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Are Pharmaceutical Patents A Barrier to Access to Medicines? The Importance Economic Development and Growth

Written by Dr. Kristina Lybecker
Associate Professor of Economics, Colorado College
Posted: May 21, 2013 @ 4:52 pm

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Critics argue that pharmaceutical patents are a barrier to wide-reaching access to medicines, especially for vulnerable populations in the developing world.  They cast their argument in the phrase, “Patents Kill” and advocate against intellectual property (IP) protection for medical innovation and the trade agreements that incorporate them.  Their position, however, begs the question of what truly influences a population’s access to medicines.  This week, as the United States and a dozen other nations continue the Trans-Pacific Partnership (TPP) Agreement negotiations, the answer is more important than ever.  Despite the critics’ position, recent students cast doubt on their argument, providing evidence that access is critically linked to a country’s level of economic development which is enhanced by strong intellectual property rights protection.

Access is defined as “having medicines continuously available and affordable at public or private health facilities or medicine outlets that are within one hour’s walk from the homes of the population” (United Nations Development Group, 2003).  Fundamentally, access is largely continent upon the nation’s level of economic development and available infrastructure.  Given this, there are two important reasons to believe that the TPP will not inhibit access to medicine.  First, most would-be signatory nations are well developed.  Second, trade and IP protection enhance growth and growth furthers access.

Not surprisingly, barriers to access are more prevalent in less developed nations and access to medicine is a function of the level of economic development.  Not surprisingly, higher-income nations benefit from greater access to medicines.  In the context of the Trans-Pacific Partnership, the included nations are all classified as “High-income” or “Upper-middle-income” with the exception of Vietnam, which is considered “Lower-middle-income” . [1]  As a function of their prosperity, these are not nations struggling with access, and the signing of the TPP Agreement will not change that.   The TPP Agreement will only enhance that development and growth.

Importantly, one can expect the TPP Agreement to enhance access, through the economic benefits of greater trade and growth.  A 2006 United Nations Industrial Development Organization (UNIDO) report examined the role of intellectual property rights in technology transfer and economic growth, concluding that, for advanced nations, evidence suggests that strengthening IPRs raises growth, in part due to increased innovation and technology diffusion.  Further, for middle-income countries, evidence indicates that stronger IPR regimes encourage both domestic innovation and technology diffusion through foreign patenting and international trade, which can positively impact growth. [2]  These conclusions are further supported by a 2012 study that finds “patent protection enhances innovation and economic growth in countries where the capacity to conduct innovative research exists”. [3]  Intellectual property rights encourage growth and growth enhances access.

History supports this argument as well.  The strength of these linkages is evident in the recent experiences of China, India and Brazil.  In the 10-year period between 1995 and 2005, these three nations doubled, or nearly doubled, their Patent Rights Index (PRI) rating.  Significantly, in the same period both biotechnology patenting and technology transfer, as captured by Foreign Direct Investment, increased substantially. [4]

As the TPP negotiations continue this week, the debate over intellectual property rights and access to medicines continues as well.  In the quest to eliminate barriers to access it is critical to correctly identify what factors genuinely inhibit access.  In the context of this TPP Agreement, strong intellectual property rights enhance trade and growth, which enhances access to medicines.  If greater access is to be achieved, safeguarding the protections surrounding innovation is essential, for it encourages investment, technology transfer, and economic prosperity.


[1] “High-income” nations include:  Australia, Bunei Darussalam, Canada, Japan, New Zealand, Singapore, and the United States.  “Upper-middle-income” nations include:  Chile, Malaysia, Mexico and Peru.  Vietnam is classified as “lower-middle-income”.  (World Bank)

[2] Falvey, Rod, Neil Foster and Olga Memedovic.  “The Role of Intellectual Property Rights in Technology Transfer and Economic Growth: Theory and Evidence”, United Nations Industrial Development Organization (UNIDO), Working Paper, Vienna, 2006.  Available at:  http://www.unido.org/fileadmin/user_media/Publications/Research_and_statistics/Branch_publications/Research_and_Policy/Files/Working_Papers/2006/WPjuly2006%20IPR_rights_in_technology_transfer.pdf

[3] Kim, Yee Kyoung, Keun Lee, Walter G. Park, and Kineung Choo, “Appropriate Intellectual Property Protection and Economic Growth in Countries at Different Levels of Development,”  Research Policy, vol.41, no.2, March 2012, pp. 358-375.

[4] Pugatch, Meir Perez, David Torstensson, and Rachel Chu. “Taking Stock: How Global Biotechnology Benefits from Intellectual Property Rights”, Pugatch Consillum, June 2012.


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Posted in: Biotechnology, Guest Contributors, IP News, IPWatchdog.com Articles, Patents, Pharmaceutical, Technology & Innovation

About the Author

Dr. Kristina M. Lybecker is an Associate Professor of Economics at Colorado College in Colorado Springs. She earned a B.A. from Macalester College, with a double major in Economics and Latin American Studies, and received her Ph.D. in Economics in 2000 from the University of California, Berkeley. Kristina’s research analyzes the challenges surrounding intellectual property rights protection in innovative industries: incentivizing pharmaceutical research and development especially on neglected diseases, addressing the difficulties of strengthening intellectual property rights protection in developing countries, battling the problems related to pharmaceutical counterfeiting and the unique nature of protection for biotech therapies. Recent publications have also addressed alternatives to the existing patent system, the balance between pharmaceutical patent protection and access to essential medicines, and the markets for jointly produced goods such as blood and blood products. Kristina has testified in more than a dozen states on the economics of pharmaceutical counterfeiting. She has also worked with US Food and Drug Administration, Reconnaissance International, PhRMA, the National Peace Foundation, the OECD, the Fraser Institute, the Macdonald Laurier Institute, and the World Bank, on issues of innovation, international trade, and corruption.

 

 


2 comments
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  1. What is interesting is that most arguments against patents are from a lack of diffusion. For instance, see Paul Romer who argues we want incentives to invest, but property rights inhibit technology diffusion. What I find interesting is there is no macroeconomic evidence for this point of view. This same ideas pervade the anticommons argument. Yet the Bayh–Dole Act seems a perfect natural experiment and shows technology diffusion increased as property rights were extended to languishing technologies developed with government money.

  2. I think the access problem is not about the existence of patent rights per se, but the ability of developing countries (government agencies/patients) to pay monopoly prices charged in developed countries. There is also a lack of ex ante incentives to fund therapies for neglected diseases for the same reason. So IPRs are not the problem, it’s this market failure. Prizes/subsidies/AMCs and other “non-IP” incentives may help overcome this gap.