TCS Daily


Fear and Loathing in Doha

By Julian Morris - November 9, 2001 12:00 AM

This weekend, hundreds of diplomats, executives and journalists will descend on Doha, Qatar-and ask for their gas masks at the airport. And they will get them, along with a sheaf of warnings about terrorists and truck bombs. They will be told that anti-aircraft batteries will ring the conference center and about emergency evacuation procedures to take them to a U.S. Navy ship in the Persian Gulf.

Even if Doha turns out to be only as dangerous and dramatic as the last ministerial World Trade Organization meeting, held two years ago in Seattle, trade negotiators will have plenty to worry about: Anti-globalization activists and Third World governments want to wreck America's and Europe's most successful and recession-proof industry - and thus the economy - by smashing protections for drug patents.

The pharmaceutical industry is one of the few reporting double-digit profit growth after September 11. Drug stocks are among the few bright spots in a skittish stock market, still unnerved by the attacks and anthrax. Weakening or eliminating patent protection for drugs would be like abolishing copyright for book publishers - and about as economically destructive. This is not exactly what the U.S. economy needs right now.

And the United States and Europe are already losing. Undermining previously agreed to protections for intellectual property is high on the agenda for the Doha meeting. Brazil is leading the charge to undo a 1995 agreement that requires that all 142 nations that belong to the World Trade Organization enforce patents by the year 2006. Brazil doesn't want an extension - which the Bush Administration has offered - but an outright exemption for itself and other Third-World nations.

And this assault is gaining momentum thanks to the anthrax threat. Starting in early October those grim-faced partisans of the anti-globalization movement said that, unless the patents on Cipro and other antibiotics were busted, millions of Americans would not have access to the drugs they need to ward off anthrax.

This wasn't true, as it turned out, but the panic soon spread to policymakers nonetheless. The Canadian health ministry announced plans to violate Bayer's patent on Cipro. Several Washington-based non-profits, including Ralph Nader's Consumer Project on Technology, agitated for the federal government to follow Canada's lead. New York Democratic senator Chuck Schumer unveiled his own patent-busting proposal.

Under pressure from the Administration, which is fighting to protect the property rights of pharmaceutical firms, Schumer and the Canadian government backed down. Meanwhile Health and Human Services Secretary Tommy Thompson cut a deal with Bayer. "Tommy Thompson may not know it, but he became our ally when he threatened that patent," Jose Viana, an adviser to Brazil's health minister, told the Financial Times. "He did what he thought was in the best interest of his country. Why can't others do the same?"

Actually, Secretary Thompson did not threaten to break Bayer's patent contrary to some press accounts. He just proved to be a good negotiator. And despite standing up for patent protections, America was nonetheless falsely and immediately accused of double standards. Jamie Love of the Consumer Project on Technology argued that if the U.S could threaten to break Bayer's patent on Cipro then Brazil, India and South Africa could legitimately pierce patents on AIDS drugs and other "essential medicines."

Thus have the lines been drawn for a bruising battle in Doha.

False Choices

Activists, Brazilian officials and others want to frame the issue as a choice between saving some people's lives and safeguarding other people's property. They refer to drug patents as a "monopoly" - owned by the shareholders of pharmaceutical firms - that has to be broken to provide affordable treatment to the world's poor.

This is a false choice. Take the frequently cited case of AIDS in sub-Saharan Africa. Outside of South Africa there are essentially no patents to break. The patent process in the poorest African lands is complex, costly and toothless. African governments don't even police or protect the few patents they grant. As a result, few major pharmaceutical firms file for patent protection in, say, Zambia. So Africans can copy AIDS cocktails to their heart's content without breaking their own laws or international agreements on patents. More than 70% of the World Health Organization's list of "essential medicines" are not patented anywhere, so clearly patents are largely irrelevant, even for those people who can both afford and obtain medicines. A recent study by Harvard professors Amir Attaran and Lee Gillespie-White of the International Intellectual Property Institute, published last month in the Journal of the American Medical Association, suggests that, even for AIDS drugs, patents are not a problem. For the 15 antiretroviral drugs sampled, pharmaceutical companies had obtained only 21.6% of possible patents in African countries. As Attaran said, the lack of drugs, "has little to do with patents."

Africans and other poor nations lack the facilities to make drugs and the means to buy cheap copies from India and elsewhere. And even if the medicines were provided for free, most poor countries do not have adequate healthcare facilities to ensure that they are delivered to those who need them or to monitor treatment to ensure that people complete courses of medicine to defeat the disease and guard against another attack. Boehringer-Ingelheim, the German pharmaceutical manufacturer, has offered the South African government free supplies of Nevirapine, which reduces mother-to-child transmission of AIDS. South Africa rejected this generous offer because it does not have the money to deliver the drug to those who need it.

Indeed, most of the globe's poorest 800 million people can barely afford bread. Medicines, even the cheapest off-patent medicines, such as aspirin, are simply beyond their reach. For many, it is irrelevant whether a medicine is patented or not as the biggest health risks in the developing world have nothing to do with patented medicines. What matters most is a good diet, clean water (diarrhea and hepatitis caused by bacterially infected water are big killers) and mosquito control (the most cost-effective means of controlling malaria, another major killer).

