This paper is concerned with the impacts of strict patents in the pharmaceutical industry, focusing on the Trade Related Aspects of Intellectual Property Rights (TRIPs) Agreement. It discusses the historical and current policy context, to better understand how strict patents affect the availability of essential drugs in developing countries.
The research shows that the pharmaceutical industry prioritises profit above health. Strict patents reduce the availability and affordability of new essential drugs in developing countries, and thereby have a negative impact on the health of the world’s poor. Larger pharmaceutical companies benefit more than smaller companies because they have a monopoly in the industry. They invest more in research and development and, linked to economies of scale, are better positioned to exploit markets for new drugs.
The example of India highlights the importance of generic production and essential drugs in developing countries. It shows that while TRIPs promotes economic growth of the industry and encourages investment in research and development of new drugs, it increases the prices of new essential drugs, thereby isolating benefits from the majority poor populations in developing countries.
The paper suggests that based on historical and current trade policy, developed countries have an ethical obligation to allow poorer countries to develop infrastructure for their pharmaceutical industry, a responsibility not being fulfilled. It suggests TRIPs be revised under a more ethical framework. This includes increasing public funding of research and development, shortening the length of patents and allowing developing countries to generically produce essential drugs.
The paper highlights the interconnectedness of social, economic and political factors that could increase the availability of essential drugs in developing countries. It highlights the importance of better understanding the issues surrounding strict patents, and why the scientific community is critical to this process, in terms raising awareness and collaborating with independent organisations and concerned citizens to ultimately press governments for change at the national and international level.
Table of Contents
1.1 What are Patent Laws?
1.2 What is TRIPs?
1.3 Focus and Structure of the Paper
2. Pharmaceutical Industry for Profit or for Improving Health?
2.1 Scale of Profits
2.2 Investment Priorities
3. Essential Drugs and Generic Production
4. Impacts of TRIPs
4.1 Main advantages
4.2 Main disadvantages
4.3 The Doha Agreement and Compulsory Licensing
‘As the ancient scourge of polio was rolled back by his vaccine 50 years ago, Jonas Salk, the inventor of the polio vaccine was asked why he never took a patent out on the medicine, a patent that would have made him wildly rich. "There is no patent," he replied … "Could you patent the sun?"’ (Salon.com magazine 2001).
This paper explores the impacts of pharmaceutical patents on drug availability in the third world, focusing on the impacts of the Trade Related Aspects of Intellectual Property Rights (TRIPs) Agreement. It highlights the value of essential drugs and generic production in developing countries, using India as a case study. It also explores alternatives to TRIPs and the role of the scientific community.
1.1 What are patent laws?
A patent can be defined as ‘a monopoly right granted to person who has invented a new and useful article, an improvement of an existing article or a new process of making an article’. It consists of an exclusive right to manufacture the new invented article, or manufacture an article according to the invented process for a limited period. During the term of patent, the owner of the patent, i.e. the patentee can prevent any other person from using the potential invention .
Figure 1: Brief History of Patent Law
The timeline below illustrates the brief recent history of patents in the world .
Patent statutes introduced in most European countries
Paris Convention for the Protection of Industrial Property – cornerstone of the modern international patent system.
1947 International Patent Institute (IIB) established at the Hague
Patent Co-operation Treaty signed in Washington, D.C.
International Patent Institute integrated into the European Patent Office (EPO)
Bayh-Dole Act passed-granted permission to U.S. universities to license and profit from federally sponsored research*
International Patent Documentation Centre (INPADOC) integrated into the EPO
In the pharmaceutical industry patents have a straightforward objective. They provide a strong incentive for companies to invest in the research and development of new drugs, knowing that they will be able to recuperate costs and, subsequently, profit from the new drug. However, patents enable parent companies to control the price and availability of new drugs. There is no competition from other companies to produce the drug, which would usually lower the price. Thus, increasing the length of patents can reduce the availability of new essential new drugs in developing countries, with knock on health problems.
Essential drugs can be broadly defined as those that satisfy the health care needs of the majority of the population. They should, therefore, ideally be available at all times in adequate amounts; in the appropriate dosage forms; at reasonable (affordable) price; and, meeting the criteria of quality, safety and efficacy (New Strait Times 1998).
Under the term of a patent, drugs, essential or non-essential, can only be produced by the parent company. This means that there is no competition from other companies to produce the drug, and the parent company can charge a high price for the drug, effectively making the drug unavailable for poorer people.
New drugs tend to be more available to developed countries, because people are more affluent and can afford higher prices. For this reason, pharmaceutical companies tend to market their drugs at developed countries. Overall, developed countries benefit more from new technology and advances in science because their governments, companies, and people can afford to buy into the technology.
The World Trade Organisation’s (WTO) Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, which extends the length of patents, enables companies to significantly increase their profits and increase the technology gap between developed and developing countries.
1.2 What is TRIPs?
The Trade Related Aspects of Intellectual Property Rights (TRIPs) was added to the General Agreement on Tariffs and Trade (GATT) at the end of the Uruguay Round of trade negotiations in 1994. It came into full force in January 2005, and its inclusion by the World Trade Organisation (WTO) was the ‘culmination of a program of intense lobbying’ by the United States, supported by the EU, Japan and other developed countries .
The United States strategy of linking trade policy to intellectual property standards can be traced to senior management at Pfizer (a large United States pharmaceutical firm) in the early 1980s. Pfizer mobilised corporations and made maximising intellectual property privileges the number one priority of United States trade policy .
According to the WTO, ‘TRIPs is an attempt to strike a balance between the long term social objective of providing incentives for future inventions and creation, and the short term objective of allowing people to use existing inventions and creations’ .
The following requirements of TRIPs all have a bearing on the pharmaceutical use of patents .
? Copyright must be granted automatically, and not based upon any "formality", such as registrations or systems of renewal.
? National exceptions to copyright (such as "fair use" in the United States) must be tightly constrained.
