Kelvin Teo
Access to medicine - an entitlement or a commercial transaction?
India, which is currently home to a number of generic drug companies, is now a signatory to TRIPS. This means that the generic companies in India have to pay a “reasonable sum” of loyalty to the patent holder. Sooner or later, all member states of the World Trade Organisation (WTO) would have to conform to the Trade Related Intellectual Property Rights (TRIPS) regime.
This will have one obvious consequence – the prices of generic drugs will be driven upwards. Generic drug companies, unlike the brand name drug company, are able to sell drugs at low prices. Take HIV anti-viral drugs for example. A typical brand name drug company will charge a patient $1000 per month. If the same patient gets his drugs from a generic drug company, it will only cost him a mere $12 monthly.
However, with the TRIPS enforcement in place, the hardest hit will be in the African continent and other third world countries with high incidences of HIV. Patients who cannot afford the costs of treatment will inevitably suffer and die at a younger age. The other unfortunate thing is that it will make it increasingly unlikely for the third world to gain access to high-end drugs such as the protein-based ones.
On the other hand, pharmaceutical companies are victims of their own successes. The blockbuster chemical drugs they produce in early years have been so successful that it is near impossible to develop another chemical-based blockbuster drug that can outdo its predecessors. Therefore, the solution is to turn to Mother Nature. Mother Nature has endowed our bodies with a powerful magic bullet – antibodies.
Antibodies are very specific on their targets, and they form the basis of a new generation of protein-based drugs. One such example is Bevacizumab which is also known as Avastin. This drug is designed to halt the progression of cancers. The more target-specific the nature of the drug, the lesser the likelihood of side effects. This also explains why there is an increasing focus among established incumbent pharmaceutical companies to develop these protein-based antibody drugs. Yet there are other downsides of drugs such as Avastin.
Exorbitant cost is one such downside. A protein-based drug is typically more expensive than a chemical-based one. In the US itself where the drug is approved for use by the Food and Drug Administration (FDA), a year’s supply is capped at US$55,000 per year. The huge cost of such a high-end drug is already a barrier per se. Currently, there are no generic drug companies producing avastin, but should one be established, the costs will be more than that of a chemical-based drug. With the WTO TRIPS regime in place, it is going to add further to the costs. This makes it highly unlikely for third world countries to gain access to this new generation of drugs.
In retrospect, the WTO TRIPS regime allows countries to impose compulsory licensing for public use. it does however impose a number of conditions. One of those conditions is that there should first be an effort to obtain a voluntary license from the patent holder. This particular condition is waived in three cases: i) when there is an emergency; ii) in case of public non-commercial use (or government use); or iii) when the compulsory license is granted to remedy anti-competitive behaviour. In another words, the WTO TRIPS regime has a limited mechanism to improve access to medicine.
Let’s examine the Malaysian experience. Malaysia is a signatory to the WTO TRIPS. In November 2002, the Malaysian Ministry of Health sought a 2-year authorisation for compulsory licensing from the Malaysian Misitry of Domestric Trade & Consumer Affairs in order to import generic versions of patented antiretrovirals (ARVs). This was in response to failed negotation for price reduction with the patent holders and authorisation was given in Jan 2003. Following the government use authorisation, the patent holders reduced their prices by 50-80% in an attempt to preserve market share in Malaysia. The compulsory license was not renewed upon expiry because the Malaysian government was satisfied with the price reduction offered by the patent holders.
However, compulsory licensing is not a miracle cure to establishing access to medicine. There are trade-offs in imposing compulsory licensing. As highlighted by the abovementioned Malaysian experience, compulsory licensing is an intervention, not an industry norm. Substituting private supply of patented drugs with compulsory licensing deters foreign investment in the healthcare market and the rest of the economy. In fact, Malaysian embassies received complaints for enacting the compulsory license while a civil suit was filed by one of the patent holders against the Malaysian government.
Secondly, for compulsory licensing to affect market price, the patent holders must be interested in meeting the domestic demand of the country in question. No amount of bargaining will convince the patent holders to supply a poor country with a non-sizeable demand with medicine at a price deemed affordable by the country. Malaysia is probably one of the most developed among developing countries in the world.
Hence, the pharmaceutical divide in terms of drug access is perpetuated by the TRIPS regime. What should have been done instead is to determine how much a particular country should pay for a drug according to its needs and current economic indicators. If a poor country is in need of the drug due to the high incidence of a certain condition, the price of the drug paid per person should be lower due to bulk purchase and low performing economic indicators. TRIPS should not be indiscriminately enforced, but rather be implemented on a case-by-case basis.
For instance, generic companies exporting drugs to an extremely poor country should be given a waiver of “royalty” fees. After all, a balance has to be struck between reasonably protecting patent rights in monetary terms, and facilitating access for those who are in real need of the product. And currently, the TRIPS enforcement tilts in favour of the brand name drug companies holding the patent rights. Indeed, the set of changes affecting India’s generic drug companies are seen by commentators as the consequence of lobby efforts by American and Western brand name drug companies.
Why can compulsory licensing not be used more frequently not merely as an attempt to lower patent market price but to move to generic alternatives altogether. Could sub-saharan countries whose AIDS situation could easily be described as a crisis in the way the compulsory licensing article of TRIPS requires? For example would Lesotho, a country whose +29% of AIDS rate cripples it economically, not be able to enforce compulsory licensing and thereby massively reduce the cost of ARVs, helping it get a handle on its AIDS problem?
Hi Johnny,
Access to medicine is not only a moral problem, but also an economic one. In this case, economics doesn’t only boil down to dollar and sense but also allocation of scarce resources (in particular, medicine) to the people of Lesotho. One of the caveat of compulsory licensing is whether the host country can effectively impose an export ban on generic HIV drugs to assure that these drugs are only meant for domestic consumption.