The team is joined by Guest Kats Rosie Burbidge, Stephen Jones, Mathilde Pavis, and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Hayleigh Bosher, Tian Lu and Cecilia Sbrolli.

Friday, 10 November 2017

Is TRIPS preventing vulnerable countries from accessing basic drugs? The case of South Africa


Kat friend Shahid Nabi from Linkilaw has offered his thoughts on the affordability of drugs and the patent system, looking particularly at South Africa.

"When the Trade-Related Aspects of Intellectual Property Rights (TRIPS) was made a compulsory requirement to World Trade Organisation (WTO) membership in 1995, it showed how integral intellectual property was thought for economic development. Since then, there has been debate about how domestic and international IP policies can provide protection for businesses interests at a global level whilst still helping advance health development goals in developing countries. One major component of this debate has been the role of IP in connection with the availability of drugs.

Against this background, countries such as China, South Africa and Brazil have challenged certain IP laws, especially those that preclude access to essential drugs. For example, the cost of cancer-treating drugs in both South Africa and China are unaffordable for the majority of the population, amounting by one estimate to 286% of the monthly salary of the average Chinese cancer patient. More generally, governments and NGO’s have claimed that IP protection imposed by TRIPS serves to maximise multinational pharmaceutical companies profits rather than foster innovation.

Under the presidency of Nelson Mandela, the Medicines and Related Substances Control Amendment Act (1997) was put into place to allow parallel importation of off-patent drugs, allowing generic substitutions. This act enabled widespread access to HIV/AIDS drugs in the country, but it was unfortunately followed by years of multilateral pressure from the Pharmaceutical Industry Association of South Africa and certain developed countries to stop the production of these drugs. Two decades later, too many people are still not able to obtain the necessary medication at an affordable price.

On 25th of October of this year, a total of 36 patient and civil society groups marched to the South African Department of Trade to request a revision to the patent laws. This was done to commemorate fellow activist, Tobeka Daki, who died in an unsuccessful struggle against HER2 breast cancer, unable to access the necessary patented drug, costing R500,000, over $35,000. Claire Waterhouse, the Access Campaign Advocacy Adviser for Doctors Without Borders Southern Africa, claimed that “ [u]ntil the relevant Acts are amended, people will continue to suffer and die in South Africa because they can’t access affordable medicines.”

The Case Against TRIPS

Numerous developing nations have claimed that TRIPS allows wealthy nations to impose their agenda through the WTO, stifling domestic innovation and increasing the cost of medicines. Mark Duggan, Craig Garthwaite and Aparajita Goyayal (2014) have found that the creation of a “textbook patent system” (one in which foreign firms are granted monopoly rights while domestic firms are immediately pushed out of the market for the length of the patent term because of infringement) results in higher prices and a low number of pharmaceutical products being sold in the market.

The Case for TRIPS

A study from the Cancer Alliance reported the South African government registers patents that may well be rejected if the country adopted stronger patentability criteria, patent examination processes and opposition procedures. UN General Secretary Ban Ki-Moon called out developing countries for not taking into account TRIPS flexibilities, which can help reduce the price of cancer drugs. These flexibilities include compulsory licensing (the government’s authority to approve the production of patented products without the approval of the patent holders), and the right for national firms producing newly patented molecules to pay international businesses to continue their access to the national market. In terms of market monopoly, pharmaceutical companies have argued that while patent monopolies do restrict price competition, they also provide fixed welfare benefits by improving incentives for marketing, which is a form of non-price competition, offsetting the costs of monopoly pricing.

Is the WTO addressing the medical needs of developing countries?

Should individual countries seek, at least in part, their own way to ensure that domestic IP laws and policies improve health and pharmaceutical accessibility, or is the framework created by TRIPS adequate as it is? TRIPS works on the basis of a common global consensus that patent protection promotes the greater good of countries and stimulates interest in research. However, this system can be distorted, as is the case in South Africa, where patent laws mainly serve large pharmaceutical companies, who often buy the rights to drugs and raise prices, regardless of consequences to the public. The recent South African IP policy proposed by the Department of Trade extends beyond patent protection in accordance with international norms and strongly favours patent holders.

