Wall Street Journal - May 24, 2004
Leila Abboud, leila.abboud@wsj.com

The question, which will be debated tomorrow at a U.S. National Institutes of Health meeting, was sparked by Abbott Laboratories' 400% price increase on one of its older AIDS drugs, Norvir, in December. The move set off a firestorm; AIDS activists picketed the U.S. company's annual meeting, some doctors are boycotting Abbott drugs and the attorneys general of several states have launched investigations.

Now the battle is moving to Washington. Prompted by a petition from a liberal group, the NIH is considering whether to invoke a little-known 1980 law to issue a license allowing the manufacture of cheaper generic copies before Norvir's patents expire.

The group that petitioned the NIH, Essential Inventions, contends that Norvir's price is unreasonable and "threatens the health and safety of people with AIDS" because fewer will be able to get needed treatments. Abbott defends the price as reflecting the drug's true market value and a way to finance the development of new medications.

U.S. regulators aren't expected to make a decision tomorrow, and there is little indication the Bush administration is inclined to take a step that would be anathema not only to Abbott, but to the entire pharmaceutical industry.

Nevertheless, the meeting reflects continued consumer frustration and will provide another forum for critics to gripe about high drug costs. It comes at an awkward time for the industry, which is trying to halt U.S. congressional efforts to legalize cheaper drug imports from other countries.

Additional Licenses

The 1980 law, called the Bayh-Dole Act, was designed to encourage companies and universities to commercialize inventions developed with government help by giving them patent rights to the products. But the law also permits the U.S. government to issue additional licenses if the patent holders somehow misuse their patents. The government has never invoked these so-called march-in rights.

The meeting will center on two questions: Should the U.S. federal government use the law to prevent companies from charging whatever they want on drugs developed in part with taxpayer money? And does the Norvir price increase represent an "unreasonable" use of the patent that limits patients' access to the drug?

Those expected to urge the NIH to take action to lower the drug's price include John Erickson, a former Abbott scientist who received an NIH grant to do the work that led to Norvir, and AIDS activists.

On the other side, former Senator Birch Bayh, who co-wrote the Bayh-Dole Act, is expected to argue that the law wasn't intended as a way to dictate prices. An Abbott representative likely will warn against any move that could prompt drug companies to forgo federal money altogether and crimp innovation.

Some early work on Norvir, an early protease inhibitor first marketed in 1996, was funded by NIH grants to Abbott. The company says the grants totaled $3.47 million, and that it has spent more than $300 million to conduct clinical trials and bring the drug to market.

Combination Dosage

Initially, Norvir was usually taken alone and at a high dose, but later became more widely used in combination with other protease inhibitors. A low dose of Norvir boosts the effectiveness of other protease inhibitors.

When Abbott raised the Norvir price to $8.57 a day from $1.75 in December, critics noted that the move effectively raised the costs of combination therapy that relies on Norvir and rival protease inhibitors.

They argued that the price increase was a bid by Abbott to induce people to turn to Kaletra, another Abbott product that contains Norvir and wasn't affected by the price change.

One Republican senator, John McCain, and two Democratic senators, Charles Schumer and Ernest Hollings, recently called on the Federal Trade Commission to investigate the price increase and whether the company might be engaging in anticompetitive behavior.

Jeffrey Leiden, who heads Abbott's drug division, denied that the price increase was intended as a way to boost Kaletra's sales, and said that the increased revenue from the price increase -- $50 million to $70 million this year -- would help speed the development of new drugs.

Abbott has said that it won't impose the price increase on government health programs for low-income people, and that it is giving away the drug to needy patients.

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