A patent on a prescription drug can mean that a pharmaceutical company controls the patient’s access to something that is essential to their health or even their life. (Photo: Medicine Bottle via Shutterstock)
By Dean Baker
There are many serious issues raised by the Trans-Pacific Partnership (TPP), but the one that may have the greatest long-term impact is its provisions on drug patents. The explicit purpose is to make patent protection stronger and longer. While these provisions are likely to lead to higher drug prices in the United States, they will have their greatest impact in the developing world.
In most developing countries drugs are far cheaper than in the United States. This is especially the case in India. The country has a world-class generic industry that produces high quality drugs that typically sell for a small fraction of the price in the United States. For example, the generic version of the Hepatitis C drug Sovaldi can be purchased in India for less than $1,000 a treatment. The patent protected version sells in the United States for $84,000.
The US drug industry desperately wants to eliminate this sort of price gap, which can exceed a ratio of one hundred to one. While India is not in the TPP, the goal of TPP proponents is to expand the pact over time so that India would eventually be included and therefore be subject to its strong patent rules.
This should have everyone very worried. The patent system is a horribly outmoded method of financing research that dates from the 15th century. The idea is that the government provides an incentive for innovation by giving the inventor a patent monopoly over use of the innovation for a period of time. This is problematic for the all the reasons that government enforced monopolies are generally a bad idea, but the problems in the case of prescription drugs are especially serious.
A patent on a prescription drug can mean that a pharmaceutical company controls the patient’s access to something that is essential to their health or even their life. In such circumstances they will pay pretty much whatever they have to, or are able to, in order to get the drug. This creates a situation analogous to negotiating payments for firefighters at the point when they show up at your burning house with your family inside. Most of us would pay whatever was necessary to get the firefighters to rescue our families and be thankful for their help.
If we actually did pay our firefighters this way, not only would we have some extremely rich firefighters, we would also get poor quality fire protection and prevention. We would expect the fire fighter companies to set up stations near rich people’s houses so that they would be best situated to get to a fire first. They may even take to sabotaging competitors by deliberating creating traffic jams to obstruct their path to especially lucrative fires. And needless to say, our firefighters would have very little interest in doing anything to promote fire safety, since they don’t get paid for fire prevention.
This is pretty much the story of drug development under the patent system. Drug research is skewed to focusing on the diseases and conditions that are the biggest problem for affluent people. The research is highly secretive, since drug companies do not want to provide any advantages to their competitors. And drug companiesoften misled the public about the safety and effectiveness of their drugs. Needless to say, they don’t waste their time pursuing treatments like nutrition and exercise, since these don’t offer the possibility of patent monopolies.
Ideally, we would be looking to switch to more efficient mechanisms for financing drug research. Joe Stiglitz, a Nobel Prize winning economist, has proposed a prize system, where the government would buy up promising patents and then place them in the public domain so that the new drugs could be produced and sold as generics. Another alternative would be to finance the research (which could be done by private companies) directly, and then have the findings immediately available for other researchers.
If we had a government committed to better public health and reducing waste in the economy we would be looking to more efficient alternatives to the patent system. Instead we have this quixotic quest in the TPP to preserve the patent system for centuries into the future and make the whole world suffer from its wastefulness.
In this respect, President Obama seems destined to duplicate and extend one of the worst mistakes of the Clinton administration. In 1994, at the urging of pharmaceutical industry, President Clinton put the TRIPS provisions into the Uruguay Round of the WTO. This required countries throughout the developing world to have US-style patent and copyright law.
Now President Obama is prepared to make these patents longer and stronger with the TPP. Perhaps President Obama plans to follow in the footsteps of President Clinton, using his post-presidency running around the world with billionaires, raising money to try to undo some of the damage he did to the state of the world’s health care during his presidency. That is not a very proud legacy.
Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.