Patent - Effective Drugs for AIDS

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Patent Question

1. Should a drug manufacturer that holds a patent on a drug that is very effective for many AIDS patients be able to sell that drug well above its cost of production during the period of patent protection? If so, under what circumstances?

This is both an ethical and legal issue. For example, most patented drugs are regulated through law in regards to pricing (e.g., when countries sign up to the WTO, they also agree to protect the patent rights of companies that sell products within their borders; companies that have patents protecting their products see this as an essential element in international trade, as it guarantees a return on the investment they have made in developing their products; etc.). However, pricing is somewhat controversial at best.

Example 1: CANADA

Like most developed countries, Canada has implemented public regulation of drug prices. But in some
respects, Canada's approach to regulating the price of pharmaceuticals is unique. Canadian law regulating the price of pharmaceuticals has consistently, throughout its evolution over the past century, been tied to Canadian law and policy on patent protection for pharmaceutical inventions. This is still the case today, and policies regarding both pharmaceutical patents and prices are controversial. This is particularly so due to the overwhelmingly value Canadians place on equitable, universal access to health care. For several decades, Canadian law allowed for "compulsory licensing" in relation to medicines, allowing someone other than the company holding the patent to compete with lower-priced versions. Following legal amendments in 1969 that expanded the possibilities for compulsory licensing, there was a dramatic increase in the number of licences issued, which spurred the growth of a significant generic pharmaceutical industry in Canada. However, price regulations changed. However, in the mid-1980s the federal government changed course. Rather than use its patent laws to promote market competition as a way of controlling the prices of pharmaceuticals, the government introduced a system for directly regulating the prices charged by manufacturers of patented medicines, to prevent them from abusing their patent rights by charging excessive prices. This is the system that remains in place today, and is administered by the Patented Medicine Prices Review Board (PMPRB)

(see full article at http://www.aidslaw.ca/Maincontent/issues/cts/e-info-dp-02.pdf). In other words, generic brands offer somewhat cheaper prices.

Example 2: Prices cut for China following negotiations with the Minister of Health
Offering sustainable preferential prices in developing countries for the medicines and vaccines that are most needed is a well-established policy at GSK. For example, Merck Sharp and Dohme (China), a Shanghai-based company under Merck & Co, actually cut its prices in 2001 as a result of long-term negotiations between the company and the Ministry of Health. On November 30, 2001, the company announced a drop in the price of two of its AIDS drugs. The combined retail prices of the two drugs, crixivan and stocrin, were cut to less than 30,000 yuan (US$3,600) per patient per year from more than 80,000 yuan (US$9,600) per patient per year. Experts say the two drugs combined form an effective cocktail treatment. Although the price is still high for most people in China, experts hailed it as a move in the right direction (http://www.chinadaily.com.cn/english/doc/2004-06/28/content_343452.htm).

Localization of drug production is another way of cutting prices. GSK announced in Beijing in November of 2002 that it would manufacture its medicine combivir, a product used widely as the backbone drug in "cocktail treatments," in China. It was the first time for a foreign AIDS drug producer to announce its intention to produce an AIDS drug in China, experts say. William Stockley, general manager of GSK China promised that the company will offer the lowest price it can. Applications for the local production of AIDS drugs are currently under examination by the State Drug Administration (http://www.chinadaily.com.cn/english/doc/2004-06/28/content_343452.htm).

2. Should these companies sell, or be required to sell, these drugs at lower prices to persons in poor nations that have a larger problem with AIDS than the United States?

Prices are often regulated through existing laws and health regulations. However, this is occurring in some countries (e.g., India, etc.) through the use of unpatented production processes, "compulsory licensing," and also by some companies cutting prices following long negotiations with the Minister of Health (see second example below).

For example, Indian AIDS drug producers offer drugs at lower prices by using different, unpatented production processes. This was the result of some compromises India obtained through ...