Intellectual Property and Pharmaceutical Access in the Developing World

Rapid technological progress over the last several decades has enabled marked improvements in quality of life and, thanks to medical advances, the capacity for humans to live significantly longer than in any prior era. Yet the fruits of this progress are not equitable. Expansive patenting of new drugs under international law has created a restrictive barrier to medical access for many in the developing world, inflating prices of name-brand medicines while cutting off the possibility of cheaper generic alternatives. Though intellectual property laws are meant to promote innovation by giving exclusive rights to companies willing to invest in research and development, their current role in the international pharmaceutics trade has led to a system that pits corporate bottom lines against human lives, often to the detriment of the latter.

Access to vital medicines is a major issue in the global south, with crises like the HIV/AIDS epidemic prompting the World Health Organization, UN Millennium Project, and others to cite overly-expensive drugs as a major threat to public health. Yet for many developing nations, getting around this prohibitive pricing would mean violating the intellectual property (IP) rights of drug manufacturers. “Patent protection in developing countries has been lax historically by comparison to the developed world” notes Alan Sykes of the Coase-Sandor Institute for Law and Economics, so the pharmaceutical corporations are generally protected under international agreements instead. The key legislation on this issue is the World Trade Organization’s 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). TRIPs outlines basic patent protections that all World Trade Organization member states must provide to all other member states and their citizens, thus defining the legal mechanisms by which foreign corporations can maintain their IP holdings in other countries. At the urging of developing nations TRIPs was amended in 2001 by the “Doha Declaration” to clarify and in some cases loosen patent regulations, especially so as to ease access to life-saving drugs.

Yet even with significant revisions, TRIPs and the state of the patents-versus-accessibility issue remain contentious, and human health crises in Africa and elsewhere have only been exacerbated by corporation’s restrictive pricing. Angela Anderson of the University of Tulsa College of Law argues that “these [IP] standards were developed based on Western European and North American property law by wealthy countries with little regard for the needs of developing countries.” Critics of reform counter that patent law is designed to promote innovation; without some level of monetary reward, pharmaceutical corporations would be unlikely to pour money into research and development (R&D) for new drugs. This is misleading, however. Because of the relative fiscal opportunities available in the developed versus developing world, scholars have noted a significant focus by corporations on only diseases prevalent in the developed world. A 2002 study published in The Lancet, for instance, revealed that between 1975 and 1999 merely 1% of new drugs developed were to treat tropical diseases, a ratio disproportionate to the global prevalence of such diseases (especially in the global south). Even with the significant patent protections they are afforded under TRIPs, corporations still fail to fulfill the medical needs of people in developing countries when the potential gains don’t meet their profit standards.

Perhaps most contentious here is the question of compulsory licensing and parallel importation, two policies outlined by TRIPs and elaborated on in the subsequent amendments. Compulsory licensing refers to the power of a nation to force a pharmaceutical corporation to temporarily allow use of patented IP with minimal royalties required. TRIPs allows this under conditions of “national emergency” while Doha establishes that each member state is allowed to define what constitutes such an emergency themselves. There has been a push to define public health emergencies as covered by this provision, but it is contested and has rarely been cited. Parallel importation, meanwhile, refers to when a country that buys a drug for a low price resells it to another country that typically pays a higher price but can now also pay the first country’s lower price. Corporations will generally sell the same drug for different prices in different nations as per the relative demand and wealth (a practice known as price discrimination) but parallel importation undermines this by making the cheapest price available to all by way of the transnational free market. Developed countries have in the past tried to bully developing countries into not taking advantage of this power, as with the United States against Brazil in 2000, and the perceived threat to aid or investment from those nations that benefit from strong corporate IP protections tends to create a chilling effect on the actual use of parallel importation rights.

Policy mechanisms aside, the most important impact of pharmaceutical patents is and always will be their impact on living, breathing humans. Angela Anderson argues that “it is unfair to deny access to essential medicines simply because poor developing countries do not have sufficient manufacturing capacity to produce or develop these essential medicines”, and critics of the current status quo generally agree that the valuation of profit margins over human lives is a fundamentally inhumane paradigm. But this issue is one rooted in the complexities and nuances of real-world international legislation where multiple stakeholders (corporate, national, and human alike) are vying for their own self-interest. Effective reform needs more substance than mere condemnation of immoral business practices. The path forwards lies in specific policy revisions to the post-Doha TRIPs agreement, using the international legal system as an avenue for bringing about broader human rights progress in the medical sphere without compromising the incentives for pharmaceutical R&D that result from effective patent protections.