An example is that the policy enables companies to easily amend their patent criteria to comply with section 7.1.4 of the IP policy when a third party attacks their patent’s validity. This makes litigation with parties extremely hard as they can continue to amend their specifications to comply with South African patent law and thus maintain a monopoly over a product. Here, it is the local law that may well contribute to the lack of accessibility to necessary drugs. As such, at least in part, domestic structures and systems may also contribute to the issue of inadequate accessibility to drugs in the developing world."

Picture at lower left by Pöllö and is licensed under Creative Commons Attribution 3.0 Unported license

22 comments:

Anonymous said...

TRIPs adherence is only compulsory when a member of the WTO, which itself is not compulsory. Clearly if WTO membership does not provide any benefits, South Africa and any other country are free to go their own way and can throw their Patent Acts into the bin, or preferably recycling (unless that causes unfairness too).

One alternative is for government ministers and their cronies to cut back on their lavish lifestyles and attempt to improve the prosperity of the country rather than their own off-shore accounts.

Gandalf said...

Anonymous of 9:03, WTO means World Trade Organisation, and so it is meant to work to benefit the entire world. When policies don't work we have debate and negotiations to fix them. We don't simply ask countries to leave, because every country has the right to speak on how it thinks the WTO should be.

Having said all that I agree most oppression of the poor is carried out by the elites of their own country and the WTO cannot be blamed for that.

Mr Blobby-Obvious said...

Gandalf, the implications of patents was well known before these countries joined. Cake and eat it time. IP rights contribute to the provision of a level playing field.

These whiners don't care about people, only the opportunity to make money out of drugs. Always remember that generic companies only sell at a the maximum competitive price and not as low as economically possible. They seek only to undercut the brand initially, and later equal to other generics. Nothing less.

I repeat many of my points ad nauseum, but it should also be remembered that most poor nations have a problem with basic health problems/ tell me how many die from diarrhea through lack of access to rehydration products, for example? Glucose and salts!!!

Worrying about dying from breast cancer is the preserve of the very wealthy in poor countries.

Patents are not the problem. Access to funding for health is - everywhere. There are plenty of large Mercedes cars everywhere, but apparently no money for healthcare.

Anonymous said...

By striving for an environment where investments into innovative drugs could not be secure enough (i.e. without patents), there would simply be no (or much less) new drugs for everyone. It is a pity that many important drugs are not affordable to the poorest, but the solution is certainly not creating a world without patents. Access to medicines should rather be fought from the angle of (national or international) public health programs. The fact is that it looks easier for many governments to publicly blame patents and innovative pharma companies than to put money in a functioning public health insurance system.

THE US anon said...

There is a fundamental mis-comprehension at the very base of this article.

"Here, it is the local law that may well contribute to the lack of accessibility to necessary drugs. As such, at least in part, domestic structures and systems may also contribute to the issue of inadequate accessibility to drugs in the developing world."

Somehow, "necessary" is being viewed as trumping the personal choices of the patent and drug holder as to what they decide to do (and the rights to make that type of decision).***

If the State is going to designate something as "necessary," then the obvious path is one of eminent domain; and "takings" is the path to be taken. Most States already have (or have retained) that power.

USE of that power does - and should - have its consequences though.

I do not question the ability (or choice) of any particular sovereign to make choices such as "that drug is necessary and thus we (the sovereign) will engage in a taking."

As I mentioned, this is a power most sovereigns have reserved for themselves.

At the same time, exercise of that power concomitant with THAT sovereign's choice to be bound to some (any) international agreement does - and should - come into play.


***lest anyone think that I am for any type of "whatever goes," one can easily read on some of the US patent law blogs my feelings as to the limits of exhaustion that apply to the selfsame decisions of the drug and patent holders. Once they DO decide to release their item into the stream of commerce, patent law is the incorrect vehicle to be used to "double-dip" and control secondary markets.

Oft times, it is this very "control of secondary markets" that is in fact the primary driver of disparity of availability. And it is this disparity that raise the ire of MANY US people who - unwittingly and without choice - become the providers of lost profits that the Big Pharma incur with choices to enter markets that cannot bear the true (and properly shared) costs. SO often the Rest of the World harbors an animus against "ugly americans" but are only too willing to turn a blind eye to how those same "ugly americans" foot the actual bill for the "necessary" drugs that are desired by markets that otherwise cannot afford them.

