[Ip-health] Economist on patents, CL and Thailand - Jon Pender (GSK) should know better

[Ellen 't Hoen]

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 =B3as a last resort=B2. He a=
rgues
that although compulsory licensing is legal, TRIPS rules allow it only unde=
r
limited circumstances, such as national health emergencies, and only after
lengthy efforts to negotiate prices with firms."





Pharmaceuticals

A gathering storm
Jun 7th 2007 | NEW YORK
>From The Economist print edition


Reuters



Drugs companies' patents are under attack. Will this really help the poor?
Get article background

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 =B3compulsory licensing=
=B2
only under special conditions=8Bconditions that some complained Thailand di=
d
not fulfil.

In the months since then, Thailand has said it would overrule the patents o=
n
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 advocates=8Binclud=
ing
Bill Clinton, whose foundation works on HIV=8Bhave 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 =B3as a
last resort=B2. He argues that although compulsory licensing is legal, TRIP=
S
rules allow it only under limited circumstances, such as national health
emergencies, and only after lengthy efforts to negotiate prices with firms.

=B3It is easy to see Big Pharma as a source of evil,=B2 laments Daniel Vase=
lla,
chairman of Novartis, a Swiss drugs giant. His firm is involved in a closel=
y
watched patent case in India that involves Gleevec, a cancer drug. Without
innovation, he insists, future generations will have fewer life-saving
drugs=8B=B3which is equally unethical as lack of access now.=B2 And as Fred
Hassan, the boss of America's Schering-Plough and head of the international
pharmaceutical lobby, warns, =B3without intellectual property there is no
innovation.=B2

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 i=
n
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. The=
y
have long used the threat of compulsory licensing to win discounts, but by
actually imposing such licensing they shift the balance of power. Rudolf Va=
n
Puymbroeck, a former senior lawyer at the World Bank, likens compulsory
licensing to other sorts of compulsory state purchases: =B3Firms are upset =
not
because this is illegal, but because they are in a very weak position to
negotiate compensation after expropriation.=B2


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. =B3Charity can come from
anywhere, not just drug companies,=B2 he notes.

Even experts devoted to the cause of helping the poor get access to drugs
see the trend as worrying. =B3Brazil is not Rwanda, which cannot afford to
pay,=B2 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 =B3the l=
ast
blow=B2 that pushes the drug industry away from looking for cures for disea=
ses
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 th=
e
generic-drugs industry. Under a provision of the TRIPS treaty, countries
that invoke compulsory licensing but lack domestic manufacturing are allowe=
d
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 =B3helps protect the right=
s
of citizens=B2.

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 =B3lethal=B2 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 =B3to avoid paying their fair share of
drug-discovery costs=B2. In doing so, he fears, they risk provoking a backl=
ash
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: =B3We do not encour=
age
compulsory licensing.=B2 He explains that his firm has 1,100 researchers an=
d
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). =B3We are very supportive of intellectual-property
rights, as innovations must be given their reward,=B2 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. =B3As a scientist myself, I know the value =
of
intellectual property,=B2 he says. =B3In future, we should develop our own =
drugs
industry.=B2