Dan Whalen is a JD Candidate at Osgoode Hall Law School.
The Indian Patent Office recently denied exclusive rights to Abbott Laboratories for a premier HIV-fighting drug – effectively opening up the market to lower-cost generic substitutes. The company’s application was officially contested by four opponents led by the non-governmental organization Initiative for Medicines, Access & Knowledge, a harsh critic of Abbott’s pricing strategies. These opponents and many observers have called the decision a landmark victory in the treatment of HIV and AIDS (e.g. one, two, and three).
Although Abbott’s pricing alone has led authorities in other jurisdictions to threaten the company’s exclusive rights on the drug, price played no official role in this decision. Rather, the Patent Office questioned the inventiveness of the process by which the drug is manufactured. Specifically, it held that the process does not involve an inventive step and would be obvious to a person skilled in the art through routine experimentation. At the same time, the Patent Office conceded the novelty of specific characteristics of the drug itself. Certain features rendered the drug capsule quite heat-stable and increased its oral bioavailability.
Abbott defends the inventiveness of both its drug and process. Unlike earlier iterations, the heat-stable tablet does not require refrigeration nor must it be taken with food. The company argues that these advances offer “significant benefit for patients in developing countries and resource limited settings.” Perhaps more importantly, the company argues that the fact the manufacturing process enables greater bioavailability of the drug’s component antiviral agents over compounds made by similar methods constitutes a novel approach. Abbott is considering its next move.
Abbott has been routinely criticized for its pricing of the drug, which it sells under the brand names Kaletra and Aluvia. A 2006 WHO study found that although the company charged as little as $550 per patient per year in some areas, it charged customers in developing countries like El Salvador and Peru upwards of $4,500 per year. Such strategies may have resulted in a windfall for Abbott; the drug generated $1.37 billion in sales in 2009, rendering it the company’s second-best selling pharmaceutical product. Although Abbott has lowered the price in India to $1,000 per patient per year, the drug is currently available for only $440 in Africa from Indian generic suppliers under a program negotiated by the Clinton Health Access Initiative.
Abbott has made no official statements explaining its pricing strategy, though the realities of the pharmaceutical industry may offer some explanation. Initial development and marketing costs of drugs are prodigious and their manufacturers must initially charge higher prices to recoup their expenses. In many parts of the world, Abbott continues to enjoy a monopoly on Kaletra and thus has little incentive by way of competition to reduce its prices.
In light of these pricing controversies and subsequent lack of much-needed access, the Indian Patent Office’s decision seems to satisfy many observers’ notions of social justice. As a matter of law, however, it remains to be seen if the decision will stand.