Patents, profit and the poor: it's like an incurable disease

[Guest guest]

Patents, profit and the poor: it's like an incurable disease

The Nation, 1 May 2001. By Sachs

Debates over drug pricing and intellectual property rights are

raging. Many life-saving drugs, notably those to fight AIDS, are

produced under patent, mainly by US and European pharmaceutical

companies.

The patent-protected prices of these drugs often puts them out of

reach of poor people in the poorest countries. Thus, while many AIDS

patients in rich countries are kept alive by these drugs, millions of

people in poor countries are dying before they should, leaving behind

misery, millions of orphans, and economic devastation.

A typical AIDS drug regimen is priced at about US$10,000 (Bt450,000)

a year in rich countries. The costs of producing these drugs,

however, are much less than the market price, perhaps as low as $350-

$500 per year for some of the three-drug combinations used to treat

AIDS.

Some quality producers of generic drugs, such as Cipla of India, have

offered to provide these drugs at prices near to the cost of

production.

In response to this offer (and to bad publicity), Merck, Abbott

Laboratories and Bristol Myers Squibb, three large patent-holding

companies, announced their willingness to supply the African market

at " zero profit " - ie. At around $500 per year for the AIDS drugs

they produce.

The tragedy of millions of impoverished people dying of AIDS even

when drugs exist to treat them raises deep questions about global

intellectual property rights, because patent protection is creating a

barrier to essential medicines reaching the world's poor. But how

can the benefits of a global patent system that provides incentives

for innovation and new discoveries be combined with an assurance that

poor people gain access to the medical care that they desperately

need? One way is to set drug prices at different levels in rich and

poor countries. In rich countries, patent protection should continue

so that the pharmaceutical industry keeps innovating. This is

particularly important in the case of AIDS, because the spread of

drug resistant viruses and the unwanted side-effects of existing

medicines, means that new anti-retroviral drugs will be needed to

keep treatments effective. Thus drug companies must keep ploughing

their earnings back into research and development. Yet poor

countries – or donors acting on behalf of the poor - cannot pay the

same prices paid by rich countries. America's average annual income

is over $35,000; in much of Africa, annual income is less than $350.

Poor countries are indeed so poor that they cannot afford the drugs

even at the production cost of around $350 because even these reduced

prices amount to a year's average income

Thus, few Africans can afford AIDS treatment even when supplied by

generic drug producers.

Any viable solution requires that the following conditions be

satisfied:

- drug companies - whether patent holders or generic drug producers –

must provide drugs to poor countries at prices near to production

costs;

- drug prices in rich countries must remain higher through patent

protection to preserve incentives for innovation;

- rich and poor markets must be separated, so that cheap drugs from

poor countries are not smuggled into rich countries (or are not

allowed in legally through parallel-market imports);

- governments in rich countries must provide substantial assistance

to poor countries, so that their affected populations - who cannot

even afford these drugs at the reduced prices - can make use of them.

But rich-country voters may demand that drug prices for them should

also fall. If politicians cave in here - say, by eliminating patent

protection, imposing price controls or allowing re-import of drugs

from poor countries – innovation for new drugs will stall.

Still, rich country drug purchasers, however, should not fear the

worst: there is no reason to believe that the drug prices they pay

would rise just because drug companies agree to lower prices in poor

countries.

During the recent court fights over AIDS drugs in South Africa,

patents received a black eye.

But without them, the stream of anti-retroviral products to fight

AIDS would not have flowed, because the incentives for developing new

drugs would be lacking.

Some opponents of patents argue that government-sponsored research is

enough to develop new drugs, but history shows that, although

government-sponsored research is good at basic science, the profit-

based private sector is best at developing and introducing new

products.

So, reform the international patent system to guarantee the poor

access to essential medicines, but don't kill the goose that lays the

golden egg by undermining the patent system.

_____________

D Sachs is Galen L Stone professor of economics, and director

of the Center for International Development, Harvard University.

Copyright: Project Syndicate. Cross posting from:[AIDSFlash] HIV/AIDS

Regional Press - No 77 (1 May 2001)