Innovation, IPR and public good

Innovation, IPR and public good

In the second part of their article on patents and prices, the authors contemplate the effects of patents and monopolies on prices

Anjan Das, K Subodh Kumar

Patents enable prices of medicines to be curbed that are artificially high due to competition. When medicines are under patent protection, the patent holder has a monopoly on the production and sale of the product for a minimum period of 20 years, and is thus, able to exercise a monopoly in the pricing of the product.

A key factor in fixing the price of a particular medicine is the patent on it, because of the monopoly on the medicine enjoyed by the patent holder. The World Health Organisation (WHO) estimates that one third of the world population lacks access to essential medicines, and the number will further increase.

Patent rights enable the patent owners to fix prices of medicines at high levels, and the effect of patents and monopolies on prices is demonstrated by data; which compares prices of patented or branded products, and those of generic producers; prices of the same product sold in different countries; and the prices of raw materials used in the production of medicines, in the open competitive market, and in transfer pricing practices of MNCs.

Prices of branded or patented products vs alternative or generic sources

A comparison of prices for HIV/AIDS medicines illustrates the fact that MNCs sell their medicines at much higher prices than those of generic producers. For example, the US price of 3TC (Lamivudine) marketed by Glaxo is $3,271 (per patient per year) whilst Indian generic manufacturers- Cipla and Hetero Drugs offer the generic versions for $190 and $98 respectively. In case of Zerit (Stavudine), the US price offered by Bristol-Myers Squibb is $3,589 (per patient per year) as compared to $70 and $47 for the generic versions by Cipla and Hetero respectively. Another case in point is that of Viramune (Nevirapine) marketed by Boehringer Ingelheim which is sold at $3, 508 in US compared to Cipla and Hetero’s prices of $340 and $202. This point is further illustrated by Cipla’s recent offer of $350-600 for a year’s supply of a combination of these three anti-AIDS medicines, as compared to the price of $10, 000-15,000 for the branded medicines.

Generic competition and prices of the patented product

Competition from generic producers will result in the lowering and levelling of prices of medicines. For example, the drug fluconazole is marketed by generic companies in Thailand for $0.29 and in India for $0.64. This compared with market prices for brand-name drugs at $10.50 in Kenya, $27 in Guatemala and (until recently) $8.25 in South Africa.

The case of Brazil offers another good example. When the Brazilian government began producing AIDS drugs generically, the prices of equivalent branded products dropped by 79 percent. The domestic production of AIDS drugs has enabled the Brazilian government to offer universal free treatment, making its AIDS programme one of the most successful – halving the AIDS death rate and saving $472 million from averted hospitalisations.

Price differentiation

In a country where alternative or generic medicines are available, a company’s branded product is usually priced lower due to the competition it faces from lower-priced alternatives. The same brand may be sold at higher prices in other countries where there is no competition from generic producers.

A health action international 1998 survey on Zantac, an anti-ulcer drug manufactured by Glaxo, indicated that the company lowered the price of the drug in India (marketed as Zinetac) because of competition. Several generic manufacturers in India produce ranitidine, the generic name for the active substance contained in Zantac. The survey showed that 100 tablets (150mg) of Zantac were sold for $2 in India, $3 in Nepal, $9 in Bangladesh, $30 in Vietnam, $37 in Thailand, $41 in Indonesia, $55 in Malaysia, $61 in Sri Lanka, $63 in Philippines, $183 in Mongolia. It was also sold at $23 in Australia, $77 in Canada, $196 in Chile, $132 in El Salvador, $150 in South Africa and $97 in Tanzania.

MNC transfer pricing of raw materials

A study by Dr Zafar Mirza compared prices of pharmaceutical raw materials imported into Pakistan to manufacture locally by MNCs. The study also found that several MNCs exported the raw materials to their subsidiaries in Pakistan at much higher prices which were available at a competitive rate if purchased from the open international market. In case of a drug produced by a German-based company, the price for the raw materials charged to the company’s subsidiary in Pakistan was $11,092 per kg whereas the competitive international price was $320. The price difference was 3360 percent. For an Italian MNC, the price of raw materials transferred from the MNC to its subsidiary in Pakistan was 7044 percent more than its price in the international market.

