Wall Street Journal - April 30, 2007

We're about to find out. Earlier this month, Thailand browbeat Abbott Laboratories into reducing the price of an HIV/AIDS drug, Kaletra, by threatening to seize its patent. The action goes against every principle of intellectual property protection under the World Trade Organization.

You'd think such a frontal attack on property rights would upset the World Health Organization, whose objective is "the attainment by all peoples of the highest possible level of health." But you'd be wrong. The WHO helped broker the Thai deal, bowing to intimidation from increasingly loud "non-governmental organizations," or NGOs.

Abbott had initially responded to Bangkok's threats by withdrawing all of its applications to market new products in Thailand. The NGOs answered with their own denunciations of Abbott, with Oxfam calling its withdrawal from Thailand a "nasty game," while Doctors Without Borders labeled it "a major betrayal to patients." (Abbott kept selling the drugs already on the Thai market.)

Under this political assault, WHO Director General Margaret Chan asked Abbott if it could "improve access and affordability" to drugs for middle-income countries. So Abbott did a reversal and said it would re-enter the market and sell a newer version of its AIDS drug at a lower price. The WHO then quickly praised Abbott for "significantly" lowering the price. And its representative in Thailand, P.T. Jayawickramarajah, added that "what the Thai Ministry of Public Health has done is quite appropriate."

The truth is closer to the opposite, as a matter of law and policy. Thailand has launched campaigns against three drug companies so far -- Abbott, for Kaletra; Merck, for Stocrin, another HIV/AIDS drug; and Sanofi-Aventis's Plavix, a blood thinner for heart patients. Bangkok's military government justified its actions under WTO rules that allow governments to seize drug patents in cases of "national emergency" or for "public non-commercial use."

These vague terms are open to interpretation, but Thailand is stretching "national emergency" beyond reason. As the American Enterprise Institute's Roger Bate points out, less than 1% of the Thai population suffers from chronic coronary disease and a little over 1% from HIV/AIDS. The latter is terrible but also far less than in most of sub-Saharan Africa.

The "public non-commercial use" justification also doesn't hold up. Bangkok intends to seize the patents and ship them to the Government Pharmaceutical Organization, a for-profit state-owned company. The Thai company, by the way, has never been certified by the WHO as a safe drug producer and has a track record of graft. Yet now the WHO has allowed the company to smash and grab a patent to make money.

The stakes here are far larger than Thailand's greed and WHO's political opportunism. Anti-pharmaceutical activists have looked for years for a government pliable enough to test WTO rules on compulsory licensing. They want to set a precedent that erodes property rights, with a goal of selling drugs at cut-rate prices everywhere. In the NGO nirvana, governments would share the burden of paying for drug research, and then create some kind of "reward" scheme for companies to innovate. This is socialism as alchemy, as if companies will take billion-dollar risks without an incentive to make a profit.

As for Abbott, we recognize their business and PR dilemmas. But the only real weapon any drug company has in these patent battles is to withdraw from an offending country's market. By threatening withdrawal and then reversing itself under pressure, Abbott has undermined its own credibility and made it harder for other companies to take a stronger stand. CEOs are paid to make more consistent business judgments.

Also culpable is the Bush Administration, which has been dozing through this assault on a major U.S. industry. Trade Representative Susan Schwab's office has publicly acknowledged Thailand's ability to use compulsory licenses -- subject to WTO law -- and may put the country on a "watchlist" for IPR protection. But what happens when other countries decide to seize patents? Last week, Brazil declared Merck's Efavirenz (another name for Stocrin) a drug of "public interest" -- a possible first step toward a compulsory license.

The large drug companies have become global whipping boys, but their therapies can't be produced on a government whim. The Abbott precedent is a bad one for global property rights, and the biggest losers will be the world's poor and sick.
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