Recent years have seen a growing debate over pharmaceutical patents and access to medicine in the developing world, and the debate has grown even fiercer as countries like Thailand and Brazil issue compulsory licenses to break patents on drugs. Led by NGOs like Oxfam and Medecins Sans Frontieres, health advocates are calling for the removal of patent protection in the developing world to allow poorer countries to develop cheaper generic versions of essential drugs. Intellectual property advocates say removing patent protection removes incentives to develop new drugs and denies manufacturers to recoup their multimillion dollar investments in developing these drugs.
According to the NGOs, however, the pharmaceutical companies’ claims are seriously wanting. Among the NGO counterarguments:
• Pharmaceutical companies spend more on marketing and administration than on research and development. If they need more money for R&D, why not just cut those spurious expenditures instead of jacking up prices?
• Governments do most of the research anyway. Using NIH funds, universities make the breakthroughs which Big Pharma then uses to put new drugs on the market. Your tax dollars already paid for this R&D.
• Corporations only seem to come up with non-essential, "me-too" drugs that don’t reflect any real innovation and don’t address the most serious health needs the planet faces, particularly in the developing world.
• The pharmaceutical industry is the most profitable of any other industry, making billions in profits using the monopoly protection from patents. They can handle a little extra competition in the developing world.
Health activists are enraged by Big Pharma’s abuse of markets. But the economist in me asks, "If it’s really this easy, why isn’t everybody doing it?" If you can make billions without much work, why isn’t every company starting up a pharma division to cash in on the mountains of profits?
And, I wondered, if it really is so easy, why don’t groups like Oxfam start up their own pharmaceutical companies? And then it occurred to me, perhaps this is the answer.
I offer this proposal only half-seriously, as I’m skeptical of the NGO claims and 99.9% certain that an NGO would never attempt such a venture, but I offer you this: The Oxfam Pharmaceutical Company (OPC).
Instead of badgering pharmaceutical companies to lower their prices, OPC could simply take away their markets by developing new drugs and pricing them competitively. Big Pharma has a lot of power, but the OPC has competitive advantages of its own. Eschewing capitalist profits and slashing needless marketing and administrative costs, OPC could cut its costs to half the operating budget of your average pharmaceutical conglomerate. OPC can plow the savings in to R&D on essential drugs, particularly drugs that developing countries need, like cures for malaria, tuberculosis and AIDS. With governments doing most of the research, OPC keeps costs down here as well.
With a slew of new life-saving medicines in their labs, the OPC can issue voluntary licenses to generic producers in the developing world to produce and distribute the medicines to the populations who need them most at an affordable price. With developing countries providing a small fraction of Big Pharma’s revenues anyway, OPC won’t be losing much by giving away its intellectual property for free. The markets in the developed world remain, however, and with judicious use of patents OPC can make enough money in those countries to recoup their investments and get the seed money for the next round of innovative drugs.
Sure, start up costs might be a little pricy, but there are investment options. Developing countries aren’t the most cash-intensive places to look for investment funds, but with the potential health savings involved, it makes financial sense for larger developing countries like India, China, Indonesia and Brazil to pool funds to get OPC on its feet and cover costs while new medicines are developed. The billions of dollars they’ll save over just a short few years will more than make up for the up-front investments they’d be asked to make. These countries also possess top scientific talent that could help staff the labs. Of course, in today’s globalized world, it doesn’t matter where the labs are built. Pick the top researchers in the developed and developing world, put them in top of the line labs in the U.S. or Europe and the countries where diseases are prevalent and let them go to work.
Instead of futilely flailing at Big Pharma for their insistence on making money off drugs, Oxfam and the developing countries can beat the corporations at their own game: developing new drugs safely and cheaply that meet their own needs at a price they can afford.
As mentioned, this is only half-serious. NGOs are not about to take on financial risk when they can simply sit back and write policy papers telling others to take on the same risk they avoid. But they should.