One specific area of possible reform is in government support and subsidization of drug purchases. Developed nations could play a major role here; because it is often they who benefit most from expansive patent protection (due to the majority of name-brand drug manufacturers being located therein) they should be expected to divert a certain amount of foreign aid into helping their less-developed counterparts pay for patented medicine through legitimate avenues. This would be expensive, but that is precisely the problem developing nations face as things stand now, and they don’t even get the benefit of having profitable corporations fueling their own domestic economies. Instead, such an transnational subsidy program would benefit the developed nations and their corporations by keeping the patent system manageable and adhered to while also aiding the developing countries through cheaper drugs and thus improved public health.

Certain areas of policy under TRIPs also leave open room for variable interpretation when it comes to niche aspects of patent law, the flexibility of which could strengthen the bargaining power of developing nations. For instance, the agreement takes no stance on the question of ‘patent exhaustion’, which refers to how long a product remains protected under patent law after being sold. If developing nations worked through the WTO to push for immediate patent exhaustion after one sale it would mean that reselling patented drugs to other countries would not violate IP protections (because the patent would have been exhausted after the medicine was purchased the first time). This is the legal path by which parallel importing could be engaged with, leading to a (legitimate) “second-hand” drugs market where countries could buy medicine at cheaper prices than the pharmaceutical corporations themselves would typically make available under price discrimination systems.

Also interesting is Alan Sykes’ proposal of expanding price discrimination to within countries too rather than just between countries. This would mean that not only might India pay a different price than Canada but that Indians in one tax bracket might also pay a different price than Indians in another (and so too for different classes of Canadians, and so on). Internal price discrimination takes the same thesis as its international version – different groups should pay different prices based on their respective means and ends – and acknowledges that that same dynamic could be emulated inside a given nation’s economy, too. This allows for more nuance than binarily judging an entire nation as either rich or poor. Enshrining such language in an amendment to TRIPs would create a regulatory framework to prevent foreseeable issues like a citizen-to-citizen analog of parallel importing, and perhaps incentivize the development of such systems by drug companies themselves.

In terms of something the developing nations themselves can do, more active use of the rights outlined in TRIPs and the Doha Declaration would strengthen their validity as mechanisms in the first place. Developing nations currently may feel pressure to not implement compulsory licensing or parallel importing for fear of reprisal through extra-legal channels from wealthy nations (trade sanctions, diplomatic tension, reduced aid) but if all those who would benefit from such action utilized their tools collectively then the threat of retaliation by powerful stakeholders with contrary interests would be diminished for all. This is especially relevant for areas of flexibility in the policies, such as the capacity for nations to unilaterally define what constitutes a national emergency. Frequent collective action would also embolden an entire generic drug industry in the global south, spurring economic and infrastructural development for pharmaceutical companies of these country’s own.

The issue at stake is a complex one. A robust IP protection system is necessary insofar as these life-saving drugs are necessary; without patents, pharmaceutical corporations will have no incentive to pay the heavy R&D costs necessary to develop new medicines, especially not those primarily needed in the poorer global south. Yet it should also be self-evident that the needs of people precede the profits of corporations and that the IP system must not be perverted into a tool of pure commercial strong-arming. As Angela Anderson explains, “instead of patents being viewed as a fundamental or natural right, patent protection should instead merely represent a conscious governmental decision to maximize social welfare.” The legal intricacies of international agreements like TRIPs and the subsequent Doha Declaration only complicate this dynamic, introducing specific policy issues like parallel importing and compulsory licensing that put the conflicting interests of the different stakeholders into stark contrast. There are certainly clear areas in which reform can be made: government subsidization and aid, flexible interpretations of patent exhaustion and other legal provisions, tiered internal price discrimination, and a normalization of counter-patent mechanisms, among others. But more broadly, progress will only be made if both sides acknowledge that real human lives hang in the balance of their decisions and that reform in either direction must place people before profits every time. Access to medicine is a human right, but there remains a long way to go before that right is made manifest for people of every economic class and in every part of the world.

Brian Contreras