Perspectives in Health Magazine
Don't let TRIPS trip up access to essential drugs
by Martin Foreman
Eight year after the Agreement on Trade-Related Aspect of Intellectual Property Rights (TRIPS) came into force, and more than a year since the Doha Declaration insisted on the priority of public health over patents, hundreds of millions of people in the developing world are still unable to access essential drugs.
There are many reasons why. Patients are unable to get to a doctor because they cannot afford transportation to the clinic or hospital. Or they arrive at the hospital, and the doctor is not in that day because he has private patients elsewhere. Or the doctor is in, but there are too many patients to be seen in one day. Or the doctor sees the patient and writes a prescription, but the patient has no money to buy the drug. Or the drug is in theory free, but the government budget for essential drugs has run out. Or the health ministry bought the drug, but it has "gone missing" from the hospital pharmacy, only to reappear, at a price, in a private pharmacy next to the hospital.
In other words, corruption, inefficiency and poverty may all restrict an individual's access to the drugs he or she needs. These are issues that must be resolved at a national level.
There is, however, one major obstacle to essential drugs that can only be resolved internationally. That is the extent to which patented drugs can be replaced by generic equivalents. Under TRIPS, patent holders can extend their monopoly to 20 years in countries that are members of the World Trade Organization (all members of the Pan American Health Organization are also members of WTO).
Because patents create monopolies, manufacturers can charge high prices. When those monopolies are broken, prices fall. When manufacturers in developing countries began producing generic versions of patented antiretroviral drugs, the annual price of individual AIDS treatment fell from $10,000 to just over $200 in countries where generic versions were available.
Governments can override patents by issuing compulsory licenses, which grant the right of manufacture to another company on payment of a royalty to the patent holder. But licenses must be predominantly for domestic use. A poor country without the capacity to manufacture drugs cannot issue a compulsory license to a manufacturer in another country and therefore must pay the monopoly price on the patented drug.
This issue-compulsory licensing for export from a country with manufacturing capacity to a country with none-has remained unresolved on the WTO negotiating table for more than a year. From time to time, delegates spend several days discussing how to resolve it, but they have not been able to come to an agreement. Essentially, the organization is split in two. The developing world seeks an arrangement whereby compulsory licenses for export are granted no differently from domestic licenses, while the industrialized world wants to restrict licenses to HIV/AIDS, tuberculosis and malaria drugs (but not drugs for pneumonia, diarrhea, cancer or heart disease) and to subject licensing to an extensive bureaucratic procedure.
It is not surprising that the countries that oppose extending compulsory licensing are the host countries of the pharmaceutical industry, which holds the vast majority of medicinal patents. The industry argues that the monopoly protection offered by patents is essential to fund research. If patents are not respected, they cannot recoup costs nor sufficiently fund new research on important new drugs, such as antiretrovirals for treating HIV/AIDS.
There is some truth in this argument, but it is not the whole picture. First, the bulk of pharmaceutical companies' profits are made in the industrialized world. In 2002, sales in North America, Western Europe, Japan and Australasia accounted for an estimated 79 percent of the industry's income. Latin America and the Caribbean represented 7.5 percent. In other words, a shift from patented to generic drugs in the developing world would represent a minor loss to the pharmaceutical industry.
Second, for-profit pharmaceutical research is increasingly focused on drugs for so-called "lifestyle" conditions rather than those for serious diseases. Many of these conditions, such as erectile dysfunction or aging skin, are not lifethreatening, while others, such as obesity and tobacco addiction, are only life-threatening over time, and alternative remedies, such as an improved diet and behavior modification, are also available.
Third, much of the essential research for life-threatening diseases such as HIV/AIDS is carried out at public expense by public institutions. Very little research is undertaken by the pharmaceutical industry on diseases that affect only limited populations, such as Chagas' disease, or those that primarily affect the developing world, such as tuberculosis. Moreover, those research costs incurred by pharmaceutical companies are largely passed on to consumers.
Since pharmaceutical customers and taxpayers in the industrialized world shoulder most of the costs of research, the industry itself has little to lose and is likely to gain from widespread acceptance of compulsory licensing, both domestic and for export. Compulsory licenses are not theft. License holders must pay patent holders a royalty for each product sold. Increased sales of antiretroviral drugs means increased income for the patent holder regardless of who the manufacturer is. A patented drug sold at a high price because it has a monopoly on the market generates less income for the patent holder than several versions of the same drug under license sold at competitive prices.
The pharmaceutical industry knows that high prices restrict sales and volume generates income, and it has tried to address this while retaining absolute control of its patents. Its solutions are donations or cut-price drugs, which are offered in many countries, and voluntary licensing, whereby companies grant a manufacturing license to third parties.
There are a number of problems with such "solutions." First, they depend entirely on the donors' goodwill, which is necessarily secondary to their need to sell drugs. They may also create a burden for the public health system by requiring staff to manage separate disbursement systems. The number of patients and geographic regions that benefit is likely to be limited, and need may not be the deciding factor. Donations, because they are free, may discourage the rational use of drugs.
These less-than-ideal solutions may make the pharmaceutical industry appear generous in public, but the reality is that millions of people who need antiretroviral and other patented drugs still do not have access to them. It is only in those very few countries (such as Brazil) where governments have used the threat of compulsory licenses that the industry has been forced to compete on a level playing field with generic manufacturers, and where the general public has genuinely benefited.
The industry argues that significantly reduced prices in the developing world may lead to demands for reduced prices in the developed countries. Indeed, in the United States the cost of drugs has become a major political issue. But maintaining relatively high prices in the industrialized world is unlikely to be a major issue. Commuters in New York do not demand that subway fares be brought down to the level of those in Santiago, and beer drinkers in London do not insist on paying Bangkok prices. Patients in the developed countries, whose medicines are usually subsidized companies, are unlikely to demand that those prices be reduced to developing-world levels.
With most of its profits being made in the developed world, the pharmaceutical industry loses little by allowing others to enter their developing country markets. This means that compulsory licenses-for export as well as domestic production and for all essential drugs-are the best compromise: They provide the pharmaceutical industry with guaranteed income while also allowing increasing numbers of people to access essential drugs.