Intellectual Property
The issue of intellectual property is involved in the debate about the perceived conflict between patents and access.
The Role of Patents in Drug Development
Under a patent system, an inventor is entitled to a limited monopoly for a period of time, typically 20 years. This exclusivity may permit high prices and, consequently, an increased economic return that serves as an incentive to develop new products. The system has worked quite effectively in the pharmaceutical area, where the incentives deriving from exclusivity have resulted in important new drugs. The first generation of patients pays a higher price than subsequent generations, which provides compensation for the large research costs involved in developing a new drug. When the patent expires, the price normally falls as generic competitors enter the market.
Even though this approach has been extremely successful in the developed world, it does not generally work for products for which the main market is limited to the developing world. The total magnitude of the market in the developing world for products for HIV, malaria, TB, or less widespread diseases is likely to be too small to provide an adequate incentive for the private sector. This fact, together with the fact that patents are likely to result in higher prices, has raised important concerns in the developing world.
The Drug Access Debate
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) entered into force on January 1, 1995.6 This agreement requires the members of the World Trade Organization (WTO), which include nearly all major trading nations, to live up to defined standards of intellectual property protection. TRIPS was part of a much broader international trade package negotiated during the Uruguay Round, one of a series of international trade negotiations that have taken place since World War II. The United States and European nations, which were the strong proponents of TRIPS, were responding to pressure from their pharmaceutical, copyright content, and trademark-based industries.
The pharmaceutical industry's concern was that a number of developing nations had made deliberate decisions to deny patent protection to pharmaceutical products and to grant protection only to processes for producing pharmaceuticals. These nations believed that inexpensive access to pharmaceutical products was so important that these products should not be patented. In its 1970 patent law, for example, India excluded pharmaceuticals from product patent protection, effectively choosing to provide low-cost pharmaceuticals for its people at the expense of eliminating incentives to create new products. This law was one of the reasons the Indian generic pharmaceutical industry was able to evolve to make and market copies of drugs that were still on patent in wealthier nations. Another concern for the pharmaceutical industry arose from the compulsory license process, a legal process available in some nations to authorize the use of a patented technology under some circumstances even over the patent holder's objection. In practice, compulsory licenses are rarely granted but are instead used as a threat to negotiate lower prices for the technology or pharmaceutical involved.
The United States was determined to change these laws and in TRIPS achieved important requirements for expanding patent protection. The most important TRIPS provision relevant to pharmaceuticals is article 27, which includes a requirement that "patents shall be available for any inventions, whether products or processes, in all fields of technology." (U.K. Commission on Intellectual Property Rights 2002). The clear intent of this language was to prohibit exclusions of pharmaceutical products as in the Indian law. Article 31 established careful procedural limitations on when a nation could grant a compulsory license. As part of the political compromise, transitional provisions gave developing nations extra time to comply with the treaty's requirements and also set up arrangements for the remaining parts of patent terms to be made available for products developed during the transition period. Because of these transitional provisions, developing nations were not generally required to provide product patents on pharmaceuticals until January 1, 2005 (a date that has since been extended to 2016 for the least developed countries).
During the years following the entry into force of TRIPS, a substantial and bitter debate over access to pharmaceutical products in developing countries focused largely on access to antiretroviral agents for HIV patients in Sub-Saharan Africa. A group of nongovernmental organizations argued that patents on these drugs in the developing world raise the prices of the products necessary to help such patients survive. The research-based pharmaceutical industry countered that many of the relevant products are not covered by patents in the nations involved and that the problem is not patents but the inadequacy of the countries' medical infrastructure.
An area of convergence has begun to emerge in relation to differential pricing: prices should be lower in developing nations than in developed nations, permitting pharmaceutical firms to recover their research expenditures in the developed world while making products available at near marginal production cost to the poor in the developing world. This differential pricing is justified because potential sales in poor nations are so small that the market provides only a minimal incentive: total sales in the poorest nations account for only about 1 percent of global pharmaceutical sales. The research-based pharmaceutical industry would prefer to achieve this differential pricing by means of a donation program or simply by charging different prices. Critics would prefer that the patent monopoly not be available to raise prices in the developing world, thereby opening up markets to local generic producers.