There is also a belief that drug companies sell their branded products cheaper in developing countries. This is often not the case. Prices of some products are higher in many developing countries. This makes medicines even less affordable, as countries with lower per capita income have to pay higher prices for the same medicine as compared to prices in developed countries.

Another study by Health Action International shows that retail prices of 10 out of 13 commonly used drugs, for which comparable data is available, are higher in Tanzania (annual per capita Gross National Product (GNP) of $120) than in Canada (per capita GNP of $19,380). The average retail price of 20 commonly used drugs in 10 developing countries of Central and South America are all higher than the average retail prices of the same drugs in 12 Organisation for Economic Co-operation and Development (OECD) countries. The average prices of drugs surveyed in South Africa are higher than in any of the eight Western European countries for which data is presented. South African drug prices are on average four times more than those in Zimbabwe.

The above points bring forth the point that the pharma industry fixes the prices for medicines by setting the limits according to what the market can bear. Profit maximisation, through the elimination of competition and the maintenance of market monopoly, is the main objective. Patent protection is the most effective tool for drug MNCs to keep out competition from generic producers and thus, maintain a monopoly control on the production, marketing and pricing of medicines.

The pharma industry and its government supporters justify patents on medicines and high prices on the ground that R&D of a drug is extremely expensive. Thus far, there is little convincing evidence to support this claim. Research indicates that industry estimates for R&D on each new drug ranges from $350-500 million, while independent estimates range from $30-160 million. Using either estimate, revenues from many life-saving drugs very easily exceed their R&D costs. For example, in 1999, the sales of Bayer’s ciproflaxin totalled $1.63 billion and Pfizer’s sale of fluconazale totalled $1 billion.

It is also debatable for MNCs to claim that their huge investments in R&D warrant the high prices for their products. A number of patented drugs were not discovered by the MNCs. Public-funded institutions and universities were largely responsible for the initial R&D of several medicines. For instance, the National Institutes of Health (NIH) in the US was instrumental in the discovery of a number of the AIDS medicines. In fact, the NIH estimated that in 1995, its contribution to the overall US health R&D accounted for 30 percent of the total, whilst that of private industry amounted to 52 percent. And yet, it is the pharma industry that reaps most of the profits from the production and sale of medicines.

In addition, available data suggests that pharma companies spend more on marketing and administration than on R&D. As percentages of sales, R&D expenses account for 10-20 percent, while marketing and administration range will be around 30-40 Percent.

Therefore pharmaceutical companies cannot justify high drug prices in developing countries as an incentive for R&D on new drugs. 80 percent of the projected worldwide drug market is in North America, Europe, Japan and Australasia. All of Africa, accounts for only 1.3 percent of the world market in pharma. In fact, Africa and Asia with 67 percent of the world’s population accounts only for 8 percent of the world market. These small markets in developing countries will therefore not significantly affect the R&D costs. The profits of the pharma industry will also not be affected by weaker patent protection in developing countries, which would enable the latter to manufacture and market medicines at lower prices.

The Africa Group in the WTO has stated, ‘All this has further aroused public interest and led to the conclusion, in some quarters, that patents have enabled drug companies to raise prices of their products far above the levels that can be afforded by a great number of people. Further it is argued that contrary to the principles and objectives of the TRIPS agreement, the present model of intellectual property rights protection is too heavily tilted in favour of rights holders and against public interest. In the same manner, patent protection is seen, whether rightly or wrongly, as shielding drug firms from competition from other firms and other products.”

Whereas K Balasubramaniam, Pharmaceutical Advisor of Consumers International states, “Consumers in developing countries can have regular access to affordable drugs when chemical intermediates, raw materials and finished products are available at competitive prices in the world market. This will not be possible when new life-saving drugs are given protection for 20 years and patent holders have the exclusive monopoly for manufacture, distribution and sales. The only way to ensure that chemical intermediates, raw materials and finished products are available at competitive prices in the world market and countries can freely import them is to have appropriate legislation, which will provide for compulsory licensing and parallel importing. Developing countries need assistance to enact such laws. They should not be in a rush to initiate the complex process of reform of the national legislation on IPR.”

