Mr. John L. Bishop
CEO
Cepheid
904 Caribbean Drive
Sunnyvale, CA 94089
USA

By fax and email: +1-408-541-4192 and john.bishop@cepheid.com

Cc: Dr. Giorgio Roscigno
FIND
Avenue de Budé 16
1202 Geneva, Switzerland

By fax and email: + 41 (22) 710 05 99 andgiorgio.roscigno@finddiagnostics.org

Dear Mr Bishop

Re: Cepheid Pricing Of The GeneXpert Machines And Cartridges For Public Sector Use In High TB Burden Areas

On 12 November 2010, the Treatment Action Campaign (TAC) and partners jointly sent an open letter to Cepheid calling for affordable and expanded access to the GeneXpert® MTB/RIF TB diagnostic test. Following this correspondence, TAC and partners had a teleconference with FIND and Cepheid, during which Cepheid indicated that prices for the GeneXpert would be reduced. During December, FIND announced that it had negotiated a volume-based price reduction agreement with Cepheid, lowering the cost of the GeneXpert. However, TAC and partners remain concerned that there is little transparency around pricing, particularly as Cepheid is currently in negotiations with South Africa’s Department of Health regarding the procurement of these machines.

1.     The benefit of GeneXpert in South Africa’s TB epidemic

These machines are being purchased for public sector, non-commercial use in a country facing a massive TB public health crisis. Recorded TB deaths tripled between 1997 and 2005 in South Africa, and TB is now the country’s leading cause of death in adults.

Given the nature of the TB epidemic in South Africa, scaling up the GeneXpert is vital to increased and earlier diagnosis of TB and drug resistant TB. In South Africa, more than 70% of people with TB also have HIV. Using standard TB diagnostics (smear microscopy), many people with advanced HIV disease will test smear negative and are therefore not diagnosed. The GeneXpert is able to detect TB in many of the false negatives given by smear microscopy.

Furthermore, the current methods of diagnosing TB are failing to diagnose the majority of drug resistant TB cases. The GeneXpert is able to detect rifampicin resistance which, in South Africa, is highly correlated with isoniazid resistance and therefore with multi-drug resistant (MDR) TB.

It is estimated that the rollout of the GeneXpert to all National Health Laboratory Service (NHLS) facilities in South Africa will increase the number of TB cases detected by 30% and the number of MDR TB cases detected by 76% by 2014.[1]

2.     Existing and planned use of GeneXpert in the country

South Africa has acquired 30 GeneXpert machines including 1 GX Infinity-48 analyser, 9 GX-XVI analysers and 20 GX-IV analysers. The Department of Health purchased 9 GX-XVI analysers and 14 GX-IV analysers. FIND provided 6 GX-IV analysers and USAID funded the GX Infinity-48 analyser.  Individual cartridges were purchased at US$16.86 (R118.02) each.

The Department of Health has announced plans to place GeneXpert machines in all 50 health districts by the end of this year, and in all remaining NHLS facilities by the end of 2012.

The Department is currently in negotiations with Cepheid regarding the purchase of machines and cartridges to meet these targets.

3.     Lack of transparency on the GeneXpert cost structure

TAC and partners are concerned that there is little transparency regarding the negotiations with the Department of Health or the measures being taken to reduce the extremely high costs of the GeneXpert machines, cartridges and additional costs related to their use.

TAC and partners call on Cepheid to provide greater transparency on the overall cost structure, including manufacturing, setup and operational costs, calibration and training requirements, royalty fees and IP holders. The agreement between FIND and Cepheid should be made public.

As more countries are investigating using the GeneXpert to improve their TB diagnostic services, the importance of an open forum for pricing discussions with key partners as well as reassessing the transparency of the original agreements becomes paramount.

We would also like to draw your attention once again to the substantial public and philanthropic investment which was made available to help develop the GeneXpert – including funds from the U.S. National Institutes of Health (NIH), the Bill and Melinda Gates Foundation, and the University of Medicine and Dentistry in New Jersey (UMDNJ). In addition, we would like to point out that greater and more rapid reductions in the price per test of GeneXpert will help make it possible for the test to be used in decentralized facilities in the communities where the highest burdens of TB disease occur.

TAC and partners would like to request a follow-up teleconference with Cepheid regarding our concerns, and to learn more about what is being done to reduce the costs of the GeneXpert.

Regards,

Catherine Tomlinson on behalf of The Treatment Action Campaign

Mark Harrington on behalf of The Treatment Action Group

Paula Akugizibwe on behalf of The AIDS Rights Alliance of Southern Africa

Donna Barry on behalf of Partners in Health