Wall Street Journal - December 20, 2001
Geeta Anand, Staff Reporter

The widely used test requires people to wait an agonizing two weeks to get results. "Does it have to take so long?" Ms. Norris asked as she headed for the door.

It doesn't. During the past decade, many companies have developed HIV tests that produce nearly instant results in a clinic or doctor's office. Unlike the traditional tests, rapid tests don't have to be sent to a lab, but instead work much like home-pregnancy kits. A drop of blood or saliva causes a strip to change color if the sample contains telltale proteins that fight HIV, the virus that causes AIDS.

No-Shows at the Clinic

The Centers for Disease Control and Prevention and U.S. Army officials say an easy-to-use, rapid HIV test is vital to reducing the U.S. rate of HIV transmission -- which remains stubbornly high at 40,000 new cases a year and is rising sharply in low-income, minority populations. According to CDC estimates, each year one-third of the 2.1 million people tested for HIV at public clinics don't come back for their results. Many go on unwittingly to infect others. At the public clinic Ms. Norris visited, 200 of the 500 people tested during the past two years didn't pick up their results, the clinic says. Many of these people are poor and transient, making it hard for the clinic to track them down.

But simple, fast HIV tests, which are commonly used in dozens of other countries, aren't available in the U.S. The reason: a patent granted over a decade ago on a rare form of the virus. The company that controls the patent, the big diagnostic-products maker Bio-Rad Laboratories Inc., has been approached by several small companies seeking licensing rights to sell their fast HIV tests here. Bio-Rad refused. Bio-Rad did sell some licensing rights to three big companies, but those companies don't sell easy-to-use tests in the U.S.

Critics at the CDC and the military say Bio-Rad and its three big U.S. licensees -- Abbott Laboratories Inc., Chiron Corp. and Johnson & Johnson -- have little incentive to sell a rapid test domestically because they already dominate the $200 million U.S. market for the slower, lab-based HIV tests. Abbott, in particular, is the biggest U.S. seller of the slower tests. Quick tests would require the companies to conduct expensive clinical trials, and would likely siphon off sales of slower tests, the critics say.

"They have, in effect, locked everyone out of the U.S. market," says Nelson Michael, chief of molecular diagnostics at the Walter Reed Army Institute of Research, the U.S. military's medical-research center. Bernard Branson, the CDC's epidemiologist in charge of HIV diagnostics, says, "I'd call it restraint of trade. It's a travesty to stand by and allow these tests to languish."

The CDC earlier this month asked the Department of Justice whether there was reason to initiate an antitrust investigation into the use of the patent by Bio-Rad and its three licensees, according to a person familiar with the situation. It couldn't be determined whether such an investigation is proceeding, and a Justice Dept. spokeswoman declined to comment.

Intellectual Property

At Bio-Rad, spokesman John Hertia says the company may have held up the marketing of rapid HIV tests in the U.S., but he says "it's common in diagnostics to use your intellectual property strategically." He says licensing the virus freely would diminish the value of Bio-Rad's patent, both for Bio-Rad itself and for its existing licensees. "We want to be a global leader in blood-virus testing," he says. Abbott, Chiron and Johnson & Johnson all say they don't unfairly use their patent rights to protect their existing products.

The struggle over the rapid HIV test offers a close look at how biotechnology patents -- which typically confer a 17-year monopoly on the commercial use of genes, viruses, organisms and scientific processes -- can sometimes delay the introduction of vital medical products. Scientists and companies that have confronted patent roadblocks argue that ownership rights to biological matter should be extended freely. But others counter that the financial incentives provided by biotechnology patents, even if the patents are used restrictively, have helped fuel such extraordinary recent advances as the sequencing of the human genome. In 2000, about 6,800 biotechnology patents were granted in the U.S. -- a 400% increase since 1990.

