Patent Law 2.0: Not the Answer the Developing World Needs
|Written by Dr. Kristina Lybecker
Associate Professor of Economics, Colorado College
Posted: August 18, 2013 @ 8:30 am
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In a recent article in the New England Journal of Medicine, Amy Kapczynski argues that the Supreme Court of India’s strict interpretation of the country’s new patent law provides a model to be followed by other countries. Kapczynski applauds this “Patent Law 2.0” and argues that it will enhance access to medicines and may improve pharmaceutical innovation. Unfortunately she is wrong on both counts.
Section 3(d) of the Indian Patent Act forbids the patenting of new forms of known drugs unless the new form significantly enhances efficacy and yields therapeutic benefits. Accordingly, much of the incremental innovation that is done on existing treatments will no longer be patentable under the so-called Patent Law 2.0. Three points are worth making.
First, this interpretation removes the incentive for improvements to existing therapies. Given that first-in-class treatments are rarely optimal, incremental innovation plays an important role in improving health outcomes, frequently becoming best in class and first line therapies. Incremental innovation may also increase the number of available dosing options, uncover new physiological interactions of known medicines, facilitate reformulations to encourage children’s compliance, and increase the shelf-life or heat-stability of a given medicine to ensure effectiveness in diverse environments. The incremental developments present in these follow on therapies allow physicians to precisely treat the specific needs of diverse patients and provide treatment options when the initial medicine is either ineffective or not tolerated by the patient. Second, incremental innovation is critical to the developing world. Incremental innovations provide for more convenient extended-release dosing and formulations that are do not require refrigeration or are less temperature sensitive, valuable characteristics in developing country settings. A recent study of the World Health Organization’s Essential Drug List finds 63% of the drugs were follow-on drugs, which points to their value and importance to public health and development efforts. Moreover, follow-on drugs are becoming more important over time as this share has increased more than 25% over the previous two decades. Finally, the Indian Patent Office is now bound by the interpretation of “increased efficacy” as therapeutic efficacy. Given this, it is important to ask how the threshold for “therapeutic benefit” will be defined. The ambiguity surrounding how this requirement will be interpreted increases the risk and uncertainty of innovation and will reduce the incentives for future innovation.
These are not issues considered by Kapczynski. Astonishingly, she interprets the impact of this law as follows, “Provisions like Section 3(d) can help reverse this effect [prioritizing incremental innovation over breakthrough drug discovery] and encourage companies to undertake the riskier and more expensive research that is required to generate breakthrough drugs.” Her analysis is strikingly naïve. It is laughable to think that weaker intellectual property rights (IPR) protection will incentivize innovative pharmaceutical firms to expend more resources and take on greater risk. The economics of innovation suggest just the opposite. Stronger intellectual property protection incentivizes innovation, increasing the likelihood the innovator will realize a return on the tremendous investment of time, talent and financial resources. It is a stronger IP paradigm that encourages innovative firms to take on risk and invest scarce resources. Contrary to Kapczynski’s interpretation, enhanced IPRs foster valueable pharmaceutical innovation and speed the development of breakthrough therapies.
Although Kapczynski correctly notes that India only represents about 1% of the global pharmaceutical market, these issues should still resonate with India and other nations in the developing world. Importantly, following the adoption of the IP protections in the TRIPS Agreement, research and development in India increased by 20%. Experience reveals that even in India stronger intellectual property rights encourage innovation and growth. This linkage is further documented in a growing body of empirical evidence which demonstrates that stronger intellectual property protections, in combination with other policies, increase economic development, foreign direct investment (FDI) and innovation.
Finally, and perhaps most importantly, Patent Law 20.0 does not address the true barriers to access. Kapczynski herself touches on some of the most significant barriers to access, barriers that remain unchanged by the stricter interpretation of Section 3(d) of the Indian Patent Act. While patents are an easy target, and readily identified as barriers to access to medicine in developing nations, the reality of getting medicines to those who need them is much more complicated. To truly overcome the barriers to access, the focus must be broadened to include other important factors such as reducing poverty, eliminating taxes and tariffs on medicines, eradicating corruption, ensuring adequate distribution and monitoring systems, ending pharmaceutical counterfeiting, and providing sufficient healthcare professionals and infrastructure. Failing to address these elements inhibits access to medicines, through financial challenges, higher prices, shortages, and spurious products. Ensuring access to medicines globally requires a more nuanced and comprehensive approach to remove all of the barriers that exist. To truly improve healthcare in the developing world, the focus must be broader than Patent Law 2.0 and the scapegoating intellectual property rights. Patents serve a purpose and have incentivized medicines that have enhanced and extend lives on a global scale. Ensuring that these medicines are available to all necessitates addressing all barriers to access.
 Kapczynski, Amy. “Engineered in India – Patent Law 2.0,” New England Journal of Medicine, online edition, posted July 17, 2013.
 Wertheimer, A., R. Levy, and T. O’Connor. “Too Many Drugs? The Clinical and Economic Value of Incremental Innovations,” in Investing in Health: The Social and Economic Benefits of Health Care Innovation, 2001, volume 14, pp.77-188.
 Cohen, J., L. Cabanilla & J. Sosnov, “Role of follow-on drugs and indications on the WHO Essential Drug List,” Journal of Clinical Pharmacy and Therapeutics, vol. 31, 2006, pp.585-592.
 Perez Pugatch, M., D. Torstensson and R. Chu. “Taking Stock: How Global Biotechnology Benefits from Intellectual Property Rights,” Pugatch Consilium, June 2012.
 An excellent review of this literature is provided by Pugatch, Torstensson and Chu (citation above). Their study documents the findings of more than 40 studies which demonstrate the positive correlation between intellectual property rights, foreign direct investment, trade and economic development. These studies examine both industrialized and developing nations from all regions of the globe.
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About the AuthorDr. 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.