Tuesday, April 15, 2008

Free enterprise and health innovation

I have always thought that product innovation – new rice and vegetable varieties, new cellphones and laptops, new shoes and dresses, new burgers and pizza, new drugs and medicines, and so on – is done by private firms and companies, not by governments. When a company is the first to innovate on something that is very useful to its consumers, then that company is rewarded with big profit and wide trademark recognition and support. That is why companies compete with each other in various forms of innovation – whether in new products and processes at various price levels, or the same/similar products and processes at a lower price or with better marketing package or better post-sale services, and so on.

Some documents by many governments and multilateral institutions, however, seem to suggest that it’s them who do the innovation and undertake costly R&D, or suggest that they can command and control the private companies that do the innovation, tell them what areas to innovate, how to do it, and at what prices the companies should sell their new products and processes.

One such document that I have encountered is the InterGovernment Working Group on intellectual property, innovation and health (IGWG, under the World Health Organization, WHO) global strategy and draft plan of action. It’s 26 pages long and unless you specifically look for it, you may not easily find it in the WHO website. This and related documents are very important if one wishes to see how the WHO and its member states represented by their respective health ministries or departments wish to “manage” intellectual property rights (IPR) and health innovation by private companies, especially pharmaceutical companies, to pursue certain public health objectives.

The IGWG global strategy and draft plan of action recognizes the important role of IPR on technological innovation but it also says that “IPR do not and should not prevent Member States from taking measures to protect public health.” And from this premise, along with many other premises, it identifies certain plans of action. Among them are the following.

One, health R&D of developed countries should reflect the health needs of developing countries. But governments of developed countries do not undertake R&D; it’s the health research and pharmaceutical companies based in developed countries that do it.

Two, promote and coordinate R&D for diseases in developing countries. This implies that the health ministries or departments of developed countries should coordinate the R&D work of innovator pharmaceutical and biotechnology research companies, and tell them to prioritize in their work the diseases in developing countries.

Three, build and improve innovative capacity of developing countries. Who will do this, the governments of poor countries, or the local health and pharmaceutical companies in poor countries, or both? If it’s the first, then this will require huge budgetary allocation for many years, which will require huge taxes and fees for many years, which can bleed productive enterprises including local health and pharmaceutical companies and disable them to improve their own innovative capacities.

Four, transfer of technology; from north to south. Technology transfer should be done voluntarily, where both the innovator and recipient bodies or enterprises will benefit. When the innovator company spent huge amount of time, effort and money – invested by stockholders and/or borrowed from banks, both of which expect reasonable returns – then it will not just transfer its technology and processes to other companies which did not help in its earlier efforts; or worse, they could be potential competitors. An innovator company will transfer technology only to its subsidiary or sister company which can give it reliable information on local conditions from which the mother or innovator company can consider in its on-going or future R&D work.

Five, manage IP to promote innovation and public health. This implies that governments should “manage” the IPR of innovator companies and if they cannot be managed, then governments can issue compulsory licensing (CL) to some of these companies’ effective and best-selling medicines. Or manufacture and export medicines without the permission of patent owner. The words “allow CL” and “export medicines without the permission of patent owner” are in fact contained in the said document.

These interventionist, if not invasive, “plans of action” by the WHO and its member-governments as drafted by the IGWG secretariat, are meant to socialize and collectivize the efforts and hard work by the innovator health companies. When you collectivize something, you normally disregard the rightful rewards of the innovators in the form of higher profit or wide trademark recognition by consumers. These are subordinated in the name of “public health” and capsulize in the slogans, “patients over patents” or “people over profit”.

Okay, fine and cute slogans. But if the innovators will not be properly rewarded, why would they innovate in the first place? And if there will be no more innovators, who will produce more effective and safe medicines to fight evolving diseases in evolving environments and communities? Or at least mitigate the pain and impatience of the sick or dying patients, like curing a disease in just 1 or 2 days instead of 1 or 2 weeks or more that existing medicines are capable of doing?

The “cheaper/affordable medicines” bill now in the bicameral conference committee by the Senate and the House of Representatives is generally treading along these lines contained in the IGWG document. The Senate Committee Report that produced the current Senate version even proudly declared that “for developing countries, the fewer the patents, the better”.

Fine, but if the few innovator pharmaceutical companies in the Philippines now will be threatened with weak patent and IPR laws for their innovations through “government use” which is more invasive than the CL scheme, and threat of price control of their effective and best-selling drugs by the DOH bureaucracy, are we not penalizing ourselves with even fewer innovator companies who can give us more effective and safe medicines for both existing and future diseases?

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