IP: Bayer's bad behavior raises larger questions: Dan Gillmor on Technology Mon Nov 05 16:45:11 EST 2001

[David Farber <dave () farber net>]

> BY <mailto:dgillmor () sjmercury com>DAN G<mailto:dgillmor () sjmercury com>ILLMOR
> Mercury News Technology Columnist
>
> One of the enduring images of recent weeks will surely be the Cipro 
> supply-and-demand spectacle. Amid a public-health emergency and near-panic 
> in some circles, the patent-holding maker of the powerful antibiotic -- a 
> drug that, for a time, was the only federally approved medicine for 
> anthrax poisoning -- loudly haggled with the U.S. government over the price.
>
> We got a lesson in profit-hunger, of course. But another important issue 
> also surfaced when a light shone briefly on the drug development and 
> patent systems. Profits and incentives to come up with new things are 
> essential to capitalism, but Bayer's bottom-line focus looked unattractive 
> in these circumstances.
>
> Profiteering from panic or shortages is common. We saw it in spades 
> earlier this year when energy companies took advantage of the mess in 
> California's electricity market.
>
> Even if it's ugly and anti-social at times, profiteering is useful in the 
> larger sense. It reveals corporate character, for one thing. And high 
> profits tend to bring new entrants into markets; competition ultimately 
> serves us well.
>
> But profiteering in a war or other national emergency raises questions. 
> When, if ever, are there obligations beyond satisfying shareholders?
>
> Bayer missed a chance to earn something the profits from Cipro will never 
> provide. A company with more public-relations sense would have avoided the 
> mess in the first place.
>
> ``If you need Cipro,'' the company should have told public-health 
> officials at the outset of the anthrax outbreaks, ``we'll give you as much 
> as you need, at cost.'' Like most people, I'd have been more inclined to 
> seek out Bayer products in the future after seeing such a display of good 
> citizenship. Now, of course, I'll go out of my way to avoid the company's 
> products.
>
> The more basic questions were about more difficult matters. In cases where 
> products or services have government-granted monopolies, when, if ever, is 
> it appropriate to use federal power to upset the system? More 
> fundamentally, does the patent system, which gave Bayer its monopoly, 
> serve the public interest?
>
> On balance, the answer to the last question is yes. But the evidence 
> suggests that the system of drug development needs an overhaul, 
> particularly when it comes to fighting bioterrorism.
>
> Actually, the worst patent problems aren't in pharmaceuticals. Technology 
> patents, especially software and so-called ``business process'' patents, 
> are a well-known disaster area. From all evidence the U.S. Patent & 
> Trademark Office (PTO) sees its job mostly as issuing patents, as opposed 
> to issuing good ones, and then letting the courts sort things out down the 
> road.
>
> That's how ridiculous patents get issued for absurd ``inventions'' such as 
> multimedia CD-ROMs (it was later overturned) and Amazon's ``one-click'' 
> shopping, which is under attack in court. Companies have learned to obtain 
> their own questionable patents as self-defense if nothing else, which 
> means that lawyers are taking positions from engineers.
>
> The drug companies have abused the patent system in their own way. They 
> use every trick in the book to prevent other companies from making generic 
> versions after patents have expired, delaying the health-care savings that 
> should be arriving sooner than later.
>
> Drug patents are clearly useful to spur innovation, however. Given the 
> high cost of developing new medications, a limited-time monopoly seems 
> like a reasonable bargain.
>
> But the industry's incentive to come up with anti-bioterrorism drugs 
> before attacks is questionable. When profit is the sole motive, protecting 
> against a possible problem isn't high on the list of development projects. 
> Companies rationally would rather sell expensive drugs for chronic 
> conditions than produce drugs that people might take for only a few days 
> in an emergency. The government role here is obvious, and vital.
>
> Protecting against bioterrorism will take much more than new drugs. It'll 
> take quick detection systems, too. Information technology companies and 
> instrument makers stand to win big in this area.
>
> Should the public be hostage to a single company's profit-seeking? This is 
> a difficult problem, and the U.S. government's jawboning of Bayer to lower 
> the Cipro price was an important, if insufficient, response to a genuine 
> problem. It turned out that other antibiotics were just as effective, 
> which solved the immediate problem.
>
> But the larger question remains. What if a start-up comes up with a 
> superior method for sniffing the air quickly and reliably, and then 
> patents it? Is this the best way to get good products? Sometimes. If price 
> matters and the issue is life and death, can patents survive intact? 
> Sometimes not.
>
> People in Africa and other places with a high incidence of AIDS but not 
> much national wealth are asking such questions about drugs that are 
> relatively affordable in the United States but way out of range elsewhere. 
> The U.S. pressure on Bayer was, at best, hypocritical given the hard-line 
> stance our government, urged by the drug companies, has taken on letting 
> developing-world nations make cheaper generic versions of expensive drugs 
> still under patent.
>
> Bayer, for its part, probably didn't expect to become a poster child for 
> greed. The company has been running an advertising campaign designed to 
> convince people that it wasn't doing anything unseemly in its Cipro sales 
> and marketing. But an ugly odor remains.


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