Justify the Patenting of Life Saving Drugs

4914 words (20 pages) Essay in Commercial Law

02/02/18 Commercial Law Reference this

Last modified: 02/02/18 Author: Law student

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There have been wide-ranging debates about the introduction of patents on pharmaceuticals in developing countries. On the one hand, it has been argued that it should give incentives to the pharmaceutical industry to undertake more research and development on tropical diseases. On the other hand, the patenting of pharmaceuticals has been criticised as raising human rights issues regarding access to life-saving drugs. To others, patents have prevented access to cheap generic versions of life-saving drugs which such countries badly need, such as for the HIV/AIDS pandemic. [1] This brief examines to what extent it is possible to justify the patenting of live-saving drugs. The brief starts by exploring the concept of patent. Then, it examines the patent system and its rationale in general. Then, it considers the relationship between patent rights and protection of public health. The brief goes to examine extent to which it is possible to justify the patenting of live-saving drugs. The examination includes an investigation into the role of the patent system in relation to the pharmaceutical industry, the moral limits of patents, how the exclusion of a patent can create social costs, the rationale for the patenting of live saving-drugs and the incentive theory and how this can be balanced with access to live-saving drugs

The patent system and its rationale: general overview

A patent is a grant of monopoly to an inventor who has used his/her skill to invent something new. [2] The grant of the patent effectively gives the inventor a monopoly to work the invention to the exclusion of others for a period not exceeding 20 years. However, a patent is not absolute and there area a number of checks and balances to curb its abuse. A patent is a form of personal property. It can be assigned, licensed or charged by way of a mortgage. However, patent is not a thing in action. [3] Patent law deals with new and industrially applicable inventions. The law grants a monopoly for a limited period of time in return for disclosure of the details of the invention. The details are available for public inspection and they are comprehensive enough to enable a skilled person in that art to make practical use of the invention. Total disclosure is a central prerequisite for the grant of a patent. [4]

Both individual and public justifications have played prominent roles in the arguments in favour of patent for invention. At times, the supporters of patent protection have emphasised the natural rights of inventors to products of their mental labour. [5] Others have argued that justice demands that an investor’s contribution should recognised by the grant of a reward. [6] Although these arguments have been relied upon in examining aspects of the patent system, they have not been popular as the public interest justifications. [7] However, the current debates about how indigenous interests should be accounted for in the patent system have seen a resurgence of interest in arguments about inherent rights and justice. [8]

Whilst some commentators have drawn on natural rights in support of the grant of patents, the most common form of argument has concentrated on the public benefit that flow from the grant of patent monopolies. There arguments have changed over times, but they share in common the basic idea that the public should ever have to endure the harm caused by the grant of a patent if the public receives some corresponding benefits. [9] Initially, public benefit in the patent system was said to flow from the fact that the patentee introduced a form of technology that had not previously been available. This involved the patentee importing information about a trade or craft from another country.

This rationale was replaced by the argument that the public benefit lays in the disclosure of the invention that occurred on publication on the patent application. The justification focused on the role that the patent system played in the generation and circulation of technical information. [10] In particular, it is said that patent act as incentive to individuals or organisations to disclose information that may have otherwise remain secret. [11] The information function of the patent was reinforced by the Patents Act 1977 (PA 1977) and the European Patent Convention 1973 (EPC 1973), which emphasised the need for invention to be disclosed in such a way that it could readily be put into practice. [12]

Although patents do make available a large quantity of information about the latest technical advances and they are regularly consulted by those concerned with developments in many industries, exaggerated expectations need to be avoided. If the inventive concept is one that has to be embodied in a marketed product, the patent may give earlier access to the information and perhaps a more explicit statement of what the invention is. The disclosure side of the patent bargain is not a policy that is easy to implement because there is obvious temptation for any patentee to omit from his/her specification information that may seem incidental but is in fact useful or important to commercial success. When this effect can be achieved, the patent system is reduced an index of sources from which further information may be had on application and payment.

Patents have also been justified by the fact that they provide an incentive for the production of new inventions and innovations. [13] As Lord Over said, the underlying purpose of the patent system is to encourage improvements and innovations. [14] The return of making the improvement known to the public, the inventor receives the benefit of a period of a monopoly in which s/he is entitled to exclusive exploitation of his/her invention except by his licence. [15] More specifically, its is said that since patents provide the possibility for inventions to be exploited for 20 years period, the inventors will be more willing to fund research and development. [16] In this sense, patents act as a vector that links scientific and technical with commercial spheres.

