E-DRUG: Economist on patents, CL and Thailand - Jon Pender (GSK) should know
Should we ever have wondered why it is so hard to get rid of the
misunderstanding that compulsory licensing can only be used under limited
circumstances. This is what Jon Pender of GSK is quoted as saying. He
should know better:
" Jon Pender of GlaxoSmithKline, a British drugs giant, insists that
compulsory licensing was meant to be used only ³as a last resort². He argues
that although compulsory licensing is legal, TRIPS rules allow it only under
limited circumstances, such as national health emergencies, and only after
lengthy efforts to negotiate prices with firms."
[Copied as fair use]
A gathering storm
Jun 7th 2007 | NEW YORK
>From The Economist print edition
Drugs companies' patents are under attack. Will this really help the poor?
NOBODY could fault Thailand for want of ambition. At the recent Bio
conference, the largest annual gathering of the biotechnology industry, it
pitched itself hard as an emerging pharmaceutical power, with a dazzling
pavilion, visiting luminaries and free drinks for all. Instead, the
arguments with Thailand are over means, not ends.
At the end of last year the Thai government stunned the drugs industry when
it said it would overrule international patents for Efavirenz, an
anti-retroviral drug made by Merck, an American firm, and switch to a
Thai-made generic copy at half the price. The country had signed the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),
which protects drugs patents. But that deal allows ³compulsory licensing²
only under special conditions?conditions that some complained Thailand did
In the months since then, Thailand has said it would overrule the patents on
two more drugs, and it may soon add a further pair to the list. Moreover, other
countries have followed its lead. Brazil declared last month that Merck was
charging too much for Efavirenz. In recent weeks the health ministers of India,
Malaysia and Kenya have also muttered about pursuing compulsory licensing.
All this has sparked an almighty row. Many global-health dvocates, including
Bill Clinton, whose foundation works on HIV, have applauded the trend, arguing
that access to cheap generic drugs will greatly help the poor. Last month the
World Health Organisation passed a resolution supporting compulsory licensing.
America objected vociferously, but other rich countries supported the motion.
Drug executives are furious. Jon Pender of GlaxoSmithKline, a British drugs
giant, insists that compulsory licensing was meant to be used only ³as a
last resort². He argues that although compulsory licensing is legal, TRIPS
rules allow it only under limited circumstances, such as national health
emergencies, and only after lengthy efforts to negotiate prices with firms.
³It is easy to see Big Pharma as a source of evil,² laments Daniel Vasella,
chairman of Novartis, a Swiss drugs giant. His firm is involved in a closely
watched patent case in India that involves Gleevec, a cancer drug. Without
innovation, he insists, future generations will have fewer life-saving drugs,
³which is equally unethical as lack of access now.² And as Fred Hassan, the
boss of America's Schering-Plough and head of the international pharmaceutical
lobby, warns, ³without intellectual property there is no innovation.²
At first sight, this row reflects an old dilemma that pits today's patients
against tomorrow's. Compulsory licensing means that more Thais will get HIV
drugs now, but it also means that drugs firms will be less keen to invest in
drugs for Thailand in the future. Yet look closer and this is more than a fight
between the poor-country sick and rich-world drugs companies. What
makes it different is the role of two new actors: muscular middle-income
countries and the rising generics industry.
This controversy has been sparked not by the poorest countries, which
already get most of their drugs at low cost, but by middle-income ones. They
have long used the threat of compulsory licensing to win discounts, but by
actually imposing such licensing they shift the balance of power.
Puymbroeck, a former senior lawyer at the World Bank, likens compulsory
licensing to other sorts of compulsory state purchases: ³Firms are upset not
because this is illegal, but because they are in a very weak position to
negotiate compensation after expropriation.²
Follow the money
A perverse result of this trend is that middle-income countries are getting
cheaper drugs, whereas quieter and perhaps more deserving neighbours are
not. Thailand's poor no doubt need treatment, but the military regime is
wealthy enough to spend more on health care. Richard Epstein of the
University of Chicago law school has observed that there is nothing to stop
AIDS organisations or foreign governments from buying these products at a
negotiated price and then giving them away free. ³Charity can come from
anywhere, not just drug companies,² he notes.
Even experts devoted to the cause of helping the poor get access to drugs
see the trend as worrying. ³Brazil is not Rwanda, which cannot afford to
pay,² says Tadataka Yamada of the Gates Foundation, a giant charity.
Victoria Hale, head of OneWorld Health, an innovative non-profit
pharmaceutical firm, reckons that compulsory licensing could prove ³the last
blow² that pushes the drug industry away from looking for cures for diseases of
the poor world, which are already woefully neglected.
Whether or not the poor end up suffering in the long run from diminished
innovation, a sure winner from the trend towards compulsory licensing is the
generic-drugs industry. Under a provision of the TRIPS treaty, countries that
invoke compulsory licensing but lack domestic manufacturing are allowed to
import generic drugs from another country.
This promises a gold rush for generics firms. Canada encourages domestic
firms to produce copycat drugs for precisely this reason. But their costs
are so high that such exports cannot hope to compete with the cheaper pills
produced by India, argues Amir Attaran of the University of Ottawa. Small
wonder that executives at Cipla, one of the Indian firms already making
generic versions of HIV drugs, warmly applaud the trend and welcome Brazil's
support for compulsory licensing, which they say ³helps protect the rights of
Does the future therefore belong to compulsory licensing? If so, there may
be trouble ahead for both pillmakers and punters. Dr Yamada fears that
compulsory licensing could prove ³lethal² for the industry. He suggests that
drugs firms and middle-income countries ought instead to use a sliding
scale, based on GDP per head, to determine prices. Bruce Lehman, a lawyer
who worked on the TRIPS accord in the Clinton administration, thinks it is
cynical for middle-income countries ³to avoid paying their fair share of
drug-discovery costs². In doing so, he fears, they risk provoking a backlash
from Americans who will, in effect, have to pay more as a result.
But things may not get that ugly, thanks to the growing influence of
innovators in developing countries themselves. Even in India drugs patents
have their defenders. Ranbaxy is a local firm that made its name by
manufacturing knock-off drugs. But ask Ramesh Adige, a member of its board,
about the current trend and he is quick with his reply: ³We do not encourage
compulsory licensing.² He explains that his firm has 1,100 researchers and
invests 7% of its turnover in research and development. It already has process
patents, and within two years hopes to have patents for novel drugs (for
malaria, possibly). ³We are very supportive of intellectual-property rights, as
innovations must be given their reward,² he says.
The reason Ranbaxy has gone from ignoring patents to defending them is that
it now has inventions of its own that it wishes to protect. Even Yongyuth
Yuthavong, Thailand's science and technology minister, seems to acknowledge
the risk his country is taking. ³As a scientist myself, I know the value of
intellectual property,² he says. ³In future, we should develop our own drugs