How to Combat Avian Flu

Tamiflu, a product produced by the Swiss pharmaceutical company Roche is effective in fighting avian flu.  But with incentives as they are, Roche cannot (or will not) supply the US market for over 1 year.  Since Roche owns the patent on Tamiflu, how can the US obtain Tamiflu to supply the market this year?  One way would be to ignore the patent and produce a generic form for sale in the US market. 

Whatever the legal obstacles, we should begin.  Yesterday the Indian drug company Cipla announced they are going to do exactly that. They will make the drug now and fight the civil battle with Roche later. It is the right thing for India.

It is important to our economy that America leads the world in respect for intellectual property. Therefore, efforts should be made to secure permission from Roche. But, if permission is not forthcoming, we should make the drug anyway and compensate Roche later. This is a matter of national security.

The problem with this is that it perverts incentives to develop and produce new medicines in the future.  Patents give the holder the exclusive right to sell a particular product, essentially giving the holder a monopoly in that market should it choose to keep the patent.  But if the government looks the other way for Tamiflu, that tells future patent seekers that a patent may be worthless even if granted.

Tyler Cowen at Marginal Revolution has another idea:

I suggest a different approach.  Let's offer Roche a large prize for speeding up the construction of the U.S. plant.  This can include legal and regulatory waivers (Bush already has suggested this idea).  We also make it clear upfront that if a pandemic comes, the U.S. government will purchase Tamiflu doses at a relatively high price.  This latter round of payments can be made upfront, with a refund to the government if no pandemic arrives.  Ex post, the government distributes the doses for free, with medical workers and key individuals in the supply chain (food, transportation, Typepad) given priority.

The idea is not only to obtain more Tamiflu in the near future but to keep property rights for patents in tact for the future.  While we want more of some medicine today, we don't want to sacrifice the future.

Update:  Kip Esquire notes:

I only semi-seriously commented in a previous post that concern (panic?) over a possible avian flu pandemic could result in the seizing of patents for flu-related vaccines and antivirals.

Now I'm deadly serious:

Sen. Chuck Schumer yesterday blasted a major international drug company for "putting profits ahead of world safety" -- demanding it suspend its patent on a drug that has proved successful in fighting deadly bird flu.
...
The senator wants Roche to temporarily suspend its patent on Tamiflu -- since it cannot keep up with world demand -- and license generic drugmakers to mass-produce it.

He gave the company one month to comply, threatening to change the law to give the federal government special powers over pharmaceutical firms in times of world health emergencies.

... In any case, here's the moral of the story: Spend billions and billions of dollars developing the only even partially effective anti-flu treatment, and have it -- or at least the well-deserved profits from it -- stolen by government thugs in the name of the "greater good." And then be expected to do the exact same thing tomorrow.

The very reason we had a flu vaccine crisis last year was because government made it impossible for companies to manufacture the vaccine profitably. Now they want to do the exact same thing with Tamiflu. Just for the sake of grabbing a headline.

Why are profits such a dirty word?  I think it's because the effectiveness of the profit motive is not well-understood and why that is the case is another question altogether.  Taking the profit potential out of drug development is one surefire way to make sure that we will have to go into crisis mode everytime something like the bird flu flies around.