? Patents must be granted in all "fields of technology" (regardless of whether it is in the public interest to do so).
? Exceptions to patent law must be limited almost as strictly as those to copyright law. In each state, intellectual property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPs signatories (this is called "national treatment"). TRIPs also has a most favoured nation clause.
? Patents in the pharmaceutical industry will apply for 20 years, instead of 10 to 15 years.
Some developing countries began to grant their own patent protection in the late 1980s, but TRIPs is a compulsory requirement for any country who wants to be a member of the World Trade Centre, and with that memberchip access to international markets and trade relationships. Countries which do not adopt TRIPs can be disciplined through the WTO's dispute settlement mechanism, which is capable of authorising trade sanctions against dissident states . Therefore, the economic and poltical threats, which could cripple a poor economy, effectively forced developing countries to ratify the agreement.
The TRIPs agreement makes it easier to obtain and enforce patents. It increases the length of pharmaceutical patents, from 10 to 15 years to 20 years, which encourages companies to invest more in research and development and promotes economic growth. However, it favours developed countries, which have the capacity to enforce their rights globally, and create more exclusive trade options under the Intellectual Property Rights (IPRs). Developed countries have more pharmaceutical infrastructure and companies that are used to using patents to make profit.
1.3 Focus and structure of this paper
Chapter 1 introduced the main contentions of using strict patents in the pharmaceutical industry. It explained how patents work, and the main changes that TRIPs will make to the pharmaceutical industry.
Chapter 2 shows the monopoly of a handful of large pharmaceutical companies in the pharmaceutical industry. It provides a sense of the scale of the profits made by these companies, contrasting the investment priorities and types of drugs produced with those that are needed in developing countries. The Chapter debates whether the industry is for profit or health, briefly highlighting how companies make false claims through advertising in developing countries.
Chapter 3 introduces the idea of essential drugs and generic production, exploring the benefits with a case study of India. Chapter 4 shows how TRIPs will restrict generic production of essential drugs, and the impacts this will have on the majority poor populations in developing countries. The conclusion, Chapter 5, suggests how TRIPs could be revised under a more ethical framework, exploring the historical and current drug policy context, with particular emphasis on the role of scientists.
2. PHARMACEUTICAL INDUSTRY FOR PROFIT OR HEALTH?
In an attempt to understand how pharmaceutical companies control the availability of essential drugs, and use patents to make substantial profits, this chapter debates whether the pharmaceutical industry is for profit or health. It looks at the scale of profits made by the pharmaceutical industry and their investment priorities, also challenging whether ‘diffusion’ of biotechnology works to provide essential drugs to developing countries.
2.1 Scale of profits
There is a very familiar trend in the international pharmaceutical industry. A handful of multinational companies, originating from developed countries, have a great deal of economic power, which gives them control over drug availability and health. They also lobby governments to make trade policy which suits their profit making agenda. In 1996 the first ten multinational pharmaceutical companies accounted for approximately 36 per cent of the world pharmaceutical sales of US$ 251 billion .
Table 1: The World’s Top Ten Pharmaceutical Companies in 2003
Company Pharma Profit ($million) Pharma Sales ($ million) Pharma Operational Profit Margin
Pfizer 12,920.0 28,288.0 45.7%
Merck & Co. 10,213.6 21,631.0 47.2%
GlaxoSmithKline 7,598.2 26,979.0 28.2%
Johnson & Johnson 5,787.0 17,151.0 33.7%
AstraZeneca 4,006.0 17,841.0 22.5%
Novartis 3,857.3 13,497.4 28.6%
Wyeth 3,505.5 12,386.6 28.3%
Aventis 2,969.6 15,705.4 18.9%
Abbott 2,739.0 9,304.0 29.4%
Takeda 2,446.6 6,838.3 35.8%
Group Subtotal 56,042.9 169,621.8
Source: Adapted from Scrip Report 2003
The pharmaceutical sector racks up the largest legal profits of any industry, with an average 18.6 % return on revenues in 2001 (Resnik 2001).
However, Table 1 shows that the top ten companies achieved a much higher average profit margin of 31.8% in 2003. Thy have a monopoly over the industry. Linked to economies of scale, larger companies can exploit larger market penetration to increase their profits. For example, Pfizer and Merck & CO, two out of the top three pharmaceutical companies in 2003 according to gross sales, had a profit margin of 45.7% and 47.2% respectively. This was much higher than the average profit margin of the top ten companies (31.8%), which illustrates the relationship between economic power and power of market exploitation.
The pharmacetical industry justifies their high profits with the argument that a great deal of time and money is invested in the research and development of new drugs. In 1998, developed countries spent US$520 billion on research and development, more than the total economic output of the world's poorest 30 countries. In 2003, it was estimated that the average cost of producing a new chemical compound is around US$ 200 million . Thus, the industry is keen to protect their investments and subsequently reward their efforts by making a great deal of profit. However, there are ethical issues as to whether the scale of the profit can be justified, given the healthcare problems that exist in developing countries resulting from the unavailability of essential drugs.
Large pharmaceutical companies maintain their monopoly by investing great sums in legalities to lobby governments into protecting the industry, by making strict patent law. ‘The combined worth of the world's top five drug companies is twice the combined GDP of all sub-Saharan Africa and their influence on the rules of world trade is many times stronger because they can bring their wealth to bear directly on the levers of western power’ (Borger 2001).
One of the leading US biotechnological companies, Genentech, has four times as many lawsuits to protect its patents as it has products (Fowler 1996). At least one company has been created in the US whose ‘main business,’ according to the Wall Street Journal, ‘is buying up broad patents and then sueing other companies for alleged infringements’ (Fowler, 1996).
Thus, there is also the issue that investing so much money and time in litigtion is highly unproductive, when this money could be better spent on research and development of new drugs, and subsidising the cost of essential drugs in developing countries.
