Protecting Innovation is not ‘Satanic Genocide’: Intellectual Property Policy in South Africa

South African Health Minister Aaron Motsoaledi recently accused a group of multinational pharmaceutical companies of plotting ‘genocide’ in a conspiracy of ‘satanic magnitude’. The reality of the situation is far from a plot, conspiracy, genocide or anything satanic.  In reality, this was an effort to protect innovation and safeguard the future of public health.   As South Africa crafts a new national intellectual property policy, the debate over access to drugs and affordable medicines has taken center stage.  Unfortunately the South African Health Minister chose to fan the flames of panic with his incendiary remarks rather than begin a genuine dialog on what should be the dual objectives of the new policy:  enhancing access while ensuring that the incentives to innovate and invest in therapeutic breakthroughs remain strong.

South Africa faces a moment of truth and a tremendous opportunity to get things right in the drafting of a new national intellectual property policy.  The South African Trade and Industry Minister Rob Davies is currently crafting the South Africa National Intellectual Property Policy which is expected to be submitted to the cabinet for approval early this year.  This is the moment to choose innovation and investment, to stand up for the future of healthcare in South Africa.

Although the debate over patents and intellectual property rights (IPRs) is frequently divisive, emotional and highly controversial, intellectual property protections embody a social tradeoff that safeguards innovation and technological progress.    At the November conference in Durban entitled, “Creating and Leveraging Intellectual Property in Developing Countries,” South African Science and Technology Minister Derek Hanekom noted that IP policy amounts to striking a balance.  “It is therefore crucial to ensure that the fine balance between research, knowledge dissemination and exploitation is maintained.  Many new life-changing products, especially pharmaceutical and biotech products, would simply not have made it to the market without adequate IP protection.” [1]

South Africa currently faces a stark choice between protecting and incentivizing innovation and stymying life-saving therapeutic breakthroughs.  Policymakers must choose between shoring up the protections that encourage the development of medicines that enhance and extend life, or sabotaging innovation through the weakening of the patent system.  South Africa is purported to have the highest number of people living with HIV in the world, people who have the most to gain from breakthrough therapies.  Innovative medicines have contributed to the 85 percent decline in the death rate from HIV/AIDS since 1995. [2]  The benefits of future medicines will become a reality only if these medicines are incentivized and developed.  Strong, effective IP protection is essential to that process.

[Kristina]

On the one hand, South Africa can support innovation and medical progress.  On the other hand, South Africa can model its IP laws after the disastrous policies put in place by India.   India’s template for national IP policy, though attractive at first blush, reveals itself to be harmful to investment and innovation under further examination.  India expected the blossoming of innovation following the implementation of its patent law in 2005.  With the fulfillment of its World Trade Organization commitments, India expected a rebirth of innovative activity.  According to Professor Stephen Sammut of the Wharton School of Business, University of Pennsylvania, around 2005-2007 close to 70 venture capitalists were making investments in India.  However, recent Indian court decisions have turned the tide.  “Now there are only two companies doing discovery research in India, and the foreign investment funds have dropped from 70 to five.” [3]  Critics argue that intellectual property legislation in India was envisioned to enhance access to medicines for the Indian population and should be evaluated on those grounds.  Sammut notes, “If people in India were getting all the drugs they need from their companies, I would concede your point.” [4]  However, he points out that people in India pay more for Indian generics than Americans pay for Indian generics sold in the US, arguing that the law has “driven innovation out of India”. [5]  Clearly this is not a system worth emulating.

In the age of globalization, capital flows more freely around the world, from nation to nation, than ever before.  Given this firms and investors need to have confidence in their locational decisions and assurances of IP rights are critical to this calculus.  Intellectual property rights must be protected and enforced if investment is to take place and economy prosperity is to take hold.

