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May 2002
Vol. 5, No. 5, pp 41–45.
patents and property

Infringement for the public good?

The threat of bioterrorism undercuts the strength of patents during a national crisis.

Geoff Smith

After the events of last September and in the wake of renewed fears of bioterrorism, the health departments of the United States and Canada had to make some tough decisions regarding public welfare, the availability of antibiotics, and the sanctity of patent protection for drug companies. And the actions of those political officers will not only affect patent law in those countries, but will also likely have significant repercussions for years to come on the ability of people in developing nations to gain access to much needed medicines.

The Canadian connection
Last October, Health Canada staff members questioned Bayer officials about the size of the Canadian stockpile for Cipro. Alan Rock, the Canadian Minister of Health, sought to confirm that Canada was ready for any bioterrorist attacks. Apparently, when he did not receive a satisfactory answer, the government office (the Canadian equivalent of the U.S. FDA) contracted with the generic drug manufacturer Apotex to supply the 1 million tablets that they felt were necessary.

Bayer was stunned and, although not threatening a lawsuit over infringement on its Canadian Cipro patent, which it holds until 2004, company officials spoke of keeping their options open. They openly questioned the source and validity of the minister’s information, grandiosely showing off a Toronto warehouse full of Cipro.

“We’ve been working closely with the government to meet all of their current demands and their future requirements,” said Doug Grant, vice president of public policy and communications for Bayer Health Care, in a Toronto interview.

Eventually, Rock backed down, continuing to work with Bayer and offering to swallow Apotex’s costs.

Meanwhile, in the United States . . .
These events were watched closely in Washington, as people like Tommy Thompson, U.S. Secretary of Health and Human Services, began to apply their own pressure on Bayer. Thompson, too, was interested in making Cipro more affordable and was concerned about the size and security of the nation’s Cipro stockpile, but he stopped short of following the lead of his Canadian counterpart. Sen. Charles Schumer (D-NY), however, did not demur from this position, going so far as to name three generic pharmaceutical manufacturers who were capable and willing to make Cipro—Teva Pharmaceuticals, Par Pharmaceuticals, and Ranbaxy Laboratories. Ranbaxy, for example, offered to make the drug for $0.40 per pill—as compared to the $1.77 per pill then charged by Bayer—and, according to company president Dipack Chattaraj, the company would still make a profit.

“We cannot just rely on Bayer to ensure we have a sufficient supply of Cipro,” Schumer said in an October 16, 2001, press release. “First, Bayer can only produce so much Cipro, and we should not put our best response to anthrax in the hands of just one manufacturer. Second, buying Cipro only from Bayer—who charges a lot more than generic manufacturers would—means we spend a lot more and receive a lot less. Hopefully, we won’t even need to use the Cipro we already have on hand, but if we make arrangements to purchase it from multiple generic drug manufacturers, we’ll have it if we need it.”

Although the dispute was far from settled, Bayer moved to improve public relations by dropping the price of Cipro tablets in both the Canadian and American markets to $0.95. The new deal met with the approval of both Thompson and Schumer.

A defining moment
With the change in Cipro pricing, the controversy lost most of its steam, but questions remained unresolved. Who has the authority to override patent protection, and under what conditions?

According to patent lawyer Kevin Carton, the Canadian Patent Act allows the government to rescind patent protection, with permission of the Commissioner of Patents, under conditions of national emergency, in which case it would be up to the patent holder to dispute the decision in court. The situation, however, seems to be cloudier in the United States.

Although Secretary Thompson considered the possibility of overriding Bayer’s patent, he routinely questioned his authority to do so and deferred to Congress. In an open letter, however, Ralph Nader and James Love, director of the Consumer Project of Technology, pointedly stated that Thompson had the authority. “The U.S. government has used 28 USC 1498 in many cases for less serious matters to authorize contractors to use patents held by others in order to provide goods and services for the government,” they wrote. “This includes cases involving pharmaceutical products in far less difficult circumstances.”

The advocates are making reference to the part of Title 28 of the U.S. Code (USC) that deals with patent and copyright cases. Under 28 USC 1498, the U.S. government retains the right to use or manufacture—or contract another party to manufacture—any invention described by a U.S. patent without license of the owner—essentially, to override the owner’s patent. In return, the owner of the patent can sue the government for “the recovery of his reasonable and entire compensation for such use and manufacture.” Exactly what is implied by “reasonable compensation” is poorly understood, but it is generally thought to include manufacturing costs and income from lost sales.