2.2 Investment priorities
The world market for pharmaceuticals shows a clear division: non essential drugs are produced and targeted at developed countries promising high profits, while developing countries are still in need of basic healthcare and essential drugs.
Of the 1223 new drugs marketed between 1975 and 1996, only 13 were developed to treat tropical diseases - and only four were directly the product of pharmaceutical industry research. In recent years, drug companies have produced thousands of new compounds but less than 1% are for tropical diseases .
In 1998, global spending on health research was US$70 billion , but 90% of the money spent on health research and development focuses on medical conditions responsible for only 10% of the world’s burden of diseases (Benatar 2000). Only US$300 million was dedicated to research for vaccines for HIV/AIDS and only US$100 million to malaria research, diseases with the highest mortality and morbidity rates in the world, and devastating in developing countries.
‘It would be more profitable to develop a drug designed to enhance sexual performance for Anglo-American males than to develop a medicine designed to treat or prevent malaria’ (Resnik 2001).
There is also the suggestion that pharmaceutical companies focus more effort on a certain drug in developing countries when it is in their research interest; "Of diseases in the Third World, AIDS is getting the most attention and focus. Not coincidentally, it is also one of the few diseases that remain a threat to First World countries" (Censored 2000).
Pharmaceutical companies are able to devote their resources to non-essential drugs targeted at the richer markets of developed countries and at the same time, exploiting the markets in developing countries by influencing the world price for drugs. For example, pharmaceutical companies have long resisted “differential pricing” on their US$12,000-a-year courses of anti-AIDS drugs, which would allow a course to cost less in Cameroon than in Canada . Thus, the effect of purchasing power parity means that the prices are even higher in real terms in developing countries.
In many cases, drug companies will provide drugs to developing countries at cheaper cost as aid. For example, in March 1998 Glaxo Wellcome (UK) announced that it would sell its anti-HIV drug AZT for 70 per cent below the normal price to pregnant women in developing countries . However, drug aid is not always beneficial. Reich et al (1999) found that out of 16,566 drug donations shipped from the US to 129 countries between 1994 and 1997, 10-40% were listed on neither the national essential drug lists nor the WHO model of essential drugs in developing countries. Also, 30% of shipment items had a year or less of shelf life (ibid.).
Advertising and false claims
There is also evidence that companies, in addition to prioritising non-essential drugs for developed countries, exploit markets in developing countries by convincing people that they need non-essential drugs. A survey, in the Annals of Internal Medicine found that ‘62 per cent of the pharmaceutical advertisements in medical journals were either grossly misleading or downright inaccurate' (Madeley 1999).
There has been much criticism of the advertising in developing countries, claiming it is particularly persuasive in nature and that people are misinformed and encouraged to believe wild promises. This illustrates the exploitative nature of the pharmaceutical industry, and the quest for profit at the expense of health.
"In the corporate headquarters of major drug companies, the public relations posters display the image they like to present: of caring companies that bring benefit to humanity, relieving the suffering of the sick. What they don't say, is that, so far, their humanity has not extended beyond the limits of the pockets of the sick" (Hilton 2000).
In summary, the pharmaceutical industry is for profit. A handful of economically powerful companies use economies of scale to exploit the markets of developed and developing countries. As a whole, the pharmaceutical industry is:
? Priortising investment in non-essential comfort-oriented drugs for the wants of the more affluent in developed countries, whilst neglecting the needs for essential drugs for poorer people, particularly in developing countries.
? Investing heavily in litigation and patents to restrict competition from other companies, and enable control over the price and availability of drugs.
? Exploiting people in developing countries, using persuasive advertising to make false claims.
? Motivated by profit, not health.
As Smith (1994) points out, ‘There is a direct conflict between the pursuit of health and the pursuit of wealth.’
Policymakers and representatives of the pharmacetuical industry argue that relevant technology reaches poorer people by means of ‘diffusion.’ This describes the process by which drugs become available to the poor after patents expire, and when competition to make the drugs drives down the prices of the drugs so that poorer people can afford them. However, as agents of disease, including bacteria and viruses, are continually adapting to drugs and developing resistance to them, new drugs are often essential and life saving, which means it is critical they are available very soon after production in developing countries. Patents reduce the availability of new essential drugs, because they increase the time it takes for diffusion to take place, if it happens at all.
The lack of infrastructure in developing countries makes it difficult for essential drugs to reach those who need them, which can increase the time it takes for technology to ‘diffuse’ to the poor, even after patents have expired. For example, oral rehydration therapy, a simple and cheap salt-and-sugar solution, has been mass distributed since the 1980s and has greatly reduced child deaths from diarrhoea, ‘but even though it only costs 10 cents a sachet, it is still unavailable for 38% of diarrhoea cases in Third World countries.’ Another example, Penicillin, discovered in 1928 and first marketed in 1943, is unavailable to 2 billion people. (Healey 2001)
The unavailability of essential drugs therefore extends beyond a lack of access to new drugs designed to treat devastating infectious diseases [essential drugs] (Resnik 2001). 50% of people in developing nations do not have access to even basic medications, such as antibiotics, analgesics, bronchodilators, decongestants, anti-inflammatory agents, anti-coagulants and diuretics (Reich 1979-1981).
In the 1980s structural adjustment programmes were enforced on developing countries by the International Financial Institutions (IFIs), such as the World Bank and International Monetary Fund. These trade liberalisation policies involved the establishment of ‘export-processing’ zones, which offered financial incentives, such as tax concessions, to companies. By favouring privatisation and encouraging multinational companies to move their operations to developing countries, one of the supposed objectives of economic liberalisation was to assist ‘development’ and the transfer of pharmaceutical technology to developing countries.
