Perilous patent

The Bush administration courts controversy by choosing to defend the monopoly interests of a pharmaceutical company rather than enable access to cheaper drugs in the wake of the anthrax scare.

BY choosing to protect the interests of a pharmaceutical company in the face of the anthrax scare, the Bush administration is mired in a controversy. Caught between the anthrax scare and the need to keep to its hardline stance on protecting patents ahead of the World Trade Organisation (WTO) ministerial meeting in Doha, the Bush Administration chose to defend the patent rights of the multinational company, Bayer AG.

Ciprofloxacin, or rather Cipro, Bayer's brand of ciprofloxacin, is in the midst of a controversy. Until recently it was the only drug on the United States Food and Drug Administration's (FDA) approved list of drugs for the treatment of anthrax. At issue is whether monopoly profits guaranteed by Bayer's American patent, which expires in end-2003, is more important than Americans' access to the generic version of the antibiotic, available across the world at a fraction of the price.

Three issues are at the centre of the Cipro controversy. First, there are concerns about the high price of the Bayer drug, enforced by its monopoly status in the U.S. market. A Cipro pill costs $6 in the retail stores in the U.S. A 60-day twice-daily regimen of Cipro, the recommended dosage for people exposed to anthrax, would cost each potential anthrax patient about $720. The high prices mean Americans empathise easily with those suffering from Acquired Immune Deficiency Syndrome (AIDS) patients who run bills to the tune of several hundred dollars a week for anti-viral drugs.

The second issue, crucially linked to the first, is the increasing doubt about Bayer's capability to provide sufficient quantities of Cipro in the face of the unprecedented emergency. In the wake of the anthrax scare, there has been a run on pharmacies stocking Cipro. Drug stores have reported thousands of orders daily and there are rumours that some pharmacies and hospitals are even hoarding the drug. This is despite the fact that the FDA has recently approved penicillin and doxycycline to treat anthrax.

The third issue relates to the U.S. stance on patents and intellectual property rights, which protects the interests of the drug companies. The implication is that the administration would rather confine the Cipro issue to a question of prices and availability rather than as one which challenges the rights of corporations with a monopoly, to make profits at the expense of public health needs.

CIPRO has been a blockbuster for Bayer in the U.S. market. Last year, its sales netted a billion dollars. In the wake of the anthrax scare the company has planned to make the most of the premium that the drug enjoys in the U.S. market. Bayer announced that it has stepped up production and expects to ship 15 million tablets in the next three months. Industry sources told Frontline that although ciprofloxacin is more expensive to produce because it must be synthesised - not mass-produced by fermentation as is the case with some other antibiotics - Cipro commands a premium in the U.S. solely because it is on patent. Industry sources have pointed out that Bayer's dependence on Cipro for revenues is greater because the company was forced to recall a drug for treating diabetes, which resulted in several patient deaths.

The availability of generic ciprofloxacin in markets across the world - at a fraction of what Cipro costs - has raised a furore in the U.S. Critics are aghast that Bayer is not only being allowed to charge high prices but is being protected from the competing influence of numerous other generic manufacturers across the world (see table). Bayer's wholesale rate for Cipro in the U.S. is $4.67 for a 500 mg pill; the company's "best price", offered on a preferential basis to U.S. Federal agencies, is $1.83 a pill. Bayer sells the drug for $1.58 to the Canadian government. In contrast, a Canadian generic producer, Apotex, sells the drug for 95 cents. In India, generic ciprofloxacin is sold for as little as three cents a pill and even the best-selling brand costs about 15 cents a pill. Bayer sells the drug for as low as about $2 in the U.K. and at about $1.50 in New Zealand.

In contrast to the U.S. government's reaction, on October 16 the Canadian government entered into a contract with Apotex for one million ciprofloxacin pills for supply to its health services. This was expected to save the Canadian government at least one million (Canadian) dollars. Indeed, Canada announced on October 17 that it had overridden Bayer's patent, allowing generic manufacturers to circumvent Bayer's patent. However, days later, the Canadian government made a turnabout. It announced that it had rescinded its agreement with Apotex and that it was offering compensation to the company. Amar Lulla, joint managing director, Cipla, told Frontline that the Canadian Government had "caved in under pressure from the drug companies".

Commenting on the Cipro affair in a response to Frontline, Jeff Connell, Director, Public Affairs, at the Canadian Drug Manufacturers Association, said the Canadian government ordered the pills from Apotex without issuing a compulsory licence or contacting the Patents Commissioner. "Given its well-publicised problems producing enough Cipro to meet demand, it is clear that one million pills for Canada was not a priority." He said that "this changed once news of the Apotex order hit the Canadian and, more important, U.S. news media." Connell pointed out that Bayer realised that Canada's move to purchase generic ciprofloxacin "was a precedent that threatened its market exclusivity (and profits) in the real Cipro market, the United States."

AT least 78 Indian companies manufacture generic ciprofloxacin. But they cannot sell the drug in the U.S. until Bayer's patent expires in 2003. Cipla's version of ciprofloxacin was developed in 1989, two years after Bayer was granted its patent for Cipro. Companies such as Ranbaxy, Cipla and Dr.Reddy's Laboratories are already in the queue to sell the drug in the U.S. after Bayer's patent closes, having obtained provisional approval from the FDA. In fact, Ranbaxy's American subsidiary, Ranbaxy Pharmaceuticals, in Princeton, has offered to supply 20 million tablets of ciprofloxacin to the U.S. Department of Health and Human Services (HHS) within 45 days. Ranbaxy exports substantial quantities of ciprofloxacin to China and Russia, apart from selling its version in the Indian market.

