Thailand’s Drug-Company Stare-Down Faces an Uncertain Future

A year ago, Thailand sent shockwaves around the pharmaceutical world when it announced it would issue a compulsory license for the patented AIDS drug Efavirenz.

Major drug companies cried foul, pouring criticism on the country for allegedly stealing intellectual property. Patients would suffer, they claimed, as drug companies would no longer have the incentive to produce life-saving drugs.

Many institutions, like the World Health Organization, didn’t know what to think. Margaret Chan, the WHO director-general, initially scolded Thailand and called the policy “naïve.” She quickly made a u-turn, writing Thai Health Minister Mongkol Na Songkhla to apologize and tell him that the WHO “unequivocally” supports compulsory licenses, and that Thailand’s use of them was “fully in line with the [World Trade Organization’s] TRIPS agreement.”

A year later, the results of the policy speak for themselves. Merck immediately cut the price of first-line anti-retroviral Efavirenz from 1,400 baht per bottle to 767 baht per bottle in Thailand, and slashed prices for other developing countries as well. Abbott Laboratories cut the price of second-line drugs Kaletra and Aluvia, a heat-stable form of the drug that does not require refrigeration, to $1,000 per month from $2,200 per month for 45 lower and middle-income countries.

“The compulsory licenses have been an incredible success,” said Paul Cawthorne, the head of mission for Medecins Sans Frontieres in Bangkok. “What’s really surprising is that after Thailand issued the CLs, Merck and Abbott reduced prices significantly for not just Thailand, but many countries.”

Merck and Abbott have not seen financial ruin so far. Abbott earned $2.4 billion in the first nine months of the year, already topping full-year 2006 earnings of $1.7 billion. Merck has seen net income rise 24% year-on-year to $4.9 billion in the first nine months, ahead of analysts’ expectations.

But while Merck extended the offer for reduced Efavirenz prices to Thailand, Abbott went the opposite way and gave the discounted offer to every middle-income country except Thailand - an apparent punishment for daring to take advantage of rights granted to it under TRIPS, the only international treaty that discusses the topic. The Chicago-based company also withdrew registration for Aluvia, forcing Thailand’s Government Pharmaceutical Organization (GPO) to spend six months conducting tests to re-register a generic form of the drug with the country’s Food and Drug Administration.

That process is now complete, said Achara Akesangsri, the GPO’s deputy chief of research and development. The state-owned drug company, which has come under fire for corruption in the past, plans to import the first batch of generic Aluvia next month from the Indian firm, Matrix Laboratories.

In the meantime, she said, the GPO is collaborating with Indian generic drug-maker Hetero Drugs to build a new plant in Thailand that meets WHO standards. Earlier this year, health minister Mongkol sacked the former head of the GPO, who let the process for building the factory drag on for more than three years as allegations of corruption mounted.

Achara said Dr Witit Artavakun, the GPO’s new managing director, is operating more efficiently. “The GPO is much improved from last year,” she said. “Everything is moving faster.”

Even though Mongkol’s term will end after Thailand finally holds a general election on December 23, he is not slowing down. The minister, who has already issued a compulsory license for popular heart drug Plavix in addition to the two anti-retroviral drugs, has threatened to issue compulsory licenses for cancer-fighting drugs unless prices are slashed. The minister said Novartis has offered to provide the drug Imatinib for free if Thailand backs off efforts to produce more generics.

But Mongkol is not just sticking it to foreign drug companies. He has also proposed regulations that would break the GPO’s monopoly on selling drugs to local hospitals - raising the ire of the state enterprise’s union.

“The GPO must develop its capacity to compete with the private sector, and I expect the price of drugs to decrease,” he said earlier this month, according to local media reports.

Pharmaceutical companies both outside and inside Thailand may welcome the end of Mongkol’s reign atop Thailand’s health ministry, but AIDS groups will miss him. In a strange set of circumstances, the coup that toppled former Prime Minister Thaksin Shinawatra allowed Mongkol, a doctor and career bureaucrat, to take a position normally reserved for politicians.

“Mongkol was under huge pressure from industry and from other ministers to stop his efforts,” Cawthorne said. “But the guy was determined. He knew where he wanted to go and what he wanted to achieve. It was a very fortunate set of circumstances.”

So what happens next? Will Thailand’s elected leaders follow the policy set by the non-elected government?

Most analysts doubt that any party will reverse what Mongkol achieved over the past year, but they also doubt that the next minister will be as aggressive. Thawat Suntrajarn, director-general of the Disease Control Department, said: “The next government should follow this policy and not turn it back. It’s useful for all the patients. I’m sure it will continue.”

Thaksin resisted issuing compulsory licenses because he was intent on signing a free-trade deal with the US. But provisions related to compulsory licenses, data exclusivity and patents proved a key sticking point in the negotiations, which stalled indefinitely after the coup.

The Democrats, the main opposition under Thaksin and one that could worm its way into a coalition, have said they support compulsory licenses for essential drugs. The front-running People’s Power Party, comprised of former Thaksin loyalists, has repeated the same thing. Other parties hedge on the issue, saying that it depends on the circumstances during the next administration.

“Foreign pharmaceutical companies have no votes in the election, so parties have no incentive to come out on their side,” said a Western diplomat who follows the issue closely.

“I went and saw [Democrat leader] Abhisit [Vejjajiva] speak to a business forum in which he said the party would seek better ways to improve access to medicine besides CLs, and a week later he talked to public health NGOs and said the opposite,” the diplomat added. “My guess is they are pandering to both audiences, and then whatever parties get in will keep the current CLs and quietly let the issue go away. For this government, the issue was mostly personality-driven; there wasn’t anyone else who necessarily cared.”

Cawthorne and other HIV/AIDS activists are hoping that’s not the case, although they realize the great amount of pressure that will face Thailand’s next health minister.

“My guess is there will be lots of lobbying from both sides,” he said. “We’ll just keep our fingers crossed.”