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News Analysis: Defensive Drug Industry Fuels Fight Over Patents
By: Andrew Polack
The New York Times, April 23, 2001
The big pharmaceutical companies march to the beat of a steady chant — that patent protection for drugs is essential for innovation. At the urging of the drug companies, the United States government has pressed many nations to honor patents on medications.
But now, it seems, the industry may have overplayed its hand. Drug patents are under attack, blamed for high AIDS drug prices that deny life- saving therapy to millions of people in developing countries. And some analysts say the industry itself fueled the backlash by staunchly defending its intellectual property in the face of a pandemic that could claim more lives than the Black Death of the Middle Ages.
The latest clash over patents on AIDS drugs came to a boil in South Africa yesterday, when 39 drug companies dropped a suit trying to block a law the companies asserted would make it too easy for the government to abrogate their patents.
The debate has erupted in other countries as well. Brazil has threatened to grant licenses to local manufacturers on patents for AIDS drugs held by Merck and Hoffman-La Roche. In Thailand, AIDS patients and activists are planning a legal challenge to the validity of a Bristol-Myers Squibb patent on an AIDS drug.
The uproar over AIDS drugs is threatening moves toward more globalization, eight years after most nations approved the Agreement on Trade-Related Aspects of Intellectual Property Rights, or Trips, which commits them to enforce drug patents. Activists are campaigning against the proposed Free Trade Area of the Americas, saying the United States wants more patent protections.
"The Trips agreement was probably the greatest political economic achievement that the pharmaceutical industry ever had," said Jim
Keon, president of a trade group representing generic drug companies in Canada. "Now it's coming home to roost, though. Can the world afford it? Is it ethical?"
Even some supporters of patents are pulling back somewhat. Washington says it will no longer pressure poor countries that allow production of cheaper versions of patented drugs for major health problems, provided they adhere to Trips guidelines. The European Parliament has expressed "solidarity and support" for South Africa and Kenya in their efforts to gain access to lower- priced AIDS drugs.
Until recently, the industry worried that erosion of patent rights or prices in one country could lead to similar actions elsewhere, particularly in the United States, where the industry gets much of its profit.
"There was a feeling that if a country deliberately went against Trips, there would be a castle-of-cards effect," said Jean-Pierre
Garnier, chief executive of GlaxoSmithKline, a major supplier of AIDS drugs. "Without patents, the industry ceases to exist."
But now, judging from their actions, drug companies have decided to sacrifice prices in some poor countries in order to argue that generic manufacturers are not needed and to relieve the pressure on the patent system. In Brazil, for example, Merck recently agreed to big price cuts for two AIDS drugs to prevent the government from allowing a local generic manufacturer to make a copy of one of them.
Some AIDS activists, however, say it is better to rely on competition from generic manufacturers than on voluntary actions by big drug companies. They say drug companies' recent discounting was only in response to an offer of low-priced AIDS drugs by a generic manufacturer in India. But under Trips, India and other countries will have to enforce patents by 2005 or 2006.
"If we don't deal with the problem now, 5 to 10 years from now we'll have no possibility of bringing prices lower and we'll be completely at the mercy of the big drug companies," said Ellen 't
Hoen, an attorney with Doctors Without Borders.
Drug company executives argue that patents are not a barrier to treatment of AIDS. Even generic drugs are out of reach for countries that spend less than $10 a year per person on public health and lack doctors and clinics to deliver the medications. Moreover, in many countries of Africa besides South Africa, AIDS drugs are not patented.
"At least for AIDS drugs, patents have been a barrier only as an exception rather than the rule in Africa," said Amir
Attaran, director of international health research at Harvard University's Center for International Development. Drug companies and some experts argue further that if developing countries honor patents, drug companies will have more incentive to develop treatments for tropical diseases. But others say what deters companies from developing those drugs is the small market size.
Patents award an inventor exclusive rights to make or sell a product for a set period. In countries that adhere to the Trips agreement, patents run for 20 years from the filing of the application. Patents provide an incentive for innovation, and in return, the invention is publicly disclosed so others can learn from it.
Drug companies argue that they need patents because it can take more than a decade and hundreds of millions of dollars to develop and test a drug, which can be copied relatively easily once it is on the market. Many countries have viewed drugs as meriting exceptions to patent law because of their importance to public health. But with trade agreements like Trips, countries have tightened their patent protection.
Trips does not go as far as drug companies would like, and it includes some exceptions to patent protection. For example, countries can force patent holders to license their patents to others, like generic manufacturers. But so far, no country has.
Some activists say the countries have not used licensing because of pressure from drug companies and Washington. But the United States has partly reversed its policy and is no longer raising objections to compulsory licensing in the case of health crises in developing countries.
The country with the most experience with compulsory licensing, albeit before Trips took effect, is Canada. For decades Canada allowed any company to apply for a license to make a patented drug there.
In 1969, it allowed copies of patented drugs to be imported, and a generic industry began to thrive. The compulsory licensing system was weakened in 1987 and then abandoned in 1993.
Since then, spending on research and development by drug companies in Canada has zoomed, to about $900 million in 1999 from $166 million in 1988. The Canadian experience suggests that protecting intellectual property may prompt greater investments by drug companies and even the development of a homegrown industry.
But it is not clear if African countries have the scientific expertise for a research-oriented drug industry. Moreover, some experts say the drug companies promised in advance to increase spending in Canada if the law was changed.
The precedent that most worries drug companies now is that weakened patent protection in developing countries will lead to pressure to weaken patents — and in the process, their latitude to set prices — in the United States.
The Consumer Project on Technology, a Washington group founded by Ralph
Nader, has asked the government to let it make a low-priced version of d4T, the Bristol-Myers AIDS drug. The National Institutes of Health has in the past rejected such requests.
Even without the AIDS crisis, there is pressure on patents as a result of high drug prices in the United States. While innovation should be rewarded, some drug industry critics say, the drug industry is the most profitable in the nation. Moreover, many drugs are initially developed with government money.
Gail Wilensky, a senior fellow at the international health education organization Project Hope who ran Medicare under former President George Bush, has proposed shortening the life of drug patents to let competition lower drug prices, as an alternative to regulatory options that are sometimes discussed.
A report issued last year by the National Institute for Health Care Management Foundation, an organization supported by health insurers, said the effective patent life for some drugs has grown from 8 years in the early 1980's to 14 or 15 years now.
"We have moved more toward increasing market power of pharmaceutical companies than we wished to," Dr. Wilensky said.
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