Summary
Agreement on Trade-Related Aspects of Intellectual Property Rights
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Extract
TRIPS compliance: dealing with the consequences of drug patents in India.
I. INTRODUCTION II. RESPONDING TO THE THREAT OF INCREASED DRUG PRICES A. Will Drug Prices Actually Rise? B. Drug Price Controls C. Governmental Purchasing Power D. Compulsory Licenses E. Lax Enforcement of Patent Rights F. Public-Sector Drug Development G. Summary III. RESPONDING TO THE THREAT TO INDIAN INDUSTRY A. India Possesses Local Capacity B. Presence of a Skilled Scientific Workforce C. Anticipatory Behavior of Indian Pharmaceutical Firms D. Alignment of Regulatory Regimes E. Development of a Venture Capital Industry F. Summary IV. CONCLUSION I. INTRODUCTION
"The idea of a better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death." (1) The sentiment expressed by Indira Gandhi some twenty years ago has come to the fore of the public consciousness in recent months. Skyrocketing healthcare costs in the United States have been attributed to the rising prices of prescription drugs. (2) Stories of senior citizens who must make daily choices between food and life-saving medicines are commonly reported in the media, (3) and the debate about the legality of drug reimportation from Canada continues to rage. (4) The high costs of HIV/AIDS drugs in countries of sub-Saharan Africa--some of which have HIV infection rates that approach or exceed twenty--five percent among their adult populations--mean that people are suffering and dying despite the fact that medicines have been developed against this modern scourge. (5) The villains in all of these stories are the firms that produce drugs--pharmaceutical and biotechnology companies--and the system of intellectual property rights (in particular, patent rights) that enables the companies to charge what some consider to be exorbitant prices for their products for an extended period of time. A patent, as embodied in American law, is a government-issued grant that confers upon the patent owner "the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States" for a period of twenty years beginning from the filing date of the patent application. (6) A patent effectively grants the patent owner a limited monopoly on the patented invention. (7) While the inventor can collect monopoly rents on sales of her product until the time of patent expiration, this inefficiency is justified on utilitarian or consequentialist grounds--that is, without patent protection, inventors would not invent, or would invent only to a level that would be considered sub-optimal. This concern is particularly salient in the world of medicines, where a substantial capital investment is required to bring products to market. (8) Significant funds are needed for drug research for two reasons: first, new drugs are exposed to extensive regulatory scrutiny and must be tested in expensive clinical trials in order to prove their safety and efficacy; and second, medical research is inherently uncertain and risky in nature, with a number of failures typically preceding any valuable breakthroughs. (9) Without the prospect of a limited monopoly, it appears unlikely that many investors would be willing to place tens or even hundreds of millions of dollars at risk on early-stage biomedical research. The trade-off with drug patents, then, involves weighing the creation of incentives for research and development against the temporary high costs for consumers and the associated economic inefficiency that result. The granting of patents, to be sure, comes at a price. The central question is: When does that price become too high? The Indian government decided some thirty years ago that the price is always too high. The 1970 Patent Act simply prohibited the granting of patents on pharmaceutical products (in other words, on drug compounds themselves). (10) However, patents on manufacturing processes are permitted and indeed enforced. (11) The upshot of this is that Indian pharmaceutical firms undertake little original research and development. Rather, a large and fragmented generic pharmaceuticals industry has developed in India, with some sixteen thousand firms. (12) These firms have become quite adept over time at starting with a drug compound that has been approved in a foreign market and reverse-engineering it--that is, determining how the compound is made and devising a novel manufacturing process for producing it in great quantities. (13) As a result of this expertise, and because reverse-engineering entails minimal research costs that need to be recouped, drugs are often available in India at a fraction of their price in the United States and Europe. (14) However, India has begun to pass legislation that will over time turn this relative pricing advantage and the robustness of the Indian generics industry into distant memories. As a result of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) and India...See the full content of this document
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