THE Bush administration has sought congressional approval of a $1.5 billion budget for preparedness against the threat of bioterrorism. Of this, $643 million is to build a stockpile of drugs. Tommy G. Thompson, Secretary, HHS, has said that in the wake of the anthrax scare, the number of people who need to be protected could rise from the current two million to about 12 million. Even if the entire amount was spent on Bayer's Cipro at the heavily discounted rate of $1.83 a pill for the U.S. government, the funding would be enough for only about 350 million doses covering the requirements of less than three million people in the U.S. This implies that if Cipro is the only available means to combat anthrax, over nine million people would not be covered. In contrast, branded ciprofloxacin from India, costing about 15 cents, would enable coverage of nearly 32 million people.

On October 16, U.S. Senator Charles E. Schumer, who represents New York, asked the HHS to purchase in bulk generic versions of the drug. He said that this would not only reduce costs but will offer more protection to citizens from anthrax. He urged the HHS to use provisions of Federal legislation - in particular 28 U.S.C. 1498 - to break the Bayer stranglehold. The legislation enables the government to make official purchases from alternative sources for a payment to the patent holder of a royalty fee determined by the courts. Schumer said that the government "cannot rely on Bayer" to ensure "sufficient supplies of Cipro". Schumer argued that the government could not afford to "put our best response to anthrax in the hands of just one manufacturer." He also called on the FDA to grant final approval to the five generic drug manufacturers who already hold tentative approvals to manufacture ciprofloxacin. However, Thompson said that 28 U.S.C. 1498 cannot be invoked. Thompson claimed that he did not have the authority to override the Bayer patent.

In the face of mounting public criticism, the HHS entered into a deal with Bayer on October 25 which pegged Cipro at 95 cents a pill. Although Thompson attributed this substantial price reduction to hard bargaining, critics took a different view. James Love, Director, Consumer Project on Technology (CPT), an organisation which has researched on intellectual property issues from a consumer and public-interest perspective, claims that the Bush administration is simply unwilling to use the power that the law has given it to handle a major public health issue. Love was an active participant in an international campaign for alternative cheaper generic anti-AIDS drugs. Cipla's efforts to sell such drugs in Africa were staunchly resisted by the drug majors (Frontline, March 16, 2001).

Love argues that 28 U.S.C. 1498 has been used on several occasions for products ranging from drug to electronics technologies. Although the World Trade Organisation's Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement does allow countries to produce or procure generic versions of drugs in the face of a national emergency - through the compulsory licensing mechanism - the U.S. and the multinational drug companies have been steadfast in their opposition to generic drugs.

On October 18, Love and Ralph Nader, in a joint letter to Thompson, pointed out that Thompson did indeed have the power to issue compulsory licences for the Bayer patent.

Nader and Love pointed out that "Bayer stands to make hundreds of millions if not billions of dollars in the wake of the September 11 terrorist attack on Americans." They said that in the absence of adequate government stockpiles those who could not afford the drug were in danger of being exposed to risk. The situation, they claimed, resulted in an "unethical and unnecessary form of rationing." They asked Thompson to protect public health instead of defending the "profiteering" drug companies.

On October 24, the Prescription Access Litigation (PAL) project filed a lawsuit against Bayer, alleging that the company had entered into collusive agreements with three generic ciprofloxacin manufacturers. It claimed that Bayer paid $200 million to three companies, among them, Barr Laboratories, to block consumer access to adequate supplies of cheaper versions of ciprofloxacin. The lawsuit, representing 11 consumer groups in 11 States, claims that the three companies agreed to abandon research on cheaper generic alternatives in exchange for the money they obtained from Bayer.

An earlier case filed in the Eastern District of New York last year resulted in a ruling that the consumer groups had established "plausible" anti-trust charges against Bayer. In that particular case the Judge observed that Barr Laboratories had applied in 1991 to the FDA to market ciprofloxacin. Barr Laboratories asserted that Bayer's patent on Cipro was invalid and unenforceable. Bayer then sued Barr for patent infringement. Although Barr obtained provisional FDA approval to manufacture and market ciprofloxacin, Bayer entered into an agreement with the company in 1997, and paid the company for not producing the drug. Bayer has till date made payments of more than $200 million.

THE Cipro controversy could not have erupted at a worse time for the Bush administration. It gave ammunition to those working against efforts to introduce a strong regime of international patent laws in Doha during the fourth ministerial. The issue has provided a rare opportunity for critics of drug multinationals to come together on a platform, citing not only public health issues but also issues relating to consumer rights.

The issue of intellectual property rights has always been controversial. The advocates of strong patent legislations have had to contend with criticism that the interests of private monopolies have to be balanced with the needs of public health, particularly in the developing world. The perception that the U.S. has been cutting corners while addressing domestic public health issues in order to protect its negotiating position in Doha is likely to enhance the prospects of resistance to TRIPS within the U.S.