Posted on 07/19/2005 12:24:01 AM PDT by nickcarraway
Drugs offer incredible medical benefits. Everyone wants to take them. Drugs cost a lot to develop. No one wants to pay for them, as Brazil has demonstrated in preparing to steal several pharmaceutical patents.
The tension between access to existing medicines and creation of new ones is particularly stark in poor nations. The regular price of HIV/AIDS treatment regimens exceed per capita incomes in some countries.
Although activists routinely vilify the pharmaceutical companies, only their extensive R&D activities generate the products that keep tens of millions of people alive. Leading companies widely discount and donate their drugs in the Third World and work with charitable groups to build health infrastructure and distribute antiretrovirals.
No good deed goes unpunished, however. Even residents of rich countries don't want to pay for life-saving medicines. Most industrialized states impose one or another set of price controls on drugs, blatantly free-riding on the scientific creativity of American firms.
Other states make even less pretense of respecting the property rights of U.S. drugmakers. Such as Brazil. Despite its manifold economic and social woes, it has the largest economy in Latin America, ranking 11th in the world. Per capita GDP runs about $8,100 -- behind the U.S., but ten or more times that of the dozen poorest African states.
Yet Brasilia believes that other nations -- or, more accurately, companies from other nations -- owe it a medical free lunch. The government wants to save money in its health budget (what country does not?), so it expects to buy AIDS drugs at fire sale prices. Brazil backs up its demands by threatening to steal the makers' patents.
International intellectual property rules allow use of compulsory licensing of patents, but only in public health emergencies. Brasilia, however, has never let juridical niceties stand in the way of forcing down drug prices.
IN 2001 BRAZIL BEGAN THE process of issuing a compulsory license for Viracept (nelfinavir), an AIDS drug, unless Hoffman-La Roche lowered the price. The company accepted a 40 percent cut on its already discounted price.
Two years later Brazil was back, demanding price cuts from Roche, again, as well as Bristol-Myers Squibb and Merck. To back its ultimatum, Brasilia threatened to confiscate the drug patents.
Brazil prepared a formal decree to authorize importation of "any generic medication in case of a national emergency or in the interest of public health." Even more ominously, Health Minister Humberto Costa indicated that Brazil would provide discounted AIDS medications to its Latin American neighbors, opening the international floodgates.
Brasilia's extortion caused the companies to slash the prices of their anti-AIDS drugs. The final cost of Merck's STOCRIN ended up little above that in Sub-Saharan Africa.
Despite its debt problems, Brasilia was not broke. It simply wanted to save cash. Alexandre Grangeiro, coordinator of the Ministry of Health's AIDS program, explained: "We need a price reduction now, because of our budget limitations." Similarly, said Dr. Paulo Roberto Teixeira, Director of the Brazilian National STD/AIDS Programme: "In previous negotiations, we managed to get the prices of these drugs reduced, but now we want to lower the costs even further."
Brazil is wielding the same weapon yet again. Only this time Brazilian officials are demanding that Abbott Laboratories, Gilead Sciences, and Merck turn over their knowledge through "voluntary licensing," allowing Brazil, either through government operations or private manufacturers, to produce generic copies.
Brazil might be a major economic player, but why pay for what you can steal? "Even with recent price reductions that we obtained from drug producers, the total cost of retroviral drugs is growing in an unbearable way," explained Jarbas Barbosa, a health ministry official. (Ironically, early in May Brazil rejected a $40 million U.S. grant for AIDS treatment in protest of the accompanying conditions.)
These are "negotiations" in name only, since Brasilia will accept only one result. Said Barbosa: "We're interested in a fast negotiation. But if we're obliged to use the compulsory licensing we will do so as a last resort."
Brazil's lower house has since voted to suspend patents for AIDS drugs. At the end of June the government announced that it was going to appropriate Abbott's Kaletra. Brasilia announced that the company had two weeks to make a counter-offer.
Understandably, the company caved, agreeing to provide ever-increasing amounts of its drug at the amount expenditure, and to yield its technology in 2015. But these concessions were like blood in the water for sharks. Brazil's health minister, Correio Braziliense, announced that the tentative accord wasn't enough: "The process of a compulsory license is still ongoing and breaking the patent has not been discarded as a final alternative."
Which means Abbott will have to give more or lose its patent. Then next on the target list are Gilead Sciences and Merck, with whom Brasilia is conducting Don Corleone-like "negotiations."
THE U.S. GOVERNMENT SHOULD punish Brazil economically -- "as a last resort," of course.
Washington generally has no duty to protect the profits of American firms that operate overseas. But in this case firms have no opt out -- Brazil simply says, give us your product or we will seize it, irrespective of where you conduct business.
The consequences are potentially dire. Antiretrovirals exist only because profit-minded drugmakers have invested billions of dollars in R&D. Roberto Gouvelo, a legislator from the governing Workers' Party, complained that one AIDS drug purchased by the government costs ten times its production cost. Unfortunately, however, industry investments must cover not only the successes, but also the failures, which are many. Even larger outlays are likely to be necessary to develop a vaccine for HIV/AIDS, as well as cures for a multitude of other serious diseases.
Should countries take new medicines whenever they want to pay less, pharmaceutical manufacturers will turn their attention to less important but less risky endeavors (most notably the "me-too" drugs routinely denounced by industry critics). It would be bad enough if Brazil stole American medicines for its domestic market. But if Brasilia begins exporting generic substitutes, it could destroy pharmaceutical innovation.