Mr Blobby-Obvious said...

US Anon:
It is also the inability control the parallel importation that may encourage pharma companies to set higher prices in poorer countries than would otherwise be the case. We should accept disparity in prices between richer and poorer nations, although we must all appreciate that there are poor people in rich countries that cannot access drugs due to their cost (i.e. the USA).

I don't believe the USA should take the burden of paying for R&D, although I don't believe this is caused simply by the ability to charge higher prices in the USA. It stems also from the willingness within the US to invest heavily in this high risk, traditionally high-reward area.

The existence of the US market makes that investment worthwhile, and other markets are nice-to-have additions.

The answer lies in a willingness for all to pay for healthcare and accept it will be expensive. Simple care-for-the-elderly in the West is another example which is just underfunded. If the pharma companies (my industry) take advantage to milk us dry through the existence and abuse of their monopoly, we shut down the offenders by withdrawing exclusivity. This doesn't mean a $15 billion per annum product is deemed abusive, but there are some recent examples as we all appreciate.

THE US anon said...

Mr. Blobby-Obvious,

Your comment of "We should accept disparity in prices between richer and poorer nations, although we must all appreciate that there are poor people in rich countries that cannot access drugs due to their cost (i.e. the USA)." is exactly the WRONG take-away.

I refuse to accept disparity in prices that are propped up under mechanisms which guarantee that MY exorbitant cost is what is floating the profit margin so that Big Corp can have a presence somewhere where a FAIR price cannot be sustained.

That is exactly the type of forced "altruism" that gives me grief. And yes - this IS exactly why Big Pharma is even willing to go somewhere at a loss. Remove the ability to control secondary markets, and the market drivers will do their natural thing (without my conscripted and overly-charged contributions).

There is some (albeit minor) fallacy to "The existence of the US market makes that investment worthwhile, and other markets are nice-to-have additions." By this I mean that a transnational does NOT look at its bottom line and then say "Oh, well, there in that developing country are some nice-to-have additions. Let's lower our financial goals just to have the losses associated with those "nice-to-haves." The ONLY way that the transnationals even bat an eye and aim for such markets is the support that comes from over-charging OTHER markets. If the transnationals do NOT enter the losing markets, my prices go down.

As to "The answer lies in a willingness for all to pay for healthcare and accept it will be expensive." this is necessarily a local (and local sovereign) choice. We have NO One World Government to make or enforce such a choice.

If I want to show some concern for developing countries and provide some personal charity, that is my business. The host of current mechanisms and forced controls over secondary markets takes such personal charity decisions out of my hands.

As to your last paragraph and the notion of "If the pharma companies (my industry) take advantage to milk us dry through the existence and abuse of their monopoly, we shut down the offenders by withdrawing exclusivity." - this ALSO is a wrong takeaway. There is NO "abuse of monopoly" associated with the exclusivity that accompanies a patent right - FOR what a patent right covers. Your statement appears to (I provide the possibility that I am over-reading your statement) denigrate the essential property aspect of what a patent is - and no doubt does so with some NON-patent "philosophy" of some "what is the greater good." Not to be stone cold, but THAT is not in accord with the very essence of patents. Patents exist merely for a short time, and during that time, exclusivity is the single hallmark of what a patent is.

As I noted earlier, governments already have a mechanism for "necessary" (eminent domain and takings) - and the price that accompanies such government actions should not be "dodged." The view of "abuse" because a patent is exercised to ANY degree of its inherent nature is NOT "abuse" but instead is officiousness.

Gandalf said...

Mr Blobby-Obvious in response to your comment of 12:35, I won't disagree with you, but I would point out that patents must be seen in the context of neocolonialism (https://en.wikipedia.org/wiki/Neocolonialism). They can be seen as one aspect of the 'economic control' that keeps the developing world in the state it is in.

