Bristol HIV Price Cut Includes Pledge Not To Enforce Patent Rights In Africa

Bristol-Myers Squibb's HIV drug price cut for sub-Saharan African countries includes a pledge not to enforce patent rights for Videx (didanosine) and Zerit (stavudine).

To "ensure that its patents do not prevent inexpensive HIV/AIDS therapy in Africa," Bristol will make Videx and Zerit's intellectual property "available at no cost to treat AIDS in South Africa," the company said.

To provide the free patent access, Bristol first amended its licensing agreement with Yale University, the owner of the Zerit patent. Bristol owns no other AIDS patents in Africa.

The company will price its two AIDS medications "below cost" and at a fraction of U.S. prices: Videx will cost 85[cents] per patient per day and Zerit will cost 15[cents] per day. Combined, the drugs will cost $365 per year. Videx and Zerit's U.S. retail prices are $7.93 (400 mg) and $10.38 (80 mg), respectively.

Bristol's announcement closely follows Merck's similar pricing program for developing countries, which will offer Stocrin/Sustiva for $1.37 a day ($500 per year) and Crixivan for $1.64 ($600 per year) (¹ (Also see "Merck HIV Discount Plan Sets DuPont Sustiva Price Floor At $500 Per Year" - Pink Sheet, 12 Mar, 2001.)).

In combining the low price with a pledge not to enforce its patents, Bristol may be looking for a politically acceptable formula to head off generic launches in the developing world.

The prices offered by Bristol and Merck appear to be below the level at which generic competitors can compete. The existing production capacity of the brand name firms should make it impossible for new entrants to match their cost structure.

The announcements also afford Bristol and Merck a greater degree of control over product distribution. It will presumably be easier for the firms to prevent (or at least monitor) re-distribution of discounted products from the target markets back to the industrialized nations than it would be if generics are launched.

Bristol says it is not concerned about potential reimportation, but will monitor the issue.

Bristol does not anticipate any capacity issues with the additional shipments, but acknowledged it is unclear how many takers the program will receive. Bristol's HIV drugs are manufactured in Puerto Rico and Ireland.

The importance of intellectual property control in Bristol's offer is highlighted by the company's decision to continue to defend itself in the South African AIDS patent lawsuit.

The company explained that while it is making Zerit and Videx patents available for others to use, it is not abdicating its rights altogether. The patent case could also be precedent-setting in other areas, Bristol added.

Some of the public relations impact of the announcement may have been undercut by a coincidence of timing in pending litigation in the U.S. over Bristol's patents on BuSpar. The day before the price cut, a Washington, D.C. federal court ordered Bristol to delist a Nov. 21 patent from FDA's "Orange Book" (² (Also see "Mylan Buspirone Launch Awaits Bristol Appeal Of BuSpar Patent Order" - Pink Sheet, 19 Mar, 2001.)).

The price cuts by Bristol and Merck are a calculated gamble as the companies seek to move the debate away from the cost of the drugs and toward methods to find funding to provide therapy even at the lowest possible price.

The willingness of Bristol and Merck to disclose a bottom price carries the risk that other purchasers in more lucrative markets will demand access to those prices.

Like Merck, Bristol's AIDS drug portfolio is not a key growth area for the company, especially in international markets. For the fourth quarter, Zerit was down 21% to $63 mil. in overseas markets and Videx slipped 3% to $31 mil. Zerit is still a key product for Bristol in the U.S. market.

Yale's role as the inventor of Zerit is another consideration in Bristol's strategy. The university was also targeted by activist groups for pressure to respond to the HIV epidemic in Africa.

Bristol's price cuts are part of the ongoing "Secure the Future" HIV/AIDS outreach program, under which the company pledged a five-year, $100 mil. commitment to fund research and training in southern Africa (³ (Also see "Bristol-Funded Africa HIV/AIDS Research Program Will Treat Subjects For Life" - Pink Sheet, 13 Dec, 1999.)). Bristol is dedicating an additional $15 mil. to the effort.