CHICAGO - On the surface, it’s a complex patent fight spanning thousands of miles and more than a dozen time zones.
But strip away the lawyers, government officials and fleet of executives, and the standoff between Thailand and Abbott Laboratories Inc. could determine how, and if, millions of people in developing countries get medicine in the future.
Thailand’s government decided late last year to override a series of drug patents, but instead of creating a cheap solution to pay for medication for more than 500,000 Thai infected with HIV and AIDS, the military-installed government wound up embroiled in one of the most-watched patent disputes in recent years. Now it’s blacklisted from receiving Abbott’s new medications while faced with the prospect of economic sanctions.
“The stakes here are very high because many patients around the world are in need of newer drugs,” said Michael Weinstein, president of the activist organization AIDS Healthcare Foundation, which supports the Thai government’s decision.
At issue is how countries negotiate lower drug prices and how they use international trade rules to issue so-called “compulsory licenses” to scrap patents in favor of cheaper, generic medication.
The debate also shows how vulnerable the pharmaceutical industry is to efforts by countries trying to override patents.
For drug companies, patents are an incentive to invest billions in future research and development and reward them for producing lifesaving products.
“This misguided focus on short-term ‘budget fixes’ could come at a far greater long-term cost, potentially limiting important incentives for research and development that are necessary to positively impact the lives of millions of patients worldwide,” Pharmaceutical Research and Manufacturers of America president Billy Tauzin said in a statement.
Industry officials also caution cheaper, generic versions can be less effective or even unsafe for patients, especially in regions of the world where drug manufacturing isn’t stringently monitored.
Health activists, meanwhile, applaud the decision, saying compulsory licenses are a way for countries to cost-effectively treat the AIDS epidemic.
“Thailand’s action, in our opinion, is exactly what developing countries should be doing to reduce the cost of medicines,” said Rohit Malpani, trade policy adviser for the aid group Oxfam America.
The Thai action marked the first time a country used the measure for a “second-line” AIDS drug: Abbott’s billiondollar blockbuster, Kaletra. As HIV patients survive longer, people have become increasingly resistant to older first-line drugs. That means hundreds of thousands more patients will require second-line virus-fighting medicine by 2010 — drugs that can cost 10 times more than first-line treatments.
In Thailand, where the per capita income is $2,720 year, patented Kaletra was sold for $2,200 a year before the company lowered its price tag to $1,700 in the fall.
Compulsory licenses aren’t illegal, but their use in medicine typically involves treating public health emergencies. After Sept. 11, 2001, the U.S. threatened a compulsory license to ensure a supply of the anthraxtreating antibiotic Cipro.
Thailand’s Public Health Minister Mongkol Na Songkhla said the decision to override patents is justified because the drugs’ high cost constituted a health crisis. The country’s AIDS budget — around $112 million — was only enough to pay for medicine for one-fifth of patients. The country has hinted cancer drugs could be next.
In response, Abbott pulled its seven drug applications pending before health regulators in Thailand — including one for Aluvia, a form of Kaletra developed for use in tropical countries — cutting off the country’s 65 million residents from new medication developed by the North Chicagobased company.
After issuing massive price cuts on Aluvia and Kaletra in dozens of developing countries, Abbott offered to resubmit a cheaper version of the drug to Thai regulators in exchange for continued patent protection.
“What motivated our action in Thailand was concern that compulsory licensing would be abused ever more widely, using HIV as an excuse,” said spokeswoman Melissa Brotz. “Now that price has been taken off the table, it’s clear that this continues to be about compulsory licensing and the potential for its abuse.”
Company officials said they’re continuing to negotiate with the Thai government, but so far the country has rebuffed any concessions.
“The excessively high drug prices have obstructed us from achieving real universal access,” Mongkol said recently.
As the stalemate continues, experts said more countries could be emboldened by Thailand’s strategy.
“It’s a problem that will only increase,” said Steve Brozak, an analyst with WBB Securities LLC. “The question becomes: Today HIV drugs, tomorrow, what?”
Drug companies typically charge different prices for medication in various countries — sometimes giving away their products or selling them with little or no profit — depending on the average income of each nation.
The trend toward disregarding patents could become popular in middle-income countries in Asia and Latin America where tiered pricing means many drugs are more expensive than in poorer nations, but government officials say they’re still unable to pay their share.
In early May, Brazil issued a compulsory license for Stocrin, a first-line AIDS medication made by Merck & Co., claiming a generic version known as efavirenz would save $240 million by 2012.
Brazil has threatened to override patents on HIV drugs before, including Kaletra’s, but this marked the first time it followed through, even after Merck offered to cut its price by 30 percent.
Still, scrapping patents can carry costs — including threatened trade sanctions and the loss of access to a targeted company’s medications.
This spring, the U.S. trade representative cited Thailand’s “weakening of respect for patents” for its placement as one of a dozen countries on a “priority watch list.” The designation could lead to sanctions if the Bush administration brings trade cases before the World Trade Organization.
AIDS activists, meanwhile, say Thailand is already receiving shipments of generic Kaletra.
And observers say the standoff — and the questions it raises about access to medication in middle-income countries — may be far from over.
“I don’t think anyone would argue that if there’s a rampant AIDS epidemic in some poor country and they can’t afford to buy the drugs, then the normal rules of commerce should be relaxed so people don’t have to die,” said Mark Waddell, a lawyer at Loeb & Loeb LLP who specializes in pharmaceutical patents.
“No one is going to argue against that extreme of an example. But we’re operating in a realm that’s quite ambiguous,” Waddell said.