Despite the need for developing countries to exercise their rights for compulsory licensing and parallel imports to enable access to affordable medicines, a major and perhaps the most disturbing aspect of the crisis of patents and drugs is that obstacles have been, and are being put, in the way of developing countries seeking to make use of TRIPS provisions on compulsory licensing or parallel imports in order to buy or produce drugs at more affordable prices.

The case of access to affordable medicines has illustrated a disturbing aspect of TRIPS—that this agreement has facilitated, and is continuing to facilitate, anti-competitive behaviour and the flow of trade in products at prices that are influenced or determined by monopolistic elements, which hinder trade at free-market prices. This runs counter to the trade-liberalisation principle of WTO.

Striking a balance

The debate over patents, drugs and fair and affordable access to health is making news worldwide. with the ever growing HIV/AIDS crisis.

Unfortunately quite often discussions involving the relation between the intellectual property system and access to health care has been based on misunderstanding or misconceptions of the patent system.

Patents perform an essential role in stimulating the development of essential drugs, including anti-AIDS drugs, by offering incentives for investing in expensive and long-term R&D of new drugs. Without patents, existing anti-AIDS drugs would not have been produced and new and better drugs that are needed to overcome the increasing resistance of the AIDS virus would not be developed.

At the same time, the patent system also contributes to society as a whole by accumulating and making available human knowledge to fight against the AIDS crisis. The patent system requires significant disclosure of the information leading to the invention of new drugs. Without the patent system, such key technical information would remain unavailable or even secret. Many health care researchers and drug manufacturers, who depend heavily on such information for their work, would have to reinvent the wheel. Given the severity of the crisis, no one can afford to spare such resources and time.

Therefore it is important to strike a proper balance between public health concerns and interest of the patent owner. This balance exists within the patent system. It is important to note that a number of member states of the World Trade Organisation (WTO) agree that the agreement on trade-related aspects of intellectual property rights (IPRs), which is administered by the WTO, also provides the necessary flexibility to achieve that balance, and to accommodate the needs of countries deeply affected by HIV/AIDS.

Some of the common misconceptions, or myths, surrounding the patent system and access to drugs and health care are:

Myth: “Problems in access to health care and the availability of life-saving drugs are primarily due to the patent system.”

Patents are only one of many factors that influence access to healthcare and drugs. Many government and non-government organisations involved in the fight against HIV/AIDS cite socio-economic factors as barriers to access to drugs. Indeed, the United Nations Declaration of Commitment on HIV/AIDS from the recent Special Session on HIV/AIDS notes the importance of strengthening national health and social infrastructures as a key means to prevent the spread of the epidemic.

Many drugs do not even fall under patent protection in some countries. In many African countries where the AIDS crisis is most acute, for example, a variety of protease inhibitors—a crucial treatment that helps stop the spread of the HIV virus from cell to cell within a patient – do not enjoy patent protection. Still, they are prohibitively expensive for most patients.

In fact, around 95 percent of the pharma products on the World Health Organisation’s essential drug list—which includes many drugs used to treat various aspects and side effects of HIV/AIDS are now off patent that is, no longer protected by patents, which generally last for 20 years counted from the time that an application is filed. Because of the time taken to process patent applications, the actual period of protection is often several years shorter.

Yet many of these ‘off patent’ drugs remain unavailable or unaffordable to most of those suffering from the virus. Why? The reasons are not to be found in the patent system. The reasons are due to socio-economic factors. In many cases, patents are irrelevant or only one of many factors that influence access

to healthcare and drugs. As noted in the UN Declaration, a concerted, cooperative effort by governments, the business community and civil society groups is needed to successfully prevent the spread of HIV/AIDS and to make healthcare and drugs available and affordable to those already affected by the disease.

Myth: “High drug costs are primarily due to the patent system, which allows companies to keep prices artificially inflated.”

A patent is not necessarily the only factor in determining the price of a drug. The price of drugs depends on a wide variety of factors, including the cost of research and development, production, distribution and marketing. Still, the actual market price is often marginal as compared to the access of same drugs. Even reducing the price of HIV/AIDS treatments to cover the costs of basic manufacturing and distribution alone – as was recently done in a number of countries hardest hit by the crisis – still keeps the cost of annual treatments at between $350 and $600 per year. These prices, which are similar to the cost of generic versions of the same drugs and make no provision for recouping the cost of R&D are still above the annual per capita income of some countries with high levels of HIV/AIDS.

