[Ip-health] Wall Street Journal editorial: Abbott's Bad Precedent

Tue May 1 13:18:19 2007

Abbott's Bad Precedent
April 30, 2007; Page A14

National borders don't mean much to diseases, but they do when it comes
to drug patents. Most governments respect patents because without them
drug companies would have no incentive to develop new therapies. So
what happens when a country seizes patents, heedless of the broader
consequences?

We're about to find out. Earlier this month, Thailand browbeat Abbott
Laboratories into reducing the price of an HIV/AIDS drug, Kaletra, by
threatening to seize its patent. The action goes against every
principle of intellectual property protection under the World Trade
Organization.

You'd think such a frontal attack on property rights would upset the
World Health Organization, whose objective is "the attainment by all
peoples of the highest possible level of health." But you'd be wrong.
The WHO helped broker the Thai deal, bowing to intimidation from
increasingly loud "non-governmental organizations," or NGOs.

Abbott had initially responded to Bangkok's threats by withdrawing all
of its applications to market new products in Thailand. The NGOs
answered with their own denunciations of Abbott, with Oxfam calling its
withdrawal from Thailand a "nasty game," while Doctors Without Borders
labeled it "a major betrayal to patients." (Abbott kept selling the
drugs already on the Thai market.)

Under this political assault, WHO Director General Margaret Chan asked
Abbott if it could "improve access and affordability" to drugs for
middle-income countries. So Abbott did a reversal and said it would
re-enter the market and sell a newer version of its AIDS drug at a
lower price. The WHO then quickly praised Abbott for "significantly"
lowering the price. And its representative in Thailand, P.T.
Jayawickramarajah, added that "what the Thai Ministry of Public Health
has done is quite appropriate."

The truth is closer to the opposite, as a matter of law and policy.
Thailand has launched campaigns against three drug companies so far --
Abbott, for Kaletra; Merck, for Stocrin, another HIV/AIDS drug; and
Sanofi-Aventis's Plavix, a blood thinner for heart patients. Bangkok's
military government justified its actions under WTO rules that allow
governments to seize drug patents in cases of "national emergency" or
for "public non-commercial use."

These vague terms are open to interpretation, but Thailand is
stretching "national emergency" beyond reason. As the American
Enterprise Institute's Roger Bate points out, less than 1% of the Thai
population suffers from chronic coronary disease and a little over 1%
from HIV/AIDS. The latter is terrible but also far less than in most of
sub-Saharan Africa.

The "public non-commercial use" justification also doesn't hold up.
Bangkok intends to seize the patents and ship them to the Government
Pharmaceutical Organization, a for-profit state-owned company. The Thai
company, by the way, has never been certified by the WHO as a safe drug
producer and has a track record of graft. Yet now the WHO has allowed
the company to smash and grab a patent to make money.

The stakes here are far larger than Thailand's greed and WHO's
political opportunism. Anti-pharmaceutical activists have looked for
years for a government pliable enough to test WTO rules on compulsory
licensing. They want to set a precedent that erodes property rights,
with a goal of selling drugs at cut-rate prices everywhere. In the NGO
nirvana, governments would share the burden of paying for drug
research, and then create some kind of "reward" scheme for companies to
innovate. This is socialism as alchemy, as if companies will take
billion-dollar risks without an incentive to make a profit.

As for Abbott, we recognize their business and PR dilemmas. But the
only real weapon any drug company has in these patent battles is to
withdraw from an offending country's market. By threatening withdrawal
and then reversing itself under pressure, Abbott has undermined its own
credibility and made it harder for other companies to take a stronger
stand. CEOs are paid to make more consistent business judgments.

Also culpable is the Bush Administration, which has been dozing through
this assault on a major U.S. industry. Trade Representative Susan
Schwab's office has publicly acknowledged Thailand's ability to use
compulsory licenses -- subject to WTO law -- and may put the country on
a "watchlist" for IPR protection. But what happens when other countries
decide to seize patents? Last week, Brazil declared Merck's Efavirenz
(another name for Stocrin) a drug of "public interest" -- a possible
first step toward a compulsory license.

The large drug companies have become global whipping boys, but their
therapies can't be produced on a government whim. The Abbott precedent
is a bad one for global property rights, and the biggest losers will be
the world's poor and sick.

URL for this article:
http://online.wsj.com/article/SB117788209564486267.html

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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