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Abbott vs. Thailand has implications for innovation and access

Many of you have been following the Abbott Laboratories story regarding its Kaletra AIDS drug and the conflict with the government of Thailand over patent protection and drug pricing. Some of you may regard this as a relatively isolated tiff between a single drug company and another developing country. Others consider this to be a central - if not the central - problem facing the pharmaceutical industry. And a few - myself included - regard this to be one of the most important issues for our society in general.

At stake is - as Tommy Thompson, the former Governor of Wisconsin and former U.S. Secretary of Health and Human Services wrote - “the balancing act between innovation and access.”

The Abbott-Thailand story is a developing one and some details could change even as this article goes to press. Here is a timeline of what has transpired so far:

Fall 2006: Abbott lowers the price of Kaletra sold in Thailand from $2,200 per year to $1,700.

Jan. 2007: Nevertheless, the government of Thailand institutes a “compulsory drug license” allowing generic versions of the drug to be sold even before patent protection expiration.
Feb. 2007: Abbott responds by withdrawing seven new drugs from entry into the Thai market, including the new formulation of Kaletra (called Aluvia). This move sparks protests in Thailand, including consumer boycotts of Abbott products.

April 2007: Abbott further lowers the price of Kaletra to $1,000 and allows Aluvia to be sold in Thailand. However, Abbott will continue to withhold six other new drugs from entry into that market. At an April 28 Abbott Labs shareholder meeting, CEO Miles White stands firm on the controversial decision to withhold new drug applications in Thailand, remarking that Abbott has spent over $300 million last year alone in humanitarian relief worldwide. Activists as well as shareholders supportive of the Abbott decision spar (fortunately peaceably).

Without taking sides, this sounds to me like a lose-lose situation out of a Shakespearean "tragicomedy," layered by miscommunication and blinkered outlooks. Both sides have valid points, but should this scenario continue to play out in this fashion, both sides will end up losing.

As feared by the pharmaceutical industry and as the Wall Street Journal pointed out in an article titled “Abbott's Thai Pact May Augur Pricing Shift,” such pricing pressures (accompanied by threats on intellectual property rights) could severely impact the development of new drugs - not just for Thailand, of course, but for everyone. Drug development is extraordinarily expensive (and risky), and it is only the promise of large returns (supported by relatively high prices) that sustains such innovation.

Slippery slope?

While Abbott has not entirely capitulated to the Thai pressure (e.g. by continuing to withhold other drugs), it has taken a path down a slippery slope that industry watchers would say endangers not just Abbott but the entire pharmaceutical business model and the ability to bring to market new life-saving medicines in the future.

It should be noted that the markets in developing nations are not trivial. That same Wall Street Journal article quoted a Merck study that indicated that its own revenues in emerging markets would double by 2010 to more than $2 billion per year. And Abbott's 2006 pharmaceutical sales internationally were nearly equal - at approximately $1.7 billion - to that of its U.S. market.

From the Thai perspective, the government may have achieved a short-term victory on Aluvia pricing, but it lost out on significant other life-saving medicines for their population. That being said, AIDS is a monumental problem in Thailand. The prevalence in that population is estimated at over one percent, which consequently makes AIDS one of the leading causes of death in that country. To a large extent, the AIDS problem in Thailand is rooted in the significant sex industry in that country, which many Thais believe is driven by American and European sex tourism.

One can understand then, the basis for considerable Thai resentment over high prices for AIDS treatments for a problem that many believe to have been, in fact, imported from the West.

Hence, the Abbott-Thailand issue is a critical issue that affects the core of pharmaceutical innovation, the life and death of millions of patients now and in the future, and the standing of the U.S. throughout the world.

“The standing of the U.S. throughout the world?”

Where did that come from, you might ask? As Tommy Thompson indicated in his article “Shrugging diplomatic responsibility: Thailand compulsory licensing symptomatic of a greater problem,” this issue involves more than just negotiations over drug prices but rather requires an integrated diplomacy reaching out to the U.S. government and other parties to achieve a comprehensive solution. Thompson further writes:

“Collaboration has worked in the past. For instance, when foreign governments have aggressively negotiated with U.S. companies, there have been compromises reached that have produced win-win situations for countries that are struggling to take care of their people.”

