Patent Protection vs. Cheap Drug Access
A recent court decision by the Supreme Court of India knocked down the intellectual patent protection of the Novartis drug Gleevec. Indian authorities refused to accept the patent protection that Gleevec holds in Europe and the US. Other pharmaceutical companies are encountering the same trouble in emerging markets such as India and South Africa. The principal idea behind this rejection is cheap access to current drugs for their respective populations. The idea is a noble one but as a member of American society, why should we subsidize the rest of the world? Granted, our living standards are much higher than developing countries but we also have to work harder to support our lifestyles and families.
As a counter to the recent court ruling, Novartis has started to re-examine their relationship with India. Keep in mind that Novartis has outsourced jobs in the US to India. So now they get a ruling that they don’t like in terms of patent protection and they are second guessing their decision. This ruling opens a can of worms for any drug manufacturer in the world. Without patent exclusivity or protection two things happen: no pricing exclusivity and generic competition.
Pharmaceutical companies are in the business of producing drugs for profit. This is done by getting patent protection on a developed drug for a certain amount of time (10-15 years). This allows them to get their investment back along with a profit. It is no different than companies that produce electricity. They have their electric rates set at a certain level to get a return on their investment. It all works well when everyone plays by the rules. The problem comes when countries or governments decide that their population deserves the latest medications with limited cost (break the rules).
The gesture is nice but pharmaceutical companies are for profits, so guess what they will do. They will keep access to medications away from certain countries due to their lack of intellectual protections and they could also limit trade or job creation in that country. Keep in mind, jobs are created in every country that a drug is sold. There has to be an employee presence to answer questions, maintain records and keep track of drug shipments.
To counter that, drug manufacturers in that host country would just try and manufacturer their own generic brand with little regard to the true manufacturer since the active ingredient is known. They won’t have to spend money on ensuring the proper formulation, stability studies nor clinical tries. They can simply import a few of the desired drugs from another nation and reverse engineer to the best of their ability. For simple compounds like aspirin (acetaminophen), this is a relatively simple process. For complex structured drugs, the results can be lethal for the patients.
This is also known as counterfeiting. If successful, other nations would buy supplies of this cheaper drug version to save on cost. Thus removing profit potential from pharmaceutical firms.
Is this necessarily a bad thing? Yes and No. It wouldn’t be a bad thing since it would keep greed in check to a degree. If a drug was overpriced, counterfeits would enter the marketplace. BUT, each new medicine will finance future medicines. If the profit potential or return is not there, new medicines will suffer. Recently, I read an article where big pharmaceutical companies have abandoned research on new antibiotics. One of the reasons is the high cost and very low return on investment.
Should the rest of the world pay our prices for medicine?