[Ip-health] FTC ASKED TO INVESTIGATE GILEAD EFFORT TO CONTROL MARKET FOR AIDS DRUGS INGREDIENTS

[James Packard Love]

http://www.keionline.org/misc-docs/15feb07gilead_pr.pdf

Press Release, 15 Feb 07

FMI  James Love +1.202.332.2670, cell +1.202.361.3040,
james.love@keionline.org  (See attachment for patent and health
experts contact information)

FTC ASKED TO INVESTIGATE GILEAD EFFORT TO CONTROL MARKET FOR AIDS
DRUGS INGREDIENTS

[Complaint available here:
http://www.keionline.org/misc-docs/ftcgilead12feb07.pdf]

Washington, D.C.  February 15, 2007.    Knowledge Ecology
International (KEI) has petitioned the U.S. Federal Trade Commission
to seek remedies for anticompetitive practices by the pharmaceutical
company Gilead.  The advocacy group claims that Gilead is using
patents on a government funded AIDS drug invented at Emory University
to cut-off low cost supplies of ingredients for two AIDS drugs.

KEI charges Gilead with using licenses to patents on the AIDS drug
emtricitabine in 45 countries to control the supply of the =93active
pharmaceutical ingredients=94 (APIs) to more than 100 other countries,
and control the market for a second AIDS drug (tenofovir) that is
generally off-patent in developing countries.

Northeastern University School of Law Professor Brook Baker notes
Gilead=92s licenses =93(1) split and tie-up the market for active
pharmaceutical ingredients, (2) seek royalties on approved sales even
when patents are not in force, and (3) prevent additional sales in
unapproved markets even where tenofivir and emtricitabine and their
combinations are not patented.=94

According to the KEI complaint, =93This action imposes higher costs for
AIDS drugs in more than 150 developing country markets.   The United
States government is the largest purchaser of AIDS drugs in the
developing world, and is harmed by this anticompetitive practice.=94

According to Ellen =91t Hoen from the humanitarian group MSF,  =93In the
case of tenofovir (TDF) the cost of the API may account for 80% of
the total cost of production.  Limiting access to API for the
production of TDF will inevitably keep the price artificially high.=94

Announced in 2003, the President's Emergency Plan for AIDS Relief
(PEPFAR) is the largest commitment ever by any nation for an
international health initiative dedicated to a single disease =96
initially $15 billion over five years.   Fifty-five percent of the
PEPFAR budget is for the treatment of individuals with HIV/AIDS, and
in FYs 2006 through 2008, 75 percent of those outlays will be spent
on the purchase and distribution of antiretroviral drugs.  PEPFAR
supports programs in 120 developing countries.

The KEI complaint details a scheme by Gilead to partition the
developing world in half, and license certain companies to sell
tenofovir and emtricitabine in one part of the world on the condition
that companies restrict the buying or selling of APIs with companies
who sell in the other part of the world.

=93The patent landscape on the two drugs is very different.  Gilead has
used the patents on emtricitabine in 45 countries to control the
market for APIs in the entire developing world, not only for this
drug, but also for tenofovir, a drug that is actually off patent in
most countries,=94 said KEI Director James Love.

The main focus of the Gilead licensing strategy is to co-op the
generic manufactures, so that they only sell or buy APIs with
companies approved by Gilead.  For receiving a license to use the
Emory patents in 45 countries, the license requires payment of
royalties in countries where Gilead does not hold a patent, and to
not compete in countries that collectively have 2.5 billion residents.

By partitioning the market in this way, Gilead has made generic
suppliers of APIs less efficient, and reduced the number of
competitive suppliers in all markets, leading to higher prices for
AIDS drugs purchased by US government funded health programs.

KEI told the FTC that the patents on emtricitabine were based upon
publicly funded research grants to Emory University, and that as a
consequence, the US government can easily demand changes in the
Gilead licensing practices, by threatening to exercise its royalty
free rights in the patents.