Has the debt that the developing world is in been imposed on them? (see https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man)

I am not anti-patent, but at some point we do need to fix the developing world, and part of that means giving them a way out of the problems they are in. Poor people in the developing world are denied drugs which are available elsewhere. Patents are one mechanism by which that happens. Millions lose their lives as a consequence. I don't believe there is no fix for this. The planet's resources are unequally distributed, and so every nation imports and exports. We are all dependent on each other when we look at the bigger picture. Simply protecting patent rights whilst ignoring all other issues is not a very sophisticated way to approach all this.

THE US anon said...

Gandalf,

May I politely disagree with you as well?

Labeling patents as part of the "neocolonialism" misstates - and vastly so - just what patents are for, as well as who can obtain them.

There is NO limit on ANY inventor in ANY country to partake equally in any sovereign's patent system. Perhaps once upon a time that was different, but those differences were removed a very long time ago.

As it is, patents are NOT some type of "keep the poor down and in their place" thing that you seem to think that they are. Instead, patents are a reward for innovation - a perfectly reasonable Quid Pro Quo that advances innovation and brings about those things that far too many simply want to have (or have at some subsidized level for those "in need").

As I have amply pointed out, there are mechanisms already in place for ANY sovereign (under its appropriate sovereign powers of "takings") to so do so for those things designated as "need." As I also pointed out, exercise of such power should not be divorced from the consequences of that exercise.

Your comment about the planet's resources being unequally divided appears to be some peon to political philosophies that should not - and will not - be forced on people worldwide. There is NO "One World Order." There is NO global commune, in which the each give according to their ability and each takes according to their need. Your sense of needing to fix the developing world does not - and will not - come at the expense of those living in the developed world by any sense of forced mechanism. Your sense of "sophistication" is outright rejected. That's not sophistication. It is the opposite.

Anonymous said...

US Anon; I appreciate my comments may have got your goat. I don't go as far as to suggest the US bill-payer should bear the brunt of the costs and pharma profit, but I do suggest that disparity in prices is inevitable in free market economies. A one-price for all takes the argument full circle and sounds a little communist in principle.

How about the price of a drug costs an average hourly/daily/monthly/yearly salary in the relevant market? I also don't suggest this as a pricing mechanism, but it does add a measure of fairness and equality to the price. I accept it is your right to be charitable or not, or for governments to do so on behalf of their citizens if elected on that basis. We all have our own opinions on charity/society-subsidence/state aid etc. However, if countries such as the US choose not to take any social responsibility for addressing sickness and poverty amongst its own people or those of other nations, you will have mass social unrest on your hands and you must accept the need to be self-reliant in respect of everything - food, minerals, oil, gas, chemicals, etc. No nation survives alone today.

The existence of patents, at least allows the pharma company to obtain a real return in those countries without overly-early generic competition. Without any ability to control secondary markets, yes, you will get what you want in the short term, but commodity-prices for innovative pharmaceuticals will kill research dead - and yes, that is because the rich American will not be paying for a lot of the research.

" If the transnationals do NOT enter the losing markets, my prices go down."
I disagree. This would only be if they were selling at a large loss. Even if only selling at manufacturing cost (which would be a significant discount), it would not make our drugs more expensive.

I'm afraid you have misunderstood by comment on being milked dry. I am not referring to patents, but other abuse - Epipen, Daraprim, phenytoin...
I am surprised that an American is anti-monopoly-abuse controls, when it is such an active area in the US.

Mr Blobby-Obvious said...

Gandalf; I stopped reading your comment at neocolonialism.

Gandalf said...

Thanks US Anon

There are clearly many positions to adopt on the patents and medicines debate. For example one could take a human rights perspective: see http://media.wix.com/ugd/148599_c76ed6f7341fa426bc22f5ccf543ea04.pdf

Or, one could look at specific policies which promote access to medicines: https://www.wto.org/english/res_e/booksp_e/pamtiwhowipowtoweb13_e.pdf

The Doha Declaration explicitly spells out the relationship between public health policy and TRIPS and gives each member state the right to grant compulsory licences

And so there are existing legislative solutions, which in theory all WTO members have agreed to. Asking the US and developed world to honour things they have signed up to is not a 'forced mechanism'

THE US anon said...

Anonymous @ 21:33,

There was no goat to be gotten, and my posts were most definitely not limited to your comments.

That being said, let's look at your reply here.