Discussions about the efficacy of incentives have a practical, utilitarian flavour which is lacking when the argument is about demands of justice for the individual. Even so, it may be difficult to measure or assess the effect that a patent is producing. Some sort of intervention is needed if inventions are to be made ad introduced to anything like an optimal rate. However, whether this should be done by a patent system or by legal protection against breach or by direct investment on the part of the State is controversial. If it is to be by a patent system, there are many questions about its exact nature which may affect performance. Modern patents systems offer a standard formula to all with inventions to protect. They contrast with systems of research grant and reward, whether funded by the State or private organisations.

Reflecting upon the way that patent law has been viewed, a number of things stand out. Much time and energy have to be expended in pursuit of often an uncertain outcome particularly there are others active in the field. There have been some horrors within the law itself such as the exposure in Genentech [17] of the falsity of the obviousness-inventiveness dichotomy and the inherent uncertainty of the purposive approach to patents being compounded by the additional uncertainty created by the common law judges having lean civil law approaches to issues of interpretation. [18] Add to this is the uncertainty which that attends the basic question of the proper purpose of the patent system and the practical problems of how much and when to claim in an application for a patent. [19] The patent system is having trouble getting grips with cutting edge issues such as biotechnology, nanotechnology and synthetic biology. There may also be imperfections in the system because the extent to which the numbers successfully worked does not match the number of patents granted.

The patent system has widely been seen as a system of regulation. When commentators talk about the patent system in a positive sense, they have always seen it as a tool to promote economic ends, such as encouraging new industries, research and development or innovation. [20] In contrast, whenever non-economic factors such as health, human rights and ethics are discussed, they have either been treated as external (negative) constraints upon the core activities of the patent system or as undesirable side effects that need to be mitigated. [21] Although patent plays a crucial role in macroeconomic policy, there is no reason why the patent system should, as a regulatory tool, only be used in pursuit of economic ends, nor any reason why external factors such as health should not fall within the core remit of the patent system. [22] There is no compelling reason why various patent practices, rules and concepts developed and fine-tuned should only be used for economic ends.

Relationship between patent rights and protection of public health

The stipulation of patenting in various international covering products or processes pushes pharmaceuticals into the domain of private monopoly. This leads to a restriction in the quantity of pharmaceuticals produced and an increase in their prices, and makes pharmaceuticals inaccessible. [23]  As a consequence, consumers who can still afford drugs have to pay more for them, conceivably consuming less of them, and consumers who cannot afford the drugs anymore are left without them. [24]  When such patent impacts on public health become apparent to countries, intellectual property rights protection becomes highly variable from country to country. [25]

Before the issue of patenting pharmaceuticals was put on the agenda at the Uruguay Round of General Agreement on Trade and Tariff negotiations in 1986, over 40 countries, including a number of today’s developed countries, provided no patent protection for pharmaceuticals. Many provided only process but not product patents. In many others, the duration of patents was less than 20 years, [26]  and there was limited enforcement of existing standards. [27] As a result, countries with no patent protection for pharmaceutical products or with less protection could get free access to drugs by putting into practice reverse-engineering or the parallel importing of drugs products in order to fulfil their own domestic consumption needs. [28] Countries that provided patent protection to pharmaceuticals could issue compulsory licences for producing pharmaceuticals for domestic use and export purposes on invoking the lenient conditions as laid down in the Paris Convention. [29]

After achieving massive economic development developed countries introduced new industrial policy perspectives in the name of TRIPS by extending the reach and length of patent rights to pharmaceutical inventions. Research shows that during the strict patent regime from 1995 to 2005, research and development in pharmaceuticals rose from 15 to 17.1% of corporate spending. [30] There are other research studies which initially admit a little adverse effect arising from the introduction of a patent in a particular market and later find this also mitigated by the invention and availability of close therapeutic substitutes. [31]  However, some empirical research studies show that the patent protection which secures profits for pharmaceutical industry and brings high spending in research and development does not apply to developing and least developed countries since their spending on pharmaceuticals and contribution to profit-making do not affect the decisions pharmaceutical companies about investment in research and development and development of new drugs. [32]

Pharmaceutical companies are hesitant to acknowledge that patent protection may drive drug prices up in developing and least developed countries, and particularly have an impact on access for the poorest of the poor. [33]  Rather, they argue that patents and patent laws are not a major barrier to treatment access because many of the drugs defined by the WHO as essential medicines are off-patent and more affordable. [34]  Nevertheless, it is also worth noting that significant health needs in developing countries require costly off-patent medicines, such as artemisinin-based antimalarial drugs, tuberculosis treatment and reserve antibiotics. In addition, the 11th edition of the WHO Model List of Essential Drugs includes for the first time a number of “patented pharmaceuticals which are important drugs for treatment of HIV/AIDS and AIDS-related opportunistic infections”. [35]