However, there has been a lack of ‘diffusion’ of knowledge and technology. In fact, it is the lack of technology transfer measures in export-processing zones that attract pharmaceutical multinational companies. With firm control over technology, even when high-tech methods of production are used they can be kept away from the domestic economy. The southern Indian city of Bangalore has, ‘thanks to Western companies' passion for outsourcing, grown into one of the world's premier technology hubs and is the centre of the India's growing IT industry’ (its export revenues rose from US$150 million in 1990 to $4 billion in 1999). However, areas surrounding Bangalore are in fact extremely ‘low-tech’. In Karnataka (also state capital), there were still only 2.73 internet connections per 1000 people in 1999; in even poorer states (like Orissa), that rate dropped to 0.12 connections per 1000 people.
‘As it turned out, there has been virtually no transfer of relevant technology by these companies to developing countries ... in fact, by using the power that control over technology brings, they have eliminated many potential competitors and prevented indigenous pharmaceutical industries from developing to meet the real needs of the people of the third world’ (Kanji et al 1992). Thus, the evidence leads me to personally agree with this line and disagree that diffusion can be relied upon to make essential drugs available at times when they are needed most in developing countries.
Multinationals provide employment in developing countries, it is typically very low paid with little security, and the products (and the techniques and profits) go back to the companies of developed countries. Unfortunately, even though direct foreign investment provides low-paid jobs and does not transfer technology, those jobs are still vital for many that live in poverty and have limited employment options. This highlights why re-regulation of the corporate sector is required so that markets meet certain social criteria. For example, interfering with markets to reduce the price of essential drugs in developing countries.
"Pharmaceuticals, they are a commodity. But they are not just a commodity. There is an ethical side to this because they're a commodity that you may be forced to take to save your life. And that gives them altogether a deeper significance. But they [big pharmaceutical companies] have to realize that they're not just pushing pills, they're pushing life or death. And I believe that they don't always remember that. Indeed I believe that they often forget it completely." (Drummond 2003)
3. GENERIC DRUG INDUSTRIES AND ESSENTIAL DRUGS
In many countries with large poor populations, such as Argentina, China, Egypt and India, national policy enabled a locally financed pharmaceutical industry to develop almost exclusively engaged in manufacturing generic drugs. These industries could ‘copy cat’ certain drugs and in some cases the manufacturing processes of other pharmaceutical companies.
This Chapter illustrates the main benefits to health of generic production in developing countries, in terms of increasing the availability of essential drugs. It uses India as a case study.
In countries with generic drug industries, drug prices are low because the primary national objective is for the government to provide affordable drugs for its people, and develop the industry for economic welfare and greater self-sufficiency. India holds a record, with prices for many drugs 10 to 100 times lower than in developed countries. The introduction of generic antiretroviral drugs by Indian companies reduced the price of these drugs by 97% (Henry et al 2002). Research and development efforts by generic drug industries have also led to the development of vaccines against leprosy and hepatitis B, and anti-cancer drugs .
Multinational companies have less economic control over the market because the domestic drug industry controls the domestic market. Therefore, poorer people are less dependent on multinational companies and the extortionate prices that they can charge for drugs. In addition to lower cost, as will be seen from the case study of India, generic drugs have the advantage of being competitive in quality to those produced by large multinationals, originating from developed countries.
A case study of India
In India, multinationals held only a 20 per cent market share in 2000 : national pharmaceuticals have gained knowledge and capacities in research and development, which has enabled them to replicate manufacturing processes for already known drugs, and develop a bulk drug industry for various chemicals and antibiotics.
India's local drug companies have long benefited from a relaxed patent regime.
History of patent law in India (up until the 1970s)
1856 The Act Vi Of 1856 On Protection Of Inventions Based On The British Patent Law Of
1852 Certain Exclusive Privileges Granted To Inventors Of New Manufacturers For A Period Of 14 Years.
1859 The Act Modified As Act Xv; Patent Monopolies Called Exclusive Privileges (Making. Selling And Using Inventions In India And Authorising Others To Do So For 14 Years From Date Of Filing Specification).
1872 The Patents & Designs Protection Act.
The Protection Of Inventions Act.
Consolidated As The Inventions & Designs Act.
The Indian Patents & Designs Act.
On March 26, 1999 Patents (Amendment) Act, (1999) Came Into Force From 01-01-1995.
The Patents Act (Act 39 Of 1970) Came Into Force On 20th April 1972.
Source: Adapted from http://www.legalserviceindia.com/articles/patents_geographical.htm accessed 10th November 2004
In the past, India honoured patents on manufacturing processes but not patents on products, which allowed generic drug companies to ‘reverse engineer and manufacture drugs’ without paying royalties to the companies who own patents on those drugs (McNeil 2001).
The features of the 1970 Patents Act helped to promote India’s pharmaceutical industry, which specialises in generics. It has enabled considerable technological innovations and development of knowledge, with its provisions enabling the drug industry to grow at a rapid pace. (The Lancet, 2004)
The Indian Pharmaceutical industry is the pre-eminent sector in India, in terms of scientific and technological developments. India ranks among the top 15 drug manufacturing countries in the world. In 2004, the domestic drug industry met approximately ‘70% of India's demand for bulk drugs, drug intermediates, chemicals, pharmaceutical formulations in the form of tablets, capsules and orals’ (Lancet 2004). India’s generic drug industry has enabled a huge number of people to afford essential drugs that would have otherwise been out of reach because of patent induced high prices and unavailability. Generic production therefore promoted self-sufficiency and assisted economic development.
"The Indian firm Cipla's offer to MSF [Médecins sans frontiéres] to provide a cocktail of antiretrovirals for less than $350 a year (compared to the big boys' $10,000) resounded like a thunderbolt. Suddenly, the emergence in the South of very low cost generics producers seems credible” .
4. IMPACTS OF THE TRIPs AGREEMENT
This chapter discusses the impacts of the TRIPs agreement (January 2005) on India’s pharmaceutical industry. It starts by mentioning the pressure and reasoning behind India’s decision to comply with TRIPs, and then examines the positive and negative aspects of the agreement, which might emerge in the next few years.
