By Ben Hirschler

October 20, 2005

LONDON - Drug industry executives are working overtime to prevent what could be a positive news story on bird flu from turning into a public relations disaster.

In contrast to previous flu pandemics in 1918, 1957 and 1968, the world now has an armoury of antiviral drugs to help contain an outbreak, if the H5N1 virus circulating in birds mutates and starts to spread easily between people.

Yet Switzerland's Roche Holding, which makes the best of the products, Tamiflu, finds itself on the defensive as critics demand it allow production of generic versions, in a row echoing past patent controversies over AIDS.

"Patents will not stand in the way of producing the drug for mankind," the company's chief executive, Franz Humer, insisted in an interview with Reuters on Thursday.

But just how far his company will go in issuing licences to generic producers is not yet clear.

Roche says it can satisfy current levels of demand for a normal flu season and deliver on stockpiling orders it has received from governments around the world.

That is not good enough for the likes of U.S. Senator Charles Schumer, who called this week for the Swiss group to license production of Tamiflu to five U.S. drug companies within the next 30 days.

The World Health Organisation, meanwhile, says there are not nearly enough supplies of Tamiflu and other antivirals, such as GlaxoSmithKline's less popular inhaled drug Relenza.

The drugs, while not a cure, reduce the severity of influenza and may slow the spread of a pandemic, which experts fear could kill millions.

Roche and the broader pharmaceuticals industry need to get the balance right between ensuring access to potentially life-saving treatments and protecting intellectual property rights that are essential for innovation.

Under World Trade Organisation rules, governments can issue so-called compulsory licences, allowing others to produce a patented product without consent of a foreign patent owner.

Normally, there must be an attempt to negotiate a voluntary licence but in a national emergency that step can be bypassed in order to save time, though the patent holder would still be entitled to a payment, according to the WTO secretariat.

Feeling the heat

James Love, director of the Consumer Project on Technology, a U.S. lobby group, believes every government that does not have sufficient stockpiles on Tamiflu should now be issuing compulsory licences.

"Roche is clearly feeling the heat, but also falling well short of the measures that would best protect the public health," he said in a statement.

The U.S. government came close to over-riding Bayer's patents on Cipro in 2001 during the scare over anthrax in the postal system before deciding it was not necessary.

For drug companies -- already suffering from a rock-bottom reputation in the wake of recent scandals over the safety of Vioxx and other top-selling drugs -- the Tamiflu controversy is worryingly reminiscent of the furore over AIDS treatments.

The industry famously mishandled an AIDS dispute five years ago, by contesting a South African law to loosen patent restrictions and suing Nelson Mandela's government.

The experience still haunts "big pharma" and Kofi Annan, the secretary general of the United Nations, warned earlier this month he did not want to see intellectual property obstructing the supply of flu drugs to the poor in the same way.

This time round, the stakes could be even higher, with pressure on patents potentially coming not only from developing countries but also rich nations worried about drug supplies.

Roche and the rest of the industry have a challenge to navigate this controversy successfully.

"Companies are very aware of the AIDS experience and the impact that had on their reputation. Have they learnt the lesson? It is difficult to speculate on that before we see what actually happens in practice," said Simon Friend, global pharmaceuticals practice leader at PricewaterhouseCoopers.