Before September 11, U.S. policy toward pharmaceutical patents was clear: The interests of the patent holder came first. However, the anthrax scare that surfaced in October has managed to shake that policy to its roots. By the time the shaking was done and the original scare had subsided, Bayer Corporation, the Pittsburgh-based American subsidiary of the German pharmaceutical giant Bayer AG, had managed to hold onto its patent monopoly over the manufacture and sale of the powerful antibiotic ciprofloxacin, now familiar to Americans by its brand name, Cipro.
How that happened provides a lesson in how both public health issues and certain types of intellectual property rights have been affected by the terrorist attacks on the World Trade Center and the Pentagon, as well as by the mail-based anthrax attacks. Perhaps more important, in a world in which threats of bioterror are only likely to increase, the tug of war between Bayer and the government over Cipro hints at how even governments that nominally give patent protection a high priority are likely to compromise their principles in the face of a perceived public health threat -- at least when that threat faces their own citizens.
Increasingly over the last two decades, American pharmaceutical policy has favored the interests of the patent holder. The U.S. has labored to discourage foreign governments from breaking pharmaceutical patents and buying unauthorized generics from India or China -- two nations widely recognized as the major exporters of unauthorized generic drugs. When necessary, the U.S. has used trade barriers and various other types of political pressure to keep non-compliant governments in line.
"For 20 years, it's been the policy of the U.S. government to tighten the screws on foreign governments over intellectual property rights, particularly with medicine," says James Love, director of the Consumer Project on Technology, a Washington, D.C.-based public interest group critical of the pharmaceutical industry.
This approach is reflected in Article 31 of the World Trade Organization's Trade Related Agreement on Intellectual Property Rights (TRIPS). That agreement requires governments to honor patents. If a government needs or wants to exploit a patented invention, it must ask the patent holder for authorization and offer "reasonable compensation" for the privilege.
Love, whose group promotes global access to "essential" medicines, says the hard-line American policy "started in the Reagan era," when the push toward globalized trade began. To critics like Love this policy seems harsh, but its logic is clear: Without a worldwide framework in which each nation honors and enforces other nations' patent rights, it's possible for nations not bound by patent agreements to flood the world market with cheap generic drugs. Drug companies wouldn't be able to price their products high enough to guarantee a return on their research investment.
Furthermore, the argument goes, if you undermine the patent incentive system, you won't get the new drugs that are needed to address new health crises. "You wouldn't have Cipro if there wasn't a patent," says Mark Grayson, senior director of public affairs for the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry's association in Washington. (See "Goddamn the Pusher Man," April 2001.)
Historically, PhRMA's view has been more or less shared by the U.S. government. So in the late 1990s, when Brazil faced a problem in providing government-subsidized access to affordable AIDS drugs and the Brazilian government authorized the domestic production of generic knock-offs of American drugs, U.S. Trade Representative Robert Zoellick announced that "the U.S. won't hesitate in using its total strength and international laws to modify the situation."
Although the U.S. approves of anti-AIDS generic-drug programs in impoverished countries such as Senegal and Uganda, it stops short of approving compulsory licensing or patent-breaking in so-called Middle Income Countries such as Brazil, which have an adequate gross domestic product and industrial base to support the purchasing of brand-name pharmaceuticals. Given this history of strong patent enforcement by the U.S., Bayer may well have been confident about its own patent rights when anthrax panic triggered a run on Cipro. But Bayer's status was in fact anything but secure.
Bayer's drug division could certainly have used the windfall: Market analysts were predicting that it would likely end 2001 in the red. Cipro was already looking like Bayer's lucky charm; the drug generated $1.6 billion in sales last year for the company, out of $10.1 billion in revenue overall. Sales volume in the aftermath of the anthrax panic could only increase.
Patented in the early '80s, Cipro until recently was best known as a treatment for bladder infections and other, more common conditions than anthrax. It's often the antibiotic of choice when infecting organisms are resistant to other kinds of antibiotics. The period of patent protection is 17�20 years, and the drug's U.S. patent is set to expire in 2003. Cipro was the first drug approved by the Food and Drug Administration for treatment of anthrax infections, receiving the FDA's blessing in 2000, even though the drug had not been tested on humans as an anti-anthrax treatment. (Until a few months ago, no one in the U.S. had had anthrax since the 1970s, so there was no existing base of anthrax patients available for testing.)
Cipro's major anthrax tests were conducted over a decade ago by U.S. Army biowarfare researchers -- on rhesus monkeys. Still, the FDA (and not, surprisingly, Bayer) pushed for, and rushed through, approval of Cipro as an anthrax treatment, primarily because of fears that Iraq's Saddam Hussein might resort to an anthrax-based terror attack. The broad-spectrum antibiotic did not do better than some other antibiotics when the rhesus monkeys were treated, but it had at least one advantage the others lacked. Ciprofloxacin is not part of the penicillin or tetracycline families of antibiotics, which means that if foreign nations (or, for that matter, the U.S.) managed to develop strains of anthrax that were resistant to penicillin or tetracycline, Cipro would remain an effective therapy.
When the first cases of anthrax infection and exposure were publicized, it was only natural that the FDA and the Atlanta-based Centers for Disease Control started recommending prophylactic treatment with Cipro. Accordingly, everyone who was exposed or at risk -- from Tom Brokaw to New York City postal workers -- starting taking Cipro. Even those who weren't at risk found ways to get a prescription. In New York City, there was a sudden run on the drug, and some pharmacies were forced to post signs saying they could issue only 10-day supplies of Cipro.
Suddenly the question became, Would there be enough Cipro to go around? In addition, the U.S. and Canadian governments were entering the market as well -- as buyers in bulk. The U.S. government alone decided to purchase 100 million or more doses.
The government balked, however, at Cipro's price tag. The standard to-the-government price was $1.83 per pill. (The standard wholesale price to pharmacies is about twice that.) There were strong hints that Department of Health and Human Services Secretary Tommy Thompson would "break" the Bayer patent, perhaps through compulsory licensing, if Bayer would not sell to the government at a lower price.