Roche Group

In a recent meeting of regional health ministers, Dr. Francisco Duque III, Secretary of the Philippines Department of Health, accused Roche of "monopolizing" the production and distribution of the drug known as Oseltamivir (brand name Tamiflu). Oseltamivir is considered to be the primary antiviral drug used to combat avian influenza, commonly known as the bird flu. Roche is the only drug company authorized to manufacture the drug, which was discovered by Gilead Sciences. Roche purchased the rights to the drug in 1996 and in 2005 settled a royalty dispute, agreeing to pay Gilead tiered royalties of 14-22% of annual net sales.

In 2001, sales of Tamiflu, an anti-viral intended to alleviate the flu, were $76 million. Then along came avian influenza, (bird flu). There is no available vaccine for bird flu, and Tamiflu appears to be the best available pharmaceutical defense for those exposed to the disease.

For now, avian flu is not spread from human to human, but many public health experts believe that an outbreak among humans is almost inevitable. More than 150 people have been infected with bird flu since 2003, when the first bird-to-human transmission was recorded, and more than half of those infected have died.

In the United States, the Centers for Disease Control estimated that, a “‘medium-level’ pandemic could cause 89,000 to 207,000 deaths, 314,000 and 734,000 hospitalizations, 18 to 42 million outpatient visits, and another 20 to 47 million people being sick. Between 15 percent and 35 percent of the U.S. population could be affected by an influenza pandemic, and the economic impact could range between $71.3 and $166.5 billion.” The illness and death toll would be much worse in developing countries.

The threat translates into a windfall for Roche. 2005 sales of Tamiflu were expected to top $1 billion. The Swiss drugmaker's Tamiflu revenues in 2006 were 1.8 billion Swiss francs (well over $1.3 billion). Investors predicted that sales would subside in 2007 to 0.8 billion to 1.2 billion Swiss francs ($640-960 million).

Given the public health urgency of stockpiling the drug, public health activists say Roche should have licensed other companies to manufacture it, conditioned on payment of a reasonable royalty. Instead, it announced it would not license others to produce it, claiming that the manufacturing process was extremely complicated and dangerous, and that the key ingredient to make the drug was in short supply.

These claims deterred officials at the World Health Organization from pushing for compulsory licenses enabling competitors to manufacture Tamiflu. (“There will be no way in the next two years a company would be able to produce generic Tamiflu,” the head of WHO’s influenza program said on October 6, 2005.)

Despite claiming that the drug was too complicated for others to make, the New York Times reported on October 14, 2005 that the Indian drug maker Cipla had reverse-engineered the drug two weeks earlier, and would have small commercial quantities available by early 2006. Following Cipla’s announcement, many other firms soon said they could produce the drug as well.

Taiwan’s National Health Research Institutes announced it had figured out how to synthesize Tamiflu in September — in 18 days. In Thailand, the Government Pharmaceutical Organization announced in November that it had capacity to manufacture 1 million Tamiflu tablets in 10 days.

Roche also claimed that limited supplies of star anise (a chinese spice containing shikimic acid) put limits on how much Tamiflu could be made, but a Michigan State University professor who developed a technique to make shikimic acid without star anise said Roche had been using the technique under license for years.

With its posture of “fully intend[ing] to remain the sole manufacturer of Tamiflu” no longer tenable, Roche ultimately announced it would license other companies to make the drug.

“There are too many potential suppliers to undertake individual negotiations with each company," James Love, director of the Washington, DC-based Consumer Project on Technology told Multinational Monitor. "Roche needs to simply identify the relevant terms it will impose on generic suppliers and offer open licenses to anyone who can comply.”

Leader in the Vitamin Cartel

According to Multinational Monitor Roche was one of eight companies fined a total of $755.1 million by the European Commission for participating in Market-sharing and price-fixing cartels affecting vitamin products during the 1990s.

Competition Commissioner Mario Monti told MM that it was the “most damaging series of cartels the Commission has ever investigated" due to the sheer range of vitamins covered.

As an instigator who participated in all the cartels, Swiss-based Hoffman-La Roche was given the highest cumulative fine of $462 million.