Abbott AIDS drug pricing leads to review of patent

Chicago Tribune - May 21, 2004
Bruce Japsen, Tribune staff reporter

http://www.aegis.org/news/ct/2004/CT040510.html
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Abbott Laboratories' decision to quadruple the price of a widely
used AIDS drug has prompted government regulators to explore
whether they can force pharmaceutical companies to lower prices
on drugs developed with the assistance of tax dollars.

Critics of Abbott's price increase on Norvir have won a hearing
next week with regulators at the National Institutes of Health.
The regulators will hear arguments for taking the unprecedented
step of allowing other companies to make generic copies of Norvir
before its patent expires--a power the government secured in 1980
under an obscure law that has never been used.

The pharmaceutical industry says such a decision would seriously
harm drug research and development. But consumer groups counter
that taxpayers would reap more benefits from the billions of tax
dollars that go to drug research annually.

"It would be precedent-setting either way," said James Love,
president of Essential Inventions, the Washington-based consumer
group that asked for the hearing.

Attempts to limit prices by diluting patents are sprouting in a
climate of growing consumer outrage over drug costs, which have
risen at an annual rate of 15 percent during each of the last
four years, far exceeding inflation.

The increases, which have prompted Americans to head across the
border to Canada to buy drugs at cheaper prices, have also raised
questions about why drugs cost as much as they do and how
companies like Abbott determine how much to charge.

Abbott's decision to raise Norvir's price dramatically also calls
into question whether U.S. taxpayers are getting a fair return on
their investment in government-funded research that private
pharmaceutical companies use to bring drugs to market.

And the government now has more reason to pay closer attention to
prices. It is poised to spend more than $500 billion during the
course of a decade on a new Medicare drug benefit.

Abbott's case will be heard Tuesday in Washington, where
testimony will be taken but no decisions will be made. Regulators
will be weighing whether the Bayh-Dole Act of 1980--a law better
known for encouraging the privatization of taxpayer-funded
academic research--allows them to intervene.

Consumer groups argue that the law would allow the government to
"march in" and grant a license to generic makers to make copies,
in effect controlling prices. But many dispute that application.

Named after its authors, former Sen. Birch Bayh (D-Ind.) and
former Sen. Bob Dole (R-Kan.), the law was never intended as a
mechanism to regulate prices, a former Bayh staffer said.

"What the public gets back is that these drugs will be
commercialized," said former Bayh staff member Joseph Allen, who
is now president of the National Technology Transfer Center.
Before the 1980 law, Allen said NIH-funded research seldom made
it to market. Since then, it has led to the creation of
life-saving drugs and other products, which in fiscal 2002
resulted in almost $1 billion in royalties paid to universities
that in turn was funneled back into more research, he added.

Without the law, "the Abbotts of the world would not work with
the public sector research," Allen said.

Still, consumer groups and AIDS activists say Abbott's December
decision to raise Norvir's price to $8.57 a day from $1.75 a day
could jeopardize patients' access to the drug. In exchange for
government funding, critics say the Bayh-Dole Act required
companies to market the drugs to the public under "reasonable"
terms.

Yet Abbott says the government's funding of less than $3.5
million was only 1 percent of what it paid to develop and
commercialize Norvir--barely a dent in its budget.

What's more, Abbott said its scientists discovered the drug.
Abbott said the federal grant, awarded in 1988 and disbursed
during a five-year-period, paid for expenses for Abbott's early
pre-clinical HIV treatment discovery program.

Two of Abbott's protease inhibitors failed in lab testing, with
Norvir going on to win FDA approval in 1996. Protease inhibitors
are key ingredients in combination AIDS therapies, which were
known in the 1990s as "cocktails."

"Norvir was brought to market and commercialized with Abbott
funds," said Dr. Jeffrey Leiden, president of Abbott's
pharmaceutical products group.

Abbott said it has spent more than $300 million to develop
Norvir. The drug last year generated about $100 million in
worldwide sales. At its peak in 1998, Norvir generated $250
million in sales.

In effect, critics say consumers pay twice because the government
helped fund Norvir's development and patients have to spend more
to buy the drug.

"The taxpayers pay for the research, so does that mean drug
companies can do just about anything they want with the patent?"
asked Love.

Abbott said it has gone out of its way to provide access to
Norvir by providing free and reduced-cost drugs to AIDS patients
around the world.

The company also said it has frozen the price it charges
government programs and given the drug, free, to the uninsured.
And Abbott knows of no commercial insurers that stopped covering
Norvir.

Abbott has said its price increase for Norvir is long overdue
after years of being priced below its rivals.

"Any patients we don't know about who have limited access, we are
going to get them the drug for free," Abbott's Leiden said.

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