In this second part of an article by Fran Quigley, we excerpt the recent history of that enclosure and why the patent system doesn’t work for medicines.
“The origins of modern intellectual property law can be traced back to the occasional awards of exclusive rights to artists in ancient Persia and Greece.
“Letters patent,” meaning open letters, were issued in 14th-century England to induce foreign craftsmen to relocate there. Attempts to coordinate global intellectual property rules led to the 1883 Paris Convention and the 1886 Berne Convention, and eventually to the creation of the United Nations’s World Intellectual Property Organization in 1967. But nations who signed on to those agreements retained the ability to determine the length of patents and what products would be covered. For many nations, that flexibility meant excluding medicines from patent protection. For example, Germany’s patent law of 1877 labeled medicines as “essential goods,” along with food and chemicals, and prohibited any attempts to patent them.
In the middle of the 20th century, several postcolonial nations adopted similar laws. India’s patent law extended only to the processes for creating medicines, not the drugs themselves. The law opened the door for Indian pharmaceutical manufacturers to reverse-engineer patented drugs and then devise different, cheaper production methods. India soon became known as “the pharmacy of the developing world.” Brazil, Mexico, and other Central and South American countries also adopted limits on the patentability of medicines.
European countries like Italy and Sweden didn’t grant pharmaceutical patents until the 1970s, and Spain refused to do so until 1992. Even when medicine patents were given, many nations granted liberal access to compulsory licenses for patented drugs, meaning that generic manufacturers were free to make the drugs and pay a royalty to the patent holders. During the period between 1962 and 1992, Canada granted 613 licenses to import or manufacture pharmaceutical products.
As commerce became increasingly global, this state of affairs deeply concerned pharmaceutical companies. Over time, an industry that once competed on the basis of manufacturing innovation and price had come to rely on the profits of patent monopolies. At one time in the mid-20th century, for example, Pfizer drew a full 33 percent of its global sales from just two patented drugs. So—as extensively chronicled in Peter Drahos and John Braithwaite’s 2002 book, Information Feudalism: Who Owns the Knowledge Economy? —Pfizer took the lead in an ambitious campaign to create a global system of intellectual-property protection: an enclosure of essential medicines.
The first step in that effort was countering the dominant international view that medicine compounds were not private property that could or should be owned by companies and individuals. Economists call this process the transformation of a public good into a “club good,” like taking a public park and turning it into a gated dues-required golf course. A July 1982 op-ed in The New York Times by the chair of Pfizer International, entitled “Stealing from the Mind,” started the process of creating that club good. The column charged that US inventions were being “stolen” by governments that didn’t protect patent rights. When governments outside the US refused to block generic manufacturing, the pharmaceutical industry argued, they were indulging acts of piracy.
But there was little in the way of binding international law to back up that position. So the industry pushed directly for the US government to make intellectual-property protection a priority in all trade negotiations. Of course, inserting monopoly patent rights into trade agreements runs counter to those agreements’s stated purpose of dismantling barriers to global competition. Yet the pharmaceutical industry, reliably at the top of the list in both lobbying expenditures and political campaign contributions in the United States, quickly found willing partners on Capitol Hill and in the White House. The United States soon adopted intellectual property protection as a litmus test for its trade partners.
The approach was to offer carrots to patent-resistant countries—enhanced access to US markets and some reductions in the subsidies of US agricultural exports—while simultaneously brandishing some imposing sticks. In 1984, aggressive pharmaceutical sector lobbying helped amend the US Trade Act to give the president the authority to impose duties on or withdraw trade benefits from any nation that did not provide “adequate and effective” protection for US intellectual property.
A few years later, the law was amended again, this time to give the US trade representative the power to put offending countries on what became known as a Special 301 watch list, a designation dreaded by countries whose economies relied on trade with the United States. The two countries that resisted pharmaceutical patents most vigorously, India and Brazil, were placed in the more serious “priority” watch list.
