[Ip-health] Susan Finston on Thai CLs - "License to Steal"

[Mike Palmedo]

http://www.american.com/archive/2008/july-07-08/license-to-steal
(The author worked for PhRMA from 1999-2005)

License to Steal

Susan K. Finston
Institute for Policy Innovation
July 16, 2008

If the Thai government really wants to improve public health, it should
stop trampling intellectual property rights.

Like a zombie in a horror flick, the issue of compulsory licensing has
emerged again in Thailand and just won=92t die.

Compulsory licensing is a fancy term for government expropriation of one
company=92s intellectual property (IP), which is usually given to another
profit-making company. For the past decade, so-called civil society
activists have pressured successive Thai governments to override private
property rights for medicines. From 1999 to 2006, they never made the
sale, because Thai policymakers understood that they could achieve
greater public-health gains by strengthening IP rights, which encouraged
innovation and technology transfers in Thailand through partnerships
with multinational pharmaceutical companies.

But in late 2006, activists took advantage of the military coup that
temporarily removed Thailand=92s democratic safeguards and called for the
issuance of compulsory licenses for innovative HIV/AIDS and cardiac
drugs. The latest Thai health minister appears to have embraced the
compulsory-licensing policy and expanded it to include innovative cancer
therapies. In essence, Bangkok is using compulsory licensing to force
foreign drug companies to underwrite its universal drug-access program.

Let=92s hope Thailand reconsiders compulsory licensing before it continues
down a pointless cul-de-sac, one that has never produced long-term
social and economic benefits.

In essence, Bangkok is using compulsory licensing to force foreign drug
companies to underwrite its universal drug-access program.In 2007,
anti-IP activists championed local drug production by Thailand=92s
for-profit Government Pharmaceutical Organization (GPO). The GPO,
however, has repeatedly failed to meet World Health Organization
standards for production of antiretrovirals. The result was that Indian
pharmaceutical companies, not local Thai producers, began exporting the
drugs to Thailand and reaping windfall profits. This amounted to a
direct transfer of revenues from innovator companies to Indian generics
producers.

Anti-IP activists still claimed victory, citing a drop in drug prices as
proof of their success. But the long-term harm caused by trampling IP
rights outweighs a few bargain-basement prices. For one thing, the GPO=92s
low-quality drug copies (already in use) have led to a higher prevalence
of viral-strain resistance to the most readily available HIV/AIDS
therapies. Thailand=92s nascent life-sciences sector is another major
loser. Foreign direct investment fell substantially during the period
following the compulsory-licensing order. Even so, the Thai ministry of
health is pushing forward with its efforts to force some third-party
private companies to either directly or indirectly foot the bill for the
government=92s promise of free, universal access to medicines.

The criteria for imposing a compulsory license are sweeping, making
almost any drug eligible. Is a drug on the National Essential Drug list?
Is it needed to solve important public health problems? Will it help
prevent or control outbreaks and pandemics? Is it considered
=93life-saving=94? If the answer to one or more of these questions is yes,
then a drug is subject to compulsory licensing in Thailand.

Because =93only=94 15 percent of patented products are affected by the new
policy=97and only for =93public use=94=97the health ministry asserts that
Thailand is upholding IP rights. This claim is risible. The Thai
government has capped royalties for expropriated drugs at 0.5 percent of
their sales value. That is all the compensation that the drug makers
receive.

The health ministry=92s short-term mentality may impose greater costs on
Thai patients and families down the road. Setting aside the long-term
harm to Thailand=92s investment climate, innovative pharmaceutical
companies operating in Thailand currently sponsor extensive corporate
social responsibility programs that go well beyond discounted or free
medicines. These programs=97which include infrastructure and other public
health projects valued in the millions of dollars annually=97are funded by
some of the very same companies whose drug products have been targeted
for expropriation.

Is there any expectation that generic exporters will fund Thai
infrastructure development? Will they back joint scientific exchanges
and support nursing and other public-health education programs currently
underwritten by the innovator companies? In terms of future research and
development, will the lowest-cost bidder supplant brand-name drug
companies currently conducting dozens of clinical trials annually in
Thailand? Has the Thai ministry of health even paused to calculate the
enormous economic and social value of these programs?

Simply put, Thailand=92s costly universal health programs cannot be
sustained by robbing private companies of their intellectual property
rights. Let=92s hope that cooler minds emerge within the Thai government
before broad-scale compulsory licensing begins to cause serious damage.

Susan K. Finston is an adjunct fellow at the Institute for Policy
Innovation.

--
Mike Palmedo
Research Coordinator
Program on Information Justice and Intellectual Property
American University, Washington College of Law
4910 Massachutsetts Ave., NW Washington, DC 20016
T - 202-274-4442 | F 202-274-0659
mpalmedo@wcl.american.edu