India amended the law governing patents i.e. Patents Act, 1970 by Patent (Amendment) Act, 2002, on 20th May 2003.
The main features of Patent Act, 2002, were:
? Enlargement of non-patentable inventions
? Twenty year patent term for all patents
? Burden of proof on defendant in case of infringement when a patent is for the process of producing a new product
? Making importation a right of a patentee
This Act prepared India for full TRIPs compliance, and currently, India is adapting to the changes to the pharmaceutical industry under the TRIPs Agreement, which came into force on January 1st 2005.
Indian companies have now lost the opportunity to develop processes for patent protected drugs. This could allow multinational companies to establish a monopoly over the Indian drug market, unless Indian pharmaceutical companies can compete.
Pressure to comply with TRIPs
There was pressure for India to meet TRIPs requirements because India would have otherwise been disciplined by the WTO, and ‘India’s market access rights would have been jeopardised’ along with other benefits (Lancet 2004).
There was intense lobbying, predominantly by the United States pharmaceutical industry, to impose the TRIPs agreement. PhMRA claimed that the US pharmaceutical industry loses US$500 million annually only through a lack of patent protection on drugs in India . The GlaxoSmithKlein CEO Jean-Pierre Garnier described the Indian pharmaceutical industry as price-undercutting "pirates", and said the company "is not doing this to get a Nobel Prize."
In response, Hamied, on behalf of the Indian pharmaceutical firm CIPLA, said "Indeed, we are a commercial company. But I market 400 products in India. If I don't make money on a half-dozen of them, it's no big deal. I don't make any money on the cancer drugs we sell or drugs for thalassemia, a blood disorder that's common in India. We sell these drugs virtually at cost because I don't want to make money off these diseases which cause the whole fabric of society to crumble. India alone will have 35 million HIV cases by 2005, and it's something we can't afford." (Lindsey 2001)
4.1 Main advantages
On the one hand, TRIPs could promote more research and development and stimulate competition to produce new drugs. On the other hand, India will lose its ability to generically produce essential drugs for its majority poor population.
Generic drug production in India has meant that research and development of new drugs has taken a back seat. Indian companies are ‘getting actively engaged in research and development of their own molecules/pharmaceutical products and processes . The Indian government is providing a range of tax concessions designed to encourage research and development, including a 10-year tax holiday on income arising from research and development. (Lancet 2004)
Thus, TRIPs is increasing investment in the research and development of new drugs. It promotes economic growth of the Indian drug industry, because companies now have patent induced control over the price and availability of new drugs. India already has more pharmaceutical products approved by the United States Food and Drug Administration (FDA) than any foreign country, which is helping the industry to obtain and enforce patents. The Indian pharmaceutical industry will be able to increase its contribution to drug discovery and development, which, given the cost-effectiveness of research and development in India, can only increase. (BJU 2003)
‘TRIPs will cement India's position as a global pharmaceutical outsourcing hub and offshore location for research and development and other support services including strategic services in patenting and related matters.’ India is also becoming an attractive location for the outsourcing of patent drafting . In addition to these benefits to the industry as a whole, TRIPs has also imposed higher quality standards for drugs and processing.
Proponents of TRIPs argue that patent induced privatisation of the industry will lead to growth of the domestic industry that will increase the availability of all biotechnology products to poor people i.e. diffusion. However, as mentioned before, patents can reduce the availability of new essential drugs by restricting short term diffusion. Thus, although TRIPs may encourage more research and development of drugs, these drugs will be less available to poorer people who cannot afford them at times when they need them most.
However, there are counter-arguments that TRIPs will not make new drugs unaffordable. For example, Shantha Biotech, which was first to launch the indigenously developed hepatitis-B vaccine in the country in 1997, has secured the World Health Organisation (WHO) certification for its product "Shanvac B" (now marketed at "Hepashield"). Shantha is the only company in India to get this certification for the hepatitis-B vaccine, and it is being provided at a quarter the price of the previously imported vaccine (Jayaraman 2001).
However, despite greater availability of a few specific drugs, linked to some Indian companies obtaining licenses, the price of new drugs over the next few years is likely to be relatively high in terms of what the population is used to and can afford.
4.2 Main Disadvantages
Under TRIPs, there will be more consolidation in the pharmaceutical industry, as larger companies are more capable of using patents to secure higher profits. Linked to economies of scale, these companies will be able to exploit the patent system to out-compete other companies. Multinationals such as GlaxoSmithKline, which already operate in India, will have a particular advantage. Smaller companies will be less capable of buying into the strict patent system. Merely securing a patent from America’s patent office costs at least $4000. Defending it in court can cost millions (Economist 2002).
Although TRIPs does not patent old drugs already on the market, there is still a backlog of products waiting for grant of product patents, some which may already be on the market, as product claim applications have been filed since January 1 1995. Unless Indian companies have stopped manufacturing such drugs completely, a large number of litigation and infringement suits will ensue .
TRIPs restricts India’s generic industry and longer patents provide additional incentive for foreign investment in India. This could actually pose a threat to India’s pharmaceutical companies. At an international level, Indian companies' advantage in cheap vaccines for hepatitis or rabies may be eroded by potential development of cocktail vaccines that promise delivery of multiple vaccines in a single shot (Jayaraman 2003). Although TRIPs encourages growth of the industry and creates some large winners, it creates many losers.
Since the 1970s, India’s poor population has benefited from a range of drugs available at relatively low prices. The industry is efficient at making generic varieties and has a number of different companies able to produce such drugs, which means that new drugs on the market can be imitated both quickly and easily. This provides a means of sharing the benefits of technological advancement in developed countries with developing countries, usually isolated by a gap in technology. According to some reports, India is home to the fastest growing rate of new infections in the world (Hankins 2003). Without the benefits of generic drug production, the population of India could suddenly be faced with a health crisis.
