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Tainted Medicine: Pharmaceutical Patents in the Developing World

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About The Author

Jen Hui Chong (Guest Contributor)

Jen is a law graduate from Cardiff University. She is currently undertaking the BPTC at BPP University Manchester, with a view to a career as a barrister. Outside of law, she enjoys debating, good movies and warm weather.

The desire to take medicine is perhaps the greatest feature which distinguishes man from animals.

William Osler

Since the Agreement on Trade Related Aspects of IP Property Rights 1995 (TRIPS 1995), public health has become inextricably linked to trade regulation. For example the granting of patent protection to novel medicines developed using an inventive step or process provides the creator with a number of rewards for their ingenuity and investment. One such reward is the permitting of that creator to have a monopoly over the pricing of that medicine.

Though this reward arguably encourages other individuals to seek to develop other medicines, it also has the unfortunate result of artificially inflating the cost of many drugs. For instance, a United Nations study shows that 150mg of the HIV drug ‘Fluconazole’ costs $55 when unpatented in India, but costs an alarming $697 in Philippines and $703 in Indonesia per dose when patented. This inevitably inhibits the ability of many citizens in developing countries to access medicine: for example, only 5% of 1 million citizens of Thailand believed to be HIV infected are able to afford the AIDS therapies prescribed to them.

In light of this, this article will discuss the pragmatic effect of TRIPS on medicines and examine how the law can ensure those who need to benefit from these medicines can.

The TRIPS Agreement of 1995

TRIPS 1995 is binding on all World Trade Organization (WTO) member states. It represented an effort by the international community to harmonize patent protection, protecting corporations and citizens from losses associated with infringement of IP rights in countries that do not offer sufficient protection.

It required signatories to create a regime that allowed patents to apply to pharmaceutical products, and gives patent holders exclusive rights that can be enforced to prevent the non-consensual use of the patents by others. This regime filled an international lacuna: prior to TRIPS 1995, over 40 countries lacked any comprehensive and long-term system of patents for medicine.

Under TRIPS 1995, developing nations were given until 2000 to implement the required patent system. Additionally, so-called ’least developed’ nations were given until 2006, and were granted a further extension until 2016 for pharmaceutical products under the Doha Declaration.

Importantly, to stop the resulting patent system from seeing medicine become an unobtainable luxury product, Article 31 of TRIPS 1995 was drafted to allow member states to invoke compulsory licensing to obtain medicines at a lower price during national health emergencies. Though well-intentioned, questions can be raised about the effectiveness of this provision: after all, it is tough for certain African countries to argue that HIV constitutes a ‘national emergency’ given that the spread of the disease was known since the 1980s. As a result, as Stine Haakonsson and Lisa Richey point out, some pharmaceutical companies were able to reject any invocation of Article 31 of TRIPS 1995 by arguing that the spread of HIV was due to governmental failure to provide an effective healthcare system.

Some subsequent solace appeared to be provided by the Doha Declaration, which provided that TRIPS 1995 should be interpreted in a manner that promotes medicine access to all and reaffirmed the right of member states to grant compulsory licenses and freedom to determine the grounds upon which such licenses should be granted.

However, this did not overcome all the lingering problems that was undermining the use of Article 31 of TRIPS 1995: issues that arose from states not having adequate manufacturing industries were not resolved. Therefore, Article 31bis of TRIPS 1995 was introduced, allowing members states to receive adequate remuneration for producing and exporting pharmaceutical products under compulsory licences. 

However, Article 31bis of TRIPS 1995 has not been utilised extensively because this would simply not feasible: since its introduction, only Eritrea and Ghana have been issued compulsory licences for the importation of unpatented medicine from countries without product patent protection. The central problem with this is TRIPS 1995 itself: the only unpatented medicine countries can import come from before the signing of TRIPS 1995, which required all such products  to be fully patented.

H.M. Mardikar et al. thus observe the conflict that has arisen: on one side, the threats of economic sanctions by governments and corporations or withdrawal of aid by foreign aid donors for declaring a national health emergency – on the grounds that it could be construed as governmental failure – limit the bargaining powers of developing nations. On the other hand, developing nations are incentivised to enforce TRIPS 1995, in the sense that it has become a necessity to receive foreign direct investment or concessions in other trade areas. 

Protection of IP Rights

The legal protection provided through patents is undoubtedly justified. Drug development is highly resource-intensive and expensive: as Kim Thomas reports, it typically takes up to 12 years from the initial stages to market release and costs an average of £1.15 billion per drug. 

Upon obtaining a patent, the patent holder gains exclusive rights relating to pricing the product and preventing its non-consensual use. This excludes competition from generic drugs of similar functions to create monopoly pricing, thereby allowing companies to recoup the costs incurred in research and development beyond the benefits they might have already received through state incentives such as extensive tax breaks on research and development.