Policymakers in South Africa have the opportunity to create a South Africa National Intellectual Property Policy that incentivizes innovation, furthers medical breakthroughs, and elevates public health as a national priority.  Alternatively, they can turn their backs on the best hope that patients have for treatments and cures.  Now is the moment for them to adopt patent term restoration and other mechanisms to further the development of South Africa’s biopharmaceutical innovation.

This is the time to establish the South Africa National Intellectual Property Policy as a blueprint for progress and hope, to recognize the importance of scientific progress, and to codify language that values and protects innovation.  All innovation should be encouraged, protected and rewarded.  South Africa has a responsibility to patients and communities to do so.  Now is the moment.

 


[1] Derek Hanekom, as reported by Intellectual Property Watch, “A Question of Balance in IP Rights in South Africa,” 21 November 2013.   Available at:  http://www.ip-watch.org/2013/11/21/a-question-of-balance-in-ip-rights-in-south-africa-2/

[2] PhRMA. “The Biopharmaceutical Industry is Driving Unprecedented Progress in Drug Discovery and Development,” 2013(b).  Available at:   http://www.phrma.org/innovation

[3] Stephen Sammut, as reported by Intellectual Property Watch, “A Question of Balance in IP Rights in South Africa,” 21 November 2013.   Available at:  http://www.ip-watch.org/2013/11/21/a-question-of-balance-in-ip-rights-in-south-africa-2/

[4] Stephen Sammut, as reported by Intellectual Property Watch, “A Question of Balance in IP Rights in South Africa,” 21 November 2013.   Available at:  http://www.ip-watch.org/2013/11/21/a-question-of-balance-in-ip-rights-in-south-africa-2/

[5] Stephen Sammut, as reported by Intellectual Property Watch, “A Question of Balance in IP Rights in South Africa,” 21 November 2013.   Available at:  http://www.ip-watch.org/2013/11/21/a-question-of-balance-in-ip-rights-in-south-africa-2/

The Author

Kristina M. L. Acri née Lybecker

Kristina M. L. Acri née Lybecker is an Associate Professor of Economics at Colorado College in Colorado Springs, and Chair of the Department of Economics and Business. 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. Dr.Acri'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.

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 13 Comments comments.

  1. Anon January 22, 2014 10:10 am

    A book I recently perused, called CounterKnowledge by Damian Thompson, covers the ploy of demonization evidenced here very well.

  2. NWPA January 22, 2014 1:15 pm

    So, I have a client that wants a patent in South Africa. Any recommendations?

  3. Kenan January 22, 2014 1:43 pm

    I am so confused by this kind of hyperbole, and that (when it makes the news) it seems to arise in Africa. Do politicians and people in Africa really think this way, or is it just something they say to try to win the argument or get attention? Either way, I find it pretty intimidating due to its sheer irrationality. Our company has filed patent applications in South Africa, but with rhetoric like this there is no way I would go there personally to try to defend or litigate any issued patents. Anyone remember the ‘Bulgarian nurse’ case in Libya? http://en.wikipedia.org/wiki/HIV_trial_in_Libya
    How could a civilized company (or person) properly deal with this kind of quasi-religious, nonsensical attack? Scary.

  4. Matt K. January 22, 2014 2:52 pm

    I hope that the new South Africa National Intellectual Property Policy will take into account the fact that lower prices for medicine leading to higher access is not always the death knell for the profits of innovators.

  5. Anton Differing January 23, 2014 7:57 am

    While I largely agree with Dr. Lybecker’s comments on the value (and necessity) of strong IP to drive innovation, Big Pharma doesn’t help itself with its greedy “profits first” attitude – and remember, despite all the talk of driving innovation, none of the big drug manufacturers are South African, so any innovation will almost certainly happen outside the country and Big Pharma will use its patent rights to charge high prices. (Having worked in the industry, I am all too familiar as to how it works). Big Pharma HAS behaved badly in the past, which is why it shouldn’t be surprised at the overwrought reaction this can provoke, such as this South African one, especially after the public relations catastrophe of the AIDS drug case. It has thoroughly fouled its own nest.

