TCS Daily


Free Trade and Folk Marxism

By Nick Schulz - March 30, 2006 12:00 AM

For many years, American trade policy on medicines has been a struggle between the drug companies, whose campaign contributions and lobbying expenses are second only to the insurance industry's, and the social imperative to provide developing nations cheaper and easier access to vital drugs."
-- New York Times, "Free Trade and AIDS Drugs," Editorial, 28 March 2006

Free trade has a lot of opponents these days. It faces opposition overseas from foreign industries allied with governments that help protect them from global competition. And domestically free trade is opposed across much the political spectrum, from nativist Republicans to labor leaders and the majority of the Democratic party.

A sometime exception to this hostility to freer trade has been the editorial page of the New York Times. The Times has pounded the table repeatedly in recent months in favor of free trade in agricultural goods. But when it comes to markets in high tech goods like medicines, the Times blinks; and it resorts to a kind of Folk Marxism that threatens to scuttle free trade agreements.

Folk Marxism is a concept developed by the economist Arnold Kling. As Kling puts it:

"Folk Marxism looks at political economy as a struggle pitting the oppressors against the oppressed. Of course, for Marx, the oppressors were the owners of capital and the oppressed were the workers. But folk Marxism is not limited by this economic classification scheme. All sorts of other issues are viewed through the lens of oppressors and oppressed."

In the context of medicines and trade, the Times looks at potential trade deals -- such as one currently being negotiated by the United States and African countries -- and sees drug companies and the US government as oppressors; disease victims and governments of developing nations as the oppressed.

According to this folk tale, here's how it works: The drug companies place the value of their intellectual property (IP) over the well-being of those who need drugs. They insist on strict patent enforcement around the world, and get the US government to pressure foreign governments for strong IP protections. And in doing so they deny cheaper, knockoff versions of their drugs to Africa and other developing regions where people can't afford the high cost of drugs.

As a folk tale, it's compelling. But is it true? After all, if strong patent protections are, as its critics maintain, in effect killing people, then the Times' Folk Marxist arguments might lead one to conclude we should scuttle free trade agreements containing IP protections. So what does the evidence tell us?

First let's examine the issue of drug access to life-saving medicines. Is patent enforcement standing in the way of ensuring access to life-saving drugs?

The scholar Amir Attaran has conducting the most comprehensive look at this issue. In the Journal Health Affairs, Attaran published a paper "How Do Patents and Economic Policies Affect Access to Essential Medicines in Developing Countries." Attaran is frequently critical of the drug industry. Nevertheless, Attaran finds that "patenting is rare for 319 products on the World Health Organization's Model List of Essential Medicines. Only seventeen essential medicines are patentable, although usually not actually patented, so that overall patent incidence is low (1.4 percent)..."

So what explains the lack of access to life-saving medicines in much of the developing world? "Poverty, not patent policies," Attaran concludes, "more often inhibits access to essential medicines in the developing world."

OK, but let's give the Times and other trade-deal skeptics the benefit of the doubt. While patents and the resultant prices are not an obstacle to the vast majority of life-saving medicines, what about when it comes to AIDS drugs, which have been more recently developed relative to some other essential medicines? Are the prices that result from the patents prohibitive relative to knockoff versions?

The only comprehensive research on the question of patents and prices of AIDS medicines -- as opposed to Folk Marxist assumptions -- has been done by Carol Adelman and Jeremiah Norris of the Hudson Institute. Using medicine price data from the group Doctors Without Borders, Adelman and Norris found that, "The majority of patented ARV drugs, either administered separately as single drugs in a 'cocktail' or combined into one tablet as a fixed dose combination (FDC), are less expensive than copy drugs. Indeed, there is only one patented drug which is significantly more expensive."

The Adelman and Norris work relies on data from Doctors Without Borders. It's an organization that, despite its laudable charity work in the field, has a political wing that is hostile to free trade and is against strong intellectual property protections. It's a safe bet that Norris and Adelman, who are in favor of freer trade as well as strong IP protections, felt it best to use data from those who disagree with their views on these issues so they could avoid being accused of cherry-picking their data.