According to a recent Times of India report; the price of cancer drug Gleevac has risen from to Indian Rs120, 000 ($2,590) from its price just a few months ago of Indian Rs4000 ($86.35) – 30 times more, because of TRIPs .
4.3 The Doha Agreement and Compulsory Licensing
TRIPs has a clause that allows governments to override patents and provide essential drugs to the poor in some circumstances. Working with Non Government Organisations (NGOs), Brazil and a group of African countries pressured policymakers to revise TRIPs. The meeting in Doha, November 2001, between the world’s trade ministers attempting to organise a new round of trade negotiations (Health Affairs 2004), led to the Doha "Declaration on the TRIPS Agreement and Public Health." This declaration affirmed that TRIPS "should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all."
‘It affirmed the right of nations to use the exceptions of TRIPS, such as the compulsory licensing provision, to meet public health concerns, specifically stating that "public health crises, including those related to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency" and thus facilitate the right to use compulsory licensing’ (World Trade Organisation Declaration 2001).
‘Governments can issue compulsory licenses to allow other companies to make a patented product or use a patented process under licence without the consent of the patent owner, but only under certain conditions aimed at safeguarding the legitimate interests of the patent holder’ . For example, the Supreme Court of India may interfere to justify the dispensation of drugs at an affordable price on the grounds of concern for public suffering. They can grant a compulsory license for companies to produce a generic drug. If required, the government may also fix the price of these drugs as well as the royalties to be paid to the inventor for the remaining term of patent .
A further 30 August 2003 Amendment to the Doha Agreement enables governments to let their pharmaceuticals generically produce drugs for other countries, as well as their own people, in times of ‘acute suffering.’ Previously, Article 31(f) of the TRIPS Agreement stated that products made under compulsory licensing must be “predominantly for the supply of the domestic market”. (WTO Press Release 2003) This applied directly to countries that could manufacture drugs, limiting the amount they could export. It will now be possible for countries to import cheap generic drugs in times of ‘acute suffering’.
This was regarded as a victory by the developing world and as a defeat by the research-based drug industry.
However, there are serious questions as to whether compulsory licensing can even work. ‘No generic medicines have been manufactured this way in the past decade, treating no patients in any country worldwide’ (Attaran 2003). ‘Threats of compulsory licensing might be useful when rattling sabres with drug companies to lower medicine prices, but only a single (and unusually powerful) developing country, Brazil, has ever succeeded in doing so. As such, compulsory licensing or the threat of it has seldom had any practical effect for public health’ (Attaran 2004).
Nevertheless, the pharmaceutical industry in developed countries has objected, with the United States leading the objections. ‘America's drug industry has fought tooth and nail to impose the narrowest possible interpretation of the Doha declaration, and wants to restrict the deal to drugs to combat HIV/Aids, malaria, TB and a shortlist of other diseases “unique to Africa” .’ This means that the industry is against the use of compulsory licencing, and only prepared to accept its use in Africa, which is very unethical when most developing countries do not have sufficient access to essential drugs. It highlights the ruthlessness of paharnceutical companies, in terms of seeking maximum profit even at the expense of the world’s health.
Compulsory licensing and the amendments to TRIPs are positive in respect to health care in developing countries. The changes suggest that governments do respond to pressure and there has already been some admission on their part that TRIPs could be revised under a more ethical framework. However, even with these amendments, TRIPs does not tackle the root problems of unequal power relations between developed and developing countries, which give rise to the unequal access to pharmaceutical biotechnology.
This chapter argues in favour of alternatives to TRIPs. It starts by summarising the benefit of increased public funding in research and development. It shows the close ties between science, business and government and goes on to explores wider policies, highlighting the ways that the scientific community can promote more ethical drug policy.
If a larger proportion of research and development of new drugs was publicly funded, then this would encourage more investment into the development of essential drugs, which are needed in developing countries.
Data submitted to the Joint Economic Committee of Congress by the National Bureau of Economic Research reveals that public research, not private, led to 15 of the 21 most essential drugs introduced between 1965 and 1992, and other studies in the 1990s suggest that only a minority of important drug discoveries in recent years (estimates range from 17% to 40%) were the result of commercial research (O'Leary 2002). This shows that public funding is paramount to the production of essential drugs, and therefore to health in developing countries. The combined effect of shortening patents and increasing public funding in the pharmaceutical industry would ensure that not only are more essential rugs produced, but that they also reach those who need them.
The next section shows that scientists need to devote more attention to the unethical nature of drug policy and voice concerns to the public. This involves deconstructing a scientific agenda from the economic agenda of government and big business.
Governments, science and big business
Scientists ideally work to discover "truth" and gather knowledge to help people. Research and development, however, tends to be profit-driven, and there are conflicts between seeking scientific advancement and helping people, because helping people is not always profitable. Government policy supports the pharmaceutical industry, as strict patents favour the expansion if the industry and economic growth. Although business and governments are therefore dependent on scientists to design new drugs and technology, their common agenda allows them to exert political and economic control over science. Any social objective to deliver essential drugs to the poor is lost in this agenda. Scientific search for ‘truth’ therefore becomes a quest for profit, because of the vested interests of government and business.
The United States Office of Management and Budget reported that academia, in addition to federal funding, receives millions of dollars for research from donors and the private industry.
“Bioethicists at the University of Toronto take funding from GlaxoSmithKline, Pfizer and Merck to write editorials on bringing biotechnology to the developing world . . . Bioethicists at the University of Pennsylvania take money from Pfizer to write an article explaining why physicians should not accept gifts from companies like Pfizer. (Engler 2004) This shows the irony whereby large companies control information which should criticise their activities.
In the United States, even federal money comes with strings attached. Federally funded experiments and research are subject to massive amounts of bureaucratic regulation and oversight. Members of academia are now increasingly involved in the private sector. ‘This means that, even in basic research, funding is not free from profit motives or federal regulation, and the research is not necessarily a pure drive for more knowledge .’ Thus, it is hard to separate science from the profit motives of business and politics, which share a common agenda. Scientific information can be biased because it is conditioned by this agenda.
