The recent cases of Thailand and Brazil breaking patents of vital HIV drugs on the one hand, and German firm Boehringer Ingelheim’s decision to forgo its HIV drug patent in some countries on the other, reflect how patent battles are reaching a crescendo. In India, the Novartis controversy led to the health minister’s comment in favour of breaking patents if needed—not a signal global drugmakers will be happy about. Clearly, the debate on the unaffordable price of patented drugs and the need for that premium as an incentive for costly drug research is only getting louder. High time to begin work on some balanced answers.
It is amid huge controversy that Thailand and Brazil have taken to the compulsory licensing route under the flexibility clause of the World Trade Organization’s trade-related aspects of intellectual property rights (Trips) pact. This allows them both domestic production by generic manufacturers and imports from countries such as India. Support for these governments is coming in no uncertain terms from NGOs in the field and eminent individuals such as former US President Bill Clinton, since prices of life-saving drugs, when produced off patent, come down to a fraction of the patented drug price.
Indeed, Trips allows for flexibility in a country’s patent laws depending on its public health requirements. But the question is whether, given the current environment, the compulsory licensing route is open to being overused as a bargaining tool.
Also consider the reality of the market—the patent regime has allowed pricing at levels unaffordable by huge numbers and pharmaceutical majors are increasingly giving in to greater price cut demands. So, the related question is whether firms can improve their pricing strategies for patented drugs, with the goal of making these less prone to extensive bargaining and the associated uncertainties.
Pragmatism of that sort has anecdotal support. Parallel to the acrimonious negotiations with governments, as well as the lobbying by non-government parties, are efforts by drug patent-owning firms to gain some goodwill as well. Recently, Boehringer Ingelheim GmbH decided not to enforce patent rights for its HIV drug, Nevirapine, in 78 low-income countries. It will not charge the fee associated with “voluntary licences” for generic manufacturers. And, it will sharply lower the price of its own brand, Viramune, in these and a number of middle-income countries.
But Viramune, incidentally, is a first-generation drug whose patent is to expire around 2010. Besides, as drug resistance grows, the future of HIV treatment lies in the newer drugs and combines that are still highly priced. Would Boehringer do the same for its newer HIV drug, Aptivus (tipranavir)? Reports suggest that back in 2003, Boehringer, along with another firm GSK, had allowed more generic versions of their HIV drugs in South Africa and sub-Saharan countries, in return for the South African competition commission dropping its probe into their pricing.
Several similar examples over the years suggest that concessions for low-income population are made mainly to gain goodwill or under pressure. And, as seen lately, this trend, associated with its uncertainties, is set to grow. Even middle-income countries such as Brazil are in favour of breaking patents, in the absence of acceptable pricing for their poor.
The time is ripe for reviewing two basic issues. The conceptual one: is the premium associated with 20-year long patent rights the best way to reward drug innovation? And the pragmatic one: why not extend the concept of price discrimination (based on a market’s capacity) which underlies these firms’ strategies across countries into one where markets can be appropriately segmented within countries, too? A multilateral discussion is the way forward.
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