Are Patents the Reason Poor Countries Lack Healthcare?

By Joseph Allen
August 15, 2016

Lady JusticeA consistent charge against the patent system is that it denies the poor access to critical medicines.  This belief led the UN Secretary General to launch his High Level Panel on Access to Medicines that is supported by groups like Universities Allied for Essential Medicines (UAEM).  The Panel is to “review and assess proposals and recommend solutions for remedying the policy incoherence (emphasis added) between the justifiable rights of inventors, international human rights law, trade policies and public health in the context of health technologies.” As our State Department observed, this focus “suggests predetermined outcomes” blaming health problems on patents.  Fortunately, two recent responses critically examine the theories driving this anti-patent crusade.

While reading Donald Zuhn’s column  summarizing the Hudson Institute’s report “The Patent Truth About Health, Innovation and Access” examining the presumptions behind the High Level Panel’s upcoming report it hit me how it compliments  University of Chicago economist Tomas Philipson’s article “If It Ain’t Broke, Don’t Fix It”  responding to UAEM’s call for international government control of drug development replacing the “failed” intellectual property based system.

The UAEM’s open letter “Make Medicines for People, Not For Profit” is a good summary of the anti-patent case.   Signed by academics, researchers and Nobel Prize winning economist Joseph Stiglitz, it calls for a new drug development system unaligned with patents because: “Preserving patent monopolies as the primary incentive for medical R&D results in exorbitant prices for medicines and medical technologies which endanger public health budgets and impoverish families.”  And: “Patent monopolies increasingly enable rising drug prices, without any corresponding increase in innovation…”

Their solution is:

A different system, based on principles of open access, open knowledge, open sharing and fair price, as well as incentives and mechanisms to encourage research and development of essential medicines according to needs of people worldwide, is possible. There are mechanisms being used that show great potential including prize funds, patent pools, and open collaborative approaches… A global agreement for an equitable biomedical R&D system can provide a much needed structure. It can provide guiding principles which can move us to a system that incentivizes research and technology transfer based on global health needs and recognizes the human right to health.

Mr. Philipson observes: “The authors of this letter, like many in the global health community, advocate for increased access to generics and a curtailing of the patent system. Such proposals are dangerous – with decreased protection of intellectual property rights, firms will have even less incentive to develop treatments for neglected diseases. This actually worsens the problem.”

Further:  “Generic drugs or bio-similars may also further reduce the cost of both health and healthcare, but these products, by definition, do not bring the potentially transformative innovation that a new product does.”

The Hudson report notes:

One of the main claims of the High Level Panel on Access to Medicines is that millions of people have been denied access to medicines. Everyone can agree that millions of people in the developing world are still suffering from poor health and are not receiving adequate health care.  To narrowly attribute this complex and serious global health problem to patents and prices, as the HLP (UN High Level Panel) does, completely ignores the transformation in modern health care delivery in developing countries over the last twenty years and the dramatic improvements in health outcomes for poor people, even as intellectual property systems became stronger since the TRIPS agreement in 1994.

A study in the American Economic Review shows that strengthening IP has resulted in better access to medicines in developing countries. Additionally, the Center for Global Development’s (CGD) recent book on global health lessons, recognizing that many people are still in basic need of healthcare, writes: “Since the turn of the 21st century, people in low-and middle-income countries have experienced a health revolution…It is a revolution that keeps mothers and babies alive, helps children grow, and enables adults to thrive through and beyond their working lives.”

The HLP seeks the replacement of the IP system, which has been accompanied by public-private partnerships and other global healthcare programs that have brought about the dramatic results…”

Including:

  • “The number of people receiving HIV/AIDS treatment increased from 600,000 in 2000 to nearly 16 million in 2015…”  
  • Between 2001- 2013 deaths from malaria fell by 47%         
  • In the 1970’s about 5% of children had access to vaccines. Today 80% have access    
  • Twenty years ago, 5 million children died of diarrhea. Today the number has fallen to 760,000

To the charge that patents increase drug costs without “any corresponding increase in innovation”, Philipson replies:

The main focus of attack in the (UAEM) letter is on the international patent system and “patent monopolies.” “The current biomedical R&D system is no longer just failing the poor,” they write, “it is failing us all.” Such a claim seems ludicrous in light of the immense gains that have been made in pharmaceutical therapies in recent decades.  The introduction of HAART for HIV in 1996 turned a death sentence into a manageable disease.  Recent breakthroughs in hepatitis C have brought a true cure for those with the virus.  Immunotherapy in oncology is offering hope to patients with previously untreatable cancers like metastatic melanoma and lung cancer. These advances and the countless others of recent years – statins for heart disease, for example – are due to private market incentives that reward products that help patients.

