October 24, 2001

CIPRO

U.S. Says Bayer Will Cut Cost of Its Anthrax Drug

By KEITH BRADSHER with EDMUND L. ANDREWS

WASHINGTON, Oct. 23 — The Bush administration said tonight that it had won a major price concession from Bayer
A.G. (news/quote) for its anthrax medicine, Cipro, after the administration threatened to buy generic alternatives instead.

Kevin W. Keane, a spokesman for the Department of Health and Human Services, said tonight that the government had
reached an agreement in principle with Bayer to buy the medicine for less than $1 a tablet. The government is amassing a
stockpile of Cipro and other drugs that could be used to treat 12 million Americans for anthrax, and Bayer had planned to
charge $1.83 a tablet.

Bayer and the government reached the deal after Tommy G. Thompson, the secretary of health and human services, publicly
demanded that the company match prices charged by manufacturers of generic alternatives.

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.

Bayer offered early this afternoon to sell the medicine for $1.75 to $1.83 a tablet, Mr. Thompson said, adding that he rejected
the bid.

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. Helge H.
Wehmeier, the chief executive and president of Bayer's American operations, cheerfully walked into the headquarters of the
Department of Health and Human Services early this 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.

Bayer confirmed that it had reached an agreement with the government but refused to discuss the price.

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 today, questioning whether Bayer had been playing a "shell game" by moving supplies
among various stockpiles.

Bayer repeated today that it planned to triple its production of Cipro over the next three months from about 60 million tablets
to 200 million tablets. The company agreed today to sell 100 million of these tablets to the United States government for its
stockpile. This means Bayer would have about 40 million tablets for the private market above the amount that it normally
expects to sell. Bayer charges $4.67 a tablet in wholesale transactions with pharmacies, so today's deal with the government
could hurt its overall revenue.

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 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
(news/quote), 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 today's hearing, 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.

Congressional Republicans have traditionally been leery of interfering with patents. But Representative Christopher Shays, the
Connecticut Republican who is the chairman of the House Government Reform subcommittee that held today's hearing, said
that Congress would probably back any request from Mr. Thompson for permission to bypass the patent.

"If the secretary asked for it, it would probably pass," he said.
 

                                       Copyright 2001 The New York Times Company