In two parts due to character limits.

Part 1:

"but I do suggest that disparity in prices is inevitable in free market economies. A one-price for all takes the argument full circle and sounds a little communist in principle."

Nonsense.

No one is imposing a "communist in principle" restriction in order to reach a "one-price." Rather, what IS being "imposed" is the natural force of secondary markets rightfully removed from the control of the patent holder.

Sure, there may still be disparity in prices, as NO ONE is forcing anyone to set any price that they do not want to set. That being said, a healthy and open secondary market merely will reflect the opportunities afforded by any patent holder's decision (and it remains their decision) to set their prices differently wherever they want to do so. All that my post says is that such behemoths do not - as a part of the patent right itself - obtain controls over that secondary market that allows them to double dip and obtain both the first advantage of their own set price AND a control of the items so set forth (by them) into the stream of commerce.

"How about the price of a drug costs an average hourly/daily/monthly/yearly salary in the relevant market?"

How about YOU not deciding any price for the person/entity enjoying the fruits of their own innovation? YOUR sense of "measure of fairness and equality" is intrusive and whether or not you "meant this" as a pricing mechanism, you cannot say "have THIS pricing mechanism and claim that you are not saying that you want a pricing mechanism. That's just not reality. A firm enjoying the fruit of innovation that is a patent has every right to set the price at whatever level they want to set it at. That's their choice (and they will then deal with whether or not the item sells because of that set price - along traditional market mechanisms). In fact, the presence of "high prices" may be the STICK that prods others into innovating some alternative solution (one of the benefits that so many look at patents and claim to be a detriment).

As to having social unrest based on government policies - the mechanism for responding to that is already in place. It's called voting. Those sovereigns who have chosen differently - well, since I am not a part of those sovereigns, I have to respect such choices of those sovereigns.

As to "no nation survives alone today," I will agree that we live in an interconnected society of nations. However, such does NOT equal (by any stretch of the imagination) some One World Order of other global "commune" philosophy. Respect of sovereigns demands something else.

THE US anon said...

Part 2:

As to "but commodity-prices for innovative pharmaceuticals will kill research dead" - I refute the canard that ANY level of secondary market controls is required. NO OTHER AREA of innovation anywhere requires such. Sorry, but one of my pet peeves is the LACK of innovation in the very aspect involved in the research efforts because of the type of shielding from innovation that allowing secondary market control provides: we institutionalize POOR research techniques that cost so much money by such shielding. ALL pharma firms competing in that market face the same pressures (from each other), so there is more than a bit of fallacy involved in thinking that secondary market control is in any way necessary.

As to your disagreement with the math of my prices going down, you are fully allowed to have your wrong opinion. Such does not change the simple calculus involved with a set margin and adding ANY type of additional loss-inducing sales. NO "large loss" is required. ANY loss provides the simple (and irrefutable) math.

You would have been better off arguing that Big Pharma may be induced to change their business model and opt for different margins (changing the basis of the simple math). That at least, may mirror reality.

As to misunderstanding your comment on abuses, yes, I did take your comment as somehow pertaining to the concepts of the patent world and did not entertain the notion that you may have been talking about NON-patent abuses. However, any such non-patent abuses remain in the picture quite outside of the discussion surrounding patents, so such a comment is a bit of a non sequitur here.

THE US anon said...

Gandalf,

Your reply of "
And so there are existing legislative solutions, which in theory all WTO members have agreed to. Asking the US and developed world to honour things they have signed up to is not a 'forced mechanism'
" misses what I have actually stated.

I invite you to read again my posts, and to note the following portion (included here for emphasis):

If the State is going to designate something as "necessary," then the obvious path is one of eminent domain; and "takings" is the path to be taken. Most States already have (or have retained) that power.

USE of that power does - and should - have its consequences though.

I do not question the ability (or choice) of any particular sovereign to make choices such as "that drug is necessary and thus we (the sovereign) will engage in a taking."

