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Activists Put Drug Research on Chopping Block

If they are successful in degrading patent rights, many lives will be lost.

June 01, 2004|James K. Glassman and Nick Schulz

In their relentless campaign against technological innovation, left-wing activists last week came up with a new approach. They're invoking a 24-year-old law that would force a drug company to give up its patent on a key medicine and let generic competitors produce the drug.

The activists are hoping to slash the price of Norvir (ritonavir), an HIV drug produced for the last eight years by Abbott Laboratories. The National Institutes of Health awarded Abbott a grant of $3.5 million for general research on protease inhibitors that ultimately helped in the development of the drug. But Abbott also spent $300 million of its own money to conduct trials and bring Norvir to market.

If the activists -- led by James Love, an associate of Ralph Nader -- are successful, they will severely retard the development of new drugs, not to mention other innovations. This is the kind of Luddite nonsense that kills people.

Here's the story: In December, Abbott increased the price of its successful Norvir by about 400%, from $1.71 to $8.57 a day. Abbott said it needed the increase to recoup the costs of developing the drug and to finance future AIDS research and development efforts. Why now? Abbott said it had discovered that the drug had an added attraction that made it more valuable: It can boost the activity of other AIDS drugs, including its own Kaletra. The price increase prompted howls of outrage from some senators and groups that claimed the company was price-gouging on an essential medicine.

Those charges are unfair. Norvir and Kaletra have effective competitors. In addition, needy patients may be eligible to obtain Norvir from Abbott at no cost, and the company is not imposing the price increase on government programs that dispense the drug.

Love's group, Essential Inventions Inc., nonetheless petitioned the Department of Health and Human Services to step in to regulate the price. In response, the National Institutes of Health held hearings May 25.

In his petition, Love invoked the so-called Bayh-Dole Act of 1980. The law, named after former Sens. Birch Bayh (D-Ind.) and Bob Dole (R-Kan.), was designed, according to Bloomberg News, "to speed the introduction of products derived at least partly from government-funded research."

Abbott received its government grant in 1988 for research into ways to block HIV from developing into full-blown AIDS. The drugs that Abbott and other firms eventually produced have saved tens of thousands of lives. Though $8.57 a day mounts up, it would seem a small price to pay when faced with the alternative of dying.

The argument made by Love is that, since government money played a role in the development of Norvir, the government has the authority to intervene and force Abbott to issue a license that would allow the manufacture of cheaper generic copies of the drug. The petition quotes the law as saying that the government has the right to act here "because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention."

This is nonsense. Abbott has been marketing the drug for eight years. The petition, however, claims that "practical application" means low price -- low, that is, according to the judgment of Love and his colleagues.

Even the Democratic coauthor of the legislation says it doesn't apply here. Bayh spoke last week on Norvir, saying, "We simply cannot invent new interpretations of the law.... This is what has happened here in this proposal before us.''

Imagine if Love's effort succeeded and if every drug company that benefited from government research spending were at risk of losing its already-brief patent, after the company had spent hundreds of millions of dollars. What venture capitalist or small shareholder would invest in a company facing such a risk? Drug companies would shun any association with federal research dollars, and far fewer drugs would be developed.

Perhaps Abbott raised its price too high too fast. But that's Abbott's decision to make. A free economy permits companies to set their own prices, constrained only by the forces of competition and supply and demand.

Intellectual property protections are wellsprings of innovation, and it is in society's interest to align basic research grants, market forces and incentives so that companies are encouraged to pursue lifesaving technologies. This system works. Trying to sabotage this productive machinery imperils health and shortens lives. We need more -- not fewer -- protections for intellectual property of all sorts, from software to entertainment to drugs.

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James K. Glassman is a resident fellow at the American Enterprise Institute and the co-founder of TechCentralStation.com. Nick Schulz is the editor of Tech CentralStation.com.

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