Anthrax Crisis-US Considers Bayer's Patent More Important than Public Health

Anthrax Crisis-US Considers Bayer's
Patent More Important than Public Health

Subject: Anthrax, Drug Transnationals and TRIPs

Antibiotics and the Food System ( Posted: 11/07/2001

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Anthrax, Drug Transnationals and TRIPs
The Anthrax Drug Price: More Scary than the Disease
Table 1: Selected International Prices of Ciprofloxacin
Abject Surrender
Canada's Flip-flop Posture
The US Administration: Hand in Glove with the Drug TNCs
Wider Ramifications

Anthrax, Drug Transnationals and TRIPs

Spreading in the aftermath of terrorist attacks in the US on 11th
September, the current anthrax crisis has, once again, raised highly
controversial issues related to intellectual property rights. Just a few
months back, the world witnessed heated debate on the patent controversy
when the Pharmaceutical Manufacturers' Association of South Africa
(PMASA), a body representing South African subsidiaries of 39 drug
transnational corporations (TNCs), took the South African government
to court to prevent it from importing cheaper versions of patented drugs
for patients suffering from Acquired Immuno Deficiency Syndrome (AIDS).

However, under tremendous pressure generated by health activists and
concerned groups around the world, the drug TNCs unconditionally
dropped the lawsuit against the South African government.

No doubt, it is unfair to compare the AIDS pandemic in South Africa with
the current anthrax crisis in the US. As compared to over 4.7 million
patients suffering from AIDS and nearly 300 AIDS patients dying every
day in South Africa, the anthrax crisis in the US has only affected a dozen
people and claimed four lives till now. Yet there are several
similarities. Not only both instances relate to public health, but more
importantly, the bone of contention revolves around the Trade-Related
Intellectual Property Rights (TRIPs) agreement of the World Trade
Organization (WTO).

Moreover, both these instances confirm the apprehensions of several
developing countries as well as health activists that drug TNCs put
profits before public health and the WTO regime severely restricts the
capacity of national governments to take measures to safeguard public

The Anthrax Drug Price: More Scary than the Disease

The current controversy on patented drugs started when the first signs of
anthrax attacks appeared in US in the early October 2001. Ciprofloxacin,
an antibiotic drug, is prescribed for treating patients suffering from
anthrax and other bacteria. German drug TNC, Bayer AG, holds the patent
for Cipro (the brand name of ciprofloxacin) in the US till December 9, 2003.
Under the present TRIPs agreement of the WTO regime, it implies that no
other drug company is allowed to commercially manufacture and sell the generic
versions of this drug in the US until the Bayer patent expires, except
under extraordinary circumstances which allow compulsory licensing and
parallel importing.1 Cipro is not only one of the best selling antibiotic
drugs in the world but it is also a mega profit earning drug for Bayer.
In US alone, Bayer sold $1.04 billion worth of Cipro in 1999.

As the spectre of anthrax epidemic loomed large on the horizon, people
started piling up stocks of Cipro. The sudden increase in the demand for
Cipro led to a steep hike in its retail prices. With the wholesale prices
of Cipro at $4.67 for a 500 mg pill in the US, the retail prices went up
to as much as $7 a pill. For anthrax treatment, it is recommended that
patients should take two pills a day for 60 days. Thus, the retail price for
two months stock of Cipro was well over $700, much beyond the means
of poor Americans. Given the fact that two months stock of a generic
version of Cipro costs a fraction of the prevalent price in the US, there was
uproar over the monopolistic profits made by Bayer from the public
health crisis. In India, for instance, Bayer's Baycip (the brand name of
ciprofloxacin in India) is available at drug stores at $0.13 a pill. Thus,
the retail price for two months stock of Baycip would be just $17.
Whereas two months stock of a generic version of ciprofloxacin is available
at a price as low as $8 at drug stores in India (see Table 1).

In spite of higher prices, there were not adequate stocks of Cipro in the
drug stores of the US. Bayer expressed its inability to produce sufficient
supply of Cipro at a short notice as requested by the US health
authorities. At best, Bayer offered to produce 200 million pills within 60
days, much lower than the requirement of 1.2 billion pills. It would have
taken several months for Bayer to meet the requirement. Confronted with
a scenario where panic was spreading like wild fire all over the US, the
Bush administration should have busted Bayer's patent on ciprofloxacin and
allowed sale of generic versions of the drug in the country. There are a
host of drug companies (including Ranbaxy, Dr Reddy's Lab, and Cipla
from India) which have already received quality approval from the US Food
and Drug Administration for manufacturing ciprofloxacin. Many of these
companies were not only ready to provide ciprofloxacin to the US within
60 days, but more importantly, they offered it at a fraction of price than
what Bayer was charging the Americans.

