Pirates or Patents: Affordable Medicine in the Developing World

Source: Wikimedia

Commons2005 appeared to be the year that marked the end of cheap generic drugs and the possibility of getting affordable medicine for millions of people. This was the year the WTO agreement on the law was extended to all WTO member states. This was a great victory for Western pharmaceutical companies, but it poses serious problems for developing countries and for poor people in need of lifesaving medicine.

In India since WWII, a big generic drugs industry has developed. In India only the process and not the drug could be patented. In 2001 this caused India to make international headlines; Cipla, a company lead by Yusuf Hamied announced that they would produce the latest HIV medicine, for only 1 dollar a day per patient. The previous price was 10-12 000 dollar a year. Due to the fact that the TRIPS agreement had not yet come into effect, no international laws were broken.

The pharmaceutical companies in a back lash against calls for reform called Yusouf Hamied a pirate, as they, as well as much of modern economic theory, see patents as a means of fostering innovation. Without the protection of a patent there will be no incentive to invest and develop new solutions and therefore there will be no new drugs. Most people don’t question the need for patents, but there are many who question the pricing of drugs. Medical companies claim that the price of a drug reflects the cost of developing it. However, Peter Rost, former vice president at Pfizer, does not regard this argument as credible. He claims that firstly, for all the big pharmaceutical companies the big expenditure is not research and development, only around 20 percent of the companies incomes are spent on R&D. The largest cost is marketing. The price could be significantly lower if marketing was cut. Secondly, research is not always paid for by the companies, funding often comes from the state; in the form of taxpayer’s money. A lot of the basic research in the development of a drug is not even carried out by the pharmaceutical companies, it’s conducted by universities. And yet the companies put a price tag on medicine that is, as Yusouf Hamied puts it, “obscene”, and one which poor people often can’t afford.

Yusuf Hamied, Chairman of Cipla. Source: Birkbeck Media Center/Flickr.

There were fears that the TRIPS agreement wouldforce India to stop producing cheap generic drugs, and therefore eliminate the cost-reducing effect that the Indian production has had on world prices. To a great extent those fears were realized; after 2005 India experienced a price rise on medicine ranging from 26-242 percent. This price rise poses a clear threat to the availability of drugs for poor people. However, there is a way around the Property rights agreement, namely compulsory licensing. This means that a domestic producer can be granted a license to produce a patented drug in certain situations, e.g. national emergency. For several years, however, there was a problem in defining this issue; what constitutes a national emergency? Perhaps somewhat unexpectedly a terrorist attack provided the solution. In 2001 anthrax letters appeared in the United States and people demanded a cheap vaccine. Such a vaccine existed, but it was patented by a German firm and quite expensive. Suddenly it was in the United States’ interest to use compulsory licensing and therefore the biggest obstacle towards an agreement was gone. Subsequently, at the WTO meeting in Doha it was decided that individual states could decide what constitutes a national emergency.

In light of that decision, India granted their first compulsory license in 2012, to manufacture a patented cancer drug. Now the drug is available for 97 percent less. But not everyone is pleased with India and other countries’ use of compulsory licensing. The pressure is mounting on India to change their policy. They are facing strong political pressure from Washington, as well as intense lobbying from pharmaceutical companies.

Only time will tell, if the western idea of rigorous patent and property rights will prevail, or if the alternative path with a focus on public heath, which is promoted by India and many other developing countries will be followed. Whatever the path we choose, generic copies raise some interesting questions; can or should the access to affordable lifesaving medicine be considered a human right? Or will the use of compulsory licensing, and the efforts to provide affordable medicine to poor people, lead to less new drugs being developed? These are complex questions without easy answers and most importantly it highlights the conflict in values that exists in the world. It forces the international community, states and individuals to face the question; which values are we putting first, human rights or modern liberal market economy? These are two core values in the western world, that are heavily stressed in international forums, but which will win when push comes to shove and we can’t have both


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