Movement toward agreement on differential pricing was reflected in the Doha Declaration on TRIPS agreement and public health, reached at a November 2001 WTO meeting of trade ministers. This declaration affirmed that TRIPS "should be interpreted and implemented in a manner supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all" (TRIPS, paragraph 4, 2001). It affirmed the right of nations to use the exceptions to TRIPS to address public health concerns, specifically stating that "public health crises, including those related to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency" and, thus, facilitate the right to use compulsory licensing (WTO 2003).
The Doha Declaration left an issue unresolved: the manufacture of drugs under compulsory license for nations that do not have the capability to manufacture the drugs themselves. The problem arises from the compulsory licensing article of TRIPS, which contains a provision, article 31(f), requiring that the manufacture of products under compulsory license be predominantly for the domestic market. Thus, a small Sub-Sahara African nation clearly has the right to grant a compulsory license but may have no local industry able to manufacture the product. If it asks a foreign firm to manufacture the product, that firm would be manufacturing the product primarily for export, a violation of TRIPS.
The Doha negotiators did not find a way to resolve this problem, and article 6 of the Doha Declaration called for members of the TRIPS Council (a group of national representatives) to find a solution by the end of 2002. By that time, all member countries except the United States had agreed to a procedure for waiving article 31(f). The new agreement covered products needed to address public health problems recognized in the Doha Declaration, but the United States feared that it would be expanded to a variety of other products and was unwilling to accept it. Finally, a compromise was reached in August 2003. The United States accepted the 2002 document, provided that the General Council chairperson of the WTO made an appropriate parallel statement. The chair made the statement, which included language that the agreement would be used "in good faith to protect public health" and not be "an instrument to pursue industrial or commercial policy objectives," and recognized the need to respond to the industry's concern that products produced under this agreement would not be exported to major developed world markets (WTO 2003; see also UNAIDS 2003).
This agreement represents a step forward for access and will certainly place pressure on the research-based pharmaceutical industry to provide products in the developing world at low prices. It leaves several important problems only partly resolved, however. One is the need to prevent importation of the low-priced products into the developed world. Such imports would cut into the patent-protected market and affect incentives to develop new products. A second is political backlash. When the general public becomes aware that a product is available to the poor in a developing nation at a price far below that which patients in developed nations must pay, the political backlash for the pharmaceutical industry in the developed world may be severe.
Most important, resolving the legal problem of article 31(f) does not resolve the economic problem. It confirms that there will be no patent incentive for the development of drugs for diseases endemic to the developing nations and that public funds will be needed for this purpose. Such funds are currently inadequate.
The Research Tool Issue
Another important problem arises from the changing nature of medical research and of patenting practice. This is the research tool problem: many of the basic tools used in medical research are now themselves patented. For example, the research use of certain genetically modified mice is patented in the United States, as are the uses of many gene sequences and protein crystal coordinates. In the case of the malaria antigen merozoite surface protein 1, some 39 patent families cover various aspects of the protein (U.K. Commission on Intellectual Property Rights 2002).
Such patents can significantly complicate research and make it more expensive. Each one that might affect a particular research program requires legal analysis to determine whether it is valid and actually applies to the planned research program. If relevant, a license must be sought or the research program must be redesigned. The more patents are involved, the greater the likelihood that a patent holder will refuse to grant a license or will demand an exorbitant sum. Even though Walsh, Arora, and Cohen's (2003) study finds no cases of research programs being canceled midstream because of this problem, it finds many cases of efforts to avoid the problem by, for example, modifying the research; conducting the research offshore in locations where the relevant patents are not in force; or, in some cases, simply ignoring the patent.