It is difficult to overstate the long-term benefits of freer trade not just to Americans but to the poor in developing countries who need it most. It's conceivable that Folk Marxist assumptions are harmless -- maybe even beneficial -- if they are undergirded by empirical research supporting the claims. And if patents and the "oppressors" in the private sector and the Bush administration were denying access to the poor, then the Times would have a strong argument. In this case, however, they are not. The push for freer trade faces enough obstacles without the Times and other groups invoking the kind of Folk Marxism that jeopardizes trade agreements.

If the Times and its friends in the global health community have data that show something different, they should use it to justify their arguments. Otherwise, they should focus on true obstacles to access -- these include economic stagnation, excessive taxes and tariffs on essential medicines, and the corruption and infrastructure problems in the developing world. It is these obstacles, after all, that explain why even though the great majority of essential medicines is not patent-protected, the poor still are dying without them.

Nick Schulz is Editor of TCSDaily.com.

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5 Comments

What a difference 3 years makes
Much Ado About Nothing?
Roger Bate Op-Ed in Tech Central Station, July 24, 2003

...Amir Attaran, a fellow with the Royal Institute of International Affairs and a board member of my own organisation, Africa Fighting Malaria, has for the past three years been exposing the various fallacies of the AIDS activists. He has also done his best to expose the HYPERSENSITIVITES of the pharmaceutical industry. And recently he did both at the TCS HAYEK SERIES BRIEFING in Brussels.

...Although he became the darling of drug companies, some of whom over-interpreted his data to imply that patents were never a problem, he never sided with their greatest demand--to restrict the breadth of paragraph 6 of the Doha Declaration. This declaration, made at the World Trade Organisation Ministerial meeting in Doha, Qatar, in November 2001, established the notion that the poorest countries should, in principle, be able to IMPORT DRUGS FROM GENERICS (PATENT-BREAKING/IGNORING) COMPANIES in countries that did not (albeit legally) respect the drug patents of the western companies.

...It remains to be seen whether Dr. Attaran is proved to be right. He is probably mostly correct, and the U.S. negotiating position has widened to allow drugs for 22 diseases (up from just AIDS, malaria and TB before) to be included. But there is little doubt that the U.S. administration and drug companies want drugs for life-style complaints and major western diseases to be left off the table...

http://www.cei.org/gencon/019,03563.cfm

Blinders
"Folk Marxism" focuses very narrowly. It ignores the recent experience in Africa with FDCs produced by generic (patent ignoring) manufacturers and championed by William Jefferson Blythe Clinton, which not only were ineffective, but also risked accelerating the evolution of even more resistant forms of AIDS. It also assumes that donors must abandon their principles and drug manufacturers must abandon their profits because Africans (and others) will not abandon their risky behavior patterns. The "cry of the poor" sounds a lot like: "You must help us; and, you must help us our way, because we like living like this but we don't like dying like this." More resistant strains of AIDS will evolve soon enough, without the world community taking actions which risk accelerating the process.

charity on the cheap
Those who believe that the poor should have access to affordable drugs could buy the drugs and then give them to the poor, or sell them at prices that they believe are appropriate.

Instead they demand that other people give away their property.

One thing that is consistent about socialists, they don't believe that they should bear the costs of the charity they advocate.

We could approach this differently, that is reduce regulatory costs and time and reduce patent time
Why is the solution here so hard. Just drop all the regulatory requirements for drug companies making these drugs. Then tell them that you will also reduce the duration of the patents. That way they still have a time span of patent protection to sell at higher prices but can save time and money by skipping regulation.

Why is this bad if the Africans are so desperate the get the drugs?

Oh yeah, Government and these other folks really do not care about Africans. They care about their own feelings and money.

did you know
that the patent clock starts ticking as soon as a company registers a new drug, which the company must do as soon as it starts field testing the drug, and usually before. The first 4 or 5 years of patent life are exhausted before the govt lets the company sell the first pill.

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