The international trade bodies or treaties did not initially come up with the idea of “essential drugs and national drug policies. Such an idea was first introduced in the late 1970s by the WHO. It aims to provide access to essential medicines by ensuring the rational selection of drugs at affordable prices so that pricing is made sustainable and a reliable supply of medicines is guaranteed within any particular national health system. [36]  However, for listing patented pharmaceuticals in the WHO Model List of Essential Drugs, essential medicines become a direct challenge to the existing patent-based pharmaceutical regime. [37] For the multifaceted goals of this programme, the WHO listing still exists in consideration of public health needs in developing and least developed countries through the adoption of national health policies specifically mentioning essential drugs. [38]

The patenting of life-saving drugs

Two kinds of justifications for the protection of intellectual property dominate the debate on the patenting of life-saving drugs. The first centres on fairness or compensatory justice concerns, and the second on arguments about the relationship between protection of new inventions and domestic and global economic welfare. Thu, the traditional role of the patent system, which seeks to balance the competing objectives of encouraging innovation through appropriate incentives and providing reasonable access to, and use of, the knowledge and information thereof, persists today in the granting of patents to life-saving drugs. [39]  Not only does legal protection for the fruits of innovation enable the patent owner to benefit from an “exclusive market position” with the temporary ability to set prices above the marginal costs of production, but there is also great societal benefit in the dissemination of, and access to, knowledge and information that may be derived thereof. [40] The patent system needs to achieve an appropriate trade-off between protection and access while maintaining competition, particularly in relation to life-saving drugs. [41]

The development of new technologies, particularly in the field of biomedical and pharmaceutical medicines, entails huge investment in research and development that is fraught with significant risks and uncertainties. Therefore, unlike other industrial sectors, the pharmaceutical industry strongly depends on the patent system to recoup its past costs on research and development, to generate profits, and to fund further research and development for future products. [42]  The Coalition for Intellectual Property Rights (CIPR) noted that:

“Successive surveys have shown that the pharmaceutical companies, more than any other sector, think patent protection to be very important in maintaining their [research and development] expenditures and technological innovation. The industry understandably takes a close interest in the global application of [intellectual property rights], and generally resists the contention that they constitute a major barrier to access or a deterrent to development in developing countries.” [43]

However, the pharmaceutical industry has frequently been criticised to its research priorities. Specifically critics point out that the industry invests heavily in developing treatments for relatively trivial ailments rather than life-threatening ones, drugs for chronic health problems that do not cure patients but that need to be taken continually for many years and one that address the diet related health concerns of the worked well in affluent societies but not those of the under-nourished. [44] In deed, empirical research has found that research investment prioritises inventions for lifestyle drugs, but not for life-saving drugs for diseases prevalent in developing and least developed countries. [45] A study of Médecins sans Frontières (MSF) support the contention that the protection of patent rights is motivated by profiteering interests, not public health needs in developing countries. This study finds that it is not medical needs but market forces that occupy 90% of the world’s health expenditure in research and development, and cause the production of lifestyle drugs for impotence, obesity, baldness and the like for just 10% of the world’s population. The study also shows that of 1,393 new drugs registered between 1975 and 1999, only 16 were specifically indicated for tropical diseases and tuberculosis, although tropical diseases largely affect poor populations, and account for 12% of the global disease burden. [46]

Therefore, whilst 95% of active TB cases occur in developing countries, no new drugs for the disease have been developed since 1967. [47] Further, according to the WHO only 4.3% of pharmaceutical research and development expenditure is aimed at those health problems mainly concerning low and middle income countries. [48] It has also been argued that many products that come on the market are variants of, or slight improvements upon, existing rather than radically novel drugs. [49] A further criticism of the industry is that is guilty of so-called “disease mongering” which is defined as “the selling of sickness that widens the boundaries of illness and grows the markets for those who sell and deliver treatments”. [50]

However, it is difficult to say whether patents are directly responsible for this lack of interest in addressing the need of the poor. Regardless of the patent system, the owners of the pharmaceutical companies would prefer the research to at aim at areas where most money can be made. They “follow the money” and direct research and development towards potential high-profit drugs rather than life-saving drugs. [51]  However, could argue that if the justification of the patent system is to serve the public interest, then they should do more to encourage research where public needs are greatest. The most criticism of the pharmaceutical industry has been the lack of access to existing life-saving drugs for the poor in developing countries. The debate was triggered by the HIV/AIDS crisis and the industry success in securing changes to international rules on intellectual property.