The controversy over biotechnology patents erupted after a landmark 1980 Supreme Court decision that first approved the patenting of a live organism. (The U.S. Patent Office later issued certain clarifications, such as a rule that human beings can't be patented.) Generally, scientists can still easily get research and other data about patented biological material from computer databases, and they can buy samples from laboratories and other researchers. But they must secure a license from the patent-holder before putting their products to commercial use.

In 1984, the discovery of the most common form of the AIDS virus, now known as HIV-1, set off a scramble for patent rights. Eventually, a patent was awarded jointly to the U.S. National Institutes of Health and the private French research center Insitut Pasteur. The NIH controls the patent and licenses it widely, sharing with the Institut Pasteur revenue that amounts to as much as 6% of the sales of various tests and drugs related to HIV-1. The NIH says the HIV-1 patent is one of its most lucrative, bringing in millions of dollars a year in licensing fees. Robert Gallo, an NIH scientist who shares credit for discovering the HIV-1 virus, says he reaps $150,000 a year from royalties -- the maximum allowed by U.S. law for a government scientist.

Once the HIV virus was identified, the race was on to develop a test to detect it. Numerous companies began experimenting, and the Food and Drug Administration approved the first tests in the mid-1980s. Like the tests still used in the U.S. today, they required multiple steps and a lab analysis of as much as six hours.

Two years after the discovery of HIV-1, the Institut Pasteur's Luc Montagnier found a variant of the virus, now known as HIV-2, in the blood of a West African man who showed symptoms similar to AIDS but didn't test positive for HIV-1. The Institut Pasteur was awarded a broad-based U.S. patent that restricted others from using any portion of the virus. The institute then turned over control of the patent to Sanofi Diagnostics Pasteur, a joint venture it had co-founded with a French pharmaceuticals company to commercialize the institute's discoveries.

In 1999, Sanofi Diagnostics Pasteur was acquired by Bio-Rad, a fast-growing maker of diagnostic tests and research tools based in Hercules, Calif., with annual revenue today of about $800 million. As part of the acquisition, Bio-Rad got the HIV-2 patent.

The HIV-2 virus has proven to be relatively rare in the U.S. -- so far, just 200 cases of HIV-2 have been reported here, compared with 700,000 cases of HIV-1. However, incidence of HIV-2 is on the rise, particularly in New York City and suburban Washington D.C., where there are large numbers of West African immigrants. In West Africa, a quarter of the HIV-infected population has HIV-2.

For this reason, the CDC in the early 1990s urged that HIV tests detect both strains of the virus. The agency's move was powerfully influential. Though CDC statements don't have the force of law, physicians and hospitals look to them for guidance in treating patients and buying medical products. Companies worried that if they produced tests for HIV-1 alone, the tests might not sell well. As a result, designers of HIV tests for the U.S. began working all but exclusively on tests that could detect both HIV-1 and HIV-2.

Throughout the 1990s, Sanofi Diagnostics Pasteur, and later Bio-Rad, sold and traded their HIV-2 licensing rights to Abbott, Chiron and Johnson & Johnson in a series of complex deals. Such arrangements are common in the industry, as companies swap licensing rights -- sometimes with restrictions -- in an effort to build a portfolio of products. Bio-Rad's deals call for it to secure agreements from its three big licensees before extending more licenses. Over time, Bio-Rad and the three licensees began selling lab-based HIV tests in the U.S., with Abbott dominating the market.

No Lab, No Fridge

Meanwhile, many companies began developing better and faster HIV tests that didn't require a laboratory or even a refrigerator. These tests quickly caught on overseas, particularly in developing countries that don't honor U.S. patents, and where labs and refrigeration are scarce. The world-wide market for quick HIV tests, which typically sell for about $2 each and can detect both HIV-1 and HIV-2, soon grew to about $50 million. Among the biggest sellers of such tests overseas are Abbott and Trinity Biotech PLC of Wicklow, Ireland.