Comparative advantage

There is a reason why Abbott Labs and other U.S. drug companies are exporting medicines to developing countries. That reason is called comparative advantage. The U.S. has a comparative advantage relative to other nations in quite a few industries. Aircraft is one of them, military technology is another, financial services also ranks high on the list and, of course, pharmaceuticals and medical technology are significant sources of comparative advantage.

This comparative advantage in medicine manifests itself in many ways. Wealthy Saudi sheikhs (along with their entourages) visit the Cleveland Clinic when they are ill. The famed Johns Hopkins hospital is building an affiliated hospital in Dubai, the government of Ukraine has reached out to GE Healthcare to help build its Children's Hospital of the Future, and a U.S. military task force called New Horizons sends Army reserve medical specialists to underserved Latin American nations.

However, as compared to other industries, comparative advantage in medical technology has a special position with respect to the unique international goodwill that it can foster. Some foreign policy experts such as the Harvard University professor Joseph Nye would call the export of medical expertise one manifestation of “soft power.” Tommy Thompson and others have called it “Medical Diplomacy” and, quite frankly, given all that is going on in the world, we certainly need more of that.

That is where the Abbott-Thailand controversy could become a true tragedy, not only because it represents an escalating battle in which pharmaceutical innovation and many Thai lives become “collateral damage,” but also because this conflict represents a lost opportunity at medical diplomacy and a failed chance at improving the perception of the U.S. among other nations.

The efforts of U.S. companies to “export” healthcare technology and medical expertise to other nations becomes not just a business matter but something that should be part of our foreign policy and all the support and encouragement that entails.

So how does this broader perspective relate to the Abbott-Thailand affair?

• What if Miles White had called Bill Gates and made a deal with the Gates Foundation to redouble, along with some Abbott support, the AIDS/HIV prevention and treatment efforts in Thailand? Bill Gates should be supportive of efforts that indirectly buttress intellectual property rights.

• What about even stricter efforts (and resources) negotiated between the Thai and western governments to staunch the sex tourism trade, combined with development efforts to provide other gainful employment for sex workers?

• What about having Abbott (and other U.S. companies) seek public-private partnerships with the Thai government to develop and upgrade AIDS clinics in that country?

• In this regard, what about having Abbott work with GE Healthcare (to whom it recently sold its diagnostics business) to develop AIDS hospitals in Thailand?

Lincolnesque mindset

These are but just a few possible solutions to the dilemma with the common theme being that of collaboration and partnership. Medical diplomacy - like other forms of diplomacy - is not just about money but about relationships and partnerships and, above all, new ways of thinking.

As Abraham Lincoln addressed Congress in 1862: "The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty and we must rise with the occasion. As our case is new, so we must think anew and act anew. We must disenthrall ourselves and then we will save our country."

Lincoln was obviously speaking about the Civil War and arguing not only for his vision of a united United States but perhaps more importantly pointing out the state of mind required to achieve that vision. In our time, the dogma that “innovation justifies high prices” is not necessarily invalid, but we need to “think anew and act anew.”

Previous articles by Ogan Gurel

Ogan Gurel: Personalized medicine and technology convergence

Of private equity, research, and drug development

Ogan Gurel: What patients want: A story of choice, clinical trials & evidence-based medicine

Ogan Gurel: Healthcare of business: Universal coverage plan includes new business taxes

Ogan Gurel: And the winners in medical design are…

Dr. Ogan Gurel is chairman of the Aesis Research Group, which provides forward-looking information and research services to the healthcare and life sciences investment community. Gurel was previously CEO of Duravest, a publicly traded Chicago investment company that initiates and develops next-generation medical technologies. Previous to Duravest, he was a vice president and medical director at Sg2, a healthcare intelligence think tank and consultancy serving hospitals and health systems. He can be e-mailed at

This article previously appeared in, and was reprinted with its permission.

The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC.

WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.