Such benefits are afforded to producers in order to encourage development of new medicines. However, in the context of medicines for the developing world, this justification loses weight for two reasons. Firstly, first-world pharmaceutical companies lack the incentive to develop drugs for a range of tropical diseases which mainly affect developing nations. Secondly, even if there is an incentive to produce necessary medicines, poorer nations are unlikely to benefit from the product developed because of the price barriers that the monopoly pricing creates.

Reason One: A Lack of Incentive for Tropical Diseases

Malaria is a well-known tropical disease that demonstrates the lack of investor interest in tropical diseases. Indeed, despite being the best-funded of all tropical diseases, research shows that the funding it receives is least 80 times lower than that for HIV and 20 times lower than that for asthma.

This is largely explained by both the higher state aid given to companies, and the greater purchasing power of individuals, in developed countries. While such countries invest huge sums of money in subsidising the work of pharmaceutical companies, African countries – in contrast – annually spend less than $20 per capita on all health programmes. Therefore, as Patrice Trouiller et al. explain, this results in pharmaceutical companies in the developing world depending on external investors, which means that the company’s priority shifts further away from public health to share value of the company. Therefore, like any other private industry, investment decisions are made to maximise returns. 

There is, however, a mechanism by which this lack of financial incentive can be overcome, with inspiration for this solution coming from the USA in the form of its Orphan Drug Act 1983 (ODA 1983). Under the ODA 1983, a number of benefits – including technical measures, financial incentives and market exclusivity – are used to encourage companies to develop products for rare diseases that affect individuals in the US, even where there is no patent protection.

That said, the extent to which the scheme under the ODA 1983 can be directly coped is questionable. For one thing, allowing pricing liberty to such a degree – particularly outside a patent period – is incompatible with the social and economic climate in developing countries. Furthermore, tropical diseases cannot strictly be defined as a rare disease – as required by Section 526 of the ODA 1983 – because of the extent to which they affect vast swathes of the populations of developing nations.

Reason Two: Price as a Barrier to Medicine Access

Many nations in desperate need of medicine are unable to afford it: while 66% of HIV patients are located in Africa, a lower state and individual purchasing power means that only 28% of those in need have access to treatments and medications.

Amir Attaran and Lee Gillespie-White contend that weak patent laws on medicines, which undermine any corporate incentive to seek a patent in poor countries, is but one of the causes of the barrier to access. They also place weight on the deficit in international aid: in their view, even if HIV treatments were heavily discounted or given out for free, poor countries still cannot afford to provide the facilities for their use. The World Health Organisation (WHO) further recognises other barriers to medicine access such as national policies and sustainable financing.

Nonetheless, notwithstanding the impact of other factors, it is undeniable that patent protection has a direct impact on the pricing of drugs; naturally, the higher the drug prices, the less likely that governments of poor countries are able to purchase the drug in large quantities or at all.

Thus, while there is scope to argue that it is the socioeconomic factors of developing and underdeveloped states that is the root cause of the problem, this overlooks the need for short-term progress: to try and counteract such long-standing problems would involve a long-term plan that is incapable of responding to the urgent need for medicines. To argue that there are other contributing factors to a particular issue does not ease the problem solving process but rather delays it. 

A Conflict: The Right to Health and The Right to IP Protection

Abadir Ibrahim argues that the advocating of free and fair trade in the context of international trade is at best neutral and at worst detrimental to human rights. This is because human rights focus on the individuals’ quality of life, whereas trade focuses on equal opportunity for trading partners but omits consideration of the other effects of equality. Furthermore, the incompatibility of human rights and trade is exacerbated through governments often representing industries in negotiations involving trade, whereas human rights do not receive such direct representation and are thus vulnerable where such a conflict between trade and human rights arises.

Also not to be overlooked is how human rights are regarded as mere externalities and rarely included in the calculation of economic success. As Nitsan Chorev et al. observe, while human rights have always only been used as a label to social and economic critique, a properly constructed assessment of the impact of trade rules such as TRIPS 1995 on human rights could allow the legal obligations of human rights to play a more active and informative role in discourse.

The role of international human rights law in the context of international trade has seen increased applicability to the importation of medicine. For example, a number of pharmaceutical companies – keen to preserve their corporate image of being pro-human rights, albeit amidst severe public pressure – withdrew their opposition to a South African law that would allow the importation and manufacturing of cheaper generic HIV drugs. Likewise, in the South African case of Tau v GlaxoSmithKlein [2003], a claimant successfully challenged a pharmaceutical company’s high prices for a licence to use a medical patent having used as the challenge’s basis the human right to health. 

