January 15, 2006 (Vol. 26, No. 2)

Threat of Avian Flu Pandemic Has Countries & Pharma Firms Exploring Manufacturing Options

If profits are the carrot, compulsory licensing is the stick in the unfolding drama to ensure adequate supplies of oseltamivir throughout the world in an attempt to mitigate an avian flu pandemic.

In dire situations, you want to have march-in rights, says Vijay Samant, CEO of vaccine manufacturer Vical (www. vical.com). For now, Governments are saying nothing, notes J. Matthew Buchanan, of counsel, Dunlap, Codding & Rogers, preferring to wait and see what licenses their own eager pharmaceutical companies can negotiate with Roche (www.roche.com), which holds the patent for oseltamivir phosphate, called Tamiflu.

That situation could change if Roche is unwilling to grant significant numbers of sublicenses or if the feared pandemic actually materializes. A compulsory license could backlash severely, notes John Callahan, J.D., attorney and shareholder in international law firm, Sughrue Mion (www.sughrue.com), in terms of dissuading companies from doing business in the countries that invoked compulsory licenses. Longer term, they have the potential to stifle innovation.

Its a little too early to tell how such measures affect innovation, because they have always been offset by high profits in Western countries, according to Dan Cahoy, J.D., patent attorney, assistant professor Pennsylvania State Universitys Smeal College of Business. But, he adds, since avian flu is a truly global phenomenon, a great impact from compulsory licenses may result.

Benjamin Bai, attorney with international law firm Jones Day, says that although the compulsory licensing of oseltamivir could open a floodgate of patent crises in the short term, it should not affect multinational companies long-term patent strategies in Asia and is unlikely to spill over to many drug patents. This is because compulsory licensing is relatively rare. The risk of compulsory licenses is just a cost of doing business.

To date, the invocation of TRIPS (Trade Related Aspects of Intellectual Property Rights) provisions on compulsory licenses generally resulted in a voluntary settlement between the government and the pharmaceutical company involved. The closest parallels are with the use of AIDS medicines in South Africa and Brazil, and the use of Bayers Cipro in the United States, notes Cahoy. Those conflicts ended in eventual agreement by the pharmaceutical companies for low-cost licenses or lower branded prices.

If compulsory licenses are granted for oseltamivir, some speculate that patents for public health therapies will become virtually meaningless. In that scenario, innovative companies might concentrate on other, more profitable ventures with dire consequences for global public health.

Roche, initially reluctant to grant sublicenses, began to understand its position was unpractical, if not untenable. Indian pharmaceutical manufacturer Cipla (www.cipla.com) announced plans to manufacture oseltamivir with or without legal rights, in what chairman Yusuf K. Hamied called a humanitarian measure. The first batch is expected to be available as early as January. In Taiwan, scientists at the National Health Research Institute made small quantities of the drug and commissioned a Taiwanese company to make 200,000 doses by the end of 2005.

Third-Part Collaborations

In light of such developments, Roche director of public affairs Darien Wilson says, Roche is prepared to discuss collaborations with additional third parties to increase the manufacturing of Tamiflu, provided such parties can realistically produce substantial amounts of medicine for emergency pandemic use, in accordance with appropriate quality specifications, safety, and regulatory guidelines.

The term substantial amounts may be the sticking point. Roche uses a specific type of anise, wild star, from which it extracts the shikimic acid. It provides a much higher yield and purity of shikimic acid than extraction from feed-grade anise, says Wilson.

The crop requires specific agroclimate conditions available only in the mountainous, traditional growing area, namely, the Chinese provinces of Guanxi, Sichuanm, Yunnan, and Guizhou.

Roche reportedly buys 90% of the wild star anise and has already doubled production; it expects to have increased production by 8- to 10-fold by mid-2006. Consequently, there seems to be little opportunity for any competitor to make substantial amounts.

Ramesh Adige, director of corporate affairs and global corporate communications for Indian pharmaceutical firm Ranbaxy Laboratories (www.ranbaxy.com), doesnt see that as an initial issue. Ranbaxy is in a position to produce sufficient quantities of generic oseltamivir within the second quarter of 2006, he says. We have made initial arrangements for the intermediates, shikimic acid/quinic acid, and would be in a position to supply sufficient dosages of generic oseltamivir phosphate in capsules.

However, he continues, in the longer term the restricted availability of this key intermediate is expected to be a bottleneck in the pharmaceutical industrys ability to produce generic oseltamivir.

Last October, Ranbaxy made a presentation to Roche to demonstrate its capabilities and expertise in R&D and manufacturing. Currently, Ranbaxy is negotiating with Roche for a non-exclusive global, voluntary license for producing generic oseltamivir. The dialogue is still on, adds Adige.

Ranbaxy has the potential to be a significant player. With a pool of 1,100 employees, it has 19 manufacturing facilities in seven nations conforming to regulatory norms. The companys products are sold in more than 100 nations.

Roche does not have patent protection in Africa or in the UNs list of the least developed countries, Wilson says. Its patent application was fast-tracked in India, but its current status is unclear, according to Callahan.


Right now, everybody is watching India with great interest, says Buchanan. In January 2005, the final amendments necessary for full compliance with TRIPS were made to Indias patent law. The January amendments put everything on the books that made Indian intellectual property laws ready for serious product development. But, Buchanan cautions, on the books is different from in practice. Pharmaceuticals have only been patentable in India since January 2005.

India is interested in intellectual property issues, asserted Callahan, who conducts regular IP seminars in India and says companies want to be active pharmaceutical ingredient manufacturers to the world. Based on the questions he receives during the seminars, Indian pharmaceutical companies are keenly interested in strategies to design around patents (particularly U.S. patents, as the U.S. represents the largest market). They are less interested in obtaining their own patents at this time, although they do obtain some, Callahan adds.

To become a player, India must respect intellectual property and is taking steps in that direction, Callahan says. Therefore, Id be surprised if India allowed a compulsory license, in the case of Roche. Indian courts have a reputation for transparency, ensuring the rule of law. But, Callahan adds, The courts are notoriously slow, and results may take five to ten years.

There is plenty of time for debate, particularly given the built-in ambiguity of the compulsory license component of Indias patent law. It extends to the manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector, in order to address public health problems. That sounds fine, except that neither public health problem nor insufficient capacity are defined, and the products extend beyond medications to include diagnostic kits and ingredients.

The provisions are somewhat more ambiguous than those of other developing nations, Callahan says, but some still find fault with Indias new patent laws. The Indian Pharmaceutical Alliance, in a letter to the Group of Ministers, reiterated its opposition to patent applications that would delay the commercialization of generic pharmaceuticals.

The decision to support, rather than deny, Roches patent application will delay entry of generic versions of oseltamivir unless Roche reaches a sub-licensing agreement with Ranbaxy, Cipla, or some other company. Although the laws have been in effect for pharmaceuticals for about one year, The letter could affect the progress of the patent applications, Callahan speculates.

The WHO says avian flu is in phase three, the warning stage, of its development. There is time for countries to prepare, and there is time for the virus to mutate. The extent of oseltamivirs effectiveness against a mutated strain of H5N1 remains to be seen, but it is acknowledged as the only effective therapy to date.

With the global death toll less than 100 persons, the rush toward oseltamivir may seem premature, but the cost of ignoring the threat could be devastating. As Samant says, We need to stockpile oseltamivir and have distribution channels set up, before a pandemic ensues. Countries are fully justified in doing what they need to do, he says, to ensure the health and safety of their populations.

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