Should Drug Patents Apply in Poor Countries?

The World Trade Organization's TRIPS Council (short for "Trade-Related Aspects of Intellectual Property Rights") will meet next week in Geneva. At this meeting, representatives of "least developed countries," or LDCs, will request that they be exempted from having to enforce pharmaceutical patent rights for as long as they remain classified as LDCs.

LDCs have an exemption under current law, but it will expire at the beginning of 2021. They sought a permanent extension two years ago, but were denied owing to opposition from the U.S. and EU.

Supporters of a permanent extension include over 140 non-governmental organizations, the majority from developing countries; the United Nations Development Programme and the Joint UN Programme on HIV/AIDS; and the European Commission, which opposed the 2013 request. In a letter to WTO members, the NGOs argue that "the public health crisis in LDCs is a long-term challenge that will endure at least as long as these countries remain LDCs." According to European Commission head Cecilia Malmstrom, intellectual-property rules should "be a non-issue when the world's poorest are in need of treatment." Furthermore, Malmstrom said that the TRIPS exemption "will give the least developed countries the necessary legal certainty to procure or to produce generic medicines."

In contrast, the International Federation of Pharmaceutical Manufacturers & Associations does not support a permanent extension of the LDC exemption, arguing that it does "not appear to be necessary at this stage, as the current waiver is in force until 2021." It further notes that "the vast majority of essential medicines are not protected by intellectual property (IP) and therefore IP plays no role in limiting access to these medicines." When it comes to patented medications, the IFPMA writes that "intellectual property may be one of many factors to be taken into account in policies to expand access."

For most developing and least-developed countries, the domestic pharmaceutical industry consists of small and medium-size companies focused on generic (off-patent) manufacturing and traditional and herbal medicines. (Exceptions to this trend, however, can be found in Brazil, India, and Thailand, all of which have substantial industrial capacity to manufacture generic pharmaceuticals.) As the IFPMA says, IP enforcement cannot be not what's keeping these countries from expanding generic manufacturing capacity. Instead, the problem is that there are few incentives for foreign direct investment by the leading multinational pharmaceutical manufacturers, which are based in France, Germany, Switzerland, the United Kingdom, and the U.S.

The issue of LDCs' low-cost access to patent-protected pharmaceuticals is much thornier. Under the current TRIPS agreement, when a national government needs to use a pharmaceutical in a health-care emergency, it has the option of compulsory licensing, where domestic companies are allowed to manufacture a patented medication without the IP owner's consent. Nations also decide their own policies on "parallel importing"; this is when a country imports drugs sold elsewhere rather than buying them through the manufacturer's official channels. (It's useful when drug makers charge different prices in different nations.)

There is evidence that the USTR has consulted with representatives of LDCs on this request, and it's possible the U.S. will depart from the position it took in 2013, as the European Commission has. Alternatively, the USTR may signal that it (with pharmaceutical industry support) will be favorably disposed to support granting another lengthy LDC extension of the pharmaceutical patent enforcement exemption in 2021? Or will the status quo prevail, with the USTR affirming its support of the existing extension? By next week, we should have our answer.

Thomas A. Hemphill is a professor of strategy, innovation and public policy in the School of Management, University of Michigan-Flint and a senior fellow at the National Center for Policy Analysis.