‘Today the most powerful players outside government are private corporations. They contribute financially to political parties in the US, Europe and elsewhere and a neo-liberal trade agenda has become the mantra of virtually all elected political parties. The price governments have to pay for this support is to ensure that their electoral platform corresponds quite closely to the agenda of big business.’ (Shutt 2001)
It is unfortunate that science, politics and business are so intertwined that it is difficult for the benefits of biotechnology and knowledge to jump the political and economic hurdles to reach developing countries.
It means that scientists need to be more vigilant about the type of drugs they help to produce, and what they endorse. Moreover, the scientific community need to play a more active role in raising awareness about pharmaceutical issues, so that people become more informed and capable of working with other groups, such as NGOs and members of the scientific community, to press governments for change. Scientists and the public can apply pressure to regulate the corporate sector, by imposing corporate social standards in the trade of drugs, and deconstruct those pressures from big business that controls science and information.
Governments have control over science. They manipulate the science often finding a balance between where public support lies and where the money lies. This has resulted in public mistrust and scepticism in science. In the UK, for example, the public was informed by government that BSE could not be transmitted from cattle to humans, and the government promoted British beef and the industry for around ten years, before it emerged that there was a human form of the disease, variant CJD. Mistrust and scepticism was the result.
Scientific ignorance can also weaken the ties between science and the public. People may ignore the science because it is viewed as obscuring a larger picture (Michael, 1996). Science can be difficult to understand and, as mentioned, communication through the media reflects the agenda of business and government. If people do not trust the scientific media or understand the science of issues, their uncertainty can be compounded by a general mistrust of science and the scientific community. It is also important to consider that people also have different views on issues, which highlights the need for better communication and debate. New abortion procedures to people who are already pro-life are simply ‘more efficient ways to kill unborn babies,’ whereas to pro-choice advocates they are safer, less intrusive ways of protecting the choices and health of mothers .
People need to feel that a scientific organisation has no vested interests. This is why independent organisations for public scientific awareness and education are important to build up this trust. In Britain, this includes COPUS (Committee on Public Understanding of Science) run by the Royal Society. There is also the Wellcome Trust, which informs the public on science policy and practice (as well as contributing to researching social implications of sciences) “The culture of science needs a sea-change, in favour of open and positive communication with the media.’ If these independent scientific institutions, collaborating with NGOs and the scientific community, can succeed in informing and educating people, ‘it will pay for itself many times over in renewed public trust’. (UK Select Committee on Science and Technology 2000)
Agreeing with this line of thinking, if independent scientific organisations can give more attention to health problems in developing countries, then they can raise public awareness about these issues. The potential to change policy rests on a more informed public.
Individual scientists and the scientific community, collaborating with independent organisations, can debate ethical issues and highlight the importance of improving health in developing countries by increasing the availability of essential drugs. “Some of the favourite topics of bioethicists seem trivial compared with the important health issues facing people in the world’s poor countries and in impoverished regions in rich countries” (BMJ 2004). “The risk of dying from maternal causes in sub Saharan Africa is 1 in 16. In Western Europe it is 1 in 4000.” Bioethicists could focus their attention on the morality of a world system that allows “500 000 girls and women [to] die every year - 99% in developing countries - from preventable conditions and injuries related to pregnancy and childbirth.” (Lancet 2004)
It is especially important to make younger people more aware of the issues pertaining to the use of strict patents, in order to produce an informed public in the long term. Thus, there needs to be more attention to such issues in colleges and universities, as part of a curriculum, then younger people could debate for themselves the fairness of TRIPs. Again, a more informed public would be less likely to accept the ‘unfair’ policies enforced by their governments.
Therefore, policy must change. After all, it is the wider policies that enable corporations to exploit poorer people, who cannot afford to buy into technology. Roy Vagelos, the former head of Merck, claims that "'A corporation with stockholders can't stoke up a laboratory that will focus on Third World diseases, because it will go broke' … 'That's a social problem, and industry shouldn't be expected to solve it .' Although biased from an industry viewpoint, he does make the point that companies are by definition profit motivated and that giving companies greater freedom is not in the best interests of health, especially poorer people.
Historical policy context
‘One cannot separate economics, political science, and history. Politics is the control of the economy. History, when accurately and fully recorded, is that story.’ (Smith, 1994). There are wider policies that need to be considered. Patents are a form of imperialism.
In the nineteenth and twentieth centuries rich, powerful states, including Britain and other European countries, exploited third world colonies. Richer states exploited the natural resources and workforce of the colony, and efficient supply chains were constructed for this purpose, based on unequal power relations. Although developing countries gained economic dependence in the 1960s and early 1970s, an economic dependence continued. Developed countries lent large sums of money to developing countries, and these debts became unpayable due to the rise in interest rates. Developing countries, instead of investing in health, still have to repay these debts, and they have become economically dependent on the companies and governments of developed countries, who control trade policy.
Thus, based on a historical trade policy context, governments in developed countries have the responsibility to help developing countries supply drugs to their populations.
‘Enormous agricultural subsidies ($310 billion) in developed countries deny the agrarian populations of poor countries the opportunity to export products and accumulate wealth’ (OECD, Paris 2002). The subsidies alone are roughly equal to the entire gross domestic product (GDP) of sub-Saharan Africa. ‘Redirecting just 1 percent of this government spending to global health would more than double the foreign aid spent to control HIV/AIDS, malaria, and tuberculosis combined.’
President Yoweri Museveni of Uganda opines that giving priority to medicine patents in trade negotiations has been a "red herring" and that "if there were no agricultural subsidies...we [Africans] would earn enough money to buy all the drugs we want” (Wall Street Journal Editorial 2003). Although I think that reducing agricultural subsidies is just one element of improving pharmaceutical infrastructure in developing countries, he makes a valid point that improving the distribution of drugs is linked to redistributing wealth between countries.