Patent Busting Poses a National Security and Health Risks

Weakening patents would also undermine the West's defenses against bio-terrorism. One reason Washington didn't break Bayer's patent, and Ottawa reversed its decision to do so, is that confiscating the Cipro patent might signal pharmaceutical manufacturers that they should reduce research dollars flowing into medicines to combat potential bio-terrorism agents.

Patent-busting threats from activists have already discouraged investments in new AIDS drugs. Pharmaprojects, a subsidiary of the UK-based PJB Publishing, which monitors the pharmaceutical industry, reports that the total number of antiretroviral compounds being studied has plunged from a peak of 250 per year in 1998 to 191 in 2000 and only 173 so far in 2001.

Let's not forget that the real cost of developing new medicines is huge, close to $1 billion. Why is it so costly? Consider the many dead-ends that researchers must go down just to find a single promising molecule that might lift depression or fight heart disease. Consider also the years of testing to prove that it actually works, and the piles of paperwork and additional tests that the regulators require. All this costs, on average, $500 million per drug. Then, pharmaceutical companies must spend another $400 million marketing their drugs-explaining the merits of new compounds to doctors, pharmacists and the public. Although such marketing expenditures are much maligned, the reality is that without them we may never hear of beneficial new drugs and those miracle cures would quickly go out of production. We speak from experience: one of us found a hay fever drug to be very effective but it was poorly marketed and quickly disappeared.

Meanwhile the cost of copying cures is quite low. Any laboratory technician anywhere in the world can synthesize a chemical compound once he knows the ingredients and proportions. And the recipes for those drugs are helpfully supplied by the pharmaceutical firms in their patent applications. Drug pirates don't even have to hop a plane; they can usually find the information on the Web. This is a nice arrangement for drug pirates. They reap a windfall at the expense of the sweat and sales of the drug's true owner. But should this arrangement be made the norm across the developed world?

In a world without patent protection, pharmaceutical firms would immediately stop all drugs in development and cease searching for new cures. Why waste the shareholders' money?

Ah, but wouldn't that create a paradise of low-priced drugs? Think of all the cutthroat price competition between laboratories that will manufacture the exact same chemicals. Besides all of the medicines ever developed would suddenly be available for pennies per pill. That's the utopia that activists and pirates promise; no new drugs but plenty of cheap ones. This might sound good, except biology conspires against this fine vision. Even ancient scourges, like tuberculosis, quickly evolved to defeat antibiotics. Without a continuous supply of new drugs, the war waged against the world's malevolent microbes would soon be lost. The world of cheap drugs would be a planet of increasingly ill people who can pop a worthless pill for a penny. Is this a world anyone wants to live in?

Nonetheless activists have rounded up support from the generic drug makers of India, Argentina and Brazil, who make a quick buck from producing patented drugs without paying royalties to the companies that discovered them. And, of course, patent-busting gratifies a certain proto-Marxist instinct among the anti-globalization crowd that wrecked Seattle, Washington and Genoa in the past two years.

Activists Are No Friends of the Poor

When trade officials sit down in Doha to debate intellectual property rights and public health, they should remember that private investment saves many more lives than public demonstrations.

Indeed, the poorest nations may need patent protection more than ever before. Policymakers should ask themselves: Who is going to produce the new medicines needed to treat the unique ailments of impoverished tropical peoples? Not the Third World generic producers. They are too busy copying other people's products. And for the most part major pharmaceutical firms will not be able to focus on niche products to treat ailments, like malaria and dengue fever that occur mostly in the warmest, poorest lands. And, of course, those drug makers face significant regulatory costs and long delays in bringing drugs from the laboratory to the market. While the major drug makers will continue to make products that alleviate the suffering of a large swath of mankind, the best hope for the development of niche drugs for neglected diseases comes from pharmaceutical firms in India and Argentina. These growing companies are pirates who want to go legit, provided that their intellectual property rights are protected.

Two major Indian pharmaceutical companies, Ranbaxy and Dr Reddy's, have begun spending heavily on developing new drugs for tropical diseases. They are doing so because they believe that India will introduce patent protection on pharmaceuticals and they will reap the rewards. At a recent conference on intellectual property in New Delhi, Bimal Raizada, Managing Director of Ranbaxy, said that his company is looking forward to stronger product patent protection.

But those Indian companies, ready to leave the realm of copying and to join the global search for new medicines, cannot count on the support of the Indian government. And even if they could, their voices would be drowned out by the chants of activists and the special pleading of drug pirates. This is a war where President Bush needs as broad a coalition as possible.

Julian Morris is Director of the International Policy Network (www.policynetwork.net), a London-based think tank. He is also a Visiting Fellow of the Liberty Institute in Delhi (www.libertyindia.org), which recently published his book "Ideal Matter: Globalization and the Intellectual Property Debate."

Richard Miniter, a former editorial page writer for the Wall Street Journal Europe, lives in Brussels. He is a Senior Fellow at the Center for the New Europe.
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