TCS Daily

Healthcare in the Developing World: Obstacles and Opportunities

By John Gardner - May 19, 2006 12:00 AM

In the run-up to next week's World Health Assembly in Geneva, a recent report from the Commission on Intellectual Property and Health (CIPIH), appointed by the World Health Organization (WHO), claims to show that a high standard of protection for intellectual property in pharmaceuticals is hurting healthcare in the developing world.

Though the report couches its recommendations carefully and acknowledges the research and innovation undertaken by Western pharmaceutical companies, underlying the report is a dangerous idea that would take away incentives for drug companies to innovate and -- ironically -- slow the process of bringing needed drugs to the developing world.

The report relies on General Comment No. 14 on Article 12 of the Convention on Economic, Social, and Cultural Rights from the UN's Economic and Social Council, which declares that it is incumbent on States "and other actors in a position to assist" -- this means you, American business firms! -- to provide international assistance and cooperation. The General Comment, while not legally binding, is considered "authoritative guidance" and "therefore constitute[s] an important foundation for arguments that treat access to essential treatments, preventives and diagnostics as a right."

Practically, this means that there will be even more pressures on U.S. drug companies to give up their intellectual property rights and patent protections, under the rationale of improving access to healthcare. But where will the innovations of tomorrow come from, if not from profits on the drugs of today? Already U.S. consumers complain that they are cross-subsidizing sales of drugs elsewhere in the world in markets that adopt price controls. And what incentive do drug companies have to invest in products for the developing world if they cannot reap the benefits of that investment?

The report recommends that "[c]ountries should seek through patenting and licensing policies to maximize the availability of innovations" -- but it does not agree with the usual understanding that reliance on the free market itself offers the greatest innovations. Instead, it states that "[c]ountries should provide in their legislation powers to use compulsory licensing ... where this power might be useful as one of the means available to promote, inter alia, research that is directly relevant to the specific health problems of developing countries."

While it shies away from a direct attack on patents themselves, the report's bias in favor of generic drugs is clear. As it notes, "[m]ore than three decades of reverse engineering "on-patent" drugs (process engineering) has made Indian companies extremely proficient in speeding generic drug development." Granted, India's new patent law is far better than having no patent law for drugs (as the country did for 30 years until recently), and Indian drug companies are playing an increasingly important and responsible role in the global market. Certainly, all would agree on the need to reduce the cost of drug development -- a concern of Western companies as much as of the patients who need their drugs.

But the report also commends India's new patent law for providing that only compounds with demonstrated "superior efficacy" may receive full patent protection, to avoid "copycat" patenting that in the Commission's view only extends patents to remove competition from cheaper generic. Even if this were true (a large and unwarranted assumption), to prove "superior efficacy" companies would presumably have to go through clinical trials -- at huge expense -- which would therefore have to begin early in the patent term. While generic manufacturers are busy preparing to market on the first day after the end of patent exclusivity, the original company is therefore effectively denied the right to enjoy the full fruits of its labor. Rather than choosing to invest the "monopoly profits" from the patent on inherently more risky new discoveries, therefore, the company would likely focus its attention on refinements to existing products, which would lead to an overall loss in innovation. So the law discourages the very risk-taking so necessary to scientific innovation.

The report downplays the ways in which the current intellectual property system is already working. It notes that the "average prices of pharmaceuticals tend to be lower in developing countries". On this theory, there is already a massive subsidization of drugs for the developing world by the West.

For instance, demand for antiretrovirals for HIV treatment in the West helps assure their increasing availability in the developing world. And while it claims that priorities for public sector funding in the developed world are shaped by their own disease burden -- a truism, given that public health systems pay for treatment of the diseases their citizens have -- it ignores other types of spending, such as a large program on developing microbicides funded by USAID precisely because of the need in the developing world for these products and the difficulty of finding commercial sponsors. And the report notes that American universities such as Stanford and Yale grant research licenses to non-profits for compounds they have developed -- more evidence that the current system is working, but no evidence to mandate this type of licensing for the private sector. Why does the Commission provide no similar examples from universities in other developed countries? Could it be that pricing policies have weakened the research capacity there?