    I do realize that drug research costs money, lots of it, and that, of 10,000 compounds, you’ll be lucky to get 10 that eventually get marketing approval for an indication. It is an enormous gamble on the part of the companies, and it’s getting bigger all the time, as pipelines dry up and the new “blockbusters” simply aren’t coming any more. Big Pharma therefore deserves to make a reasonable profit. However, its occasionally somewhat extravagant interpretation of “reasonable” has made it few friends. How to square the circle, i.e., to allow Big Pharma to make a satisfactory profit and still give life-saving drugs to people who need them at a price they can afford, will continue to be a problem. (I don’t know either – if I did, I wouldn’t be typing this rubbish, I’d be polishing my Nobel medal on the sideboard and browsing the Rolls-Royce catalog…)

  6. Bob January 23, 2014 3:47 pm

    Anton makes a very good point that the innovation will almost certainly happen outside of South Africa. Thus such profits derived from the pharmaceuticals will also presumably go overseas (apart from a small amount of tax revenue).

    So looked at from a purely South African perspective (as the SA health minister is wont to do), what is the benefit of enacting extensive patent rights that go beyond the rights afforded by many western countries (i.e. patent term extensions (amusingly referred to as “restorations” by Dr Lybecker))?

    There may be a small benefit to local industries but the lions share of the benefit will be to overseas companies. Can we expect these less-developed countries to act in the interests of overseas companies? I think not unless there is an appropriate pay back in terms of investment in infrastructure, jobs, or favourable deals on drugs for major public health problems and emergencies i.e. AIDS, Malaria etc.

    The idea of a second tier of IP rights which provide protection for strong inventions but do not provide protection for minor advances (e.g. section 3(d) of the Indian Patents Act) is unpalatable for the lobbyists in Washington DC. However, when viewed through the lens of a struggling government in a less-developed country with massive public health issues and an election to win, it seems reasonable that they should act in the national interest by meeting the protection stipulated by the TRIPS agreement but nothing more.

    The fly in the ointment for South Africa is the potential trade backlash from overseas governments induced by the powerful pharma lobby. Increasing trade barriers including tariffs and discouraging investment are a price that the SA government may have to pay if patent rights are curtailed. Perhaps his comments were designed to stake out an extreme position so that negotiation could bring them back to the centre-ground. Taking a central position may mean concessions and other forms of assistance would be less.

    In general, I think the Dr Lybecker presents a very one-sided case with no real consideration of the SA position and no description of what the SA government is even planning to do. The comments by the health minister are clearly ridiculous but it would be great to have some real facts on their plans – are they planning to solely not provide patent term extensions, or are they considering going down the Indian route re. section 3(d) and compulsory licenses?

  7. ip guy January 23, 2014 10:43 pm

    We need criminal prosecution for patent infringers.

  8. MaxDrei January 24, 2014 4:12 am

    Repeat because the first attempt (apparently) did not get through.

    I don’t know about economics but I do know that first Japan, then Korea and now China have made enormous investment in filing patent applications to promote their own progress in the useful arts. But that’s now. Go back to an earlier stage in their progress. How did Korea and Japan kick start their economies, after WWII? Not by behaviour deferential and submissive to American patent portfolio owners, that’s for sure. What got them started, pulling in some funds, was free-riding (copying) wasn’t it?

    I think Africa has a lot to learn from Asia, about how to get started.

    I wonder what I would do, if I were Prime Minister in some African State in which huge numbers of my people were dying of easily cured diseases. I think I would do what I could, to bring in drugs from anywhere i could get them, at a price I could afford. I would not spend much time thinking how I could set up a domestic innovative pharma branch of my country’s economy. Not in my lifetime, i think I would conclude. P01it1cs is the art of the possible. Don’t economics professors realise that?

