Glaister: It’s not all fun on the ‘pharm’

Brian Glaister

Under the current agreement on Trade-Related Intellectual Property Rights in the World Trade Organization, member countries have the right to issue compulsory licenses to enable the generic production of patented medicines in light of a public health crisis. However, the current TRIPS agreement failed to recognize that the manufacturing sectors of developing countries, where the public health risks are greatest, are not able to handle the production of pharmaceuticals.

So in November of 2001, the trade ministers of the WTO’s 144 member countries met in Doha, Qatar to debate a new TRIPS agreement. At the end of the meeting, all 144 ministers agreed to create an amendment to the TRIPS agreement known as the Doha Declaration that would enable developing countries to import generic medications from countries with adequate pharmaceutical manufacturing capabilities. However, when the ministers met again to create the amendment, the United States Trade Representative cast the only dissenting vote out of concerns voiced by the pharmaceutical industry’s lobbying group, PhRMA.

PhRMA believes that undermining the intellectual property regime would consequently undermine the entrepreneurial American spirit that has created numerous medical advances that benefit society. Specifically, gray market imports and research and development costs are of great concern to PhRMA.

They argue that generic drugs intended for developing countries would find their way into rich markets. These cheap generics would undermine industry profits that are necessary to recover the high costs of research and development that are necessary to create medical miracles.

On the surface, PhRMA’s arguments appear to be legitimate. However, upon closer examination, they do not stand on such a solid foundation.

First of all, generic drugs have been produced in Brazil and India in large quantities for years. Consequently, the U.S. enacted strong legislation that bans the importation of generic medication into the country. Even if this illegal medicine somehow found its way into the country, there is no suitable marketplace for its distribution. After all, it is hard to imagine a soccer mom parking her minivan in a dark alley along Crack Row to pick up a cheap, generic asthma inhaler for her daughter. PhRMA has nothing to fear regarding gray market imports into the U.S.

However, even without the danger of gray market imports, PhRMA still argues that profitability and, consequently, medical progress could still be harmed if the full scope of the Doha Declaration is implemented, since the widespread production of generics will decrease the world market price of pharmaceuticals. What PhRMA fails to mention is that the medical breakthroughs that are benefiting society actually come at taxpayer expense.

A recent article by two former editors in chief of The New England Journal of Medicine claims that 85 percent of the research for new drugs comes from independent researchers funded by taxpayer-supported grants from institutions like the National Institute of Health. Furthermore, the article argues that PhRMA members spend most of their research and development budgets developing new drugs similar to popular drugs already on the market, not the medical breakthroughs they claim responsibility for.

The industry uses its high profitability to recover the costs of selling drugs, not developing them. As the article explains, marketing costs are over twice as large as research and development. PhRMA’s claims that high profits are necessary to ensure medical progress are unfounded.

No one doubts the need for an intellectual property regime or the right of industry to return profits on their investment. However, PhRMA claims that the Doha Declaration would undermine pharmaceutical development are weak. The pharmaceutical industry is not responsible for medical progress; it only profits from it. However, PhRMA does have a chance to legitimize claims that the industry is a sort of savior for humanity.

If it dropped its pressure on the USTR against Doha, PhRMA could heroically bring life-saving medicines to millions of people suffering from preventable diseases in the developing world. It can only happen if the pharmaceutical industry puts people before profits.