The Cipro Rip-Off

The prospect of bioterrorism on a massive scale has painted the Bush administration into a corner, as it tried to address demands for price reductions on the anti-anthrax drug Cipro while maintaining an anti-generics position in international trade negotiations.

When the anthrax scare first hit, Cipro was understood to be the drug of choice for treatment. Secretary of Health and Human Services Tommy Thompson said he wanted a stockpile adequate to treat 10 million exposed persons. That meant he needed 1.2 billion Cipro pills (the treatment regimen is two pills for 60 days). Bayer, which holds the disputed patent rights to Cipro in the United States, could not meet that demand in a timely fashion.

For the drugs it was able to supply, Bayer was charging the government $1.89 per pill. The drugstore price was more than $4.50. Indian companies sell a generic version of the same drug for less than 20 cents.

In October, Senator Charles Schumer, D-New York, called on the administration to use its authority, under existing law, to issue compulsory licenses to generic companies to make Cipro for sale to the government.

“We cannot just rely on Bayer to ensure we have a sufficient supply of Cipro,” Schumer said. “First, Bayer can only produce so much Cipro, and we should not put our best response to anthrax in the hands of just one manufacturer. Second, buying Cipro only from Bayer –– who charges a lot more than generic manufacturers would –– means we spend a lot more and receive a lot less. Hopefully, we won’t even need to use the Cipro we already have on hand, but if we make arrangements to purchase it from multiple generic drug manufacturers, we’ll have it if we need it.”

Schumer’s call for generic competition cast a spotlight on Bayer’s monopoly control over Cipro — controversial, in that generic companies had sued to challenge Bayer’s patent, but dropped suit upon receiving payment from Bayer [see “Names in the News,” this issue] — and its resultant power to set prices and limit supply.

But the Bush administration chose not to exercise its authority to introduce generic competition.

With the spotlight shining on Bayer’s price-gouging for Cipro, however, the Department of Health and Human Services (HHS) was forced into action. Against a backdrop that he might be forced to issue compulsory licenses if Bayer refused to drop the price, Secretary of HHS Tommy Thompson cut a deal with the company to lower Cipro prices, agreeing on a price tag of 95 cents a pill.

The Washington Post reported soon after that HHS pays Bayer 45 cents per Cipro pill for purchases under a separate government program.

Nonetheless, Thompson and Bayer congratulated each other on HHS’s tough negotiating skills and Bayer’s generosity.

“This agreement means that a much larger supply of this important pharmaceutical product will be available if needed,” Thompson said. “The beneficial price also means that we can have more funds available to assist state and local health responders to be ready for all eventualities. I commend the Bayer Corporation for its ongoing efforts to ensure a fully adequate supply of this valuable product.”

“Bayer is fully committed to supplying America in its war on bioterrorism,” said Bayer president Helge Wehmeier. “This agreement between Bayer and the Department of Health and Human Services is an important security measure that will enable the nation to have in its stockpile ample supplies of Cipro to combat the threat of anthrax. Cipro has become standard for anthrax treatment. The men and women of Bayer are 100 percent committed to delivering this vital antibiotic to the U.S. government on schedule.”

Activists campaigning to improve access to essential medicines had a different take.

“The government is cutting corners on public health to protect its negotiating position in the Doha World Trade Organization meeting,” said James Love, director of the Consumer Project on Technology, “where the issue of compulsory licensing of drugs, and imports under a compulsory license where a country does not have domestic capacity for production, is a central issue, with the United States, Canada and the European Union opposing the Africa group. Americans are being put at risk in order to protect the pharmaceutical companies doing business in Africa and other developing countries.”

The issue, said Asia Russell of the Health GAP Coalition, was that the U.S. government “did not want to set a precedent that could be used against the U.S. administration at the upcoming WTO meeting.”

“If U.S. officials had agreed to license production of generic ciprofloxacin,” she said, “all their arguments against patent flexibility in poor countries seeking generic AIDS drugs would have fallen to pieces — and Robert Zoellick, the U.S. Trade Representative, wouldn’t tolerate that, no matter how high the stakes. Thousands die daily from untreated AIDS globally, and Zoellick is blocking the use of common-sense strategies among poor countries to promote generic AIDS drug access.”

If a desire to avoid a precedent was their goal, however, the administration failed. It was enough that the threat of compulsory licensing loomed over the HHS negotiations with Bayer. Brazil quickly alleged hypocrisy in the U.S. position — noting U.S. willingness to use compulsory licensing at home (or at least the threat) while working to effectively block poor countries’ use of the same policy tool, as did the New York Times.

“When the federal government wanted to stockpile the antibiotic Cipro as a treatment for anthrax,” the Times editorialized, “Health and Human Services Secretary Tommy Thompson persuaded Bayer, the patent holder, to cut the price of the drug by threatening to buy generic versions. Yet the Bush administration is derailing efforts by poor countries ravaged by AIDS to facilitate their efforts to do the same.”
The Cipro dispute appeared key to swinging momentum to poor countries as the WTO negotiations approached. African and other poor countries sought a declaration that the WTO’s intellectual property rules not be interpreted in ways that undermine efforts to advance public health. Above all, they sought to clarify their existing right under WTO rules to do compulsory licensing.

The Cipro issue also sparked new efforts to consider how intellectual property rules affect health care in the United States. Some consumer groups have sued to challenge Bayer’s patent on Cipro. Others are using the Cipro example to oppose a fast-moving Congressional proposal to extend patent terms for drugs companies that undertake studies on how their drugs affect children [see “Behind the Lines,” this issue].

As a more structural response, Representative Sherrod Brown, D-Ohio, introduced legislation, H.R. 3235, the Public Health Emergency Medicines Act, that would reiterate the government’s ability to do compulsory licensing in case of public health emergency (the government currently has this right, without regard to situation of national emergency) and establish that compensation paid to patent holders should be “reasonable.” It lists a variety of criteria to determine reasonability, including how much the patent holder invested and risked in the drug’s development, and how significant the government contribution was to the drug’s research and development. It also would permit the government to authorize generic producers to manufacture on-patent drugs in the United States for export to countries undergoing public health emergencies.

— Robert Weissman