In addition to Abbott, Bio-Rad and Johnson & Johnson's Ortho Clinical Diagnostics unit also have made easy-to-use, rapid HIV kits for sale overseas. But none of the companies brought them here. Gerard Vaillant, Ortho's chairman, says he knows it's important for the U.S. to have a rapid HIV test, but Ortho doesn't have a sales force to market one to U.S. doctors and clinics. "Some other companies are better poised," he says. A Chiron spokesman deferred to Ortho, citing a partnership between the two companies related to diagnostic tests. An Abbott spokesman says the company recognizes the U.S. need for a simple, rapid HIV test, and has talked to several small companies about distributing their tests here, but hasn't made any deals yet. Abbott's simple test for the overseas market, called Determine, is highly regarded by the CDC and foreign clinicians, but the Abbott spokesman says the company has no immediate plans to market it in the U.S. He says Abbott is preoccupied with bringing its diagnostic-equipment manufacturing plants in compliance with a 1999 FDA consent decree.

The 'Sucks' Test

Abbott does offer another, so-called rapid test in the U.S., called the Single Use Diagnostic System, or "SUDS" test. This test takes only about 15 minutes to show results, but it requires plasma-separation equipment and must be interpreted by a trained lab technician. The FDA has approved SUDS only for laboratories and other settings that are equipped for moderately complex tests, and it isn't widely used. Rivals have jokingly nicknamed it the "sucks" test. Abbott defends the SUDS test as accurate and useful. The company sells about 600,000 SUDS tests annually for about $10 each, just a fraction of the sales of Abbott's best-selling slower, lab-based test.

Bio-Rad itself recently applied to the FDA for approval to market its own rapid HIV test in the U.S. But officials at the CDC and the military say that, much like Abbott's SUDS test, Bio-Rad's test requires multiple steps that would likely prevent its use in mobile clinics, on military outposts and in other remote settings. Bio-Rad's Mr. Hertia, who is the company's operations manager for diagnostics, says the test is easy to use and would work in busy clinical settings.

In the mid-1990s, several small companies sensed opportunity and began working on an easy, rapid test for the U.S. market. A company called Universal HealthWatch Inc. applied for FDA approval for a test it named Quix. Clinical trials that tested blood from some 9,700 people indicated that Quix was extremely accurate in detecting both HIV-1 and HIV-2, according to the CDC's Dr. Branson. He urged the FDA to approve it.

The FDA never had a chance to act. Universal had easily secured HIV-1 licensing rights from the NIH, agreeing to pay an annual licensing fee of $10,000 plus 2% to 6% of annual sales, depending on the final product. But when Universal sought HIV-2 rights from Sanofi Diagnostics Pasteur -- which controlled the patent before being acquired by Bio-Rad -- its request was refused. "We had just assumed that if we were willing to pay the price, we could acquire the licenses," says David Bernstein, who headed the research team at Universal. "We hit a wall."

Bio-Rad's Mr. Hertia says Bio-Rad and Sanofi Diagnostics Pasteur declined to grant licenses to some companies, but wouldn't discuss specifics. He cited Bio-Rad's obligation to reach agreement with its existing licensees before awarding any other licenses. Ortho's Mr. Vaillant says Bio-Rad never asked his company or Chiron for permission to give out HIV-2 licenses. He says Ortho wouldn't object to Bio-Rad's licensing HIV-2 to other companies for rapid HIV tests. Abbott's vice president of research and development for diagnostic products, James Koziarz, declined to say whether Bio-Rad has asked Abbott for permission to give out additional licenses.

Fear of Lawsuits

Universal scientists went back to the lab and tried to find a way of making a test that wouldn't infringe on the HIV-2 patent. But the company's investors were worried about the possibility of lawsuits from Bio-Rad and its licensees, and withdrew funding early this year. "Even if we could win in court, our investors were worried it would cost a little company too much," Mr. Bernstein says. The company didn't consider pursuing a test for HIV-1 alone because its investors were worried about the commercial prospects of such a test, and declined to commit additional funds. Universal eventually ran out of money, and is no longer pursuing approval of its test.

