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On 20th June 2001, senior government
officials from around the world met in Geneva to discuss the vexed question
of the relationship between intellectual property protection and healthcare.
The meeting was called in response to growing concern that attempts to protect
the intellectual property of companies in rich countries might undermine the
health of people in poor countries. The concern arose because of several disputes
relating to the implementation of the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS), which was negotiated as part of the Uruguay
round of trade talks.
All members of the WTO are bound by TRIPS, which creates minimum standards for
patents, copyright and other forms of intellectual property. Crucially, TRIPS
requires that by 1st January 2006 all countries must have in place systems for
patenting products, including pharmaceutical products (see the paper in this
volume by Bibek Debroy for
more detail on the specific requirements).
Pirates and anti-patent activists
Until recently, the patent laws of most poor countries exempted pharmaceutical
products from protection. As a result, producers of generic pharmaceuticals
were able to thrive in such countries by copying drugs developed and patented
elsewhere. Many of those generics producers understandably fear implementation
of TRIPS, as they will no longer be able legitimately to copy on-patent pharmaceuticals
and their profits will likely fall considerably.
Argentina - home to several major generics producers - has already amended its
patent law to comply with TRIPS (though the law was reputedly written by lawyers
working for one of the major local pharmaceutical companies, which had paid
politicians around $30 million for the privilege).
However, India - which is home to some of the world's largest generics producers
- has yet fully to amend its patent laws to comply with TRIPS. Whereas some
Indian pharmaceutical companies - including the largest, Ranbaxy - do invest
in the development of new products (which they patent in the US), many others
do not. Amongst the latter, perhaps the most well known is Cipla, whose charismatic
boss, Yusef Hamied, has spent the past thirty years arguing against the patenting
of pharmaceuticals. The introduction of pharmaceutical product patents in India
would seriously undermine the profits of Cipla and other similar companies.
Meanwhile, the Health Global Access Project (HealthGAP) and allied groups -
including the Consumer Project on Technology (a Ralph Nader organisation), ActUP
New York, the Treatment Access Campaign (a South African AIDS activist group),
Médecins Sans Frontières (MSF), Health Action International, and
Oxfam - have been campaigning to reduce the cost of pharmaceuticals. By focusing
on the emotive problem of AIDS in Africa, HealthGAP has managed to obtain significant
media coverage and thereby ensure that its concerns are taken seriously by policy
makers. Central to the HealthGAP campaign is the assertion that governments
should use whatever means are available to ensure that essential medicines are
supplied cheaply to all. In the context of TRIPS, that means interpreting the
provisions for compulsory licensing very loosely, so that they can be applied
to all drugs on the WHO's list of 'essential medicines'. HealthGAP members see
enhanced protection of product patents on pharmaceuticals as antithetical to
the supply of cheap medicines.
The coincidence in perspective of the generics manufacturers and HealthGAP is
reminiscent of the relationship between the Baptists and the bootleggers in
the southern United States. Baptist ministers object to the sale of alcohol
on Sundays because it reduces the number of people who attend their church services.
Meanwhile, bootleggers object to the legal sale of alcohol because it reduces
the profits they can make from the sale of illicit liquor. But bootleggers realise
that they are not well placed to make the arguments for restricting the sale
of alcohol, so they instead fund the campaigns of the Baptist ministers, who
have more social legitimacy.
Whether any members of HealthGAP and its allies have likewise received direct
financial support from the generics companies is unclear and, as Owen Lippert
points out, may not be relevant.
What is important is that the NGOs who campaign to restrict patent rights and
accuse pharmaceutical companies of putting 'profits before people' give moral
legitimacy to the more dubious interests of the generics manufacturers.
From Geneva to Doha
At the Geneva meeting of the TRIPS Council, officials from 47 countries issued
a joint statement requesting that Ministers attending the forthcoming WTO Conference
in Qatar take steps to ensure that 'the TRIPS Agreement does not in any way
undermine the legitimate right of WTO Members to formulate their own public
health policies and implement them by adopting measures to protect public health'.
