[Ip-health] Tom Giovanetti in Policy Bytes: Abbott’s "con cession" on price of Kaletra in Thailand

[Thiru Balasubramaniam]

http://www.policybytes.org/blog/PolicyBytes.nsf/dx/kaletra-in-
thailand.htm

Abbott’s "concession" on price of Kaletra in Thailand

April 23rd, 2007

Tom Giovanetti

The latest news in the game of chicken between the military
dictatorship in Thailand and U.S. pharmaceutical company Abbott over
access to Abbott's AIDS drugs is that Abbott has decided to offer the
most improved version of it's critical drug Kaletra to Thailand at a
discounted rate if the Thai government will forgo its plan to issue a
compulsory license. It's covered by an article in today's Wall Street
Journal, which is also commented on at the WSJ's Health Blog.

Thailand, of course, is ruled by a military junta. Thailand's health
minister is, from most reports, a radical activist who's instincts were
held in check so long as Thailand was ruled by a government that
understood that it had to participate in the community of nations. But
now that the military is in charge, and has little respect or
understanding for the tedious business of international relations,
trade and development, the Thai health minister has free reign to do
what's he's always wanted to do--use health policy to demagogue against
Western pharmaceutical companies, and enrich himself and his cronies at
the corrupt Government Pharmaceutical Office by issuing a blizzard of
compulsory licenses on some of the most critical and popular
pharmaceuticals, including (but not limited to) Abbott's AIDS drug
Kaletra.

Compulsory licenses give Thailand the right to willfully violate a
company's existing patent rights, either by producing the drug
domestically, or by licensing a third-party nation to produce the drug
for them. Because Thailand isn't remotely capable of producing
"Thailetra," the assumption is that Thailand will engage producers in
India to begin making the drug for them. And, since the Indian producer
will want to find other markets for this exciting new product as well,
before you know it you have a significant international market for
Thailetra.

The international treaty governing trade in intellectual property goods
is TRIPS. I'm not going to get into the argument here over whether
Thailand's actions are a legitimate application of the compulsory
licensing authority granted in TRIPS, because it doesn't matter. They
did it and no one is going to stop them.

By issuing a compulsory license for an AIDS drug, a developing country
like Thailand plays a powerful card. Who is going to blame a poor
country for trying to get AIDS drugs to their suffering population?
It's a powerful negotiating tool, and that's how it has been used,
although the compulsory licensing authority granted in TRIPS is
explicitly not intended as a negotiating tool--it's intended to deal
with health emergencies and for instances where negotiations break down
on critical medicines.

How would you like to be in Abbott's shoes here? For both business and
humanitarian reasons, you want people to have wide access to your
drugs. But perhaps more than any other industry, you depend on funding
R&D for your very existence, and you know that lower prices means less
money available for R&D. From a business standpoint, Abbott is in a
horrendous position, and they are left with no good option. The only
question for Abbott is which is the least bad option?

Abbott could play hardball with Thailand and dare them to fully
exercise the compulsory license, protecting their pricing authority. Or
they can do the best they can to work with the government to arrive at
a drug price that staves off the compulsory licensing of their drug.
The only question is which is the bigger loss.

And the answer is that widespread use of compulsory licensing is the
bigger loss. If and when countries get comfortable with issuing
compulsory licenses at whim, the entire system of world trade in IP
goods will break down. Compulsory licenses are intended as the extreme
exception to the rule--not as the rule. Compulsory licenses are used as
means of settling legal disputes, patent conflicts, antitrust
settlements, alternatives to injunctions, etc. Not as negotiating
strategy, and especially not as industrial policy.

     The litany of examples of compulsory licenses approved in the U.S.
that people like Jamie Love have been reciting as supposed examples of
U.S. hypocrisy on the issue are ALL such examples. They are compulsory
licenses legally imposed or agreed to as parts of antitrust
settlements, etc.  They are exceptions. They are not the rule. If they
become the rule, the economies of innovative countries is in trouble.


Notice the words of Abbott's CEO:

     "In this particular case, in the name of access for patients, we
offered to resubmit Aluvia at our new price, which is lower than any
generic, provided they wouldn't issue a compulsory license," Mr. White
said. He said the initial decision was driven by "concern that
     compulsory licensing would be abused ever-more widely, using HIV as
an excuse."


He's exactly right.

So a couple of weeks ago Abbott slashed its price on Kaletra, cutting
the price to less than half of its previous price point and below the
cost of nonequivalent generics. And now Abbott is offering substantial
discounts on the improved version of Kaletra as well.

By offering discounted pricing on the improved version of Kaletra,
undoubtedly, Abbott has made the best of two lousy choices. Every
incentive must be given to countries to not issue compulsory licenses.
Compulsory licensing of pharmaceuticals is not the "thin end of the
wedge." It IS the wedge.

An observation: If countries are simply going to appropriate patented
medicines, what is the point of continuing to innovate? And especially,
what is the incentive to do R&D on AIDS remedies, if the minute you
come up with something it is going to be taken from you?

Final observation: Where is the U.S. government in all of this? In
international trade, even major multinational companies are no match
for governments when it comes to negotiating. The U.S. government must
stand behind U.S. companies in such clashes. But I'm afraid thus far
what we've seen is an apparent willingness on the part of the U.S.
government to sacrifice the interests of one of our most innovative
industries, and for what?

---------------------------------
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org