Is the patent system the reason poor countries lack access to critical drugs?  Hudson observes:

 If the Secretary General and his high level panel had looked at the track record of affordable life- saving medicines and technologies available to the developing world, they would have seen that the most important problems impeding access to medicines and better health for poor people are not patents and prices. The high level panel, however, excludes consideration of any other barriers to access to medicines and healthcare delivery.

The report identifies policy failures in developing countries including:

  • Tariffs and taxes that inflate the costs of medicines by one third. “When combined with VAT taxes on medicines, government imposed levies account for an additional 55% in India; 40% in Sierra Leone; 34% in Nigeria; and 29% in Bangladesh.”
  • “Weak healthcare systems hinder the effective distribution of drugs. While insufficient hospitals and medical staff are obvious weaknesses, insufficient infrastructure including poor roads, unreliable electricity, and poor water and sanitation are key constraints as well;”
  • “The intervention of international public health authorities is no guarantee that medicines will be widely distributed. The WHO’s (World Health Organization) “3 by 5” HIV/AIDs program failed to achieve its targets, and may have even increased drug resistance.”

And:

These policy failures reflected some earlier views of the WHO in understanding the real reasons for poor access to medicines. In 2006, the director of the organization’s HIV Division publicly stated: “Africa has been the hardest hit by the AIDS epidemic… it is very obvious that the elephant in the room is not the current price of drugs… The real obstacle is the fragility of the health systems… You have infrastructure that is dilapidated, and supply chains that don’t exist.” In 2010, the International Treatment Preparedness Coalition of South Africa listed a number of key barriers to access, including “long delays for routine services; unsafe and unhygienic conditions; low salaries; deterioration of facilities, and

shortages of basic materials— have had negative impact on the quality and effectiveness of HIV treatment services.”

So why would the UN Panel ignore these problems, focusing instead on the patent system? Hudson notes:

Had the HLP considered the most important factors behind access to medicines and had it properly consulted with UN member states, their panel might have pursued more meaningful solutions than eliminating the intellectual property system. The U. S. Department of State’s submission to the Secretary General’s High-Level Panel emphatically stated that the HLP occurred “almost entirely without UN Member State involvement or input.”Although the Secretary General called for “the involvement of all relevant UN agencies,” those most involved in the broad subjects of health and trade, such as WHO, WIPO, and the WTO were not consulted prior to its establishment.

Any fair study would reflect the impact that the patent system has made to world health.  Hudson points out:

The High Level Panel on Access to Medicines primary premise purports that the intellectual property system limits the innovation that serves the medical needs of the poor. This assertion blatantly ignores the lifesaving drugs and vaccines that have dramatically reduced infant mortality and increased life expectancy in low-income countries. But nowhere is the importance of innovation and drug development for the poor more clear than in the case of HIV/AIDS over the last 35 years.

In the history of therapeutic medicine, there has not been a comparable period during which so much innovation resulted in so many new products—which principally benefited the poor in markets far away from those of the manufacturers. In the United States, between 600,000 and 900,000 people were living with HIV in 1989, while approximately 5- 10 million people were living with HIV around the world, most in lower income countries. In just over ten years, the number of people living with HIV around the world had grown to approximately 37 million while the number in the United States was just under one million people.

At the beginning of the crisis, an HIV/AIDS diagnosis was a death sentence, and only      Zidovudine, developed in 1987 by Glaxo Wellcome, could slow the progression of HIV.  Despite the fact that the majority of the end users of ARV drugs for people living with HIV were citizens in low- and middle- income countries, including some of the poorest in the world, the U.S. pharmaceutical industry invested in the development and manufacture of these drugs and the FDA designed a new approval system for bringing more safe and effective generic drugs into the marketplace… Today, nearly16 million people around the world have extended life spans due to the historic innovative developments of the pharmaceutical industry. Millions more, at risk of contracting opportunistic infections like TB, are also eligible for prevention and treatment through global HIV/AIDS programs.