On its own this statement is hardly objectionable: of course members of the
WTO must formulate their own health policies. The problem arises when one interprets
the statement as a justification for interfering with the ownership of intellectual
property.
As the authors of the papers in this monograph show, IP protection can be a
powerful force for economic development, enabling technology transfer and foreign
direct investment as well as encouraging local invention. However, if IP rights
are diminished below a certain level, these benefits will be foregone. Crucially,
the authors caution against imposing compulsory licenses on certain kinds of
IP, because this is likely not only to undermine investments in the development
of products based on such IP, but also to discourage foreign investment and
technology transfer more generally.
Institutions and the health of nations
As Martin Krause shows, the health of nations is fundamentally dependent on
the creation and maintenance of stable institutions, especially rights to property,
freedom of contract and transparent government. When the state interferes with
property rights - whether by condemning land or by compulsorily licensing patented
pharmaceuticals - it risks undermining the incentives to make new investments.
The consequence is lower rates of economic growth, which in turn leads to slower
improvements in human health.
Krause describes how Argentina's unstable and corrupt institutions have undermined
a formerly robust economy. As a result, Argentina has been slowly decaying,
its wealth frittered away in bribes instead of being invested in the development
of new products. The consequence for the people of Argentina has been a decline
in relative wealth compared to other economies and a consequent decline in relative
health.
Patents help the poor
Bibek Debroy argues that it is in the best interests of poor countries to comply
with the requirements of TRIPS and to limit the use of compulsory licensing.
Whilst the introduction of product patents may adversely affect some powerful
vested interests (especially generic pharmaceutical manufacturers) and thereby
be costly both economically and politically in the short term, the benefits
in the medium to long term - in terms of increased foreign direct investment,
technology transfer, and local product development - far outweigh these transitional
costs.
Price controls undermine investments
Owen Lippert shows that the World Health Organisation proposal to impose
price controls on pharmaceuticals would be counterproductive. A far better way
of ensuring that pharmaceuticals are supplied to the world's poorest would be
to deregulate the pharmaceutical industry, enhance patent protection for pharmaceuticals,
and enable pharmaceutical companies to price discriminate.
Ending the obsession with AIDS
Roger Bate and Richard Tren offer a critique of the current obsession with HIV/AIDS,
pointing out that globally other diseases are more worthy of attention. Many
of these other diseases, including TB, diarrhoea, malaria and hepatitis, are
not only treatable but also curable. By contrast, at present pharmaceutical
treatments for HIV - whilst making a valuable contribution to improving quality
of life and in some cases reducing the likelihood of transfer from mother to
child - are ultimately not cures.
If the objective of international health policy were to focus on these other
diseases, it would bring a much more immediate improvement to the health of
the world's poor. Meanwhile, if these and other diseases (including AIDS) are
to be eradicated in the longer term, then there must also be a commitment to
enabling companies to profit from the production and sale of pharmaceuticals
and vaccines. This means, at least, ensuring that product patents are enforced
across the world and limiting the extent of compulsory licensing.
Conclusion
Whilst government officials in poor countries may be under pressure to delay
implementation of TRIPS, they should be aware that the short-term advantages
of such a decision come at a long-term cost. In particular their countries are
likely to experience lower levels of foreign investment, slower technology transfer,
less local investment in research and development and delays in the development
of drugs for the diseases that most adversely affect their people.
Poor countries will not eradicate diseases by compulsory licensing certain pharmaceuticals.
In fact the opposite is more likely because of the negative signal that such
a decision would send to companies contemplating investment in knowledge-based
industries. It would be a tragedy if long-term economic development and consequent
improvements in the health of the poor were to be undermined by short-sighted
policies aimed at placating narrow vested interests.
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The author
Julian Morris (julian@policynetwork.net)
is Co-Director of International Policy Network and a Research Fellow at the
Institute of Economic Affairs in London. A graduate in economics from Edinburgh
University, he holds Masters degrees from University College London and Cambridge
University, as well as a graduate diploma in law from Westminster University.