Four years ago, almost to the day, we had a dustup with Bayer over our too-small ciprofloxacin stockpile.  The mail-borne anthrax attacks on the Senate, NBC News, and elsewhere drove the surge for more cipro.  This past Friday, stories by both the Associated Press and the Financial Times show that a similar, far graver donnybrook may be upon us ... this time, over Roche's exclusive license to make tamiflu (i.e., oseltamivir), a therapy that may help fight avian flu.  Stephen Gordon urges the U.S. government to push forward to make tamiflu now, and pay Roche later.  Tyler Cowen urges a very different approach, focused on inducing Roche to act much faster to boost tamiflu output.  Neither, however, mentions the cipro flap of four years ago.  The deal we struck with Bayer for our cipro stockpile makes a helpful point for today.

Cowen quite rightly warns against expropriating Roche's tamiflu production rights, and the premium those rights bring.  He focuses on dynamic efficiency:  "If we confiscate property rights this time around, there won't be a Tamiflu, or its equivalent, next time."

Respecting Roche's property rights does not, however, entail paying whatever price Roche demands, no matter how high.  A credible threat to trigger our compulsory license rights under TRIPS provides us with important bargaining leverage, and using it will not, I think, prevent there being a tamiflu, or its equivalent, next time.

With cipro, we bargained hard with Bayer and extracted a 46% discount, from $1.77 to $0.95 per pill.  Today, Roche sells tamiflu in the U.S. for $60 per treatment course.  My guess is that we can get a deep discount and still provide Roche a healthy return, so that it (and others) will continue to develop powerful antivirals and other drugs.  If we need to rattle the expropriation saber in our talks with Roche, so be it.

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