Myth: “The patent system favours corporate interests over the greater social good.”

The patent system exists to protect the work of any inventor, whether an individual, a research institution, or an enterprise—ranging from a small operation employing a few persons to a large multinational conglomerate—in both developing and developed countries. It provides key incentives to inventive work and its related investment cost, by ensuring that the inventor derives certain economic benefits from his or her work for a fixed period of time, generally 20 years. An inventor must prove that the invention (such as a new drug) is new, is inventive, and is of practical use.

In return for patent protection, the patent system requires adequate disclosure of information about new inventions which would otherwise remain secret as proprietary information, without being shared with society. Through this quid-pro-quo agreement between society and the inventor, key information on the invention is made available to the public and to other researchers, thus adding to the general body of accessible technical knowledge in the world. This form of technology transfer is of prime importance in promoting and aiding further R&D in every country, especially in case of healthcare products. Medical researchers rely heavily on previous work in developing better drugs to treat diseases.

Myth: “The patent system deters sound competition.”

The patent system can be viewed as a form of social contract, administered by the government that balances the interests of the inventor—whether an individual or company—keeping in mind the interests of society at large. In granting a patent, the government gives exclusive rights to the inventor or patent owner for a limited period of time to decide who may—or may not—use the patented invention. The patent owner may give permission to, or license, other parties to use, produce, license, or sell the invention, or may do so himself. During the patent period, anyone can obtain a patent on an improved invention on the basis of the patent of others. When a patent expires the protection ends, and the invention enters into the public domain, meaning that anyone can freely use or reproduce it without having to ask for permission or make payments. The patent system is designed this way to allow new entrants to compete against existing patent holders.

At the same time, in most countries of the world providing patent protection the relevant laws stipulate circumstances under which patent rights could be curtailed or limited, for example, by way of granting non-voluntary (compulsory) licenses, subject to certain conditions.

Myth: “The patent system is especially unfair to developing countries, which face difficult social and economic circumstances and should be exempt from international intellectual property requirements, especially in the case of patent protection for certain drugs.”

A robust patent system providing adequate patent protection is an indispensable incentive to creative and inventive work and is crucial in establishing and maintaining an attractive commercial environment. An adequate patent system, effectively administered, ultimately stimulates domestic innovation, fosters new industries, and creates jobs. It helps attract foreign investment. It also helps countries develop and strengthen their own research infrastructures and capacities, seen by the UN and other organisations as a key factor in fighting AIDs in countries that are affected badly. In general, adequate intellectual property systems are a key factor in sustained economic development, which ultimately helps break the cycle of poverty and leads to better education, higher living standards, and better healthcare for people.

Besides this an adequate patent system also provides a proper balance between public and the interest of the inventor. For example, it should be able to work effectively and equitably whenever the patent owner abuses the exclusive right, or if specific circumstances require an adjustment to the patent owner’s rights.

Myth: “International treaties concerning patent protection interfere with the basic human right to life-saving drugs.”

The right of any individual to enjoy the material and moral benefits as a creator of intellectual property, and the right of all human beings to a standard of living that affords adequate health and medical care, are both set forth in the United Nations Universal Declaration of Human Rights (Articles 25 and 27). They are not contradictory but should be seen as complimentary because the former rights afford the enjoyment of the latter rights through progress and innovation in science. International intellectual property treaties, including those relating to patents, fully comply with the Declaration.

Monopoly vs patent as an exclusionary right

In England the ‘Statute of Monopolies’ of 1624 was an attempt to limit the abuses of privilege and power by the ruler. In stark contrast US courts have long stated that patents are a ‘negative right’ to exclude, not a ‘positive right’ to make, use, or sell. While the patent contains within its terms the right to exclude competitors from engaging in economic activity, US courts have insisted that this right is fundamentally different from a monopoly right—not related to or an extension of it as in the English historical example. As stated by the US Supreme Court, ‘monopolists have the sole right to buy, sell, or make and others are deprived of a pre-existing right to buy, sell, or make. The patent grant gives the patentee only the right to exclude others; his own right to practice the invention may be subservient to another patent. Moreover, since novelty is a requisite of patentability, the grant does not exclude the public from a pre-existing right.