JC_HKT responded 8 years ago: #1

The article has many good points but fails in one important aspect: the writer clearly has little or no knowledge about the Thai society or mentality. If he did, he would know that whatever problems occur, Thais are always eager to blame the evil farangs (white-skin foreigners). This is especially true about the sex trade. 98% of the sex workers cater to local customers and the trade has existed here for hundreds of years. It has next to nothing to do with foreigners. They only started to contact foreigners in the 50s when American GIs were on their R&R in Pattaya.

Contrary to the common belief, quite a few girls are happy in their chosen profession of prostitution with foreign customers. I witness every day western men coming to Thailand and wanting to save these poor souls. In my observations I'd claim that 35% of these women have chosen that profession and do it both willingly and voluntarily. The rest is often driven to it due to lack of other choices to support their families and offspring. And guess what - those families are Thai, not foreign. In most cases, the families are fully aware of the work these girls do but prefer the money they send home over the well-being of their daughters. Now one thinks that this money earned will at least be well spent to improve their lives. Wrong again. In most cases it is used to buy consumables and to throw parties. Reason being the will to gain face. This country is all about appearences, nobody cares about substance.

I could write for days about these issues, but this is hardly the forum for it. I just suggest that the author does some background research on the country he is commenting on. Judging by his professional and well-thought suggestions, I am sure he is capable of presenting a balanced view on Thailand too, presumed he makes the effort.

David Wilson responded 8 years ago: #2

In considering this issue, I would make sure to point out that Abbott’s total revenue in 2006 was $22.5 billion with a net income of $3.9 billion (1). Total Abbott sales in 2006 in Thailand were $30 million (2). Thus, sales in Thailand represent only 0.13% of Abbott’s total revenue.

Clearly, Abbott knows that it is not going to lose any money by denying these life-saving medications to the Thai government. This is a very symbolic act on the part of Abbott to send a message to the entire developing world. They are in effect, saying, “If you try to lower the price of our medications in a way that is not on our terms, we are going to make you pay. It won’t cost us much money, but it will cost you thousands of lives.” This is using human lives as a political bargaining chip to keep the cost of their drugs high.

One must also point out that compulsory licenses are completely legal under international patent law set forth by the World Trade Organization (3). The WTO established the right of countries to issue compulsory licenses in the interest of public health, recognizing that developing countries have a huge need for high-priced medications without any ability to afford such high prices. Thus, Thailand is not doing anything illegal in issuing these compulsory licenses. It should also be pointed out that the licenses are for the non-commercial use of supplying their national health program.

People often argue that drug companies have to charge such high prices to recoup their R&D costs. However, in 2004 Abbott spent almost 3 times as much money on marketing and administration costs than it did on R&D (4). Clearly more of the company’s money is going towards finding ways to maximize profit than towards developing new drugs.

We must consider that selling antiretrovirals is not the same thing as selling hairdryers. One can sell their hairdryers wherever they want to sell them and no one will be harmed. However, when a company has a monopoly over the production over a life-saving medication and makes billions of dollars of profit off of that medication, they have an ethical obligation to make that medication available to those who need it the most but cannot afford it. When people’s lives depend on your drug, denying them your drug is like having a monopoly on food and refusing to sell it to the hungry. Thus, the sale of pharmaceuticals should be regulated in a more humane way than the sale of hairdryers.

Abbott should issue generic licenses for it’s drugs in the developing world and collect the royalties off of those sales. Gilead issued generic licenses for its antiretroviral Tenofovir in August of 2006 and collects 5% royalties from the generic manufacturers (5). In addition, Abbott should register it’s drugs in all developing countries that need it, as well as provide pediatric formulations for its drugs.

Human lives must not be used as bargaining chips for corporate profit, and Abbott must reverse its decision to withhold medications from Thailand.

David Wilson
University of Rochester Medical Student

2) Walls Street Journal “Abbott's Thai Pact May Augur Pricing Shift” April 23, 2007; Page A3
5) New England Journal of Medicine 2007; 356:544-546

Uncle Che responded 8 years ago: #3

Current estimates are that 30% of all females between the ages of 18 and 30 are involved in the sex trade in one way or another in Thailand and most prostitution customers are Thai men, not Western tourists. I find it crazy the statement that Thailand blames the aids problem on Western sex tourists because if the girls were not willing to sell their bodies and Thai businessmen and women didn't provide the venue, then there would be no sex tourism in Thailand. It's a Thai problem.

