by two weeks, the bid was closed with a cheaper price for the ampoule, 894 BRL (US$ 224), 4.7% less over 939 BRL (US$ 235).

Suspicions involving the PDP and disputes on the bid affected the supply of the ampoule between the end of last year and the beginning of this year. During TCU’s trial, the Ministry of Health acknowledged that the stock of trastuzumab was limited to 15 vials in September 2018, and that some states were already running out of supplies.

“I was without medication for four months,” says Guimarães, who has been using herceptin for two years, after discovering that the cancer had advanced to the lungs and bones. Tests revealed that her health condition worsened in the period without the medicine. “It’s frustrating,” she laments.

In addition to Pará, there were shortages in Ceará, Santa Catarina, Espírito Santo, Alagoas, Rio de Janeiro and Paraná, according to a survey by Femama (Federation of Breast Health Support). There are also reports in Maranhão and Rio Grande do Norte.

More than 9,000 Brazilian women use trastuzumab via the SUS, according to the Ministry of Health. The office informed Repórter Brasil that “it has other sources to obtain the products in addition to those implemented within the scope of the current PDP and in the supply phase”. Tecpar did not comment on the shortage, which is currently normalized (read the positions of the Ministry of Health and Tecpar in full).

After the publication of the article, Roche informed Repórter Brasil that it does not overprice herceptin, that it maintained the value of the product when supplied it to Tecpar and that it is not responsible for shortages in SUS (read the full statement from Roche).
(Illustrations: Angelo Abu)

The battle against generics

To contest bids, as Roche did with trastuzumab, or to start battles in court to hinder the emergence of generic versions, as Gilead does in the case of the antiviral sofosbuvir, are strategies of the pharmaceutical industry to expand the monopoly on an active ingredient. It is an attempt to buy time and keep competition away, says lawyer Vitor Ido, a researcher at the South Center and an expert in international negotiations

Another strategy of pharmaceutical companies to maintain market control is to submit several patent applications for the same active ingredient. In the case of trastuzumab, Roche filed 12 orders in Brazil alone, according to a study by Fiocruz.

The confusion generated by the excessive requests is so great that even the National Institute of Intellectual Property (INPI) was unable to inform which patent was in force over herceptin, after being questioned by Repórter Brasil. The agency recognizes that most medicines are protected by more than one patent, but points out that it does not cross-check information on brands and orders granted. Roche did not comment. 

Price abuse 

The doubt that afflicts Guimarães on the price of the medicine also puzzles academics, managers and even the World Health Organization (WHO). “Companies say research and development costs are very high, but these costs are not known. Governments do not even know how much neighboring countries pay for the same medicine,” says Ido.

Due to the mystery of prices, the WHO passed a resolution in May this year demanding greater transparency from manufacturers. The text is not mandatory for countries to adopt, which makes its results uncertain.

With the market monopoly, the way for price abuse opens up. This is what happens with herceptin. Roche is accused by the Distrito Federal’s Public Prosecutor’s Office (MPF-DF) of causing losses of 107 million BRL (US$ 27 million) to 11 states when charging for the drug, between 2012 and 2015, up to three times what it charged the Ministry of Health. The MPF investigation was carried out by the Law and Poverty group (Grupo Direito e Pobreza), from University of São Paulo Law School.

Prices are different because, while the ministry is negotiating a large-scale purchase with Roche, state departments bought the drug after a court order. “Then the opportunity for price abuse arises, because the manager does not have the capacity to negotiate,” says Carlos Portugal Gouvêa, professor of commercial law at USP and a member of Law and Poverty. He says it is common practice in the pharmaceutical market to “charge more when there is a court order”. In the state of São Paulo alone, there are 15,000 actions involving trastuzumab, according to the study group.

MPF’s action against Roche is unprecedented in Brazil and could change market regulation. In the appeal presented to the Federal Court, after a favorable decision to Roche in the 1st instance, the prosecutor Anna Carolina Garcia stated that the multinational directly harms SUS and public funds “by establishing a deliberate differentiation of prices, without reasonable justification”.

Research by Repórter Brasil confirms that Roche continues to differentiate prices in 2019: the Brazilian Navy pays three times what the Ministry of Health, considering the value per milligram. When contacted, the Navy says that the contract generated “savings to the public funds”, since the legislation allowed it to pay even more. (Read the full statement by the Navy).

Roche does not recognize price abuse in any of the cases cited in this report. The Swiss multinational says that pricing in Brazil “is public and defined” by the Medicines Market Regulation Chamber (Câmara de Regulação do Mercado de Medicamentos – CMED), under control of the Ministry of Health.

The maximum price adopted by the agency, however, is questioned by experts because it is based on amounts charged in high-income countries. Minister Aroldo Cedraz, from TCU, says that CMED prices “are not the most appropriate parameter” for public purchases. The aggravating factor is that the law does not authorize CMED to reduce the maximum price of medicines, even when their market value is falling, as in the case of trastuzumab.

It is also because of the price that perjeta, the new generation of herceptin, also by Roche, is not available at SUS. With more promising effects in the fight against breast cancer, it was expected in the public health system for June 2018, when it could be used by patients like Guimarães. But due to the market monopoly, Roche and the Ministry of Health have not yet reached an agreement on the price.

While waiting for the new cancer drug, the patient would feel more relieved if trastuzumab was not lacking in the public health system. “We hear several excuses, but it is the patient who really suffers,” says Guimarães.

This story was originally published on 15th August 2019



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