Table 1: Selected International Prices of Ciprofloxacin

(Prices per pill of 500 mg in US dollars, October 2001)

Country Company Price

US Bayer wholesale 4.67

US Bayer federal government 1.83

Canada Bayer government 1.58

Canada Apotex generic/government 0.95

New Zealand Bayer retail 1.29

South Africa Bayer government 2.10

Poland Bayer 1.51

Poland Polfa Grodzisk generic 0.29

India Bayer retail 0.13

India Blue Cross generic/retail 0.10

India FDC generic/retail 0.06

Source: Compiled by the author from several sources including Health Action
International, Consumer Project Technology and retail drug stores in Delhi.

In fact, there are legal provisions in the US that allow compulsory
licensing. Under the US Federal law (28 USC 1498), the US can purchase
products like ciprofloxacin for official use from manufacturers other
than the patent holder. In addition, the US government can also promulgate
HR 1708 that exempts it from paying any compensation to Bayer for
suspending its patent.

Not only the health activists and anti-corporate campaigners in the US,
even politicians like Charles Schumer, a Democrat senator from New
York, strongly demanded the suspension of Bayer's patent. In a letter
addressed to Tommy Thompson, US Secretary of Health and Human
Services, Ralph Nader (consumer advocate and former presidential
candidate) along with his colleague, James Love, called upon the
administration to immediately authorize generic production of ciprofloxacin.
In the letter, they pointedly asked the US Health Secretary, "your official
responsibility is to protect the public's health, and not to defend large profiteering
pharmaceutical companies, which are already making a fortune because of
our country's current problems. How do you define the patriotic choice here?"

Abject Surrender

Despite extensive domestic support to suspend Bayer's patent on Cipro,
the response of Bush administration was outrageous. Tommy Thompson
considered it "illegal" to suspend Bayer's patent on Cipro and he preferred
to enter into negotiations with Bayer with the sole intention of lowering the
price of Cipro. Facing an unprecedented public embarrassment, Bayer agreed
to lower the price of Cipro for government purchase from $1.77 to $0.95.

Dubbed as "historic victory" in the US official circles, it would be
absurd to view this agreement as a major accomplishment of the Bush
administration. Rather, it was a major victory for Bayer because the
agreement is based on the condition that the company would continue to
remain the sole supplier of the drug in the US till December 2003.
Further, the agreement with Bayer only covers government purchases of Cipro
from the company while the drug will be sold at hospitals and drug stores at
normal price. Even on discounted price, Bayer is still making profits from huge
orders placed by the health authorities. Meanwhile, perturbed over this
lopsided agreement with Bayer, consumer activists and concerned groups
in several states have filed a lawsuit asking the court to scrap the
agreement that gives monopoly rights to Bayer.

Had the Bush administration suspended Bayer's patent and allowed the
commercial manufacture and sale of generic versions of Cipro as per the
existing national laws and international agreements, the real
beneficiaries would have been the American people who would have
procured drugs in time and that too at reasonable prices. This episode
confirms the allegations of anti-corporate activists that drug TNCs are
being rewarded by the Bush administration for their large financial
contributions to the Republicans in the election campaigns.

While these developments were taking place, allegations of price
manipulations by Bayer have also come to light. It is alleged that the
US subsidiary of Bayer AG signed illegal agreements with three of its
competitors - Barr Laboratories, Rugby, and Hoechst-Marion Roussel - to
prevent them from challenging its patent rights over Cipro. According to
anti-corporate activists, Bayer has paid a total sum of $200 million
till date to these companies for not manufacturing or marketing a generic
version of Cipro, thereby neutralizing competition to protect monopoly

Canada's Flip-flop Posture

Watching these developments in the US from a close quarter, neighboring
Canada announced on October 18 that it would suspend Bayer's patent on
Cipro and allow generic drug makers to manufacture and sell this drug in
the country. The Canadian authorities also approached a domestic generic
drug maker, Apotex, to produce one million pills as Bayer was unable to
meet the requirement of Cipro. Apotex agreed to sell its generic version
at $0.95 per pill to the health authorities, which was significantly lower
than $1.59 charged by Bayer. This move by the Canadian health
authorities sent shock waves in the entire pharmaceutical industry. The
drug industrywas taken aback by the sudden change in the Canadian stance
because the country had been consistently supporting the US position on the
intellectual property rights issue in the past. Bayer in collusion with
several lobby organizations used all kinds of pressure tactics, including
threat to sue the Canadian government, for reversing this move. Within
hours, the Canadian authorities reversed their stand and announced that
they would honor Bayer's patent on Cipro and would buy the drug only
from the company. This sordid episode demonstrates the shady role played by
the drug companies and their lobby organizations to stifle competition from
low cost generic drug manufacturers.

