IP Disputes in Medicine

Thursday, February 01, 2007

Pharma's Seven Deadly Lies about Thai Compulsory Licenses

by Brook Baker

Brook K. Baker, Health GAP
Feb. 1, 2007

As Thailand issues more TRIPS- and Thai-compliant compulsory licenses for AIDS and heart treatment, the drug industry is unleashing an ever more strident disinformation campaign.

Lies Number One and Two - Abbott: "We do not view [the compulsory license on Kaletra] legal or in the best interest of patients" says Melissa Brotz, spokeswoman for Abbott.

Truth: Thailand's compulsory license on Kaletra is lawful in every respect: (1) it is a fully TRIPS-compliant Article 31(b) license issued on valid public health grounds and for government, non-commercial use, which requires no advance negotiation with the patent holder; (2) it is fully complaint with Thai law which directly authorizes government, non-commercial use licenses without prior negotiation; and (3) it sets a royalty at .5% of the sale price.

Likewise, Thailand's compulsory license is in the best interest of both patients and the Thai government. Abbott has systematically refused to lower its middle-income discount price below $2200/patient/year despite multiple protests by AIDS patients and their advocates. Not only will Thailand and its patients be able to access Kaletra at half the cost of Abbott's firmly-held, best-and-last-offer price, but the costs of such medicines will undoubtedly fall as greater and more secure demand creates economies of scale for Indian and eventually Thai generic producers.

Lie Number Three - Teera Chakajnarodom, Thai Pharmaceutical Research and Manufacturers Association: "After the company does 10 years of research, and then suddenly the Thai government would like to impose the compulsory license, taking away their property, their assets."

Truth: Patents are not "property" in the traditional sense - they are government granted rights that are intended to balance the interests of innovators and the public at large, and which are granted by governments with many express and implied conditions, including the right to issue compulsory licenses. Governments around the world, including the United States, have issued thousands of compulsory licenses since the late nineteen century, including on pharmaceutical products. Moreover, Thailand had its compulsory license law on the books when all three companies, Merck, Abbott, and Sanofi-Aventis, filed their patent claims in Thailand. How exactly was a patent granted by government, but only subject to its rights to issue a compulsory license, suddenly transformed into an absolute right that is violated when a license is actually issued?

Lie Number Four - Teera Chakajnarodom, Thai Pharmaceutical Research and Manufacturers Association: "Everything is negotiable."

Truth: For monopoly-based drug companies, everything isn't negotiable. Abbott has flatly refused for nearly six months to lower its $2200/year mid-tier price for Kaletra. (It did so in Brazil only because of Brazil's drawn-out threat to issue its own compulsory license.) Moreover, even when negotiating deeper discount prices, drug companies frequently extract promises that countries will refrain from seeking other cheaper sources of supply. In this context, drug companies are mainly interested in preventing generic competition. Paradoxically, in pursuing the generic-freeze-out option, drug companies will occasionally give concessions to bigger middle-income countries that "make the market" - like Thailand and Brazil - even though they would not do so for smaller and poorer countries like Guatemala.

Lies Number Five and Six - Harvey Bale, International Federal of Pharmaceutical Manufacturers and Association: "Compulsory licensing cannot be a route to commercial abuse and can put patients at risk." Merck, Abbott, and Sanofi-Aventis also warn that overriding patents risks jeopardizing quality.

Truth: Monopolies and excessive pricing are not commercial abuse, but competition and lower prices are - go figure. For the hugely rich, R&D drug industry (more than 90% of the global pharmaceutical market) to complain about commercial abuse by generic producer (less than 10% of the global pharmaceutical market) is deeply ironic.

In terms of product quality, Bale roll outs out another old chestnut - "generics are inferior." He neglects to mention that multiple generic versions of efavirenz have received pre-qualification at the WHO. (Note: generic versions of Kaletra are still awaiting pre-qualification). Similarly, the U.S. FDA has approved dozens of India anti-retroviral products, producing them in some of the 70 FDA/GMP-approved pharmaceutical plants in India.

Lie Number Seven - all of the above, compulsory licenses will reduce incentives for innovation.

Truth: All of Asia (except Japan) and all of Africa comprise only 5.1% of the global pharmaceutical market according to Information Management Group. Even though low- and middle-income markets are growing faster that developed country markets, drug companies continue to make that vast bulk of their profits off of sales in the U.S., Canada, Europe, and Japan, which collectively buy nearly 89% of drugs by dollar volume. Drug companies always argue that compulsory licenses interfere with their R&D incentives, but they never admit that developing C.L.s never affect their monopoly profits in rich country markets. How can South and Southeast Asia's infinitesimal share of the global market really affect R&D incentive?

Journalists covering the Thai compulsory license stories should begin to ask real questions to drug company representatives instead of acting as PhRMA press agents by simply reproducing their patently false assertions. For balance, journalists should also at least occasionally present the countervailing and easily accessible fact-based refutations of PhRMA's misrepresentations.


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