TCS Daily

A Collective Mistake

By Sylvain Charat - March 31, 2005 12:00 AM

"India has an unmatched place in providing affordable medicines to the poorest," French President Chirac recently told Indian Prime Minister Manmohan Singh. Chirac proceeded to tell the Indian leader how concerned he was that India recently amended its 1970 Patent Act to bring it in line with the country's World Trade Organization (WTO) obligations. The new legislation will make it harder for Indian companies to make cheap copies of patented Western pharmaceutical products, and Chirac is worried that this will make medicine more expensive for third world countries.

Unfortunately, Chirac's statement received little attention in the media, which was busy reporting on increasing French euro-skepticism and speculating what might happen if French voters reject the European constitution in the referendum on May 29. However, the fact remains that the French president is disregarding important French and European interests by undercutting the ongoing WTO efforts to protect intellectual property rights. He is also doing the world's poor a tremendous disservice. The media in Europe and elsewhere would therefore be well advised to pay careful attention to French policies on intellectual property rights protection during the coming months.

In December 2005, WTO ministers will meet in Hong Kong to discuss, among other things, the creation of an international regime for sharing the benefits that derive from using genetic resources to make products such as medicine. In a nutshell, the question is how best to make sure that areas (such as the Brazilian rain forest) that supply genetic resources also benefit from the commercial use of these resources.

Two principles for benefit sharing are competing against each other: A free-market principle based on respect for intellectual property rights and a collectivist principle that would undermine the protection of intellectual property rights worldwide. France may well hold the key to which principle will emerge victorious after December's meeting.

The free-market principle is to secure benefit sharing through contracts between the companies that demand genetic resources and the countries, peoples or individuals that supply these resources. The buyer and the seller can freely negotiate the terms of the contract, which ensures that both parties are satisfied.

The collectivist principle, on the other hand, is to give governments a right under international law to expropriate patents based on genetic resources found within their jurisdictions. Not surprisingly, the main advocate for this approach is Brazil's socialist leader "Lula" da Silva who could wish for nothing better than an opportunity to expropriate a couple of the many patented products that might contain materials found in the vast Brazilian rain forest.

The European Union will play a key role at the Hong Kong meeting in December. Given the enormous influence Chirac recently showed in derailing the Bolkestein directive for liberalization of the European services market, there is reason to fear that France will be able to tilt the EU in the collectivist direction.

European journalists and politicians should keep in mind that collectivists like Chirac or Lula are making a real mistake, setting up policies based on what they see, and forgetting what they do not see. They see intellectual property rights creating benefits for pharmaceutical industries, profits that must be shared by weakening patent policy. But what they do not see is that without strong patent protection there would be little pharmaceutical research. With the present free trade system, poor countries have a real chance to benefit from research. But with a collectivist system this hope would disappear since companies are not willing to work for free.

Patents protect the competitive advantage of pharmaceutical companies that invest huge amounts of money on research. It is this competitive advantage and these heavy investments that allow companies to make profits, which, to close the circle, boost research.

A high level of intellectual property rights protection is in the interest of the public for two reasons. First, innovation in medicine is possible only if intellectual property rights are secured. In an Australian APEC Study Centre report called "Developing Effective Approaches to Access to Genetic Resources", Alan Oxley wrote that "the profits generated by [intellectual property patents] in fact generate the development of new and better medicines and make it possible to deliver medicines for free or at low cost to the poorest people around the globe".

Second, strong patent protection is a core element for pharmaceutical research centers' decisions to locate in countries, bringing jobs and wealth along with them. Swiss giant Novartis put the Novartis Institute for Biomedical Research Inc (NIBRI) in Cambridge, Mass., in 2002. The decision was worth $250 million dollars, creating 400 jobs, and an expected 1,000 researchers hired by 2009. Imagine the effect such medical research and innovation could have in poor countries.

Contrary to the current mythology, patented medicines are not outrageously expensive. "The pricing surveys published by Médecins Sans Frontières clearly show that copy ARVs (antiretroviral drugs for HIV/AIDS) made by foreign manufacturers are by no means cheaper than patented ARVs," stated Carol C. Adelman, Jeremiah Norris and S. Jean Weicher in a Hudson Institute white paper. Their conclusion: "The majority of patented drugs are less expensive."

Medicine is less expensive as long as markets are open, since this allows pharmaceutical companies to reach more consumers and thus spread the cost of research on an ever increasing number of people. Erecting barriers has the opposite effect. This is the free market logic dictating that freedom of enterprise requires property rights protection.

Chirac, however, openly despises free markets and proclaimed at the end of the recent European summit on March 23 that global liberalization is an economic system that cannot be sustained. He therefore instinctively supports Lula's approach in Brazil, a country that, along with India, is the biggest generic drugs producer in the world.

It is worth remembering that collectivism is embedded in the French constitution. "Any property or undertaking which, in the course of its business, possesses or acquires the characteristics of a national public service or a de facto monopoly, shall come under collective ownership." That is point 9 of the preamble of the French Constitution of 1946; its importance was proclaimed again in the preamble of the Constitution of 1958, still in use. A good example: empty apartments can be requisitioned by public authorities for homeless families. The owner is not deprived of his property, but is kept from doing what he wants with it.

When it comes to medicine, Chirac apparently sees pharmaceutical intellectual property as a sort of "national public service" - or even "international public service". So it naturally follows that these rights come under collective ownership. Chirac's policy aims to create an international rule thus written: "Any patent which possesses or acquires the characteristic of an international public service or a de facto monopoly, shall come under universal collective ownership." Free traders beware.

Perhaps it is not so strange that some legal experts liken property rights in France to an artichoke: even if its leaves are thinned out, it still remains an artichoke as long as its heart is there. While not formally eliminated, property rights can in other words be reduced to the extreme. Unfortunately, the French president now seems bent on spreading the artichoke version of property rights to the rest of the world.

Sylvain Charat is Director of policy studies in the French think tank Eurolibnetwork.



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