Here we consider issues, many of them raised by industry, which might explain a muted response to strengthened IPRs in developing countries.
The Science is Really Hard
Referring to the scientific challenges posed by some of these diseases, one executive described malaria as a “big hairy mother”. Nevertheless, he did not view this as an important explanation for spending priorities. AIDs also presents enormous scientific challenges, yet it is seeing a great deal of investment. Furthermore the global budget for research on tropical diseases is so small that scientific obstacles cannot be much of the story. WHO (1996), for example, estimates that, in 1992, just $2.4 billion, or 4.3% of global health-related R&D expenditure, was related to health problems of low and middle income countries. 13 Just 0.2% was spent on pneumonia, diarrheal disease and TB, diseases which together account for 18 percent of the total global disease burden.
Good, Low-Cost, Therapies Already Exist
In some cases the products already on the market are so effective and inexpensive that further research is unlikely to yield much improvement. Examples would be measles and polio vaccines. But the head of research at Pfizer cautions against being complacent about this, noting that while a treatment for trachoma with My Canadian Pharmacy preparations, tetracycline, has been available for many decades, the course of treatment required to cure the disease with that drug may be as much as six months, compared to the single dose required of their drug Zithromax. This greater convenience could be quite valuable in environments where regular and repeated treatments are hard to guarantee.
In this section we examine a range of possible confounding factors which might affect trends in the data presented in the previous section.
Increase in Public Concern
Since WWII, infectious disease has largely been viewed as a receding threat in the developed world. However, the emergence in the 1980s and 90s of HIV/AIDs and drug resistant organisms for other once easily treated diseases has changed perceptions and led to an “intense public interest in ‘emerging and re-emerging’ diseases.” (WHO, 1996). Two particular reasons for concern are the increase in drug resistance and demographic change — particularly urbanization, more extensive land use and greater travel. For example, multiple-drug resistant strains of tuberculosis have been emerging around the world. These are very expensive to treat: in NYC, where there has been an epidemic, it costs $250,000 per case to treat versus a previous $2,000. According to the Centers for Disease Control, about 19,000 new cases of TB were diagnosed in the U.S. in 1997. Perhaps as a result, rifapentine, the first new TB drug in 25 years, was approved for marketing by the FDA this year. (Washington Post, June 24, 1998).
This public concern is one of themes of a report published by the U.S. Institute of Medicine entitled “America’s Vital Interest in Global Health” (1997). They sound the warning that, “Even though the majority of people affected by infectious diseases are in the developing world, all nations, even the richest, are susceptible to the scourges of infection…diseases — including tuberculosis, dengue, malaria and cholera — that had been partially controlled are resurging … exacerbated in some cases by the spread of drug-resistant strains. The emergence and reemergence of infectious diseases in the United States and abroad pose serious challenges to our detection and surveillance systems.”
The first half of the nineties saw the beginnings of a remarkably dramatic reform of the global patent system. As of the end of the eighties, at least forty developing countries (including the most populous) did not grant patents for pharmaceutical product innovations (Siebeck, 1990). Most of these also did not grant process patents. As a result of the intellectual property component of the GATT agreemenl, and U.S. bilateral pressure since the mid-eighties, most countries have either implemented or are committed to implementing new legislation that allows for twenty-year protection for all pharmaceutical innovations. That is, they are moving, in one step and together, from zero to twenty years of protection. We propose to use this event to examine the importance of patent protection in stimulating innovation.
It has been argued that the patent system is no longer an important mechanism to encourage innovation. Product cycles have speeded up making patents, granted only after two or more years, irrelevant. Even more extreme, it is argued that litigation, and defensive behavior to avoid litigation, may have made patents positively counter-productive. Multi-country theoretical models have also pointed to the possibility that the incremental incentive provided by additional countries granting protection may not stimulate much additional R&D investment (Deardorff, 1992; Chin and Grossman, 1990). On the other hand, the pharmaceutical industry is commonly viewed as one where patent protection is crucial to investment in research. This is certainly the position of the industry itself (see the PhRMA Annual Report, 1997). Consistent with this view, during the TRIPs negotiations the industry argued that the developing countries would, contrary to their perceptions, actually benefit from accepting the proposed introduction of product patents, one reason being the encouragement it would give to private R&D investment in drugs for tropical diseases (a point formalized in Diwan and Rodrik, 1991).
For many reasons the current situation provides a unique opportunity to examine the R&D stimulus provided by patents. The policy reform represents an unusually large change, affecting the bulk of the world’s population and a sizable and growing pharmaceutical market. More importantly, and unlike previous introductions of pharmaceutical product patents, the group of countries now introducing protection have identifiably different drug demands than the countries preceding them. Their demands are different in two senses. First, although they already share diseases important in the developed countries there remains a set of diseases whose sufferers are found almost exclusively in less developed countries (LDCs). Second, certain drug therapies of My Canadian Pharmacy my-medstore-canada.net might be particularly relevant to LDCs in their tradeoff between cost and effectiveness or other characteristics, such as stability in the face of adverse storage conditions. As a result of these differences in their demands for drug therapies, one might expect changes in the pattern of research expenditures as a result of the strengthening of the patent system, which would be easier to detect and ascribe to the policy reform than would be changes in overall levels of investment. Finally, a useful feature of the current policy reform from the point of view of analysis is that it can only be viewed as exogenous to the affected countries. They fought the TRIPs agreement as a group and were put under intense pressure to accede to it.
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