[Ip-health] WSJ editorial: "Theft in Thailand"

[Benjamin Krohmal]

Probably the most scathing and misguided piece yet on the Thai
compulsory licenses:


Theft in Thailand
February 10, 2007; Page A8

http://online.wsj.com/article/SB117097198633602800.html?
mod=todays_us_opinion

The crusade against drug patents was once fought in the halls of the
World Trade Organization. No more. By seizing patents for HIV/AIDS
treatments and heart disease, Thailand has asserted that governments
have the right to take intellectual property whenever they please.

The Thai Ministry of Public Health announced recently that it would
issue a "compulsory license" for Abbott Laboratories' Kaletra, an HIV/
AIDS drug, and Clopidogrel, the local Thai brand of Sanofi-Aventis's
Plavix heart medication -- meaning that Thailand will eventually
produce generic copies of these drugs. Its decision follows a similar
move in November against Merck's Stocrin, an antiretroviral HIV/AIDS
drug. The Ministry said WTO rules give Thailand "a right to issue a
safeguard measure to protect public health, especially for universal
access to essential medicines using compulsory licensing on the
patent of pharmaceutical products."

Thailand's actions may be technically legal. The WTO language on
compulsory licensing is regrettably vague, and doesn't list specific
causes for which governments can seize private patents. The only hint
of protection of private property lands in Article 31, which says
"the proposed user has made efforts to obtain authorization from the
right holder on reasonable commercial terms and conditions."

However, Thailand did not bother to consult prior to issuing the
compulsory licenses, and the drug companies woke up to read about it
in the papers. So it clearly breached the spirit, if not the letter,
of Article 31. In any case, it's hard to argue that Thailand has an
AIDS epidemic, when its incidence is a little over 1% -- and
countries such as South Africa are well over 20%. The same goes for
heart disease.

Until now, governments have been careful to define disease outbreaks
as "emergencies," primarily because they didn't want to dissuade drug
companies from investing in their countries. Hong Kong, for example,
refrained from issuing a compulsory license during the 2001 SARS
outbreak. Drug companies spend billions of dollars in research,
development, training and distribution. Without market-based
incentives, there's little reason to invest in R&D.

It's worth noting that Thailand's confiscations are also a boon for
the Government Pharmaceutical Organization, the state-owned monopoly.
Until it can ramp up its own production, GPO will be the sole
importer and reseller of the products Bangkok seized.

GPO says it will charge consumers lower prices. But Merck was already
selling Stocrin at cost in Thailand, as it does in other developing
countries with over 1% incidence of HIV/AIDS. GPO's profits, then,
must come from sourcing a cheaper producer of generics. It's likely
to turn to India -- the world's most prolific source of counterfeit
generics.

How this is good for Thai patients is anyone's guess. GPO's
production facilities have never met WHO standards. HIV drug
resistance in Thailand is high, most likely because of the reliance
on faulty GPO generic copies. Now, given the lack of patent
protection, foreign companies may hesitate to introduce newer, more
expensive and sophisticated second- and third-generation drugs into
Thailand. If Merck's new AIDS vaccine shows promising results, for
example, you can bet it won't debut in Bangkok.

Thailand's decision is already reverberating world-wide. Brazil,
which has used the threat of compulsory licensing to extract lower
prices from drug companies, is paying attention. Full credit, then,
to World Health Organization Director-General Margaret Chan for
criticizing Thailand's move and defending IP protection. "I'd like to
underline that we have to find a right balance for compulsory
licensing," the Bangkok Post quoted her as saying last week. "We
can't be naive about this. There is no perfect solution for accessing
drugs in both quality and quantity."

Thailand's military junta has embraced bad economics in the name of
populism since taking power last October. So far, these decisions
have mostly hit investor pocketbooks. Now the government is toying
with its citizens' lives.