|Will Eliminating Patents on Drugs Help Poor Countries?|
|Key Words||Big Pharma, drugs, patents, developing countries, patent laws|
|News Story||Middle-income countries have become more vociferous in their objections to the cost of prescription drugs. Some, like Thailand, have taken steps to no longer recognize the international patents protecting those drugs, and have begun to import cheaper generics. The government’s argument is that the poor of the nation will benefit from cheaper drugs. Is that the case?
The economic argument of the awarding of patents is based on a return to investment. Since research and development of novel drugs is expensive, firms will be loathe to attempt such research, if a fair return is not guaranteed. Patents protect the ability of firms to extract monopoly-like profits for a period of years; when the patent expires, competition with generic drugs ensues.
The complaint has always been that high prices for drugs eliminate developing nations – and the poorest of the world’s poor – from the market for these drugs. Pharmaceutical companies have responded by reducing price in developing countries, usually by increasing prices slightly in the developed world. Now, firms are seeing patent laws openly ignored internationally, in favor of cheap generics.
This will have several effects. First, it may cause firms to lose interest in researching drugs important to those developing nations. That seems an intuitive response to the elimination of profit potential in those nations. Second, it may cause drugs to be diverted away from a country that needs the medicine more, because the firm no longer has an interest in that part of the world. Third, it will stir a market in generics. While Thailand does not have a generic drug industry of its own, it will import generic drugs from other countries, such as Brazil or Canada.
And this may be the underlying trend here. Middle-income nations, including Brazil and India, are developing their own generic drugs industry, and have the ability to undercut the major drug companies with their copies of the name-brand pill. Thailand has hopes of becoming a major player in generic drugs. What better way to get a foot in the door to that industry than by overruling the patents of developed-world drug companies?
|Source||: “A Gathering Storm.” The Economist, June 7, 2007.|
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