Mr. Philipson remarks:

The existing patent and property rights system have led to the discovery and introduction of  incredible treatments and cures over the years, and this process is only accelerating. As policy makers search for ways to expand access and incentivize innovation in neglected diseases, it is critical that we do not rashly abandon the institutions that have generated such immense health benefits over the last century. It is fundamentally sensible to financially reward those whose innovations address dreadful health issues – what behavior    is more worth rewarding? We live in a world where when you make billions from inventing    an app such as snapchat (initially to allow sexting), you are a savvy and heroic entrepreneur… but god forbid you invent a cure for a deadly disease, shame on you for making money!

The Hudson Institute sees a broader goal behind the anti-patent efforts:

Looming beyond patents and prices, however, is the larger agenda of the HLP and other advocacy groups. Their mission is to establish an alternative drug development system from the existing system that relies on government sovereignty in issuing patents and setting the standards and approval processes for drugs entering the public domain. In addition, the HLP and other advocates want to remodel the funding mechanism for drug development that would de-link research and development costs from drug patents and pricing. All innovation, proprietary information and processes, and clinical trials would be “global public goods” governed by the UN in one form or another.

So would a drug development system run by international governments be “more fair” than a patent driven system? Philipson observes:

Patents have the well-known problem that we reward something we like, innovation, with something we don’t like, market power and higher prices. However, it decentralizes the search for valuable innovations by rewarding those who generate them with profits. It differs from a centralized system of prizes set by politicians whose opinions are not aligned with what patients value. In the last few centuries, no one has come up with a better solution to provide market signals to innovators than the patent system. This group (UAEM) is no exception.

An important, but often ignored, point in this debate is the breathtaking advancement of medicine under the patent system. This graphic from Global Oncology Trend Report A Review of 2015 and Outlook to 2020 shows the incredible growth of new cancer drugs in just a few years: 

70 new cancer drugs were launched between 2011 – 2015

 

The reports notes:

  • “The pipeline of oncology drugs in clinical development has expanded 63% over the past ten years…”
  • Newer therapies with increased survival benefits allow for longer treatment– and for treatment of patients who were previously beyond help.

While it’s certainly fair to look for ways to make drugs more accessible, it’s a great disservice to blame the patent system for world health problems while ignoring its benefits.

As Tomas Philipson said:

The vague and potentially dangerous approach suggested by the (UAEM) letter’s authors, however, does not reflect an understanding of the complex issues at play. This is perhaps not surprising, given that UAEM is a university student-led group. The letter’s signatories are largely doctors, lawyers, and political scientists without any economic expertise, or economists without health care expertise. Should the oncology world take action based on a letter from economists and cardiologists about the proper methods for tumor staging? I think not. As I have said many times before, having doctors and lawyers guide economic policy is as valuable as economists conducting surgery.

As to UN Secretary General’s claim of a “policy incoherence” between IP rights and access to medicines, without the patent system there will be a lot fewer drugs to access here or abroad. That’s a thought he might ponder.

The Author

Joseph Allen

Joseph Allen is a Featured Contributor on IPWatchdog.com, and a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications.

Joe served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act. He is our resident Bayh-Dole expert, and will write frequently about Bayh-Dole and issues surrounding the commercialization of university research.

In 2008, Joe founded Allen & Associates, through which he offers consulting services assisting clients in technology transfer issues, including developing effective communication strategies with national policy makers.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 3 Comments comments.

  1. Alex in Chicago August 15, 2016 6:31 pm

    There is no right to state-of-the-art healthcare. The very thought of this is why drug prices in America are higher than the rest of the world. Even Europe essentially gets all drugs for free on the back of American taxpayers and insurance premiums.

  2. Jane August 16, 2016 12:40 pm

    The problem is the drug companies a use there market power by trying to recoup the costs of other R&D on the cancer drugs or other drugs people are most desperate for–e.g. $10,000 per dose. Many drugs are not great improvements over other available treatments but are marketed as such. We need a middle ground between incentives and abuse of monopoly power.

  3. Gene Quinn August 16, 2016 12:45 pm

    Jane-

    The problem you raise in your comment is very real. Many times there are drugs that exist that are off patent that could be used to treat various illnesses (even serious illnesses) but which are not available because there is not enough money for even a generic drug developer to make and distribute the drugs. That is why some doctors are actually talking about the need to increase (not decrease) patent term to give incentive to create the drugs that are necessary to treat various forms of cancer, for example.

    The answer lies somewhere between the greedy individuals like Martin Shkreli and those who think stripping all patents away will result in some panacea.

    -Gene