Multinational Monitor

JUN 2002
VOL 23 No. 6


An Epidemic of Neglect: Neglected Diseases and the Health Burden in Poor Countries
by Rachel Cohen

Victory and Betrayal: The Third World Takes on Rich Countries in the Struggle for Access to Medicines
by Asia Russell

Commentary: Patents Pools and the AIDS Crisis
by James Love

The Evergreen Patent System: Pharmaceutical Company Tactics to Extend Patent Protection
by Robert Weissman


Essential Drugs and Health for All: Healthy Innovations from Bangladesh
an interview with
Zafrullah Chowdhury



Behind the Lines

Stripping Away Big Pharma’s Fig Leaf

The Front
Haiti’s Not-So-Free Zones

The Lawrence Summers Memorial Award

Names In the News


Commentary: Patents Pools and the AIDS Crisis

by James Love

What would FDR have done?

Faced with an unfolding disaster in terms of infections and deaths, political figures and public health officials speak of the global AIDS crisis as a calamity that cries out for action. Meetings are held, speeches are made, interviews granted, and photo opportunities organized, and the public is given the impression that world leaders are focused on doing what is feasible to relieve at least some of the massive suffering.

There are a huge number of problems in dealing with AIDS crisis, particularly in the poorest countries, where the underfunded health care system cannot address even routine health care problems, let alone the difficult demands of the AIDS crisis.

Given all of the other barriers to treating the poor, it is appalling that government policies would be designed to drive up the prices of essential medicines or other important inventions, such as viral load testing technologies. Inefficient distribution systems and patents create problems that could and should be overcome.

Unfortunately, the most economically powerful countries continue to lobby against solutions. The United States, Japan, Canada, and the European Union, on behalf of member states like Germany, the UK and Sweden (countries with strong pharmaceutical export industries), continue to oppose many of the most obvious steps to lower the prices for essential health care technologies.

It doesn't have to be this way. The wealthy and the poor countries could work together to bring down the prices of medicines in poor countries. To illustrate what a real effort might look like, it is useful to review what the U.S. government did in 1917, when, spurred by a war mobilization effort, it overcame barriers to building a modern aircraft industry.

Franklin Delanor Roosevelt (FDR), then an under secretary in the Navy, headed up an effort to address the patent barriers that had blocked the development of a competitive aircraft industry. The Wright Brothers and the Curtiss Brothers held key patents that effectively blocked the manufacture of aircraft. The U.S. Congress passed legislation that gave the federal government the authority to buy or take the patents, and forced the Wright Brothers and the Curtis Brothers to license their patents to the Manufacturers Aircraft Association (MAA), which created a pool for aircraft patents.

The speed of the government intervention to fix the aircraft problem was astounding, when compared to the slothful response to the HIV crisis. Congress created a National Advisory Committee for Aeronautics to consider and advise the president on aeronautical problems. On January 13, 1917, the Secretary of the Navy reported "various companies were threatening all other airplane and seaplane manufacturing companies with suits for infringements of patents." These litigation threats made it difficult for the government to fulfill orders. "To protect themselves in case they were forced to pay large license fees, the companies had greatly increased the sales prices of their products," the Secretary stated. "Some companies would not expend any money on their plants for fear that suits brought against them would force them out of business."

The Committee, the War and the Navy Departments and the aeronautical industry met jointly on March 22, 1917, to discuss "various means by which the basic airplane patents could be acquired by the Government for the development of the industry," while providing "just recognition Ö to the owners of the more important or basic patents in the form of reasonable royalties to be paid by the purchasers of planes whether for military or civil use." The next day, on March 23, 1917, the patent committee of the National Advisory Committee rendered a report recommending "the formation of the Aircraft Manufacturers Association among all aircraft manufacturers and suggesting the details of a cross-license agreement among its members."

On June 14, 1917, the executive committee of the National Advisory Committee for Aeronautics "authorized the patent committee to take such steps as appeared necessary to effect a solution of the patent question." It recommended that royalties to be paid by the Manufacturers Aircraft Association to the "Wright and Curtiss Companies, who owned the principal airplane patents, be limited to two million dollars each."

Four days later, on June 18, 1917, the subcommittee on patents met with the Wright-Martin and Curtiss-Burgess interests, and on July 10, 1917 a meeting was held with competitive airplane manufacturers and the Wright and Curtiss patent owners. The Manufacturers Aircraft Association was incorporated in New York on July 16, 1917, and its first meeting was held on July 24, 1917, where the patent pool was formally created.

Prior to the creation of the patent pool, the Wright Brothers asked $1,000 per aircraft as a royalty (about 5 percent of the cost of a plane then) for a single patent. The federal government forced patent owners to accept a $200 flat fee for each airplane that was manufactured, and later lowered this to $100 per plane. The royalties were divided 67.5 percent to the Wright Brothers, and 20 percent to the Curtiss-Burgess company, with the remainder used to support the MAA. The royalties to both the Wright and Curtiss patent owners were reduced once they accumulated $2 million in royalty payments, to $25 per airplane.

In less than seven months, the federal government "solved" the patent problem. The companies that grew out the MAA included Boeing, McDonald-Douglass and virtually the entire modern U.S. aircraft industry. The MAA expanded its pool of patents, created an international system for evaluating the value of patents, and lasted until 1975, when it was dismantled at the request of the federal government.

Today the world faces a terrible crisis, and severe patent barriers in even the poorest countries contribute to the problem. Thirty-seven African countries have patents on combivir, a fixed-dose combination of AZT and 3TC, probably the most important Nucleoside Analogue Reverse Transcriptase Inhibitor combination, and two dozen African countries have patents on Nevirapine, the cheapest to manufacture Non-Nucleoside Reverse Transcriptase Inhibitor. In most African countries, because of patent barriers, and because no single brand-name company has rights to all of the needed drugs, it is illegal to sell three-in-one pill fixed-dose anti-retroviral combinations that are only manufactured by generic producers. (Triple-drug combinations are the most effective treatment for HIV/AIDS. Combining these drugs into a single pill makes it much easier to maintain the prescribed regimen, as anyone who takes multiple medications knows.)

Developing countries are baffled and intimidated by the colonial legacy of complex legal arrangements to use compulsory licensing to authorize generic production of on-patent medicines. So far only Zimbabwe has acted to override patent rights to make medicines more cheaply available.

If the Europeans and the U.S. government will let them, UNAIDS or some other global body could do for Africa and other developing countries what needs to be done -- create a patent pool for essential medical inventions to be used in poor countries. Maybe they should name it after FDR. He knew how to get things done.

James Love is the director of the Consumer Project on Technology.

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