Patents may be implicated in anti-competitive behaviour, such as where control of a foreign patent is included in an arrangement to fix prices or to control availability of product. But competition laws and patent laws go hand-in-hand, and rarely collide with one another within a single jurisdiction. As the court said, “The two bodies of law are actually complementary, as both are aimed at encouraging innovation, industry and competition. A fine line may occasionally, exist between actions protecting the legitimate interests of a patent owner and antitrust law violations. On one hand, the patent owner must be allowed to protect the property right given to him under the patent laws. On the other hand, a patent owner may not take the property right granted by a patent and use it to extend his power in the marketplace improperly, ie beyond the limits of what congress intended to give in the patent laws. The fact that a patent is obtained does not wholly insulate the patent owner from the antitrust laws.” “The patent is a ‘shield’ to protect an invention,” the Court went on to say, “not a ‘sword’ to eviscerate competition unfairly.”

The need for developing economies to innovate

In the era of globalisation, technology is emerging as key competitive factor. Therefore companies have to innovate to produce cutting edge technologies which would keep them competitive in market place. An innovation is more than an idea; it is the implementation of an idea. It is also not the same as creativity. Creativity is a skill whereas innovation implies a process starting with an idea following through different stages of development and refining to implementation. Both ideas and creativity are vital parts of innovation, but neither is sufficient for an organisation to follow a creative idea through to the fuller state of an innovation.

Licensing is a valuable instrument to help individuals and enterprises to survive and to be more successful in the global market. Why is that so? Particularly small and medium sized enterprises (SMEs) are not in a position, because of lack of capacity, capital, and experience, to act globally. Accordingly, the owner of eg a certain new technology, which in principle may be useful world-wide, is not in a position to manufacture and import products from a certain home market into markets elsewhere.

This is even more so because in relation to a variety of goods, especially as an example in the pharma field, one must follow a wide variety of national admission procedures, standardisation etc..

The most natural step for a company, not being a so-called global player, in such a situation is to look for partners in those parts of the world which cannot be served directly. An ideal form of such a cooperation partner, to which the new technology shall be ‘transferred’, or by the aid of which the new technology in question shall be transferred to the respective foreign market, is a licensee.

Also, in a broad range of technical fields there is a permanent need for new products. As an example, pharma industry world-wide is constantly in need of new developments, which by the ‘giants’ of this world could be further developed and marketed world-wide. Again, a small or medium sized company would have neither the sources nor the knowledge of such technologies being available elsewhere. The natural cooperation partner in such an example would be a licensor, possibly even a licensor from abroad which, as far as its own market is concerned, is in a similar situation, and which would even be willing to grant exclusive rights to a licensee in a certain foreign territory, because that territory would be fully out of reach for such a licensor.

As a consequence of the aforementioned situation, which in its totality is due to the above described increasing globalisation of world markets, licensing, both in and out, plays a steadily increasing role in nearly all fields of technology, but particularly in such fields like pharma, computer software, or telecommunication, which may provide for the most prospering licensing markets in the world.

Special considerations relating to developing/emerging countries

The increase in the number of licenses and similar cooperation’s as discussed above are taking place all over the world, the impact on developing/emerging countries in particular cannot be overestimated—On one hand, the world-wide competition of goods will make it more and more necessary for enterprises in all countries, even in emerging market areas, to manufacture and sell products being able to compete with similar products world-wide, ie of similar technical standard and technology. This in many instances will make it necessary to license in up-to date technology from licensors in other countries. This is the challenge.

On the other hand, the chance, immediately and inherently connected to increasing globalisation of world-wide economies and the denser and denser network of license agreements world-wide derived there from, is that own developments, just as an example: biotech or computer related inventions developed by rather small or medium sized companies in Japan, in future will no longer be used just on a local or regional scale, but through the aforementioned network of licensing reach each and every country and industrial region of this world, with the highly welcomed contribution of royalties, i.e. essentially income beyond general overheads connected with the development of new technologies, flowing into the home country of such enterprises.

The role of the government as a facilitator

Compulsory licenses are licensees that are granted by a government to use patents, copyrighted works or other types of intellectual property. The US government has several specific statutes for compulsory licensing covering a wide range of topics, as well as more general authority for compulsory licensing under antitrust and eminent domain laws. Other countries have their own approaches to compulsory licensing.