  9. Anon January 24, 2014 9:57 am

    MaxDrei,

    One only has to look at the US herself in relation to a ‘starting’ period.

    Those who do not have – take. And most often this taking is objectively called theft.

    This is neither surprising, nor any indication of the merits of a strong IP system.

    Most (civilized) nations simply want to eliminate the ‘taking’ portion of the historical curve, because most civilized nations realize the actual free-riding that is going on in the ‘take’ era.

    Again, this is not a surprise.

    You will not gain any favor in your position that Africa learn from other nations that have gone through the ‘theft’ phase of developing IP laws. Is Africa disadvantaged because the existing nations want to curb theft? Sure.

    Is that so bad? Maybe. Maybe not.

    From a legal standpoint, developed nations have realized this “legal realism” in existing treaties by including in those treaties buffers of time, which in essence look the other way for awhile, sanctioning ‘theft’ without officially sanctioning lawlessness in the hopes that the given time is taken advantage of by the poorer nation and that nation comes up to speed and joins the civilized world. China is a stellar example of such a nation rising from outright thievery to a nation creating stronger and stronger IP laws.

  10. Anon January 24, 2014 10:00 am

    I would add that true advances – beyond the mere copy and theft stage – only come with strong IP – and come to those nations willing to allow strong IP.

    This is why I advocate against weakening of IP laws in any way, shape or form.

  11. MaxDrei January 24, 2014 1:57 pm

    anon writes:

    “China is a stellar example of such a nation rising from outright thievery to a nation creating stronger and stronger IP laws.”

    Thanks for that, but it surprised me. As far as I know, judges in China do what they are told to, by The Party. What The Party wants has nothing to do with “The Law”. If they don’t do what The Party wants, they disappear. Is that your idea of a “strong” patent system? Is that how it is in the USA?

    Very magnanimous of the USA, I must say, to grant China “buffers of time”. Does China realise that, do you suppose? And if so, do you think it gives two figs? What happens by the way, when the time buffer ends?

  12. Anon January 25, 2014 10:19 am

    MaxDrei,

    I will be short and blunt: If I want to be mischaracterized and have my message deliberately twisted, I would post it on Patently-O.

    This is not Patently-O.

    I recognize that you have a running fued with lower case anon – I have already clarified that situation here with you. I will note that in that running fued you do not fare well, as you very often leave such ‘conversations’ in a huff with your ‘points’ left exposed. Here on this blog where accuracy is prized and mischaracterizations forcibly checked, you will fare far worse.

    Let me set you straight in two important ways.

    First, it was not the US allowing something specifically to China. It was all of the treaty signatories allowing less developed nations time. Check the historical record before you post your sardonic replies.

    Second, the manner in which China enforces international patent agreements simply does not matter to the fact that China is doing far more to enforce those agreements. Likewise, it is a fact that China has been making their patent system stronger. I do not know what you think to accomplish by posting a non-sequitur as you have done (China’s political system and control of their courts), but clearly you post without knowledge or understanding in a manner meant only to provoke.

    I advise you to post in such a manner with more care. You have not established for yourself any sense of latitude and your gamesmanship is not appreciated by those wishing to have fruitful discussions.

  13. MaxDrei January 25, 2014 3:18 pm

    Above, Upper Case Anon writes:

    “..the fact that China is doing far more to enforce those agreements. Likewise, it is a fact that China has been making their patent system stronger”.

    Readers, I don’t know about you, but I’m just a teenzie bit skeptical, when Anon announces what is “fact”. Where I come from, comment is free but Facts are sacred. Just because somebody (whether the Party in China or Anon in the USA) announces that something is a fact, that in my book doesn’t yet make it Fact.

    And anyway, it all depends what one means by a “strong” patent system. Opinions differ, and not just between the USA and China. Perhaps we all might agree that it is “strong” when those that own the system get what they want out of it? What are your thoughts on that, Dr Lybecker?