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TRIPS, Product Patents and Pharmaceuticals
Participants in the international debate on patents and pharmaceuticals have begun exploring two distinct sets of TRIPScompliant options/mechanisms that would enable patients in the developing world to access new treatments at affordable costs. The first set relates primarily to 'global' ailments, where R and D is already supported by the north, and includes options such as compulsory licensing, 'tiered' pricing and national drug price regulations. The second set of mechanisms is aimed at 'creating markets' for treatments relating to poor country-specific ailments in a manner that allows affordability without endangering incentives to future research and innovation.
In the pre-Uruguay Round negotiations, developing countries actively opposed the inclusion of IPRs (Intellectual Property Rights) in the new GATT Treaty on the grounds that this would lead to higher prices and be detrimental to the development of their domestic, infant, hi-tech industries. Developed countries, however, pointed out that stronger intellectual property protection would serve to stimulate research, which would, in the long run, be beneficial to both firms and consumers in LDCs. The latter argument won the day, and the WTO Agreement that came into effect in 1995 included a TRIPS (Trade Related Intellectual Property Rights) component. With the signing of this agreement, developing member countries are committed to making their IPR regimes TRIPS-compliant in the near future. For India, with respect to pharmaceuticals, this implies, inter alia, shifting from a patent regime that granted only process patents of seven years’ duration (Indian Patents Act, 1970) to one that, by January 2005, must provide for product patents of twenty years’ duration.1 This shift, from process to product patents for pharmaceuticals, has generated intense debate, and understandably so, given the critical, life-death nature of the issues at stake here.
A key objective of policy-makers in the developing world is to ensure the availability of new medical treatments, at affordable prices, to patients in the region. The adoption of a process patent regime for pharmaceuticals helped in meeting this objective. It allowed pharmaceutical firms in developing countries to specialise in the production of cheap, generic versions of on-patent drugs for domestic markets, as well as for export to other countries where similar patent regimes were in place. The move to product patents, however, will make such production and commerce illegal. As a consequence, the price of newly patented drugs is set to rise sharply in the region, imposing a significant social and economic cost on these countries. Nonetheless, as developed nations have argued, higher prices are necessary to ensure the delivery of new medical treatments in the future. Product patents, and the legal monopoly rights that they create, enable patent-holding pharmaceutical companies to price above marginal cost, and thereby, to recoup the large, fixed, research and development costs incurred by them in developing new drugs. By affording inventors this right, thus, product patent regimes ensure incentives for future research and innovation activity.
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