=93It is particularly troubling that some of the drugs were developed
with federal government funding, and that the costs of any such
anticompetitive licensing would be paid by American taxpayers who
subsidize developing country purchases through the PEPFAR program,=94
said Joshua D. Sarnoff, from the Glushko-Samuelson Intellectual
Property Law Clinic at American University.

              - 30 -

COMMENTS BY PUBLIC GROUPS AND PATENT EXPERTS

Ellen 't Hoen Policy Advocacy director MSF Access to Essential
Medicines Campaign
"TDF is part of the standard 1st line treatment in the West, but it
is largely out of reach of people in developing countries despite the
fact that WHO recommends its use for 1st line. In the case of TDF the
cost of the API may account for 80% of the total cost of production.
Limiting access to API for the production of TDF will inevitably keep
the price artificially high.=94

Joshua D. Sarnoff Glushko-Samuelson Intellectual Property Law Clinic,
Washington College of Law, American University
  =93The potential for these critically important AIDS drugs to be
licensed in an anticompetitive fashion is a very serious concern, and
one that definitely warrants investigation by the FTC.  We should be
finding ways to make such drugs more affordable in developing
countries where they are needed and where the ability to pay for the
drugs is severely limited.  It is particularly troubling that some of
the drugs were developed with federal government funding, and that
the costs of any such anticompetitive licensing would be paid by
American taxpayers who subsidize developing country purchases through
the PEPFAR program.=94

Professor Brook Baker, Northeastern University School of Law
"We need new standards to assure that rich drug companies like Gilead
don't over-reach when they are forced to grant licenses for accessing
essential medicines in developing countries.  These so-called
voluntary licenses are usually granted as a result of pressure by
AIDS and public health activists who seek to ensure that robust
generic competition results in sustainable supplies of low-cost and
good quality medicines.  This is what happened in the Gilead case,
but when the actual details of the licenses are revealed, we find
that profit-maximization still reigns supreme through terms that: (1)
split and tie-up the market for active pharmaceutical ingredients,
(2) seek royalties on approved sales even when patents are not in
force, and (3) prevent additional sales in unapproved markets even
where tenofivir and emtricitabine and their combinations are not
patented.  All of these illegal terms increase profits for Gilead and
simultaneously raise prices in fractured developing country markets.
Under the cover of good deeds, Gilead has engaged in some sharp and
anti-competitive practices that must be and can be addressed by the
U.S. government, which retains rights to correct the anti-competitive
terms and to issue its own licenses to inventions it helped finance.
The Knowledge Ecology International request for an FTC investigation
is public citizenship at its finest."

Contacts:

James Love, Director of Knowledge Ecology International
Office phone: 202 332 2670
Cell phone: 202 361 3040
e-mail: james.love@keionline.org

Brook Baker, Professor at Northeastern University School of Law
Office phone: 617 373 3217
Cell phone: 617 659 0760
e-mail: B.Baker@neu.edu

Amy Flood, Director of Public Affairs at Gilead
Office phone: 650 522 5643
e-mail: aflood@gilead.com

Randy Marks, Federal Trade Commission
Office phone:
e-mail: rmarks@ftc.gov

Joshua Sarnoff, Assistant Director of the Glushko-Samuelson
Intellectual Property Law Clinic at American University Washington
College of Law
Office phone: 202 274 4165
e-mail: jsarnoff@wcl.american.edu

Ellen F.M. 't Hoen, Director of Policy Advocacy for Doctors Without
Borders Essential Medicines Campaign
Office phone (Geneva): + 33 1 4021 2836
e-mail: ellen.t.hoen@paris.msf.org


----------------------------------------------
James Packard Love
Knowledge Ecology International
http://www.keionline.org
james.love@keionline.org
Washington, DC +1.202.332.2670

"If everyone thinks the same: No one thinks." Bill Walton"