I've seen Thailand justifying their position in all of this by claiming that government funded universities in the US are the ones doing most of the innovation but ignore the fact that US taxpayers (including drug companies) are funding them. They wish to benefit illegally off of US taxpayers. They don't have enough money for meds, but do have enough to dramatically increase their "defense" spending....defense not really, junta corruption funding. It's all a bunch of baloney. I live in Thailand and it's not nearly as poor as they say it is.

So I ask this question: Why should American taxpayers have to pay the price for some Thai girl who sells her body to buy the latest mobile phone? Why should American taxpayers have to pay the price for some Thai bar owner who sells girls bodies so that he can drive a new Mercedes?

jacques lemieux responded 8 years ago: #4

I agree with JC_HKT and Uncle Che...the prostitution in that country caters in majority to Thai people, and not to foreigners, and yes, they have money for defense spending, pay raises for the military, but not enough for other things.

JC_HKT responded 8 years ago: #5

The govermment here in thailand estimated that the compulsory licencing of certain drugs will save them US $24 million. At the same time they increased the military budget by $1 billion! All this hogwash about wanting to help the poor is utter nonsense. If the government was serious about the health of it's citizens, it would use that money to subsidise the drugs instead of buying more guns.

The health of the Thai citizens should be the responsibility of the Thai government, not of foreign drug companies. How can anyone in their right mind claim that Abbott is more responsible for the health of thai citizens than the Thai government?

Thai health mimister shrugged of the decision by Abbott by saying thailand can easily purchase the drugs elsewhere. It's not that the WTO TRIPS rules allow for compulsory licencing but how the thai government went about it. Their arrogance is mindblowing, as if everyone was dying to do business with Thailand. Fortunately, looking at the rapid decline of FDI and domestic investments, an increasing number of both foreigners and Thais are waking up to the realities of current day business climate in Thailand.

A reality check on the issue came yesterday when Thailand was placed on the IPR watch list of 12 worst offenders. This will have serious consequences on the export economy, which is the only thing keeping this country afloat at this time. I'm ever so pleased that such arrogant actions will have consequences.

Thailand is behaving like an arrogant little brat and in my opinion it deserves a swift kick in the butt.

These actions, among many others, are no surprise from a government that flew to Chiang Mai to seek advice from a soothsayer to solve the country's mounting problems. No, this is not a joke. They really did that.

Thailand was outraged by the insulting videos of the King on YouTube, but just 3 months ago Thai people were burning effigies of the Singaporean PM in Bangkok. If that is not insulting to a head of state of a foreign natiion, then what is? Not only did the government allow it to happen but they further fueled anti-Singaporean sentiment in every feasible media here. It's always so convinient to blame others but so painful to admit what goes on in your own back yard.

These are just a few more examples of what kind of society Thailand is. For those with no inside knowledge about Thailand, the Abbott issue may seem difficult to understand, but I invite everyone to spend 1 month reading the news at and to get an idea what goes on here. Even under strict military rule censorship, it still gives you a pretty good idea.

The real Thailand couldn't be further from the picture your travel brochures paint you.

Amazing Thailand, in more ways that you could ever imagine.

FYI I am a Scandinavian national, living in Phuket, Thailand

David Wilson responded 8 years ago: #6

There is no question that there is much corruption in the Thai government, and that it overthrew a legitimately elected government to take power. It's national health care may be more of a populist scheme than out of legitimate concern for its citizens. But the fact remains that it is giving healthcare to people who would not get it otherwise.

No actions by anyone merit the denial of medications to the people of an entire nation. Even if you think that Abbott can charge whatever it wants for its drugs (which I would contest), you cannot deny the fact that withdrawing medications awaiting registration and refusing to register new medications is an unprecedented, spiteful act that will cost lives. This action has huge implications on all other developing countries, some of which you may consider more deserving of issuing a compulsory license. What is to stop pharmaceutical companies from withdrawing their medications from sub-Saharan African countries when they try to get affordable medications for their people via compulsory licenses? Abbott is putting lives at risk to send its threatening message to the rest of the developing world.

