Administration Announces
Deal to Purchase Cipro
at Discounted Price
By: Keith Bradsher with Edmund L.Andrews
New York Times, October 24, 2001
WASHINGTON, Oct. 24 — The Bush administration said
today that it reached an agreement with Bayer A.G. to buy Cipro, the
antibiotic considered most effective in treating anthrax, at a discounted
price.
The Department of Health and Human Services and Bayer
said the federal government would pay 95 cents a tablet for Cipro, or $95
million for an initial order of 100 million tablets. This compares with a
previous price of $1.77 paid by the government, as negotiated by the
Centers for Disease Control and Prevention and including a bulk discount.
The company said it had agreed to supply the federal
government with up to 300 million 500-milligram tablets of Cipro, and the
government said additional purchases would be increasingly less expensive.
A second order of 100 million tablets would cost $85 million, or 85 cents
a tablet, and a third order would cost $75 million, or 75 cents a tablet.
Bayer also said it would rotate the government's inventory to ensure a
fresh supply. That agreement, the government said, "adds an
additional value of 30 percent."
The rotation would ensure that none of the tablets
grew closer than 6 months to their expiration date, said Campbell Gardett,
a spokesman for the Department of Health and Human Services.
The government is amassing a stockpile of Cipro and
other drugs that could be used to treat up to 12 million Americans for
anthrax. Cipro, which has come into demand as the anthrax scare has
spread, would represent 10 percent of the government's drug stockpile, the
government said. The nation's emergency reserve, the National
Pharmaceutical Stockpile, already has 18.6 million doses of Cipro on hand,
which could treat two million people, in combination with other drugs, the
government said.
The government keeps eight 50-ton packages of drugs
at points around the country, spread out to allow delivery to any spot in
the 48 contiguous states within 12 hours. If the deal is finalized, the
government would take delivery of enough tablets to stock four new
packages, but Bayer would keep the rest of the drugs, Mr. Gardett said.
Congress must approve the president's proposal for
money to buy drugs before the agency can pay Bayer. As it builds the
stockpile, the government again emphasized that people should not hoard
Cipro.
"This agreement means that a much larger supply
of this important pharmaceutical product will be available if
needed," Tommy G. Thompson, the secretary of health and human
services, said in a statement.
Bayer and the government reached the deal after Mr.
Thompson publicly demanded that the company match prices charged by
manufacturers of generic alternatives.
Today, Helge H. Wehmeier, president and chief
executive of Bayer, said in a statement, "`Bayer is fully committed
to supporting America in its war on bioterrorism."
Bayer also said today that it would supply 100
million Cipro tablets "for distribution to U.S.-based pharmacies and
hospitals," but it was unclear to whom those tablets would be
supplied or how that action fit into the government's purchase plan. A
Bayer spokesman did not return a call seeking clarification.
The administration's demands that Bayer cut its price
represented a nearly complete reversal of its position last week, when Mr.
Thompson was still emphasizing his desire to safeguard the patent system.
A central principle of the patent system is that a patent holder can
choose whether to sell a patented product and for how much; pharmaceutical
companies have warned that government efforts to set drug prices could
discourage them from spending the money to develop new drugs.
The government can override a patent it has issued
and order drugs from a generic company. Canada had taken that step with
Cipro, and Senator Charles E. Schumer, Democrat of New York, had urged Mr.
Thompson to do the same. Mr. Thompson said publicly that he would need
more authority to override the patent but never used such action as a
bargaining chip with Bayer, Mr. Gardett said.
On Tuesday, Bayer offered to sell the medicine for
$1.75 to $1.83 a tablet, Mr. Thompson said, adding that he rejected the
bid. Bayer normally charges $4.67 a tablet in wholesale transactions with
pharmacies.
Mr. Thompson insisted that the administration was
interested only in a lower price for the medicine and was not concerned
about Bayer's ability to deliver enough Cipro.
Bayer officials appeared to have been caught off
guard by the administration's sudden demand for lower prices. Mr. Wehmeier,
the chief executive and president of Bayer's American operations,
cheerfully walked into the headquarters of the Department of Health and
Human Services on Tuesday afternoon and predicted that he would need only
a brief visit to the department to settle matters. But he and his aides
ended up staying into the evening.
Mr. Thompson negotiated a reduced price a day after
Canada struck a deal with Bayer to buy a million tablets for $1.30 apiece.
The Canadian health ministry had overridden Bayer's patent and ordered a
generic version of Cipro from a Canadian drug maker.
Bayer contended that it had a stockpile of one
million tablets ready to sell the government. But Allan Rock, the Canadian
health minister, criticized the company Tuesday, questioning whether Bayer
had been playing a "shell game" by moving supplies among various
stockpiles.
Bayer officials say that about two-thirds of its
Cipro sales are in the United States under normal conditions, but they
have not said how sales are likely to be divided up now among countries.
Federal health officials recommend that people
exposed to anthrax take two 500-milligram tablets of Cipro a day for five
days and then switch to certain generic antibiotics for another 55 days.
In the days after the first recent anthrax case was diagnosed in Florida,
many private doctors initially prescribed 60 days' worth of Cipro for
people who demanded the medicine, Bayer said.
The price Bayer is charging the government is close
to what generic drug makers would charge. Barr Laboratories, a company
already licensed by the federal government to produce a generic version of
Cipro when Bayer's patent expires in 2003, said that it could be making 30
million to 40 million tablets a month within six weeks if it received a
large government order. And Bruce L. Downey, the chairman and chief
executive of Barr, said his company could sell generic Cipro for less than
$1 a tablet if it did not have to pay royalties to Bayer.
Mr. Thompson said that the tablets now being
manufactured by Bayer would be enough to protect 10 million Americans, and
would add to a government stockpile already adequate to treat 2 million
Americans. But Representative Bernard Sanders, a Vermont independent who
favors a much larger government role in the nation's health system and who
led criticisms of Mr. Thompson at a congressional hearing on Tuesday, said
this might not be adequate if anthrax were sprayed in large quantities on
major metropolitan areas.
"If an aerosol was dropped on our three largest
cities, you would have more than 12 million people," he said.
Other antibiotics, like penicillin, have proved
effective against anthrax and generic versions of these antibiotics are
available in abundant quantities, he said.
In a news conference today, Ari Fleischer, the White
House press secretary, said law enforcement agencies do not know the
source of the anthrax mailings.
"People should feel safe opening their
mail," Mr. Fleischer said. "People should also be alert."
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