Bringing the pharmaceuticals industry to its senses

MSF's comments to the editorial 'Patent nonsense' published in the Financial Times, 24 August 2001

Sir, Your editorial "Patent nonsense" (August 24) says it would be "a bad precedent" for Brazil to "set aside" Roche's patent. We disagree. This is an important precedent that will bring a myopic industry to its senses.

A patent is a contract between public and private interests. When a patent monopoly is against the public interest, governments have the right to free themselves from that monopoly. This is an inherent and necessary component of any patent system and is recognised by the World Trade Organisation, which allows for measures such as compulsory licensing. The US issues compulsory licences all the time on technologies such as tow-truck parts, computer technologies and gene rights.

Roche's anti-Aids drug was consuming more than a quarter of Brazil's spending on Aids treatment. This was an unacceptable level of expenditure for Brazil, which negotiated with Roche for six months for a price cut, without success.

Countries should follow Brazil's example and be able to turn to measures to resolve market failure by allowing generic competition. This is
precisely what a united bloc of developing countries has proposed at the WTO's trade related intellectual property rights council. The European Union supports them, leaving the US isolated in opposition. Concerns that cheap generic drugs may leak back into rich countries are old hat. Some companies already sell some medicines and vaccines at low prices and are having no difficulty with leakage. Pascal Lamy, the EU trade commissioner, has offered a regulatory firewall to ensure that they do not get into the EU.

Patents can be a crucial incentive for drug research and development. The pharmaceuticals industry is one of the most profitable in the world and has produced vital new cures. But if vast numbers of poor people are excluded from the benefits of these innovations, and die as a consequence, patent monopolies are unacceptable. Brazil's move does not threaten hopes of finding new drugs and vaccines. Where Aids medicines are unaffordable, profits are non-existent.

Seeking alternative sources of these medicines will have little impact on the profitability and research activities of the pharmaceuticals industry. The global patent system will avoid attack if countries are allowed to exercise their legal rights within a system that ensures that the resultant benefits are shared with those most in need.

Phil Bloomer
Director
Cut the Cost Campaign
Oxfam

Dr Bernard Pecoul
Director
Access to Medicines Campaign
Médecins Sans Frontières


Editorial comment: Patent nonsense for drug sales

Financial Times, August 23 2001

The pharmaceuticals industry is losing ground in its efforts to maintain patent rights against the demand for cheap drugs in developing countries.

After a humiliating defeat in a legal case against the South African government, the industry is facing further reverses in Brazil. In June the US government ended its attack on a Brazilian law that can override drugs companies' patent rights. Then, on Wednesday, Brazil threatened to end the monopoly of Roche of Switzerland over nefinavir, its Aids drug. This would be the first time that a country had explicitly set aside such patent rights.

It would be a bad precedent. Both sides should seek a compromise, as Merck of the US did in March when it agreed steep cuts in the prices of two Aids drugs sold in Brazil.

There is widespread sympathy for poorer countries that are seeking cheaper drugs. Brazil needs them for its well conceived programme to help Aids victims. In Africa hardly any of the 25m people infected with the HIV virus can hope for medication at present prices.

But government attacks on pharmaceuticals companies' patent rights - and campaigners' attempts to demonise them - are not the way forward. The hope of finding new drugs such as a vaccine for Aids depends on the research and the profits that patent laws protect.

In richer countries it is broadly accepted that the high cost of drugs includes the price of progress. But a general erosion of patent rights
could jeopardise that consensus.

That is not an argument for maintaining high prices in poor countries. In many of them, the choice is between cheap drugs or no drugs. So, quite apart from humanitarian considerations, there should be an economic incentive for pharmaceuticals companies to sell their products at close to the marginal cost.

There are obstacles, however. First, cheap generic drugs may leak back into rich countries. Second, two-tier pricing may provoke consumer revolts in the west. Third, many poor countries lack the infrastructure to make even a free distribution of medicines effective.

The difficulties are not insurmountable. Some drugs are already offered at lower prices to poor countries. Still, the industry needs to be much more pro-active. Otherwise its hand will be forced - as in Brazil. Richer countries must also recognise that they alone will bear the costs of drug development. They may need to offer protection against imports of cheap drugs from the third world. And they must be more generous to poor countries, with cash for drugs and medical expertise.

Copyright: The Financial Times Limited