Compulsory licenses are an essential government instrument to intervene in the market and limit patent and other intellectual property rights in order to correct market failures. The authority to issue a compulsory license is important, even when the right is not exercised, because it may temper the exercise of market power or the abuse of a patent.

Governments issue compulsory licenses to broaden access to technologies and information in order to achieve a number of public purposes. For example, National Public Radio (NPR) was granted compulsory licenses for non commercial educational broadcasting use of the repertoires of the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI). The Clean Air Act provides for compulsory licensing of patents related to air pollution. Antitrust authorities seek compulsory licenses as remedies for problems of monopoly or anticompetitive practices. The National Institutes of Health is examining compulsory licenses in order to facilitate broader dissemination of biotechnology research tools. Many countries have provisions in laws for compulsory licensing if the patent owner refused to make the invention available (failure to work the patent), for dependent patents, or for various public interest reasons, such as to correct cases where pharmaceuticals are available to the public in insufficient quantity or at abnormally high prices.”

Patents and other intellectual property rights are creations of government policy. In writing about a German compulsory license related to the development of interferon, Michael Kern wrote—”One should not forget that patents represent an interventionist instrument, ultimately for the sake of community welfare. Thus intervention to restrict some of the effects of patents may be required, when the community welfare is no longer served.”

Nations currently have the right to issue compulsory licenses on patents and copyrights. The Paris Convention for the Protection of Industrial Property plainly states, “Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.”

The World Trade Organisation provisions on intellectual property are contained in the agreement on trade related aspects of intellectual property, known as TRIPS. The TRIPS provides for compulsory licenses of patents in Article 31, but also provides a number of restrictions on the use of compulsory licenses. The North American Free Trade Agreement (NAFTA) has its own provisions for compulsory licensing of patents, which are somewhat more restrictive than those in the TRIPS. In earlier drafts of the OECD’s proposal for a Multinational Agreement on Investments (MAI), there was language to limit compulsory licensing of patents much more severely. Compulsory licenses would only be used ‘to remedy an alleged violation of competition laws’.

Markets for technology are increasingly important for the circulation of knowledge. Patents play a pivotal role in the development of technology transactions. Governments need to improve their knowledge of the functioning of markets for technology and the effect of such markets on economic performance in order to support their development in the most socially beneficial directions.

Encouraging patenting by public research organisations (PROs) has led to increased commercialisation of inventions derived from publicly funded research hence generating greater benefits to society but may have made it more difficult for researchers to access certain types of basic science. Governments should ensure access to basic inventions, for instance by monitoring patenting and licensing practices at PROs, and by reinstating and clarifying the exemption for research use, which is now being restricted.

In biotechnology, the surge in innovation, notably by start-ups, benefited greatly from the possibility of obtaining patent protection, which attracted the capital needed in this area. In certain upstream fields, such as genetic material or genetic testing, there are cases where patents might still impede access to technology. The quality (novelty) and breadth of patents in these areas need to be reviewed. Governments should explore ways to encourage alternative means of disseminating knowledge, such as the public domain, and to improve the diffusion of patented inventions, e.g. through the promotion of patent pools and the publication of licensing guidelines.

Software and services are new subject matter for patents, although to a different extent across countries. The impact of patents on innovation and diffusion in this area has yet to be systematically evaluated, and such evaluation is sorely needed. The quality and breadth of software patents also need to be monitored, and patent offices should keep up their efforts to systematise their experience and knowledge base. The role of patents in the expanding world of open source software also needs to be evaluated.

Economic evaluation suggests that there are further possible directions of change for patent regimes that are worth exploring. Possible avenues for economic-based reforms of patent regimes include introducing a more differentiated approach to patent protection that depends on specific characteristics of the inventions, such as their life cycle or their value (as opposed to the current uniform system); making patent fees commensurate to the degree of protection provided; and developing alternatives to patenting, such as the public domain. In the near future, the patent system will be facing even greater challenges than those it has confronted in the past two decades, including increased globalisation, the overwhelming use of Internet as a vehicle of diffusion, and expanded innovation in services. Well-informed and more global policies will be needed to prepare the patent system to meet these new challenges, so that it can continue to fulfill its role of encouraging innovation and technology diffusion.

