[Pharm-policy] WSJ on CIPLA's voluntary license request

[love@cptech.org]

http://interactive.wsj.com/articles/SB982280636510845109.htm

February 16, 2001  
 

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Companies Weigh Offer of Royalties
For AIDS Drugs Aimed at Africa
By DANIEL PEARL 
Staff Reporter of THE WALL STREET JOURNAL


Two U.S. drug companies appear to be weighing an Indian generic-drug
maker's offer to pay them 5% royalties in exchange for permission to
sell knockoff versions of their patented anti-AIDS drugs in developing
countries.

Bristol-Myers Squibb Co. and Pfizer Ltd. have both promised to respond
soon to the offer from Bombay-based Cipla Ltd., according to letters
made available by Cipla. The Indian drug company produces its own
version of anti-retroviral drugs used to fight AIDS, and recently jolted
pharmaceutical companies by offering to sell an AIDS "cocktail" to an
international aid organization at a much lower price than the
multinational pharmaceutical companies had offered poor countries.

What should pharmaceutical companies charge developing countries for
AIDS drugs? Participate in the Question of the Day in the online
Journal.

Drug Makers Are Prodded on Cut-Rate AIDS Medicines
 
Cipla says it hasn't received responses from two other companies --
GlaxoSmithKline PLC of the U.K. and Boehringer Ingelheim Ltd. of Germany
-- to its proposal, made in a Dec. 19 letter that requested a "timely
response." Glaxo told The Wall Street Journal it was considering Cipla's
offer but had reservations about it.

The idea of a 5% royalty is unlikely, by itself, to resolve the current
quandary over how to protect patent rights while making drugs available
to poor countries hit hard by the AIDS pandemic. Glaxo, after all, has
already rebuffed Cipla's bid to sell AIDS drugs in Ghana, where Glaxo
claims patent protection. Still, it is risky for drug companies to brush
off Cipla's royalty offer, because doing so could hand Cipla a weapon to
enter those markets anyway, through a maneuver called "compulsory
licensing."

Under compulsory licensing, a government can force patent holders to
grant licenses to generic drug makers. Unless there is a "national
emergency," though, the generic company first has to establish that it
tried to get a license on "reasonable commercial terms" but was
rebuffed.

Patent holders "don't want to issue licenses," says James Love, a
Washington-based activist who has been involved in talks between Cipla
and international aid groups that are hoping to distribute AIDS drugs
free of charge. Mr. Love, of the Ralph Nader group Consumer Project on
Technology, says that with compulsory licensing, it is "up to the
governments" to decide who gets a license. He says citizens groups are
starting to put pressure on African governments to try to get low-priced
AIDS drugs even if it means going generic.

Pfizer expects to respond to Cipla's proposal later this month, a
spokesman said Thursday. "We think it unlikely that an agreement could
be reached with Cipla," the spokesman, Bob Huber, said. But Pfizer will
ask for additional information about Cipla, including its roster of
board members and manufacturing processes. Pfizer advocates donation
programs as the best way to expand patient access to vital medicines in
Africa and elsewhere. "It makes little difference if a medication is
priced at $5,000 a year or $500 a year in many developing nations," Mr.
Huber said. "Both are beyond the reach of most patients."

Bristol-Myers didn't respond to a request for comment on Cipla's offer.
A spokesman for Boehringer Ingelheim said that he was unaware of Cipla's
letter but that "any kind of offer would have to be discussed."

Glaxo spokesman Phil Thomson said, "The best thing we can say is we have
received [Cipla's offer] and it's under consideration." But he cautioned
that "we need to look at the royalties" and said he couldn't say when
the company would respond to Cipla's offer. Right now, Glaxo said, it is
focused on selling the two products Cipla referred to in its letter,
lamivudine and zidovudine, through a United Nations program in which
drug companies negotiate with developing countries to sell their AIDS
drugs at a discount.

>From Cipla's point of view, a compulsory license would be an easier way
to get its AIDS drugs into sub-Saharan Africa than selling to aid
groups. Cipla is expected to meet in coming days with the group Doctors
Without Borders to try to iron out an agreement to sell the group an
AIDS cocktail at a price of $350 per patient per year. But even if a
deal is reached, Doctors Without Borders could face problems
distributing the drugs in countries with strong patent protections.

Cipla's strategy is to "somehow persuade the governments to recognize
compulsory licensing," says Jesal Shah, a research associate with SG
Asia Securities, based in Bombay. He adds, "Cipla has been trying to
break into the sub-Saharan region with its AIDS drugs for quite some
time now."

Cipla officials say winning a compulsory license wasn't necessarily the
intent of the December letter to the AIDS-drug patent holders. "We don't
have a definite plan of action" if the drug companies turn down the
offer, says Amar Lulla, Cipla's joint managing director, who signed the
letters. "I don't think we would be able to afford litigation or to
pressure governments."

The World Trade Organization, by 2005, will require members to have laws
in place to protect pharmaceuticals from copycat manufacturers such as
Cipla. But countries can include compulsory licensing in their laws. The
licenses would require an adequate payment to the patent holder, though
determining what's adequate could be sticky. Cipla is offering up to 5%
of sales, depending on how strong a patent claim the other company has
in a particular country. Cipla says it drew the figure from a year-old
submission by a U.S. pharmaceutical trade group that cited 5% as the
average pharmaceutical royalty rate. But a spokesman for the group,
Pharmaceutical Research and Manufacturers of America, says the 5% is a
"low-end, conservative estimate."

Although some developed countries such as Canada have used compulsory
licensing in the past to keep drug costs low, poor countries haven't
been jumping on the idea. Even in India, some pharmaceutical companies
have mixed feelings about a strong compulsory-license measure being
considered in their country. After all, it could come back to haunt them
if they develop their own drugs. Government officials worry that foreign
aid could dry up if they push for compulsory licenses, says Anand
Grover, a Bombay public-interest lawyer specializing in AIDS issues.

U.N. officials are cheering the idea of royalties, but from the
sidelines. Jonathan Quick, director of the World Health Organization's
department of essential drugs, notes that royalties are a "business
arrangement," and that U.N. officials decided this week that "it's not
our role to get in the middle of commercial patent discussions."

-- Geeta Anand, Jesse Pesta and Vanessa Fuhrmans contributed to this
article.

Write to Daniel Pearl at danny.pearl@wsj.com