Abbott's actions of withdrawing registrations, charging such high prices for its medications, failing to register medications in countries that desperately need it, and failing to develop pediatric formulations for its drugs are unethical acts regardless of the context.

Roger responded 8 years ago: #7

David has a point and I fully agree with him and support compulsory licensing. Unfortunately JC_HKT has a point that I share too for living in Thailand and having the same analysis. The problem is that Thailand was not the best country in the world to lead the way...

JC_HKT responded 8 years ago: #8

Mr David Wilson, you have good points and on some I do agree with you. However Abbott was not denying anyone anything, it was merely charging a price competetive in the local market when the Thai government suddenly decided to just steal their products. Most of the time, regardless of the product, the buyer will claim the seller overcharges, that issue can be debated until doomsday.

My point is that if you are not happy with the price of a product, you can't just simply steal it. The author of this article here made some very good and constructive suggestions how a compromise may have been found. However, the Thai government chose not to negotiate.

How much money Abbott has, earns or how it spends it is irrelevant. You don't demand that Microsoft sells their product at 90% reduced price either because the company is rich and the OS is a vital product.

The Government should have subsidised the drugs and at the same time negotiated with Abbott.

Passing the blame to Abbott is unwarranted and in-line with the Thai mentality of always blaming others for their shortcomings. Just read the Thai comments in today about their reaction to being placed to the IPR worst offenders list and you'll see what I mean.

The government of any nation in need of medicines must first do what they can to help their people and only after those resources are exhausted, should they commence in negotiations about the TRIPS clause. This is especially true when the amount in question was a trivial US$ 24 million compared to their US$ 1.1 billion increase in military spending.

Thailand neither made an financial effort itself nor negotiated.

The TRIPS rules state that compulsory licencing can be negotiated IF a national emergency is declared. I have not seen any emergencies declared here, and even if one would claim AIDS is rampant in Thailand, heart disease and leukemia are definitely not of epidemic proportions.

Furthermore they have openly said to be considering more drugs for compulsory licencing. This is NOT what the TRIPS rules allow.

I fully agree that if the local government has no funds and/or is financially strained as is the case in most sub-saharan countries you referred to, then the drugs manufacturers should reduce their prices and offset the lost margins in more economically sound markets. Incidentally, this is precisely what the pharmaceutical industry is doing all the time. The debate is just to what extent the price should be reduced.

At the end of the day theft is theft, especially when the thief could easily have afforded to pay for the goods but just chose not to.

If I borrow you my car and you refuse to return it, would you blame me if I wouldn't borrow you another car? Why should Abbott introduce their most valuable products for the thief to steal them too ?

I'm sure they will immediately do this though if the compulsory licencing is cancelled and a fair agreement on pricing is achieved.

David Wilson responded 8 years ago: #9

Dear JC_HKT,

Thank you for taking the time to thoughtfully discuss this issue. I really appreciate you taking this issue seriously.

I want to address your statement that Thailand “stole” Abbott’s products.

As several people have stated, and you have acknowledged, compulsory licensing is completely legal under the TRIPS agreement. You stated that “The TRIPS rules state that compulsory licensing can be negotiated IF a national emergency is declared.” This is actually a common misconception, and I would refer you to the WTO website that specifically addresses this question:

If you read carefully, you will see that since Thailand is using compulsory license for “public non-commercial use”, it is actually not even required by TRIPS to try to negotiate a fair price for the drugs with Abbott.

The only requirement is that Thailand has to pay “adequate renumeration” to the patent holder after issuing the compulsory license. Consistent with international precedent, Thailand set a royalty at 0.5% of the sale price to go to Abbott.

Thus, Thailand’s actions are in complete concordance with the TRIPS agreement, and it is perfectly clear that nothing was “stolen.”

