DO IP RIGHTS DAMAGE THE THIRD WORLD?

This was the motion debated tonight by the Global Development Forum in St James’s, Piccadilly. Yes they do, said Ruth Mayne, a TRIPs researcher with leading charity OXFAM GB and a specialist on access to patented medicines. No they don’t, replied Sir Dominic Cadbury, Executive President of the Wellcome Trust and former CEO of Cadbury Schweppes. A second speaker in support of the motion was Dr Ken Shadlen, Lecturer in Development Studies at LSE.

Opening the debate, Ruth Mayne contrasted the high prices charged for patented medicines and the big profits made by pharma giants with the suffering and poverty of the sick in some of the world’s poorest nations. She argued that WTO membership and TRIPs compliance had forced poor countries to adopt standards of IP protection which benefited only the rich. She criticised the proprietary drug companies for their position in opposing compulsory licensing of HIV AIDS treatments in South Africa and maintained that developing countries spent some US $20 billion a year for the privilege of using IP-protected goods and services. Patents might provide incentives to invent, but they still didn’t give poor people purchasing power.

Sir Dominic Cadbury defended the expensive nature of patented drugs by reference to the extraordinarily high cost of developing new products and the 90% plus failure rate in coming up with successful products. He pointed out that ill health in the Third World cannot be blamed solely on IP rights when 90% of drugs listed as essential by the World Health Organization were not patent-protected. Protection was necessary if investment in new products was to be stimulated. He added that TRIPs was not a straitjacket (it permitted compulsory licensing and parallel importation, for example) and that developing countries which joined the World Trade Organization and agreed to adopt its IP norms did so voluntarily.

Ken Shadlen conceded that IP rights were not “good” or “bad” in themselves. They were merely tools of development policy, along with many others, and it was how they were used which made them good or bad. He reminded the audience that pharma patents constituted only around 10% of patents and that there were lots of other IP rights apart from patents. The processes of industrialisation and technology transfer could be helped by the protection of IP rights in developing countries, but only where those IP rights had to be exploited there. TRIPs permitted the compulsory licensing of IP rights where there was a national emergency or health crisis, but not where it was merely industrialisation that was at stake. This was a failing which TRIPs should address.

The IPKat notes that the moral argument in favour of widening access to medicines is a strong one – peoples’ lives and well being depend on it (this is not so much the case with industrial technology transfer). In so far as this access it not forthcoming, the blame cannot be placed solely at the door of IP rights. Issues such as distribution mechanisms and infrastructure and poverty must also be addressed, but this does not mean that problems with the patent rights granted under TRIPs and the way in which they were negotiated can be ignored.

Granting strong IP rights in developing countries immunises patent owners from competition from legal generic versions of drugs for which they own patent rights and thus means that there is no competitive limit on the price that the patent owner can charge (the essence of a patent “monopoly”). The ability to charge high prices is meant to act as an incentive for pharma companies to invest in research. This incentive can’t work vis-à-vis developing countries though if the drugs are priced so highly that those in developing countries cannot afford them because pharma companies will simply be unable to obtain any revenue from their invest activities in those markets. In response, pharma companies can either refuse to supply those markets and rely on their TRIPs-based IP rights, which would have disastrous effects on access to medicines or lower their prices.

The IPKat realises though strong IP rights can be of assistance to developing countries. They can be used by pharma companies to stop the sale of counterfeit drugs. Additionally, strong IP rights in developed countries can make a significant contribution to developing countries if the developed countries by their patent or trade mark laws prohibit the parallel import of drugs from developing countries. This prevents the medicines from “flowing” back to developed countries where it can raise a higher price than the price that they were put on the market in the developing country for and allows them to remain on the market in the developing country.

More on generic drugs here, here and here
How generic drugs affect pricing in the pharmaceutical industry here
Generic drugs and developing countries here and here
IP rights and the HIV-AIDS issue here
Do IP rights confer any significant benefit on developing countries? Click here and here