The human right to health is protected under Article 12 of the International Covenant on Economic, Social and Cultural Rights 1966 (ICESCR 1966). It is a right that has often come into conflict with the right to trade, the latter being itself a form of the human rights that concern a person’s right to property. This is important, particularly in light of decision like that of the US Supreme Court in Citizens United v. Federal Election Commission [2010] which confirms that human rights can be extended to corporate bodies.

A conflict in rights protection also exists under the ICESCR 1966 itself: while Article 15(1)(c) of the ICESCR 1966 protects the right of authors to benefit from the moral or material interests from any scientific, literary or artistic production that they make, Article 15(1)(b) of the ICESCR 1966 recognises the universal right of all persons to enjoy the benefits of scientific progress and its applications. These are contradictory, because denying all persons their right to enjoy the benefits of scientific progress can interfere with the rights of authors to decide who should be allowed to enjoy the products which they create.

This can only be resolved by interpreting ICESCR 1996 as creating a distinction between IP rights and human rights, such that the former are considered a temporary monopoly established for the social purpose of encouraging innovation, whereas the latter are the timeless expression of fundamental entitlements. This implies a superior legal claim to human rights, resulting in IP rights being regarded as rights of a lower order. 

Implying such a superior order of ‘rights’ is arguably problematic because the legal and political contexts within which rights are enforced differ between countries. International human rights, and the apparatuses with which they are enforced, are not uniform: developing countries and least-developed countries appear to be left in a position to choose which form of human rights to prioritize or uphold based on the extent to which their existing infrastructure allow it. 

However, Laurence R. Helfer has suggested that this conflict between human rights and IP rights brings about positive consequences in the long term. For one thing, human rights advocates are now more likely to press for specific interpretations of human rights which may speed up the jurisprudential progress of undeveloped economic, social and cultural rights. Secondly, governments can more credibly argue that a rebalancing of IP standards is part of the legitimate effort to harmonize competing forms of internationally recognized rights instead of a self-interested attempt to distort international trade rules.

Available Alternative Approaches

An alternative to drug pricing that could overcome the difficulties experienced by the patent regime could involve differential pricing. This would see prices in developed countries reach levels that allow research and development investments to be recouped while also prices in poorer countries being at levels that ensure greater levels of access. In effect, it is a system of subsidisation.

Though useful in certain contexts, this mechanism does not seem to counter the issue of incentive with regards to neglected or tropical diseases that mainly affect developing and poorer countries. Furthermore, Thomas W. Pogge notes that such a mechanism could not work unless the buyers of different categories can be prevented from knowing about the difference in price or from trading with each other.

Some argue that the principle of equity requires healthcare to be a public good and not a market commodity. This places the burden onto governments to ensure equal access, overlooking how governments of developing nations invariably cannot afford the cost of doing so. Critiquing this line of thinking, Stephen P. Marks argues that the current model of private research is worth preserving due to the extent to which questions can be raised about whether public investments are able to endure the complex scientific challenges.

Thomas W. Pogge has proposed a solution that squarely falls within the middle ground. It involves any medicines successfully created by companies being provided as public goods that all pharmaceutical companies may access for free, while the developer of the product receives financial rewards from a public fund that are proportionate to its contribution to reducing the global disease burden. This ensures companies are incentivised to lower drug prices and ensure drugs are properly administered; otherwise, their contribution to the global disease burden – and accompanying financial reward – would not recoup the cost of development. It could also incentivise companies to work towards resolving more neglected diseases, the adverse effects of which can be reduced cost effectively. 

The cost for Thomas W. Pogge’s proposal is borne by taxpayers and governments of more developed countries. This is justified in two ways: firstly, that citizens of developed countries would themselves benefit from the lower drug prices. Secondly, it is argued that the participation in the current system – which foreseeably and avoidably deprives human rights – is enough to constitute a violation of human rights for which there should be universal accountability.

Conclusion

Although healthcare should be a public good, drug development requires intensive funding and expertise which the public sector often do not have the resources for. The private sector is therefore required to take up the role. This requires the provision of some form of incentive – whether that be in the form of patent protection or financial returns – but which can effectively marginalise those that cannot afford it. This undeniably creates human rights issues. The relationship between trade and human rights should therefore no longer be considered separate; certainly, due attention must be paid to the fact that human rights are often neglected in trade negotiations and is still relatively weak against the enforcement of trade rules.

Ultimately, an effective mechanism for resolving this long-standing and crucial issue is one where tangible incentives are given to companies to ensure not only that new medicines are developed, but also that they are made accessibly to as many people as possible. Whether Thomas W. Pogge’s proposed mechanism meets these criteria is debatable – questions can definitely be raised about the extent to which the justifications advanced will make developed countries be convinced to fund the cost – but it represents a welcome plan that should be given due consideration.

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Tagged: Human Rights, IP, Intellectual Property, Law and Development, Medical Law & Ethics, Property Law, Supreme Court, Technology, Trade

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