Chicago Tribune - March 28, 2001
Bruce Japsen, Tribune staff reporter

Abbott said it has cut the price on its Norvir and Kaletra drugs--two protease inhibitors used in cocktails hailed for suppressing the HIV virus--by at least 70 percent.

The discount comes in the wake of an international uproar over the industry's pricing of drugs used to treat HIV, the virus that causes AIDS. Health experts estimate that 25 million people are infected with the virus in sub-Saharan Africa, but say those people cannot afford treatments.

North Chicago-based Abbott joins Bristol-Myers Squibb Co., Merck & Co. and two makers of generic drugs that have announced price cuts since the beginning of the year.

While Abbott's move should help alleviate the plight of poor African countries, consumer groups and Wall Street analysts say the company could be opening itself up to criticism in other countries where markups still exist.

Norvir sells in the U.S. for about $7,100 a year while Kaletra sells for about $6,500 a year.

Now the price will be somewhere below $1,000, according to industry analysts. Abbott would only say that its new prices are "in the range of what other drug companies" that have cut their prices are charging. It added that its prices do not include its marketing or research costs.

"What we will offer to African countries is availability of these drugs at no profit to Abbott," said Abbott spokeswoman Cathy Babington.

Abbott said the products for Africa must be used in the country where they are sold and cannot be exported.

Industry observers note that Abbott and other drug companies could be opening themselves up to criticism from other poor nations that will not be getting discounts for AIDS drugs.

"Do you go down this slippery slope and open a window for other countries and everybody else wanting a humanitarian discount?" asked Sarah Ross, analyst with Edward Jones in St. Louis. "Some other organizations may be pushing for the same discount. There is that risk that you open the door and you get more pressure from consumer-type groups."

But a consumer group said the cuts do not go far enough for poor nations.

"It's pretty clear all of these companies are responding to the protests of all the AIDS activists," said Peter Lurie, deputy director for health research at Public Citizen. "They have a political justification for focusing on AIDS drugs, but no medical justification. The underlying problem is access to drugs in general."

Abbott, however, said the company has been working for years on initiatives to improve access to all treatments as well as HIV prevention. The company also will sell its HIV diagnostic test, Determine, at no profit, the company said.

"Abbott has taken this action to give people most affected by this disease a better opportunity to access care," Abbott Chief Executive Miles White said in a statement. "The next step in the global response is to develop the infrastructure necessary to deliver effective treatment."

The drug industry now hopes that its effort will trigger international financing from the World Bank or other organizations to help African countries purchase drugs.

Sub-Saharan African countries spend about $10 a year per capita on health care, Abbott said.

Abbott would not disclose how much it spent to develop its AIDS drugs, but defended its U.S. price for Kaletra and Norvir, which each generate about $200 million a year in sales.

"When people talk about the cost, it's not just the ingredients that go into making the tablet or the capsule," Abbott spokesman Rick Moser said. "Nobody is amortizing the cost of research across the capsule."

Analysts say such markups are necessary if drugmakers are to continue to develop new and better treatments.

"In the developed world, there is a real awareness that you have got to have profits if you want new drugs and you have got to give incentives to these companies to innovate," said Edward Jones analyst Ross.

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