Your point that Thailand has it’s priorities screwed up in it’s refusal to spend enough money for the healthcare of it’s citizens, while at the same time allocating enormous amounts of money to military spending is well-taken. Unfortunately, Thailand is not unique in this regard. As a citizen of the United States, my country soon will have spent over $500 billion on the war in Iraq, yet has under funded and failing schools throughout the country and over 40 million people without health insurance. I agree with you that Thailand is misguided in its military spending, but I would consider that maybe Thailand shouldn’t be held to a different standard than the rest of the world.

I agree with you that many people and governments around the world are quick to blame others for their problems so that they don’t have to take responsibility for it themselves. I think that this is a problem that we must all work on as individuals and as a society. However, this point is not relevant to Thailand’s right to issue a compulsory license.

Abbott was not denying anyone anything before, but now it is denying Thailand seven drugs that it had registered with Thailand (including Aluvia, the heat stable form of Kaletra), and it is refusing to register any future drugs with the Thai government. This could add up to dozens of medications if Abbott does not reverse its decision.

I think your analogy with cars does not work in this situation. First of all, Thailand didn’t steal any property. Second of all, cars are very different than life-saving medications. Denying someone a car means that they will have to take a bus. Denying someone a life-saving medication means that they will die unnecessarily. I would argue that there is a huge difference. I would argue that denying someone medication is like denying someone food or water.

David Wilson responded 8 years ago: #10

One more interesting fact:
As a result of Thailand's policy of universal coverage for antiretroviral treatment, as of June 2006, an estimated 89,000 Thais, or about 4/5 of those who needed it, were receiveing antiretroviral therapy, according to the WHO.

Source: New England Journal of Medicine Feb. 8, 2007 p.544

Ogan Gurel responded 8 years ago: #11

First, I wanted to say thanks to all who have taken the time and interest to comment on this important issue. The editors at Wisconsin Technology (as well as do a fantastic job of editing the columns that appear. In shortening these articles it is inevitable that some portions end up not being published. In the original (unedited) version, the second paragraph read as follows:

"This brief column aims to summarize the problem, highlight some of the main points and hopefully argue for the importance of this issue. Alas, there are no simple solutions. Yet hopefully as more people become aware of this complex and important issue, the more likely we are to find a solution."

It's great that such a spirited discussion has emerged and to that extent, I think the article has achieved some success. Thanks again.

In terms of a few of the specific points made, here are a few thoughts and comments.

JC_HKT has suggested that I could be more informed about Thai culture and attitudes. I don't live in Thailand and have not studied that country very deeply, so I am sure that my analysis along these lines could benefit from such a deeper understanding. That being said, I did comment on a perceived level of resentment among the Thai population. However, a combination of necessary tact and incomplete knowledge required a more tempered description of the situation than JC_HKT has presented.

David Wilson raises some excellent points and I very much appreciate (given the limited space for such comments) his careful analysis. However, he certainly does appear to take a particular stance (e.g. against the Abbott position). Carefully considered opinions like that need to be respected. My goal, however, was less to take sides than to (1) stimulate debate and (2) shed light on the bigger picture.

Point (2) - the bigger picture - is important. Much of the "Talk Back" discussion has centered around the pricing and patent issues. This is certainly the core of the issue, but one of my major points was for Abbott (and Thailand) to look at the issues beyond just pricing and intellectual property protection and to aspects of medical diplomacy, innovative partnerships, and interlocking relationships that help serve to facilitate sustainable solutions to the AIDS crisis. It appears that the negotiations centered nearly entirely on the balance between price and compulsory licensing. While this may have represented the simpler approach, simpler may not always be best.

Finally, a number of comments were made regarding the nature of prostitution in Thailand - whether, for example, it is by compulsion or voluntary and so forth. These topics - while related to the AIDS issue - go beyond the subject matter intended in my original article. While I don't wish to discourage such discussion, I don't think, however, that I can lend any useful insights relative to that specific topic.

cc responded 8 years ago: #12

I just wanted to be clear on one point.

When you write that in April 'Abbott allows Aluvia to be sold in Thailand,' please note that Abbott put this offer forward in context of blackmail. What I mean by this is that Abbott would only re-register Aluvia IF Thailand withdrew their LEGAL compulsory license.

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