[Ip-health] Glassman and Nick Schultz on Norvir March-In

[Mike Palmedo]

http://www.latimes.com/news/printedition/opinion/la-oe-glassman1jun01,1,574=
6876.story

Activists Put Drug Research on Chopping Block
- If they are successful in degrading patent rights, many lives will be
lost.

By James K. Glassman and Nick Schulz
L.A. Times, June 1, 2004

In their relentless campaign against technological innovation, left-wing
activists last week came up with a new approach. They're invoking a
24-year-old law that would force a drug company to give up its patent on
a key medicine and let generic competitors produce the drug.

The activists are hoping to slash the price of Norvir (ritonavir), an
HIV drug produced for the last eight years by Abbott Laboratories. The
National Institutes of Health awarded Abbott a grant of $3.5 million for
general research on protease inhibitors that ultimately helped in the
development of the drug. But Abbott also spent $300 million of its own
money to conduct trials and bring Norvir to market.

If the activists =97 led by James Love, an associate of Ralph Nader =97 are
successful, they will severely retard the development of new drugs, not
to mention other innovations. This is the kind of Luddite nonsense that
kills people.

Here's the story: In December, Abbott increased the price of its
successful Norvir by about 400%, from $1.71 to $8.57 a day. Abbott said
it needed the increase to recoup the costs of developing the drug and to
finance future AIDS research and development efforts. Why now? Abbott
said it had discovered that the drug had an added attraction that made
it more valuable: It can boost the activity of other AIDS drugs,
including its own Kaletra. The price increase prompted howls of outrage
from some senators and groups that claimed the company was price-gouging
on an essential medicine.

Those charges are unfair. Norvir and Kaletra have effective competitors.
In addition, needy patients may be eligible to obtain Norvir from Abbott
at no cost, and the company is not imposing the price increase on
government programs that dispense the drug.

Love's group, Essential Inventions Inc., nonetheless petitioned the
Department of Health and Human Services to step in to regulate the
price. In response, the National Institutes of Health held hearings May 25.

In his petition, Love invoked the so-called Bayh-Dole Act of 1980. The
law, named after former Sens. Birch Bayh (D-Ind.) and Bob Dole (R-Kan.),
was designed, according to Bloomberg News, "to speed the introduction of
products derived at least partly from government-funded research."

Abbott received its government grant in 1988 for research into ways to
block HIV from developing into full-blown AIDS. The drugs that Abbott
and other firms eventually produced have saved tens of thousands of
lives. Though $8.57 a day mounts up, it would seem a small price to pay
when faced with the alternative of dying.

The argument made by Love is that, since government money played a role
in the development of Norvir, the government has the authority to
intervene and force Abbott to issue a license that would allow the
manufacture of cheaper generic copies of the drug. The petition quotes
the law as saying that the government has the right to act here "because
the contractor or assignee has not taken, or is not expected to take
within a reasonable time, effective steps to achieve practical
application of the subject invention."

This is nonsense. Abbott has been marketing the drug for eight years.
The petition, however, claims that "practical application" means low
price =97 low, that is, according to the judgment of Love and his colleague=
s.

Even the Democratic coauthor of the legislation says it doesn't apply
here. Bayh spoke last week on Norvir, saying, "We simply cannot invent
new interpretations of the law=85. This is what has happened here in this
proposal before us.''

Imagine if Love's effort succeeded and if every drug company that
benefited from government research spending were at risk of losing its
already-brief patent, after the company had spent hundreds of millions
of dollars. What venture capitalist or small shareholder would invest in
a company facing such a risk? Drug companies would shun any association
with federal research dollars, and far fewer drugs would be developed.

Perhaps Abbott raised its price too high too fast. But that's Abbott's
decision to make. A free economy permits companies to set their own
prices, constrained only by the forces of competition and supply and demand=
.

Intellectual property protections are wellsprings of innovation, and it
is in society's interest to align basic research grants, market forces
and incentives so that companies are encouraged to pursue lifesaving
technologies. This system works. Trying to sabotage this productive
machinery imperils health and shortens lives. We need more =97 not fewer =
=97
protections for intellectual property of all sorts, from software to
entertainment to drugs.

*

James K. Glassman is a resident fellow at the American Enterprise
Institute and the co-founder of TechCentralStation.com. Nick Schulz is
the editor of Tech CentralStation.com.