Once again, the US’ annual assessment of how effective the intellectual property laws of its trading partners are has stirred the debate over the propriety of the exercise. That the US, itself a member of several international treaties on intellectual property rights, should examine and demand revisions in the laws of other countries, as mandated by Special 301 section of its Trade Act of 1988, obviously raises the hackles of the latter. Each of these countries has intellectual property laws that are consistent with current international treaties, and whose implementation is monitored by two multilateral institutions—the World Intellectual Property Organization and the World Trade Organization.
In the two decades or more since this practice started, India and China have consistently found themselves in the “Priority Watch List”, which includes countries whose intellectual property laws, according to the US, are the most “ineffective”. While China has often been “named” for not making its copyright Act more effective, India has been repeatedly named for not providing stronger patent protection. The US has also invited “any trading partner appearing on the Special 301 Priority Watch List … to negotiate a mutually agreed action plan designed to lead to that trading partner’s removal from the relevant list”.
In naming India, the US has raised concerns regarding provisions in the country’s patent law, which prohibit grant of patents on pharmaceutical products that constitute only minor improvements on existing variants. Policymakers had originally included these provisions in agreement with public interest groups for a specific reason—such patents were often used to extend the patent terms of existing products whose patents were about to expire. The overriding consideration had been to ensure that prices of medicines were kept in check by giving generic producers the opportunity to enter the market and provide low-priced alternatives.
The US’ contention, reflected in its Trade Representative’s report, is that by denying patent protection to these products, India is not “providing incentives to potentially beneficial innovations, such as temperature-stable forms of a drug or new means of drug delivery”. There is thus a difficult choice to be made—on the one hand is the larger social good, to be achieved by creating conditions that would help make medicines more affordable; on the other are private incentives for the pharmaceutical firms that can provide innovative products.
Thomas Pogge and Aidan Hollis of Yale University have provided a possible solution, suggesting a mechanism that would neither diminish the incentives necessary for privately funded pharmaceutical research and development, nor constrict the availability of affordable medicines to consumers. Holding the key to this mechanism is a Health Impact Fund (HIF), to be created through contributions made by countries. The money from the fund will be used to make a stream of payments to pharmaceutical firms based on the efficacy of their products to reduce the disease burden. In return, the firms would agree to sell their products at an administered price near the average cost of production and distribution. Proponents of this mechanism argue that the firms engaged in pharmaceutical innovation will benefit, for they will be able to profitably introduce important new medicines that will be needed mainly by patients who cannot pay high prices.
Such an HIF’s implementation may face several imponderables, not the least of which is the willingness of pharmaceutical firms to enter into negotiations and to be compensated according to the suggested parameters. Of course, there will be some socially responsible firms that will be persuaded by the benefits that an HIF would bring to the less advantaged sections of society.
From a broader perspective, there is certainly a case for greater corporate social responsibility in a sector like pharmaceuticals, particularly at a time when a large number of people across the world find modern medicines beyond their means. However, the global pharmaceutical industry has thrown up cases over the years where dominant firms have sought to retain their monopoly control over the market even after patents have lapsed.
For a number of years, the US Federal Trade Commission (FTC) has been trying to remedy a situation where manufacturers of branded pharmaceutical products have restricted the entry of generic producers to the market even after patents on the former’s products have expired. FTC has been especially gunning cases of collusive arrangements between the big brands and their potential generic rivals, in which the latter agree to defer the introduction of lower-cost medicines to the consumers. These so-called “pay-for-delay” deals have increased dramatically over the past three years, going from 14 cases in 2007 to 31 in 2010. Last year, such deals spanned 22 branded drugs with total annual sales of roughly $9.3 billion.
When it comes to giving the underprivileged the access to affordable medicines, social concerns and private incentives seem to face an irreconcilable frontier. A more intensive public engagement among all the stakeholders could provide the way through.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi
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