As I mentioned, this is a power most sovereigns have reserved for themselves.

as well as:

As I noted earlier, governments already have a mechanism for "necessary" (eminent domain and takings) - and the price that accompanies such government actions should not be "dodged." The view of "abuse" because a patent is exercised to ANY degree of its inherent nature is NOT "abuse" but instead is officiousness.

as well as:

As I have amply pointed out, there are mechanisms already in place for ANY sovereign (under its appropriate sovereign powers of "takings") to so do so for those things designated as "need." As I also pointed out, exercise of such power should not be divorced from the consequences of that exercise.

Gandalf said...

US anon - what do you mean by 'consequences'?

Mr Blobby-Obvious said...

Blobby said:
"but I do suggest that disparity in prices is inevitable in free market economies. A one-price for all takes the argument full circle and sounds a little communist in principle."

US Anon Said:
"Nonsense."

But, US Anon then said:
"Sure, there may still be disparity in prices,..."

Blobby says:
"!!!!!!!!!!!"

Blobby said:
""How about the price of a drug costs an average hourly/daily/monthly/yearly salary in the relevant market?"

US Anon said:
"How about YOU not deciding any price for the person/entity enjoying the fruits of their own innovation? YOUR sense of "measure of fairness and equality" is intrusive..."

US Anon must have missed the next part of what Blobby said:
" I also don't suggest this as a pricing mechanism..."

Blobby says:
"!!!!!!!!!!!"


Generally, the response to most comments can be:
"US drug prices represent the result of free-market economics. YOU, US Anon, will pay the prices charged because YOU have made that choice and can afford to do so. In Europe, we also pay high prices that covers R&D investment etc. Demanding you pay the same as everyone else IS communist. You wish to restrict pharma controls over the secondary market because it affects YOU financially, which is no different than those who want to abolish patents, either generally, or from TRIPs obligations, because it affects them financially."

THE US anon said...

Sorry Blobby, but you could not be more incorrect in your statements of:

"YOU, US Anon, will pay the prices charged because YOU have made that choice and can afford to do so. In Europe, we also pay high prices that covers R&D investment etc. Demanding you pay the same as everyone else IS communist."

There is NO demand from me that everyone MUST pay the same - where you get that is unfathomable.

Also, you seem to NOT realize that the heart of the beef is that the prices paid in the US are NOT fully "by choice" because certain non-natural market mechanisms (the inordinate and NON-patent right related control of the secondary markets) is what force US payers to pay an inordinate share - that's kind of a rather important point of the entire complaint.

Remove those inordinate controls on secondary markets (the double-dipping) and you will see exactly what US consumers will (freely) choose to pay (hint: it is not going to be the artificially subsidizing of third world markets price).

by the way, I need not see your exclamation points, and I did not miss (at all) your follow-on statements - my reply shows that YOU are the one being self-contradictory in those very statements. Rather than double down with the exclamation points, perhaps you should take a second look at your own musings.

THE US anon said...

To equate the removal of NON-patent secondary market controls with the removal of patents is - to be frank - asinine.

There is a HUGE difference between allowing ANY Pharma company to set (and obtain) any price they want on a first sale on patent-protected items, and allowing a second dip by allowing BOTH that first sale AND the non-patent right related control of secondary markets.

That you think this to be "no difference" shows that you understand neither the patent system nor why the NON-patent secondary market controls are distorting the sharing of costs. So while yes, my view is most definitely driven by the financial impacts I feel - there is every difference imaginable between those that may want to abolish patents and my stated views.

Carey said...

Interesting article here from the BBC about the US facing the dilemma of whether to ignore a patent to an anti-anthrax drug: http://news.bbc.co.uk/1/hi/business/1613410.stm

Even the US is faced with health issues that are more important than patent rights.

Mr Blobby-Obvious said...

All health issues are more important than patent rights, but that misses the whole point of the patent system, in particular with regard to pharmaceuticals. No patents, not R&D, no new drugs.

The BBC story is from 2001, so you should have said "the US was faced with..."

What was the outcome? Was a compulsory licence granted? Was Bayer able to meet demand? This is a key criteria of the TRIPs exception.

I must also apologise to US Anon for my response to his comments not being posted. I must have disagreed with the view of the censor.

Mr Blobby-Obvious said...

No patents on toilets, so why is there a shortage???

https://www.unilever.com/news/news-and-features/Feature-article/2017/everyone-should-have-access-to-a-clean-safe-toilet.html

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