Web resources
The Canadian Patent Act can be found at http://laws.justice.gc.ca/en/P-4/index.html. Information about the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement can be found at www.wto.org/english/tratop_e/trips_e/trips_e.htm.

The U.S. Code can be searched at http://uscode.house.gov/search/criteria.shtml, and a downloadable copy of Title 28 of the U.S. Code can be found at http://uscode.house.gov/.

The U.S. Department of Health and Human Services has a website at www.hhs.gov.

More information about James Love and the Consumer Project on Technology can be found at www.cptech.org.

A copy of Jeffrey Sachs’ article “Helping the World’s Poorest” can be found at the Center for International Development’s website, www.cid.harvard.edu/cidhipc/index.html.

Historical precedent?
In the late 1960s, the Veterans Administration (VA, now the Department of Veterans Affairs) purchased meprobamate, a tranquilizer, from a Danish company at $1.55 per 500 tablets, even though the same product was available from the U.S.-based pharmaceutical firm Carter-Wallace at $26 per 500 tablets, more than 17 times the price. Had the VA invoked 28 USC 1498, it would have been able to contract an American company to produce meprobamate at a fraction of the price being charged by the pharmaceutical firm. As it was, Carter-Wallace filed suit against the VA, Department of Defense, and General Accounting Office to recover compensation under 28 USC 1498 for what it saw as an infringement on its patent for meprobamate.

In the Bayer case, however, the problem of lawsuits was avoided by its decision to reduce the price of Cipro, relieving Secretary Thompson from having to invoke 28 USC 1498, ask Congress to do so, or accept Bayer’s position. But, although Bayer’s decision largely made the U.S. situation moot, the events in Canada and the United States were also being watched abroad, and people were still asking what exactly constitutes a national emergency.

Worldwide implications
When Rock decided to override Bayer’s patent protection in Canada, not a single Canadian case of anthrax infection had been detected. During the discussions in the United States about Bayer and Cipro, fewer than a dozen individuals died of anthrax, yet the governments of both countries considered overriding the patent laws of their own countries.

What about the developing world? Annually, more than 2 million people die in Africa due to complications from AIDS, but a pill that costs a few dollars to manufacture might carry a price tag 10 to 100 times higher. Yet efforts to reduce the costs of AIDS-related drugs through the production of generics are routinely met with threats of lawsuits. A case in point is the threat by 39 drug companies last year to take the South African government to court when it considered buying generic versions of AIDS drugs.

“Tommy Thompson may not know it, but he became our ally when he threatened that patent,” said Jose Viana in an interview. Viana is an adviser to the Health Minister of Brazil, another country ravaged by diseases for which drugs are available but expensive. “He did what he thought was in the best interest of his country. Why can’t others do the same?”

Thus, the desire to provide low-cost pharmaceuticals for their own people while denying them to others is the reason that many people see the positions of the American and Canadian governments on drug patents as hypocritical. Although companies like Bayer give some drugs away for free—a little good will—there is still a lot of pressure to prevent manufacturers of generic drugs from lowering prices.

Activists for expanded access to medicines have called on companies and governments to recognize the World Trade Organization’s (WTO’s) TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement. Article 31(b) of this agreement basically statesthat a member state can use the subject matter of a patent without the authorization of the patent holder if, before such use, the member has made efforts to obtain authorization and that such efforts have not been successful within a reasonable period of time.

This requirement may be waived, however, in cases of national emergency or other circumstances of extreme urgency, although the right holder should be notified as soon as reasonably practicable. But again, the problem of how to define a “national emergency” rears its ugly head.

At the November 2001 meeting in Doha, Qatar, the WTO reaffirmed Article 31 in the light of worldwide public health concerns over diseases such as AIDS, tuberculosis, and malaria, leaving it up to the individual member states to define a national emergency as they see fit. How this reaffirmation will influence implementation, however, remains to be seen. The changed legal and political landscape that has resulted from the actions of Rock and Thompson puts the WTO position in a much different light than it would have been only months earlier. Perhaps because of the precedent in Canada, developing countries will have a firmer foot upon which to stand in achieving affordable health care.

The last word
Jeffrey Sachs, world-renowned economist at Harvard University’s Center for International Development, perhaps explained the situation best in an August 1999 article for The Economist when he wrote, “In a world in which science is a rich-country prerogative, while the poor continue to die, the niceties of intellectual property rights are likely to prove less compelling than social realities.”

Randall C. Willis is a senior associate editor of Modern Drug Discovery. Send your comments or questions regarding this article to mdd@acs.org or the Editorial Office by fax at 202-776-8166 or by post at 1155 16th Street, NW; Washington, DC 20036.

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