The US Administration: Hand in Glove with the Drug TNCs

The Bush administration did not suspend the patent of Bayer largely
because it was more concerned with the wider implications of such an
action, particularly on the ongoing negotiations at the WTO. Realizing
that scrapping Bayer's patent would set a precedent that could give
legitimacy to the growing demands of the poor and developing world for
more flexibility on patent issues, the US has given a clear message to the
world that patents are more important than public health. Such a calculated
move was not only meant to serve the corporate interests of drug TNCs,
but it also conveyed the message to the developing nations that the US
administration would continue its discriminatory policy on the issue of

It is ironical that the US administration abandons its responsibility when
it comes to protecting its own citizens from public health calamities while
it acts as a supercop when drug industry's patents and profits are at
stake. In international economic negotiations, the US administration has
been one of the strongest allies of the global drug industry. Acting on
the behest of drug TNCs, the US played a key role in initiating the Uruguay
round of GATT negotiations where several agreements including TRIPs were
pushed forward. The US has challenged various countries at the WTO
tribunal and has even threatened trade sanctions against several countries
including Thailand, India, South Africa and Brazil for breaching TRIPs.
Although TRIPs agreement does allow member countries to take compensatory
measures to counter the effective monopolies of companies owning patents, but
undue pressure has been put on many developing countries to refrain from
exercising their rights of compulsory licensing and parallel import. The
dispute settlement case lodged by the US against Brazil in the WTO in
relation to its Industrial Property Law and the lawsuit filed by 39 drug
TNCs against the South African government are some of the instances of
pressure tactics.

Particularly in the last couple of years, US has been advocating imposition
of stringent measures for protecting patents under the so-called
'TRIPs-Plus' mechanism. Therefore, it is not surprising that the US has
been vehemently opposing a document on patents and drug issues prepared
by nearly 50 WTO member countries, including the Africa Group, Brazil, and
India. Concerned with poor peoples' lack of access to affordable medicines
due to high prices of patented drugs and the resultant public health crisis,
this document seeks suitable changes in the present TRIPs agreement. The
document clearly states that "nothing in the [TRIPs] agreement shall prevent
governments from taking measures to protect public health." The document
has been prepared for ratification at the Fourth WTO Ministerial Conference
in Doha, Qatar during November 9-12, 2001. The chances of this document
being ratified at Doha conference are extremely bleak as the developed
countries led by US have already expressed their intentions to push for a new
round of negotiations in areas such as investment and competition policy to
further expand the operations of TNCs.

Wider Ramifications

Several inferences can be drawn from the anthrax crisis in the US. First,
by sacrificing the public health concern of its own citizens to protect
private interests of drug TNCs, the US has unabashedly acknowledged the
supremacy of patents over public health. Second, the present patent
regime not only poses a grave danger to public health in the poor and the
developing world, but the developed world is also not immune to it.
Hence, this episode should serve as a wake up call to the rest of the developed
countries who usually follow the footsteps of the US on patent issues.
Poor and ordinary people, irrespective of their location, have a basic right
to sound health, and therefore, safeguarding public health must take
precedence over patents and monopoly profits of the drug TNCs.

Third, apart from universal health programs and other public funded
interventions, it is of utmost importance that monopolies in the drug
industry be dismantled to ensure that crucial drugs are made accessible
to the poor patients at affordable prices. Therefore, strict regulation of
drug TNCs must be an integral component of building public health system
in the developed as well as the developing world.

Fourth, with critical support from the developed countries not forthcoming,
the responsibility for demanding a comprehensive review of TRIPs,
including reduction in the duration and scope of patent protection for drugs that
are essential for public health rests with the poor and developing
countries. This calls for greater unity and solidarity among the poor and the
developed world on issues of common interest at the WTO and other
international economic negotiations.

This episode also carries an important lesson for the Indian authorities
who are recklessly pursuing amendments in the domestic legislations to
conform with the WTO regime. Instead of rushing ahead with Patents
(Second Amendment) Bill 1999, the Indian government should reconsider
its commitment in the light of these developments.

It is high time that the primacy of national health policy over
international agreements, including the WTO, be restored. The TRIPs
agreement in its present incarnation needs to be thwarted at Doha
Conference and new round of negotiations should be put on hold till
contentious issues related to the implementation of Uruguay round of
negotiations are resolved.

Kavaljit Singh (

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