[Ip-health] Chicago Tribune: Abbott AIDS Drug pricing leads to review of patent

[Joy Spencer]

Dear All,

This made the front page of the Chicago Tribune today.

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Abbott AIDS drug pricing leads to review of patent

http://www.chicagotribune.com/features/health/chi-0405210344may21,1,6729402.story


By Bruce Japsen
Tribune staff reporter
Published May 21, 2004

Abbott Laboratories' decision to quadruple the price of a widely used
AIDS drug has prompted government regulators to explore whether they can
force pharmaceutical companies to lower prices on drugs developed with
the assistance of tax dollars.

Critics of Abbott's price increase on Norvir have won a hearing next
week with regulators at the National Institutes of Health. The
regulators will hear arguments for taking the unprecedented step of
allowing other companies to make generic copies of Norvir before its
patent expires--a power the government secured in 1980 under an obscure
law that has never been used.


The pharmaceutical industry says such a decision would seriously harm
drug research and development. But consumer groups counter that
taxpayers would reap more benefits from the billions of tax dollars that
go to drug research annually.

"It would be precedent-setting either way," said James Love, president
of Essential Inventions, the Washington-based consumer group that asked
for the hearing.

Attempts to limit prices by diluting patents are sprouting in a climate
of growing consumer outrage over drug costs, which have risen at an
annual rate of 15 percent during each of the last four years, far
exceeding inflation.

The increases, which have prompted Americans to head across the border
to Canada to buy drugs at cheaper prices, have also raised questions
about why drugs cost as much as they do and how companies like Abbott
determine how much to charge.

Abbott's decision to raise Norvir's price dramatically also calls into
question whether U.S. taxpayers are getting a fair return on their
investment in government-funded research that private pharmaceutical
companies use to bring drugs to market.

And the government now has more reason to pay closer attention to
prices. It is poised to spend more than $500 billion during the course
of a decade on a new Medicare drug benefit.

Abbott's case will be heard Tuesday in Washington, where testimony will
be taken but no decisions will be made. Regulators will be weighing
whether the Bayh-Dole Act of 1980--a law better known for encouraging
the privatization of taxpayer-funded academic research--allows them to
intervene.

Consumer groups argue that the law would allow the government to "march
in" and grant a license to generic makers to make copies, in effect
controlling prices. But many dispute that application.

Named after its authors, former Sen. Birch Bayh (D-Ind.) and former Sen.
Bob Dole (R-Kan.), the law was never intended as a mechanism to regulate
prices, a former Bayh staffer said.

"What the public gets back is that these drugs will be commercialized,"
said former Bayh staff member Joseph Allen, who is now president of the
National Technology Transfer Center. Before the 1980 law, Allen said
NIH-funded research seldom made it to market. Since then, it has led to
the creation of life-saving drugs and other products, which in fiscal
2002 resulted in almost $1 billion in royalties paid to universities
that in turn was funneled back into more research, he added.

Without the law, "the Abbotts of the world would not work with the
public sector research," Allen said.

Still, consumer groups and AIDS activists say Abbott's December decision
to raise Norvir's price to $8.57 a day from $1.75 a day could jeopardize
patients' access to the drug. In exchange for government funding,
critics say the Bayh-Dole Act required companies to market the drugs to
the public under "reasonable" terms.

Yet Abbott says the government's funding of less than $3.5 million was
only 1 percent of what it paid to develop and commercialize
Norvir--barely a dent in its budget.

What's more, Abbott said its scientists discovered the drug. Abbott said
the federal grant, awarded in 1988 and disbursed during a
five-year-period, paid for expenses for Abbott's early pre-clinical HIV
treatment discovery program.

Two of Abbott's protease inhibitors failed in lab testing, with Norvir
going on to win FDA approval in 1996. Protease inhibitors are key
ingredients in combination AIDS therapies, which were known in the 1990s
as "cocktails."

"Norvir was brought to market and commercialized with Abbott funds,"
said Dr. Jeffrey Leiden, president of Abbott's pharmaceutical products
group.

Abbott said it has spent more than $300 million to develop Norvir. The
drug last year generated about $100 million in worldwide sales. At its
peak in 1998, Norvir generated $250 million in sales.

In effect, critics say consumers pay twice because the government helped
fund Norvir's development and patients have to spend more to buy the drug.

"The taxpayers pay for the research, so does that mean drug companies
can do just about anything they want with the patent?" asked Love.

Abbott said it has gone out of its way to provide access to Norvir by
providing free and reduced-cost drugs to AIDS patients around the world.

The company also said it has frozen the price it charges government
programs and given the drug, free, to the uninsured. And Abbott knows of
no commercial insurers that stopped covering Norvir.

Abbott has said its price increase for Norvir is long overdue after
years of being priced below its rivals.

"Any patients we don't know about who have limited access, we are going
to get them the drug for free," Abbott's Leiden said.


Joy Spencer

Consumer Project on Technology
1.202.387.8030 (p)
1.202.234.5176 (f)
joy.spencer@cptech.org