Wall Street Journal - November 15, 2001
Leslie Chang, Staff Reporter of The Wall Street Journal

SHANGHAI, China -- Two Chinese drug companies have applied to produce AIDS drugs, seeking to take advantage of China's inconsistent patent laws in a development that could transform the way the country battles a looming epidemic.

Until now, China has lagged developing-world nations -- among them India, South Africa and Brazil -- in challenging the world's pharmaceutical giants to cut prices for medicines to treat HIV, the virus that causes AIDS. But now a little-known private company, Shanghai Desano Biopharmaceutical Co., has applied to the country's State Drug Administration to generically produce two anti-HIV drugs and plans to apply to make AZT, the first medicine approved to treat the HIV infection. And the state-owned Northeast General Pharmaceutical Factory says it has also applied to the government to make HIV drugs for domestic sale.

The companies, which already manufacture and export raw materials used to make AIDS drugs in markets like Brazil and India, could benefit from loopholes in Chinese law that allow generic drug makers to copy and sell medicines alongside the patented version. And they both see a market in China's own rising numbers of infected -- estimated at 600,000 nationwide and growing at around 30% per year -- most of whom can't afford patented versions of the medicines that cost at least $10,000 a year.

"We can produce everything an HIV person needs for $400 a year," says Li Jinliang, deputy general manager of Shanghai Desano, adding he expects a decision around June next year. The State Drug Administration didn't respond to requests for comment.

If approved, the moves could dramatically change the way China treats what has become one of its biggest health epidemics. Though China's AIDS problem has exploded in recent years, the number of patients who take AIDS medicines remains miniscule. GlaxoSmithKline PLC, which holds patents on several key HIV drugs, says it has about 50 customers in China buying its combination of AIDS medicines. The company says it has been in talks with the Chinese government over the last two months on a range of issues, including cutting prices for its HIV drugs. A spokeswoman for Bristol-Myers Squibb Co., which started selling two AIDS drugs in China in April, says business is still "very small-scale."

The treatment's high cost is one reason that some doctors don't push patients who are at risk for the disease to get tested. Some may not even tell people in high-risk groups like drug users or prostitutes, who are tested to monitor the disease's progress, whether or not they have the disease unless they take the initiative to ask on their own. Says Li Jianhua, a psychiatrist who has worked for more than a decade with drug users in Yunnan province, where HIV first took root through needle-sharing among heroin addicts: "In theory, we should tell them. But China is in an awkward situation of no care, no help, no treatment. If you tell them and there's no treatment, they may commit suicide or turn against society."

The launch of affordable, generic AIDS drugs could change that, opening up choices and lessening the view among Chinese doctors and patients that the disease is simply a death sentence. "If cheaper medicine is available, doctors will have more methods at their disposal," says Cao Yunzhen, deputy director of the National Center for AIDS Prevention and Control under the Ministry of Health. "This would bring huge benefits not just to China, but to the whole world."

China's generic drug makers could also benefit from loopholes in the law and a cumbersome registration process that has left some patented medicines without protection in China. According to Chinese law, drugs granted patents elsewhere between 1985 and 1993 -- which include some AIDS drugs -- only receive what's known as "administrative protection," which allows exclusivity for seven and a half years, less than in many western markets. But foreign drug makers say the law contains loopholes that allow domestic rivals to essentially copy medicines through slight tweaks in formulation or to register to sell a drug in China while its developer is still in the process of applying for administrative protection for it.

For now, the complexities of patent protection spell opportunity for domestic companies. In recent months, Shanghai Desano has applied to the State Drug Administration to produce two drugs, known as ddI and d4T, both of whose patents are held by Bristol-Myers Squibb. Through changing the way a medicine is combined or other details of preparation, the applications don't violate the protections the medicines enjoy in China, explains Shanghai Desano's Mr. Li. The company plans to apply this month for permission to produce AZT as well, and is next targeting a powerful class of drugs known as protease inhibitors, which work to stop the virus from infecting healthy cells. "In China, there are no medicines in the appropriate price range," says Mr. Li, who envisions his company selling seven AIDS medicines, at varying prices, in three years.

But many warn that cheaper medicines are no cure-all. Medical treatment of HIV involves a complex combination and dosage of different medicines; especially in rural areas, China may lack a network of doctors and hospitals to administer that treatment properly. And many people who are infected simply don't know.

"The medicine does not solve the basic problem. That still requires prevention and education," says Ms. Cao of the Ministry of Health's AIDS center.

Write to Leslie Chang at leslie.chang@wsj.com1.

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