The perception that there is widespread “market failure” in public health care has prompted many government health ministers and bureaucrats, upon the prodding of health activists, some policy writers and media people around the world to advocate more government intervention as “government solution to market failure.” And the World Health Organization (WHO), through its InterGovernment Working Group on Public Health, Innovation and intellectual Property (IGWG), will be one of the the chief instruments of such bigger involvement by governments.
In late April this year, government health officials, health activists and lobbyists for more government involvement in health care – and more taxes and bureaucracies for such additional intervention – from many countries will head to Geneva, Switzerland, to attend the continuation of the second session of the IGWG.
Among the planned additional interventions that will be discussed by the attendees, are for WHO member-governments to encourage: (1) entry of cheap drugs via parallel importation and/or copying without bio-equivalence testing; (2) local production through huge subsidies to chosen players; (3) issuance of compulsory licenses (CL); and (4) price controls.
The reason for the above respective measures are as follows: One, there is the persistent pressure to deliver “cheap at all cost” drugs even without strict bio-equivalence testing that will ensure equivalent efficacy and safety of medicines. Two, big multinational pharmaceutical companies do not prioritize in their R&D and production drugs for many poor country diseases. Three, compulsory licensing is allowed even in WTO’s trade-related aspect of intellectual property rights (TRIPS). And four, price controls will allow more sick people to have access to otherwise expensive but effective drugs.
A longer discussion of these old and new government interventions and related issues are tackled by the new paper, “Increasing access to medicines: Civil society commentary on the IGWG draft Plan of Action”. It is a report jointly sponsored by 24 independent think tanks and institutes from 21 countries, including Minimal Government Thinkers. (If interested to see the document, send the author a private mail)
Due to space constraints, we will briefly discuss only the “copy” drugs and CL. The IGWG’s draft Action Plan conflates “copy” drugs with generics drugs. The latter are required to pass “bio-equivalence” testing for a reference drug or product. If drugs do not go through this testing by a rigorous and scientifically-capable drug regulatory body, then these are just “copy” and very often, substandard drugs. Most counterfeit, unsafe – and cheap – drugs fall in this latter category and they can be dangerous if not fatal, to patients.
When a patient takes substandard or fake drugs, treatment failure happens. The patient either feels no improvement after taking the medicine, or develops resistance to genuine drugs while the disease may be mutating inside the body of the patient. So a hunt for “cheap at all cost” drugs can backfire.
On CL, assume there are 100 different medicines to cure AIDS patients. About 1/4 of them can cure an average patient in 7 to 10 years; another 1/4 can eradicate the disease in 5 to 6 years; another 1/4 can do the job in 3 to 4 years; and another 1/4 can control the disease in 1 to 2 years. But among the "top 25" medicines, about half are effective but have some adverse side-effects or cause allergies to people who have other diseases (diabetic, have hypertension, etc.) and the other half are plain effective.
Which of those medicines will be issued compulsory license (CL) by governments? The bottom 3/4, even if they are cheap, readily available and can also fight the disease? Not a bit. It's those in the top 10 or 15 most effective medicines, which are also among the most expensive.
And this tells us one thing: the selective application of CL is driven by envy, by the simple desire for quick-fix solution through more unproductive government intervention.
Huge investments by innovator companies do not matter. What matters is to spot who among those innovator companies have the most effective medicines, then disrespect their patent and intellectual property rights, copy the effective medicines for use by a government corporation or crony generics manufacturing company which spent very small, if ever, in expensive R&D. And the state that issued the CL is now a "hero" while the innovator companies that invented the effective drugs and resisting the CL are now the "villains".
Instead of interfering with the market for medical treatments, governments should step aside. Scrapping taxes on medicines would be a good start. In the Philippines for instance, medicines are slapped with an import tax of 5 percent and a value-added tax of 12 percent.
Geneva next month will be crowded with many technocrats and bureaucrats who have little appreciation for respect for private property, and they won’t hesitate to further incite national governments to extend their intervention and adapt confiscatory policies that disrespect the property rights of innovators and freedom to choose of patients.
Patent busting and price controls might bring cheaper drugs in the short term, but they threaten the well-being of poor patients and stifles medical innovation over the long haul. Governments can achieve “cheaper medicines” by simply getting out of the way and allowing more competition among innovator companies to reach out to the patients and their physicians.