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Patent pendulum
05-07-2007
by Randall C Willis  |  Email the author
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It seems that yet again the pendulum of patent protection has swung to one extreme in the battle between social activists and for-profit businesses. In this case, the pendulum has swung in favor of the activists with the recent announcements by the governments of Thailand and Brazil to push for compulsory licenses on HIV drugs manufactured by Abbott (Kaletra) and Merck (Stocrin), respectively.
 
Both sides are fully entrenched and feel perfectly justified in their arguments. The government agencies no doubt feel that they've negotiated in good faith with the companies to try to get the lowest price for drugs desperately needed by their citizens, but were forced into a very unattractive corner by the companies' intransigence. The drug companies meanwhile are equally disappointed that their good-faith efforts met with developing world governments with unrealistic expectations.
 
Unfortunately, like a bad divorce, the only people likely to see any benefit from these disagreements is the respective lawyers. As is their typical reaction, lobbyists for the pharmaceutical industry will push for international trade representatives and the WTO to apply pressure to the offending governments to reverse their position. Likewise, lobbyists for Thailand and Brazil will fight back in these same international courts to say that they were perfectly within their rights under the WTO TRIPs Agreements to issue the licenses.
 
But which party is right? Both. And neither.
 
Going back to the divorce analogy, there is always a trace of truth in the arguments made by both parties, but the truth is typically so buried in outrageous rhetoric that no one comes across as believable.
 
Perhaps the strongest reason for countries to pursue compulsory licenses is that they simply can't afford to provide their citizens with the drugs they need. And yet, according to 2004 World Bank statistics, the GDP for Brazil (#14) was slightly larger than that of Russia and slightly smaller than that of Australia, so money isn't the only problem. At #32 in the same stats, Thailand has more of an argument to make, but it still beats out Israel and New Zealand.
 
By the same token, the posturing by big pharma seems equally hyperbolic.
 
"Research and development-based pharmaceutical companies like Merck simply cannot sustain a situation in which the developed countries alone are expected to bear the cost for essential drugs in both least-developed countries and emerging markets," said Merck in an official statement about the Brazil decision.
 
A similar statement by Abbott about discussions with the WHO said: "The patents of scientists and inventors must exist so that there are incentives for sustained research and development. Without this system, the miracle drugs the world enjoys today, including HIV medicines, would not exist."
 
I've always had problems with this type of rhetoric. It's like having your landlord raise your rent to pay for building upgrades, but refusing to lower the rent after the upgrades have been paid for. It just doesn't add up.
 
Let's say that it costs $1.2 billion to develop and commercialize a new drug. According to industry estimates, Abbott's sales for Kaletra in 2004 alone were almost $0.9 billion. Assuming that sales haven't dried up over the last three years, the company has more than made up their expenses and should be seeing quite the profit from Kaletra at this point.
 
And as for scientists and inventors needing incentives, I am confident that most of the individuals would be more than happy to lend the developing world a hand. Besides, the individual scientists are rarely tied directly to the monetary success of new drugs, with the exception of continued employment.
 
And of course, what doesn't help big pharma convince people that they are taking developing world issues seriously is the fact that industry-advocate PhRMA's web page Health Care in the Developing World doesn't appear to have been updated since October 2004, with most references being several years older.
 
As I said before, the truth is undoubtedly somewhere in between these two extremes. Much as the developing world and social activists would like to think otherwise, they have little choice but to deal with the companies that are developing the next generation of life-saving drugs. If they don't, they likely won't have much of a population to represent in another few decades.
 
Pharma companies need to similarly chill out and recognize that developed countries can actually afford to bear the bulk of the costs associated with new R&D, and that there are ways to better wrench the last few dollars out of developing world countries. If the economies of the developing world continue to grow as they have been, these populations are going to represent an amazing market for future drug sales, so it is in the best interest of the pharmaceutical industry to keep these people alive.
 
There are no sinners and there are no saints in this situation; only victims…and increasingly bored bystanders. And still the pendulum swings.
 
 
OUR READERS RESPOND
 
Just an FYI, the $1.2 billion dollar estimate for getting a new drug through the pipeline is not just an industry estimate. Both Tufts University and the governments own GAO have come up with similar estimates. Please also realize that a product does have some production and marketing costs associated with it, not all of the drug's income can go into paying off its development costs. 
 
 I like your balanced reporting and objective position on most things. Please keep up the good work.
 John E. Somerville, Princeton, NJ

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