The report notes that commercially driven research promotes synergies, where a drug developed for one condition is found to have uses for others. So let's get this straight: in the developed world, pharma companies are criticized for "salami slicing" and for allegedly promoting off-label uses. In the developing world, though, people are begging for other uses of approved compounds. What is a company supposed to do?

The report was clearly written with American audiences in mind. It quotes frequently from American documents and even references the United States as "the most successful country in biomedical innovation." Still, when it attacks the profitability of pharmaceutical companies, it only references U.S. companies, as though profits from generic manufacturers or European or Asian companies are somehow immune from criticism.

At times, the report singles out American policies. It suggests that bilateral trade agreements should not seek to incorporate intellectual property protection in ways that may reduce access to medicines in developing countries." This is nothing more than a shot at the U.S. free trade agreements (FTAs) being negotiated with many countries in the developing world. But in the absence of a comprehensive global trade deal, these FTAs are the best tool to raise economic growth, and therefore health, in the developing world.

There is some good news in the report. It highlights the impressive advances in innovation in developing countries -- both of their own research and generic products. On malaria, the report fortunately admits, albeit softly, the key to the solution:

"Early malaria eradication campaigns successfully employed a combination of spraying, elimination of mosquito breeding sites, and mass treatment to free 500 million people from the threat of disease. Today, [Africa] is home to 90% of the malaria burden and the overwhelming majority of malaria-related deaths. A number of tools exist to prevent and treat the disease, including bednets, indoor residual spraying, and artemisinin-based combination therapies." (Emphasis added.)

Spraying -- the controlled use of small amounts of DDT as now advocated by the governments of South Africa and Zambia as well as leading anti-malaria activists is the best way to reduce, quickly and dramatically, the appalling and immoral toll that malaria takes, particularly on African children. If any company is asserting intellectual property rights protection to prevent this from happening, I am not aware of it: resistance to using DDT comes from European policymakers, not from patent protection.

The Commission notes that "there is an underlying moral issue" in the discussion of intellectual property rights. Exactly so -- and this is why simply reducing protections for Western intellectual property is not the answer, unless the world simply wants innovation to stop. One can even take the concept a step further: reducing poverty through economic growth itself increases health. As people become richer, they spend more of their income on health care.

A much better approach was proposed in a report (pdf) from a number of civil society organizations:

This report shows that intellectual property rights do not prevent better health care in the developing world. Instead, governments have a responsibility to take actions, many of them comparatively inexpensive, that will quickly raise standards of health. Greater spending on health care systems, better nutrition, building of small clinics, training doctors and nurses, better water and sanitation -- these types of interventions will raise health care quality and standards in the developing world far more quickly and effectively than just focusing on intellectual property issues. And Western donors need to play their part, too, by directing their resources towards these types of interventions rather than just trying to import Western systems. Finally, a good bit of the solution must also come from efforts such as the "Grand Challenges" posed by the Gates Foundation.

Unfortunately, reports such as CIPIH tend not simply to gather dust on shelves or enter the circular file, as they so often do in the United States. Instead, they frequently develop lives of their own, building like tumbleweeds rolling across the desert until they reemerge as something far more authoritative -- and frequently more dangerous -- than they were originally. It's past time to focus attention on ways of improving economic growth in the developing world, the quickest way to reduce poverty and so increase health, and on low-cost health interventions that reflect the actual needs of developing world citizens.

John S. Gardner was General Counsel of the U.S. Agency for International Development from 2001 to 2005. He also served as a Deputy Assistant to President George W. Bush.


1 Comment

The fly in the new ointments
There is one fly in your ointment. The cost of new drugs is extremely high. Some of this is development costs (esp. clinical trials), the cost of paying the U.S. FDA to evaluate (no longer done for our benefit from general tax funds), and the high costs of advertising.

The advertising costs to the public now are higher than research costs. This is the big, ugly fly in their ointment.

Until the advertising costs are reduced drastically, we have rapacious pricing. This needs serious efforts at change.

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