[Ip-health] Stiglitz in BMJ Scrooge and intellectual property rights: A medical prize fund could improve the financing of drug innovations

[James Love]

http://www.bmj.com/cgi/content/full/333/7582/1279

BMJ  2006;333:1279-1280 (23 December), doi:10.1136/bmj.39048.428380.80

Editorials

Scrooge and intellectual property rights

A medical prize fund could improve the financing of drug innovations

At Christmas, we traditionally retell Dickens's story of Scrooge, who
cared more for money than for his fellow human beings. What would we
think of a Scrooge who could cure diseases that blighted thousands of
people's lives but did not do so? Clearly, we would be horrified. But
this has increasingly been happening in the name of economics, under
the innocent sounding guise of "intellectual property rights."

Intellectual property differs from other property=97restricting its use
is inefficient as it costs nothing for another person to use it.
Thomas Jefferson, America's third president, put it more poetically
than modern economists (who refer to "zero marginal costs" and "non-
rivalrous consumption") when he said that knowledge is like a candle,
when one candle lights another it does not diminish from the light of
the first. Using knowledge to help someone does not prevent that
knowledge from helping others. Intellectual property rights, however,
enable one person or company to have exclusive control of the use of
a particular piece of knowledge, thereby creating monopoly power.
Monopolies distort the economy. Restricting the use of medical
knowledge not only affects economic efficiency, but also life itself.

We tolerate such restrictions in the belief that they might spur
innovation, balancing costs against benefits. But the costs of
restrictions can outweigh the benefits. It is hard to see how the
patent issued by the US government for the healing properties of
turmeric, which had been known for hundreds of years, stimulated
research. Had the patent been enforced in India, poor people who
wanted to use this compound would have had to pay royalties to the
United States.

In 1995 the Uruguay round trade negotiations concluded in the
establishment of the World Trade Organization, which imposed US style
intellectual property rights around the world. These rights were
intended to reduce access to generic medicines and they succeeded. As
generic medicines cost a fraction of their brand name counterparts,
billions could no longer afford the drugs they needed. For example, a
year's treatment with a generic cocktail of AIDS drugs might cost
$130 (=A365; {euro}170) compared with $10 000 for the brand name
version.1 Billions of people living on $2-3 a day cannot afford $10
000, though they might be able to scrape together enough for the
generic drugs. And matters are getting worse. New drug regimens
recommended by the World Health Organization and second line defences
that need to be used as resistance to standard treatments develops
can cost much more.

Developing countries paid a high price for this agreement. But what
have they received in return? Drug companies spend more on
advertising and marketing than on research, more on research on
lifestyle drugs than on life saving drugs, and almost nothing on
diseases that affect developing countries only. This is not
surprising. Poor people cannot afford drugs, and drug companies make
investments that yield the highest returns. The chief executive of
Novartis, a drug company with a history of social responsibility,
said "We have no model which would [meet] the need for new drugs in a
sustainable way ... You can't expect for-profit organizations to do
this on a large scale."2

Research needs money, but the current system results in limited funds
being spent in the wrong way. For instance, the human genome project
decoded the human genome within the target timeframe, but a few
scientists managed to beat the project so they could patent genes
related to breast cancer. The social value of gaining this knowledge
slightly earlier was small, but the cost was enormous. Consequently
the cost of testing for breast cancer vulnerability genes is high. In
countries with no national health service many women with these genes
will fail to be tested. In counties where governments will pay for
these tests less money will be available for other public health needs.

A medical prize fund provides an alternative. Such a fund would give
large rewards for cures or vaccines for diseases like malaria that
affect millions, and smaller rewards for drugs that are similar to
existing ones, with perhaps slightly different side effects. The
intellectual property would be available to generic drug companies.
The power of competitive markets would ensure a wide distribution at
the lowest possible price, unlike the current system, which uses
monopoly power, with its high prices and limited usage.

The prizes could be funded by governments in advanced industrial
countries. For diseases that affect the developed world, governments
are already paying as part of the health care they provide for their
citizens. For diseases that affect developing countries, the funding
could be part of development assistance. Money spent in this way
might do as much to improve the wellbeing of people in the developing
world=97and even their productivity=97as any other that they are given.

The medical prize fund could be one of several ways to promote
innovation in crucial diseases. The most important ideas that emerge
from basic science have never been protected by patents and never
should be. Most researchers are motivated by the desire to enhance
understanding and help humankind. Of course money is needed, and
governments must continue to provide money through research grants
along with support for government research laboratories and research
universities. The patent system would continue to play a part for
applications for which no one offers a prize . The prize fund should
complement these other methods of funding; it at least holds the
promise that in the future more money will be spent on research than
on advertising and marketing of drugs, and that research concentrates
on diseases that matter. Importantly, the medical prize fund would
ensure that we make the best possible use of whatever knowledge we
acquire, rather than hoarding it and limiting usage to those who can
afford it, as Scrooge might have done. It is a thought we should keep
in mind this Christmas.3 4 5 6

Joseph E Stiglitz, professor

1 Columbia University, New York, NY 10025, USA

jb2632@columbia.edu

Competing interests: JES was chief economist of the World Bank from
1997 to 2000 and a member and then chairman of President Clinton's
Council of Economic Advisers from 1993 to 1997. He won the Nobel
Prize for economics in 2001.

References

    1. M=E9decins Sans Fronti=E8res. People not getting the treatment
they need to stay alive. Newer AIDS drugs unaffordable and
unavailable. Geneva: MSF, 29 November 2006.
    2. Andrew J. Novartis chief in warning on cheap drugs. Financial
Times 29 September 2006.
    3. Stiglitz JE. Making globalization work. New York: WW Norton,
2006.
    4. Hollis A. Optional rewards for new drugs for developing
countries. Geneva: World Health Organization, 5 April 2005.
www.who.int/entity/intellectualproperty/submissions/
Submissions.AidanHollis.pdf.
    5. Pogge T. Human rights and global health: a research program.
Metaphilosophy 2005;1/2(36).
    6. Love J. Submission of CPTech to IGWG. 15 November 2006.
www.who.int/entity/public_hearing_phi/summary/15Nov06JamesLoveCPTech.pdf