Patent Falsehoods

by Carol Adelman and Jeremiah Norris 
July 15, 2003
The Hudson Institute
Original Source: http://www.hudson.org/index.cfm?fuseaction=publication_details&id=2933

Thousands of people are dying unnecessarily in Africa because activists are blaming the AIDS epidemic on drug patents—which are, in fact, an important part of the solution. 
Decisions made by the World Trade Organization on how to treat AIDS in the Third World will hold life-or-death consequences for the 42 million people infected with the virus worldwide. At the WTO Conference in Cancún, Mexico between September 10 and 14, the AIDS debate will center on an attack on patents - the very system that allowed development of the drugs now used to treat AIDS patients around the globe. Third World activists and First World pundits alike argue that patents on AIDS drugs - and for that matter, all drugs - are a major obstacle to treating poor people in developing countries. The fact is that patents have little to do with the barriers of treating HIV/AIDS and other infectious diseases in Africa today.
In a Harvard study of 53 African countries, published in the Journal of the American Medical Association, the authors concluded that patents were not a major impediment to getting treatment. Why? Because most AIDS medicines are not even patented in these countries. Though most AIDS drugs are still under patent, the WHO has encouraged the formulation of generic substitutes and research-and-development-based companies are not enforcing their patents in poor countries. Some companies are even granting licenses to Third World companies to produce generic versions of patented drugs. Boehringer Ingelheim, for instance, gave a South African company the right to produce and sell nevirapine, an anti-AIDS drug. Pharmacia and Bristol-Myers Squibb also have ceded patent rights on AIDS medicines. America, the European Union, Switzerland, and Hungary have placed moratoria on bringing any WTO action based on patents for AIDS treatment. Thus, needy patients in Africa are now guaranteed that patents will not prevent compulsory licensing. 
Developed countries, particularly America, however, should draw the line at adopting a policy to allow developing countries to expropriate companies' intellectual property for any disease conveniently defined as an emergency. This therapeutic creep is the latest demand by health activists, the United Nations, and developing countries at the WTO talks. Third World countries such as Egypt were quick to see the potential benefit from this, claiming that erectile dysfunction in Egypt was a national emergency, thus exempting them from their international treaty obligations to honor patents on Viagra. 
The oft-repeated charge that the WTO agreement on intellectual property, Trade Related Aspects of Intellectual Property, works against better health for the world's poor is just wrong. First, the least developed countries are exempt from honoring any patents until 2016, and the more advanced developing countries don't have to comply until 2006. Moreover, compliance means merely that the developing countries must enforce laws for those drugs patented after 2006 or 2016, not any drugs patented before those dates. Second, the treaty already allows those developing countries that are capable of copying patented American drugs to export the copies to countries whose populations need them. 
The chief economist of the World Bank, Nicholas Stern, argues that patent rules implemented by the WTO will limit the ability of poor countries to get affordable drugs. His solution is to expropriate intellectual property rights from the pharmaceutical industry in developed countries, so that poor countries such as India, Brazil, and China can produce their own generic medicines at lower cost and export them to the poorest countries in Africa. This solution necessitates buying only the cheapest generic drugs made in developing countries. While less costly, it is misguided to think that buying the cheapest generics from countries with under-developed drug regulatory authorities is the best value for patients. Generic drugs are fine if they come from countries that have high manufacturing standards and qualified drug regulatory systems, and there are indeed some high-quality products produced in developing countries. A study in Lancet, however, found that approximately half of the sampled drugs in Nigeria were substandard, as were more than one-third of tablets from shops in various parts of Southeast Asia - and in some cases, there was no drug in the tablets at all. The scientists found that this was most probably due to the absence of adequate quality assurance during manufacture. 
They also expressed concern that substandard drugs sold in less-developed countries would contribute to global microbial resistance and treatment failure. The chief executive of U.S. Pharmacopoeia, America's national quality and safety-standards setting body for medicines, Roger Williams, warns, There are likely to be few faster ways to induce resistance to current AIDS drugs than by treating patients with counterfeit substandard products. 
Another fact that critics fail to appreciate is that consumers want the best value, not just the best price. While prices of some generics produced in developing countries may be lower than those of some discounted American drugs in developing countries, these prices exclude many standard features such as shipping and in-country distribution. Proven safety, quality, good packaging, instructions in the local language, liability for adverse affects, physician education, distribution systems, and follow-up on health outcomes are all factors that raise the price of both high-quality generic and patented drugs. With medicines, these factors translate into life-or-death matters. 
Donors financing these drug purchases must be ready to take full responsibility for adverse effects of any cheap generic drugs they purchase. This is the opposite, however, of what the WHO is doing now. When the WHO pre-qualified products for the Global Fund, it approved generic companies in India that make copycat American patented drugs. In doing so, the WHO issued a disclaimer stating, Inclusion in the list does not constitute an endorsement, or warranty of the fitness, of any product for a particular purpose, including in regard of its safety and/or efficacy in the treatment of HIV/AIDS. The organization refused to say exactly who, besides the poor African patient, does hold the liability for whether these cheap generic copies, untested in any clinical trials, work. Or worse yet, if they evoke resistant strains of the virus. 
The current focus on patents and prices may be well-intentioned, but good intentions do not translate into good policy if they ignore the real barriers to treating infectious diseases in poor countries - corruption and diversion of drugs, life-threatening quality control problems, and insufficient health-care infrastructure. The answer is not to blame patent laws; it is to provide the best supply of medicines for treating sick people in the safest and most cost-effective manner, not just the cheapest one.
This article originally appeared in American Outlook in July, 2003
Carol Adelman is a senior fellow and director of Hudson Institute's Center for Science in Public Policy. She served as a career foreign service officer for ten years and as an assistant administration from 1988-1993 at the Agency for International Development (USAID).
Jeremiah Norris is a senior fellow with Hudson Institute.