Kanji et al (1992) take this further to point out that a country’s pharmaceutical and health policy cannot be isolated from its general development startegy. November et al 1982 elaborates by stating that ‘dependence on products [drugs] and the agents and institutions which make them available, fosters the notion that the solution to illness resides in the purchase and consumption of medications rather than improvements in living condtions’ (November et al 1981).
I agree with this line of reasoning that links the unavailability of essential drugs in developing countries to wider policies, and highlights the need for more sustainable development that takes into account the vulnerability of the poor by imposing strict social criteria in drug policy and trade, rather than strict patents (economic criteria). It should be emphasised that shortening the time length of patents is one important factor among many that could improve the avilability of essential drugs and all round healthcare in developing countries.
Melrose, 1982, says that ‘companies should keep to their declared obligation of making sure that drugs “have full regard to the needs of public health” and demonstrate special social responsibility in poor countries by not advertising non-essential multivitamin tonics, cough and cold preparations and expensive and irrational combination drugs (Melrose 1982).’ Although I agree that corporations need to behave more responsibly, this should be a legal prerequisite rather than an ‘obligation.’
Ironically, there is great potential and ability of the large pharmaceutical firms, which have been so criticised in this text, to develop more essential drugs for the poor. The private sector has a great deal of knowledge and capital, which can be used to produce new essential and non-essential drugs. Thus, although public funding would help to give priority to essential drugs, the private sector should still contribute significantly. This is especially the case in the foreseeable future because the private sector is largely responsible for the production of all new drugs. ‘If Pfizer, Merck, Glaxo-Wellcome, and other pharmaceutical companies do not develop drugs that plague developing nations then …there is a real danger that people in developing nations will become therapeutic orphans’ if the pharmaceutical companies lack the proper incentives to develop drugs for the developing world’ (Reich 1979-1981).
Thus, the final part of the conclusion looks at ways of regulating the corporate sector.
Regulating the corporate sector
Governments can regulate the pharmaceutical industry in two broad ways, either by direct control, usually by making legal requirements, or by creating incentives. A mixture of the two strategies can be effective.
Control involves regulating and monitoring biotechnology companies and pharmaceuticals through the creation of legal requirements. For example, when these organisations develop drugs/ vaccines, governments can mandate them to comply with research and manufacturing standards to ensure products are safe and efficacious . Governments can control drug prices furthermore because they often have authority over the granting and use of patents. For example, in the US, the government has the right to license drugs to other companies if the patentee does not make it available to the public on reasonable price and terms. Such a right is currently focused on drugs that have been developed with public support . It needs to extend to drugs developed with private support.
Although laws are paramount in regulating corporate conduct, there is the issue that corporations have no moral obligations over and above the requirement to comply with the law (Friedman 1970). Governments can, in this regard, create further incentives for these organisations to engage in developing drugs/ vaccines that benefit populations in developing countries. For example, it could create subsidies or offer grants for research in certain areas. The Orphan Drug Act, introduced in the US in 1983, creates tax and marketing incentives for those companies that engage in creating drugs for rare diseases. Also, governments could commit to purchasing future critical drugs/ vaccines in order to minimise the ‘private entity's financial risk’ .
Ideally, TRIPs should be replaced by policy which curtails the power and influence of the private sector, by shortening the time length of patents, allowing generic production in developing countries, and at the same time increasing public funding of research and development.
In summary, making more ‘ethical’ drug policy is dependent on:
? International policies
- removing TRIPs, shortening the length of patents; allowing developing countries to generically produce essential drugs.
- subsidising research and development of essential drugs.
- regulating the corporate sector: ensuring that essential drugs are reasonable priced; ‘a price that allows the company to earn its money but also promotes accessibility and equity’ (Brody 1996) & (Spinello 1992).
? National policies
- providing funding and technical support for NGOs who raise awareness of the issues surrounding the use of strict patents in the pharm,aceutical industry.
- Promoting education in schools; collabortaing with independent scientific organisations to provide information publicly, through the media.
- Setting an example by increasing public funding in research and development; prioritising investments in essential drug production; greater transparency; governments more accountable to the public than companies.
- Campaigning for fairer drug policies at the international level
? Education and public awareness
- Informed people in developed countries, able to raise issues pertaining to the use of strict patents and resist ‘unfair’ policies.
? The role of the scientific community
- a scientific community that focuses more on third world issues and health problems, and raises awareness about the underlying policies that cause an imbalance in wealth and health.
- Independent scientific organisations that can communicate information to the public and collaborate with scientists and NGOs, and raise concerns with business and government.
- campaigning for ‘truth’ and sharing of knowledge, as well as more regulation of the corporate sector, and governments who are more accountable to the public.
This paper highlights the interconnectedness of social, economic and political factors which can improve the availability of essential drugs in developing countries.
To end on a more positive note, pharmaceutical companies have created life-saving drugs which have helped to save millions of lives, but these drugs have tremendous potential to save many more lives and alleviate suffering by helping to curb the incidence of various infectious diseases, which cripple the social and economic fabric of developing countries. The paper also highlights the importance of better understanding the impacts of TRIPs in developed countries, so that governments are pressed to change policies at the national and international level. The role of the scientific community is critical, in terms of having more say and control over drug policy, and helping to increase public awareness about drug policy. Ultimately, a concerted effort between the scientific community, public and NGOs can resist ‘unfair’ drug policy and some of the exploitative practices of pharmaceutical companies.
Attaran, A. (2003) Assessing and Answering Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health: The Case for Greater Flexibility and a Non-Justifiability Solution. Emory International Law Review 17, no. 2 (2003): 743–780.
Benatar, S. (2000) Avoiding Exploitation in Clinical Research. Cambridge Quarterly of Healthcare Ethics 2000; 9: 562-65
BJU (2003) Fitzpatrick (Ed) International Volume 92 No