Another small company, OraSure Technologies Inc., Bethlehem, Pa., ran into similar roadblocks. Last year, OraSure's scientists, led by Richard George, a 60-year-old microbiologist formerly at the CDC, developed a new product they called OraQuick. In 20 minutes it could accurately identify HIV-1 and HIV-2 in blood from a pinprick or in oral fluid. The CDC, after testing OraQuick and finding its accuracy comparable to lab-based blood tests, got special permission from the FDA to begin using it on an experimental basis in delivery rooms in hospitals in major cities.

OraSure's chief executive officer, Robert Thompson, approached Bio-Rad about licensing HIV-2. Dr. George says he urged his boss not to bother, since he himself had made numerous fruitless attempts to license the virus from Sanofi Diagnostics Pasteur. A series of negotiations ensued, but failed. Bio-Rad's Mr. Hertia declined to discuss the talks, citing a confidentiality agreement, but says the disagreements were over money.

OraSure next approached Abbott, to discuss the possibility of Abbott's distributing OraSure's test -- so that OraSure would be covered by Abbott's HIV-2 license. OraSure says the talks fell through this spring because Abbott refused to guarantee OraSure it would sell a minimum number of tests. OraSure's Mr. Thompson says he became suspicious that Abbott wanted to buy his test only to shelve it, because OraSure's test would compete with Abbott's Suds test and other lab-based HIV tests, and undercut their sales.

Abbott's Dr. Koziarz declined to discuss the negotiations, citing a confidentiality agreement. But in general, he says Abbott never approaches negotiations to purchase a product with the intention of shelving it. He says rapid tests wouldn't cut into the market for the tests processed in labs. "They are completely different market segments," he says.

At least three other makers of rapid tests, MedMira Laboratories Inc. of Toronto, Chembio Diagnostic Systems Inc. of Medford, N.Y., and Ireland's Trinity, also say they approached Bio-Rad and Sanofi Diagnostics Pasteur in recent years to try to obtain the HIV-2 license and were refused. The CDC, which is so eager to get a rapid test on the market that it has undertaken certain clinical trials to evaluate several of these companies' tests, says they were easy to use and accurate.

Blood on the Battlefield

With U.S. troops in Afghanistan, the CDC and the military want to use rapid tests to prevent the accidental transmission of HIV-infected blood on the battlefield. In terrorist attacks in East Africa and on the USS Cole, the military couldn't use rapid tests because no simple tests were FDA-approved. In those cases, stockpiled blood ran out, and injured troops were given transfusions from people at the scene. "We'd hate to save someone's life and find out that by resuscitating them, we gave them unscreened blood that gave them a fatal disease," says the Walter Reed Institute's Dr. Michael. "It's only a matter of time before that happens."

As a result of the patent stalemate, the CDC last year changed its longstanding signal to doctors and hospitals that HIV tests be able to detect both forms of the virus. Instead, the agency urged that the FDA approve tests for the HIV-1 virus alone. "We realized there was no other way to get around the patent," says the CDC's Dr. Branson. "It's better than nothing."

In response to the CDC's move, several companies have lately been racing to conduct clinical trials of rapid, HIV-1-only tests, and some could win FDA approval as early as Dec. 31. OraSure, MedMira and Trinity have modified the quick tests they sell outside the country -- which detect both strains of the virus -- so that they now detect only HIV-1. The tests are awaiting FDA approval.

Public health officials say a test for just HIV-1 would be helpful, but won't solve the problem. They point out that both forms of the virus can spread exponentially. "One person can have 100 partners, and each of those partners can have a hundred partners," says Niel Constantine, director of the clinical immunology laboratory at the Institute of Virology in Baltimore. "How would you like to have a partner who was told he was HIV negative when he wasn't?"

Write to Geeta Anand at geeta.anand@wsj.com
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