Against this ominous backdrop, the World Trade Organization in 1986 convened talks to create a global intellectual-property agreement. At the time the talks began, more than 40 of the 90 counties involved refused to grant patents for pharmaceutical products, and others that did grant them adopted strict limits. But over the course of years of negotiations, US trade pressure wore down the resistance. By April of 1994, the Agreement on Trade-Related Aspects of Intellectual Property Rights, a.k.a. TRIPS, was signed by 123 government ministers. The deal was one of the foundational documents of the World Trade Organization, and immediately became the most significant intellectual property agreement of modern times.
TRIPS transformed an uneven worldwide patchwork of intellectual property law into a blanket of standards mandating protection for holders of patents, copyrights, and trademarks. For patent holders, that protection features at least 20 years of government-granted monopolies on their products, including medicines. TRIPS also requires each nation to award intellectual-property rights regardless of national origin, a boon for multinational pharmaceutical corporations, and a death blow to their local manufacturing rivals.
The enclosure of essential medicines was complete.” (http://www.thenation.com/article/corporations-killed-medicine-heres-how-to-take-it-back/)
The Fallacy of the Patent Incentive, by Fran Quigley:
“When it comes to inducing innovation for essential medicines, it turns out that the evil of monopoly patents isn’t at all necessary.
The history of pharmaceutical innovations, especially vaccine developments and life-saving treatments for infectious and chronic diseases, shows that the critical research behind these developments was created outside the patent system. Even in the current post-TRIPS era, patent-seeking private industry still looks to governments to provide funding for pharmaceutical research, especially for essential medicines. The US National Institutes of Health alone provides $30 billion annually for medical research; governments provide tax credits to support corporate research; and government health programs are bulk purchasers of patented medicines priced far above the costs of production.
When it comes to medicines, the taxpayers of the United States and other research-supporting countries are the very opposite of free riders: They pay to build the bus, fill it with fuel, and hire the driver. But they’re still asked to pay a steep fare if they wish to take a seat.
In fact, a decade ago, US economist Dean Baker crunched the numbers and estimated that the US could save over $140 billion a year if its health systems could provide medicines without the artificial mark-up imposed by monopoly patents. That money could fund the replacement of all private industry research and development several times over, while still leaving billions of dollars in remaining public benefit. A significant source of those savings derives from eliminating the for-profit pharmaceutical companies’s expenses on marketing, a cost that exceeds their investment in research and development. As it happens, there are more efficient uses of resources than funding television ads for erectile dysfunction drugs.
The enclosed medicine system inflicts additional damage beyond the artificially inflated cost of patented medicines. The resources of for-profit corporations are inevitably concentrated on the development and promotion of medicines that can be sold at a high mark-up to wealthy consumers. “Lifestyle” drugs that address male pattern baldness or sexual performance are exhaustively researched and marketed, yet the past half-century has seen just one drug developed to treat tuberculosis, which kills more than a million people each year. A landmark study published by the British medical journal The Lancet showed that of the 1,556 new chemical entities marketed between 1975 and 2004, only twenty-one were for tropical diseases.
When corporations do develop a new drug, it more than likely doesn’t provide much value to society. Remarkably, a full 70 percent of the medicine brought to market by the industry in the past 20 years provided no therapeutic benefit over the products already available. Instead, these “me too” drugs were put forward in order to grab a share of an existing lucrative market.
The inefficiency of the enclosed medicine is paired with the creation of real barriers to medicine innovation across the board. By definition, a reward system based on artificial exclusivity will wall off knowledge from being shared. For-profit pharmaceutical corporations are known for discouraging innovations by creating voluminous “packet thickets” and seeking extended protection for their monopolies in a process known as “evergreening” their patents.
Seen through the lens of a pharmaceutical corporation, all of these approaches are fully rational: The industry is one of the most profitable in recent history. The rest of us are not faring as well. Law professor Michael Heller has labeled the costs associated with over-enclosure and lack of knowledge sharing as the “tragedy of the anti-commons.”
It is an economic theory, of course. But, for the millions of people who die each year from diseases neglected by the current medicine system, the tragedy is not the least bit theoretical.”