[Reader-list] Fallout of Anthrax Panic

[Shohini]

Financial Times
http://www.ft.com
October 23, 2001

A bitter pill for the drug makers

Instead of an opportunity, the anthrax scare has raised awkward questions 
about patent protection

by Geoff Dyer and Adrian Michaels


If there are to be any beneficiaries from the anthrax panic sweeping North
America, they should be the drug companies. With 10 people infected and one
killed so far, Americans are rushing to buy antibiotics that can treat the
disease.

Instead, the threat of bio-terrorism has thrown the pharmaceuticals industry
on to the defensive. Not only has the anthrax crisis reopened the
controversy over patent protection of sought-after treatments, it has also
moved the debate from the developing world to the industry's most lucrative
and protected market: the US.

The Canadian government has asked a local company to make copies of Cipro,
the drug under patent to Bayer of Germany that has become the most popular
treatment for anthrax. Meanwhile, in the US, Charles Schumer of New York, a
leading Democratic senator, has called on the government to ensure adequate
supplies of anthrax treatments by buying generic versions of Cipro. The
administration has so far rejected his plan.

Campaigners who have been pushing for developing countries to ignore patents
on drugs to treat Aids and other illnesses have been quick to claim a double
standard. "Canada has done the right thing, given that it needs the rapid
supply of a drug," says James Love at the Consumer Project on Technology, a
Washington lobby group. "But the US and Canada have been trying to
discourage African countries from doing this over Aids."

The industry suffered a bruising defeat in April in South Africa, one of the
countries worst affected by Aids, when it withdrew a lawsuit against the
country's patent law, which it claimed broke international rules. Before the
drugs companies withdrew, the trial was dominated by the issue of the cost
of Aids medicines.

Urged on by pharmaceuticals companies, the US government took Brazil to the
World Trade Organisation last year, claiming that Brazil's patent law made
it too easy to ignore patents and amounted to protectionism. That complaint
was also later withdrawn.

Developing countries were already planning to bring the issue up at the WTO
ministerial summit in Doha, Qatar, next month. Brazil has proposed a motion,
signed by at least 50 countries, arguing that Trips, the WTO's rules on
intellectual property rights, should not impede access to essential
medicines. The US and Canada had strongly opposed the idea. But now those
developing countries will use the anthrax incidents to press the case in
Doha.

"It smacks of one rule for the north, another for the south," says Paulo
Teixeira, director of the Brazilian government's Aids programme. "The
anthrax outbreak is very distressing but I hope it will make them reflect
more about our position that compulsory licensing is an entirely legitimate
instrument if there is a problem of access to a crucial drug."

The Consumer Project on Technology has compiled an archive of cases where it
believes the US government has overridden patents or copyright on products.
The examples of compulsory licensing range from protective eyewear and
camouflage screens supplied to the US army to machines that can control the
spinning of space vehicles.

For the drugs industry, the importance of the Cipro case is not the
financial loss to Bayer, which will do well from the anthrax windfall and
would receive compensation in the event of a compulsory licence being
issued. In Canada, many legal experts think the government could lose if the
case were to go to court.

Rather, after the bruising battles over Aids, the industry fears that the
clamour for anthrax treatments will increase the pressure for lower prices
and reduced patent protection in rich countries.

Hence the close attention paid to Washington's response to the bioterrorism
crisis. The US government has committed itself to securing a stockpile
sufficient to treat 12m people. Given that doctors generally prescribe a
two-month treatment of two pills a day, that means the government needs
about 1.4bn tablets. Yet even after tripling its US output, Bayer can supply
only 200m pills over the next three months.

The US government stresses that Cipro is not the only medicine suitable for
anthrax victims. Penicillin and doxycyclin, both of which are off-patent and
easily produced, can also be used.

And, to allay criticisms of war profiteering, Tommy Thompson, the US health
and human services secretary, said that he would drive a hard deal with
Bayer and that the final price "may be very much in line with the generics".

Even so, Phrma, the powerful industry organisation, remains fearful. It
insists there is no need for the US government to override Bayer's patent,
because Bayer's increased production and the use of other medicines can
easily meet the demand for anthrax medicines.

The patent issue is not the only controversy in the drugs industry that the
anthrax outbreak has highlighted. The Cipro dispute has reminded an
increasingly sceptical public of the spate of allegations that big
pharmaceuticals companies have colluded with generic manufacturers to keep
cheaper versions of drugs off the market.

In recent years, the Federal Trade Commission has opened a number of
investigations into potentially anti-competitive deals between drugs
companies.

Cipro is the subject of one of them. Back in 1991, Barr Laboratories, a
generic manufacturer, took legal action to contest Bayer's patent on Cipro.
Six years later it struck an out-of-court deal with Bayer that has led to
Barr and Watson, another generic company, being paid about $170m by Bayer in
order not to pursue its claim to produce a copy of Cipro.

Barr says it took the view that it had less than a 50 per cent chance of
winning its case. The company says that it is no longer challenging Bayer's
patent, which ends in 2003 in the US, but that others are free to do so. The
FTC, which opened an investigation into the deal 2* years ago, has not
brought any charges.

Even so, the publicity surrounding the case, combined with renewed anxiety
about patent protection, presents more awkward questions. A crisis that
could have been a boon for drug manufacturers looks instead like becoming
another problem.


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