Conclusion

  • The accessibility to new technologies in developing economy should be addressed with a holistic approach. While the benefits of patent protection are not confined to business interest of the patent holder but it has demonstrated several positive impacts on the well being of the society in general.

  • The question of overall balancing of rights is not specific to the access to drugs issue alone, but rather a problem that arises from the implementation of TRIPS generally. In the context of public health and access to medicines, Article 8.1 offers some scope for WTO Members to take necessary measures. However, the extent of its usefulness is limited by the phrase “provided that such measures are consistent with the provisions of this agreement” as it to a large degree negates the underlying premise of Article 8; that is to enable WTO members the flexibility of adopting policy measures for public good. It should therefore, be clarified that the public-interest intention of Article 8 should not be frustrated, and a revision of the provision should be undertaken for this purpose. In line with a suitably amended Article 8.1, members will have certainty when they adopt measures to protect public health. Such measures would include compulsory licensing, parallel imports and exclusion of patentability of medicines (or some categories of medicines).

  • A tiered or differential pricing system may make limited contribution to the problem of access to medicines.

To be effective and equitable, initiatives on tiered or differential pricing must be approached on a multilateral basis, with the participation of patent holders and generic producers in fair and transparent negotiations. However, it is crucial that any differential pricing initiative must not be used to extract promises of intellectual property rights protection that could make medicines more expensive in the long term. As such, discussion on tiered and differential pricing initiatives should be undertaken outside of the WTO and the TRIPS Council. Discussions or negotiations on such initiatives shall not prejudice the rights of countries to adopt policy options in TRIPS, namely the right to implement compulsory licensing and parallel import measures, nor should such initiatives be seen as an alternative to generic competition.

References

1. Balasubramaniam, K (2000) Implications of the TRIPS Agreement for Pharmaceuticals: Consumers Perspectives, Consumers’ International 2. Balasubramaniam, K (2001) Access to Medicines: Patents, Prices and Public Policy—Consumer Perspectives, paper presented at Oxfam International Seminar on Intellectual Property and Development: What Future for the WTO TRIPS Agreement?, Brussels, March 20, 2001 3. Correa, C (2000a) Integrating Public Health Concerns into Patent Legislation in Developing Countries, South Centre, Geneva 4. Correa, C (2000b) Intellectual Property Rights, the WTO and Developing Countries—The TRIPS Agreement and Policy Options, Third World Network, Malaysia 5. HAI (1994) HAI News, No 78, August 1994 Health Action International 6. HAI (1998) HAI News, No 100, April 1998 Health Action International 7. Kavaljit Singh (2001) Patents vs Patients—AIDS, TNC and Drug Price Wars 8. Medicines Sans Frontiers (2001) Prescriptions for Action, MSF Briefing for the European Parliament – Accelerated Action Targeted at Major Communicable Diseases within the Context of Poverty Reduction, Medicines Sans Frontieres 9. Oxfam (2001) Cut the Cost, Patent Injustice— How World Trade Rules Threaten the Health of Poor People, Oxfam GB 10. TWN (1998) Options for Implementing the TRIPS agreement in Developing Countries—Report of an expert group on the TRIPS agreement and developing countries, third world network, Malaysia 11. UNCTAD (1996) The TRIPS Agreement and Developing Countries, UNCTAD, Geneva, New York 12. WHO (2000) Communicable Diseases 2000—Highlights of activities in 1999 and major challenges for the future, World Health Organisation, Geneva 13. WHO (2001) Globalisation, TRIPS and access to pharmaceuticals, WHO Policy Perspectives on Medicines, No 3 March 2001, World Health Organisation, Geneva

14. Zimbabwe (2001) Statement by Zimbabwe on Behalf of the Africa Group on the Crisis Arising from the Effects of Patents on Prices and Affordability of Pharmaceutical Drugs, Permanent Mission of Zimbabwe to the World Trade Organisation, Geneva.

(These are the view points of the authors and not be construed as the opinion of the organisation they represent. Anjan Das is Senior Director and Head-Technology, Innovation & IPR at the Confederation of Indian Industry. K Subodh Kumar is Head IPR & Andhra Pradesh Technology Development & Promotion Centre, Confederation of Indian Industry. They can be contacted at anjan.das@ciionline.org and subodh.kumar@ciionline.org respectively).