Brazil's threats highlight another problem. By artificially driving down prices, such controls increase the gap between domestic and foreign prices, creating the perception that drugmakers are treating American consumers unfairly. That, in turn, increases pressure for so-called reimportation of the very drugs being sold under foreign price controls.
Washington should attempt to educate Brasilia. India serves as a good example: once a celebrated patent-breaker, New Delhi now sees pharmaceuticals as an emerging industry and has instituted a legal regime to protect intellectual property.
The U.S. also should indicate that Brazil's behavior risks disqualifying it from joining any free trade system including America. The de facto theft of U.S. patents is inconsistent with open access to the American market.
Since Brasilia continues to misuse patent provisions intended to resolve a health care emergency, Washington should file a complaint before the WTO. Washington should consider direct sanctions as well.
Brazil certainly does not deserve preferential access to the U.S. market under the generalized System of Preferences (GSP) program. Brasilia's ability to export $2.5 billion worth of goods to America duty-free already is undergoing a special review while the USTR considers the effectiveness of a Brazil's system to combat copyright privacy. The Bush administration also should use a Special 301 investigation and penalize Brazilian exports.
Moreover, Congress should empower the U.S. Trade Representative to suspend recognition of intellectual property rights for companies headquartered in countries that violate American copyrights and patents. Retaliatory sanctions obviously should be a last resort, since a trade war is in no one's interest. But if Brazil hopes to become a significant economic power, it should stop looking at U.S.-made pharmaceuticals as a free lunch.
If people won't pay for their medicines, drugs won't be created. Washington must protect the intellectual property which has created a medical boon for the entire world.
Doug Bandow is a Senior Fellow at the Cato Institute.
Why "Washington" (US taxpayers) should care for the interests of private corporations which do not care for the other interests that their own? Let the corporations put their trust in free market and global trade!
"Let the corporations put their trust in free market and global trade!"
I couldn't agree more! When things going on overseas favor business and their profits, (e.g. China - no EPA, no OSHAA, prisoner labor), I'm told constantly that it's free market. So, if business gets hurt playing out in the big world, not my problem. I want my tax dollars to go for national defense, not business defense!
That says nothing about billions in taxpayer funded grants to pharmaceutical companies for R&D. It says nothing about research carried out by NIH. It says nothing about the 67 Billion spent for sales & marketing vs the 30 billion spent on R&D.
Sometime I feel as if I'm being held hostage by the free market.
One wonders how many "manufacturing" installations the drugmakers have outside the USA--obtained for wage-arbitrage purposes...
"Don't let facts stand in the way of your irrationality."
Everything costs, but your point is valid, the administrative cost of such an action is negligable. I would be in favor of nothing more than this. Free Market don't you know? Kind of reminds me of how sports teams operate: When they want your money, it's about being a fan. About loyalty. About the home team. When they want to apply pressure, it's a business. Cold, hard, calculating business, emotion doesn't enter into things.
You can't have it both ways, you can't have unrestricted free marketeering, and have the government protect you.
I think the Brazilians are being good capitalists. Find an advantage, and apply pressure.
One has to wonder, if the pharmaceutical companies can sell at such discounted prices, how much are they making on drugs they sell here?
And we get the drug companies crying about large profits needed for R&D! They're worried about the public good? Bull$hit.
Other industries seem to operate in this environment. Let them deal with it on their own. If international dealings are too rough, stay home.
Do I have an axe to grind? Yes. This is a precursor. What happens when businesses start getting beat up in China? Should the government worry about it? No.
Do the businesses that leave worry about anything American other than American dollars? No.
You are a little confused at the difference between capitalism and Marxism. In capitalism, the pressure is, "I won't buy it if it is too expensive." In Marxism, the pressure is, "I will steal it if it is too expensive."
Brazil is just trying to nationalize the drug industry. The idiot drug companies should simply cut them off and develop their own drugs.
But CEOs always think they can negotiate with thugs.
"You are a little confused at the difference between capitalism and Marxism. "
There was some sarcasm intended there. However, it's a different game when you operate in an international setting. Rather than buyer beware, it's seller beware.
And the parallel I draw, you validate it. I believe the Chinese don't have a big problem with Marxism.
http://grants.nih.gov/grants/guide/rfa-files/RFA-AI-00-010.html
In June 1991, this subcommittee asked TAP to provide testimony on a Cooperative Research and Development Agreement (CRADA) between Bristol-Myers Squibb (BMS) and the National Cancer Institution (NCI), regarding the development of taxol.(1) Our review of the NCI/BMS taxol CRADA was followed by a much broader review of the government's role in the development of new drugs.
For example, in a study presented in February 1993, TAP examined the federal government's role in the development of all FDA approved cancer drugs that were discovered since 1955, and found that 34 of the 37 cancer drugs were developed with significant federal support.(2)
...Of these 30 "important" new drugs approved by the FDA, 15 benefited from significant funding by the U.S. government. When one considers the country where the drug was first discovered the government's role is even more important. 17 of the "important" new drugs were discovered in the U.S. Of these drugs, 12 were developed with significant government funding - that is, 71 percent were developed with significant government funding.
http://www.cptech.org/pharm/igrep.html
Additional notes on government role in the development of HIV/AIDS drugs
http://www.cptech.org/ip/health/aids/gov-role.html
A google search returns 58,200 results
I believe I did. The first cite is an announcement of grant money available to the industry from NIH.
The second cite details why the money is difficult to track.
Perhaps the confusion stems from your belief that independent researchers and universities are truly independent.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.