The Trade Related Aspects of Intellectual Property (TRIPs Agreement) is one of the most recent and far reaching victories by intellectual property owners who want to see their rights protected globally. TRIPs Agreement was the result of the strategy whereby pharmaceutical companies defined themselves as the victims of immoral and malicious pirates and thieves. Developing countries that violated intellectual property rights were engaged in unfair trade as well as morally bankrupt. Within the intellectual property discourse, morality is defined as adhering to the law. Since the 1980s, the strategies of pharmaceutical companies have been to persuade United States’ policy makers to force developing countries to adapt restrictive patent rules. [52] The industry successfully influenced the United States’ policy by opening revolving doors between patent and trademark office and the industry jobs. The close link between industry and government influenced the development of the United States’ position on intellectual property rights and was instrumental in getting intellectual property rights included in the GATT negotiations.

During GATT negotiations, the United States argued that the lack of international protection cost its manufactures billions of dollars annually. [53] The industry also made a set of arguments about the importance of strong international protection of intellectual property rights to foster economic development. In particular, this would encourage investment in research and technological transfer in developing countries. The industry gained significant traction on the issue of intellectual property by developing rights discourse. [54] The pharmaceutical companies defined their own behaviour as moral when they successfully claimed they were defenceless from the theft of immoral countries.

The TRIPs Agreement was intended to eliminate or delay price-lowering from generic producers. [55] The extent to which patents affect the prices of drugs varies and it may not be enough to say drugs will always be expensive when they are patented and vice versa. However, since patents may restrict competition, they are likely to have the effect of keeping the prices artificially high and unaffordable to countries responding to health crises. A recently published study assessing the impact of patents on the pricing of HIV/AIDS drugs in a sample of low and middle-income countries from 1995 to mid-2000 shows that patents prevent competition between the innovator of the drug (and any of its licensees) and the imitators (unauthorised providers). [56]  It also finds that patents prevent competition between providers of products that contain the same therapeutically active substance and that only differ slightly in other characteristics. The findings in the study lead to the fact that the dearth of such close competitors shifts drug prices upwards. Drug companies have a strategic desire not to reveal, by such pricing, just how low their marginal costs actually were. This information could be used by large purchasers of drugs to bargain down the price of drugs in rich developed countries. Therefore, drug companies have been prepared in some instances to give away drugs to poor countries

The moral limits of patents

It is important to examine the discourse of morality surrounding the patent fights over access to affordable live-saving drugs. The debate over access to life-saving dugs highlights that in some cases what is needed is a new paradigm from which to discuss rights more generally. Prior to the controversy over access to HIV/AIDS medications, drug companies had been very clever at monopolising the discourse on morality. They successfully labelled anyone making drugs that violated patent rights as pirates an thieves, and utilised the international system of trade sanctions to punish possible infringers. The AIDS crisis in South Africa was an event that made it possible to challenge the discourse created by the pharmaceutical industry. In 1997, the South African government passed the Medicines and Related Substances Control Act Amendment to address the problems associated with delivering AIDS medication to the million of South Africans with HIV/AIDS. The Act allowed the Minister of Health to make affordable medication available to protect public health. The South African government decided to pass the legislation because the issue of AIDS could no longer be ignored. However, the South African government was sued by a conglomeration of international pharmaceutical companies that provide AIDS medication on the international market.

The South African AIDS controversy is important for a number of reasons. However, the most important aspect of the controversy was that activists working internationally successfully resisted the discourse of patent rights and have argued that lives ought to be more important that property. Activists were able to put pressure the pharmaceutical industry, the United States and the WTO into conceding the necessity of developing access to medication as a crucial human right. In the process, these activists have created an alternative moral framework for the understanding between patent and human life. The moral discourse shifted from in favour of the pirates and the drug companies lost some of their grounds. The moral paradigm created by these transnational social movements advocates parallel importation, compulsory licensing agreements and an understanding that health care is a moral and human right. [57]

Despite its position on international protection of patents, the United States itself allows compulsory licensing to military technology and public health goods. For example, neither the American nor Canadian supplies were able to supply enough Cipro, a patented drug owned by a German pharmaceutical company Bayer, to meet demand in the event of anthrax epidemic. In response, Canada ordered a million doses of Cipro from a genetic drug manufacturer in violation of Bayer’s patent. Having threatened Buyer to follow the Canadian lead, the United States negotiated a reduced price to stockpile enough Cipro for large attack. The United States used threat of compulsory licensing to lower the price of a medicine needed by American consumers. The united States have ignored this double standard as it works to protect interests of its pharmaceutical companies abroad.

Reconciling the incentive theory and access to life-saving drugs

The pharmaceutical industry argues that they are in the business of producing life-

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