Saturday, November 22, 2008

Compulsory coercion

This week, the Implementing Rules of Regulations (IRR) of the “cheaper medicines law” or RA 9502, will take effect. Two of the prominent provisions of the law and its IRR are medicine price control and compulsory licensing (CL). The law and the IRR did not explicitly call it price control but “maximum retail price” which amounts to the same thing. Note the two words: “control” and “compulsory”, which means coercion. These are the 3 Cs of more government intervention and can be called “3CG”, in reference to an initiative that called for Cut the Cost, Cut the Pain or “3CP” by successfully lobbying for the said 3CG. Curiously, “Cut the taxes” on medicines was not part of its agenda.

Also this week, Thailand’s Health Ministry promised “more compulsory licensing” for essential drugs. For twp years now, the agency has issued CL on some medicines for HIV/AIDS, cancer and heart diseases, all manufactured by multinational pharmaceutical companies. (See the article here.) Last year, Brazil also issued a CL on drugs for HIV produced by a US pharmaceutical firm. India and Mexico are also toying with the idea, if they have not done it already.

What is CL and is its issuance for essential drugs – in Thailand, Brazil, and soon in the Philippines – really driven by concern for the poor, or plain envy?

CL, as defined in the IRR, means “a license issued by the Director General of the Intellectual Property Office to exploit a patented invention without the permission of the patent holder, either by manufacture or through parallel importation.” Most policy pronouncements by governments involved and supporting arguments by health activist groups say CL issuance is driven by concern for the poor. This writer argues otherwise. It is plain dark envy and hatred for multinationals, even hatred for globalization and capitalism, that drives those campaigns for CL, for 3CGs and various forms of government coercion, ultimately for health socialism.

Before, many people were dying of HIV/AIDS, cancer, heart and various communicable diseases. Then some medicines were invented by pharmaceutical companies to cure, or at least keep at bay, those diseases. Those earlier medicines were less effective, treatment period was long, and there could be some side effects. So newer, more effective, safe and more revolutionary medicines came on stream. Naturally, these new medicines also required new and more costly research and development, more revolutionary expenses to comply with more strict health regulations and more demanding expectations by patients.

High development cost means high retail price. And this is something that the health activists and government health bureaucrats cannot accept. The inventors of the new and effective medicines are now painted as evil, greedy capitalists who prey on the weakness and ignorance of the poor. Thus, the solution is to confiscate their patent -- that government-issued tool supposedly to allow those companies to recoup their huge investments and losses in non-successful researches and drugs. The tool for such patent confiscation is compulsory licensing.

There are many other medicines against HIV, cancer, heart and communicable diseases. They can cure, they are safe, and they are relatively cheaper, but they seem to be less effective and treatment period is longer. Patients, rich and poor alike, demand something that will cure them fast and quick, at cheap or no cost to them if possible. So governments and health activists target those more effective but more expensive medicines for CL (and government use and price control). And that’s how plain, dark envy came to surface.

The IRR of RA 9502 is 65 pages long. Minus the general provisions and definition of terms, and Annex TRIPS Protocol, it is 53 pages long. Out of this, 12 pages are devoted to CL and Special CL (Rules 12 to 13 of the IRR). If the provisions on “Use by government” (Rule 10) and “Parallel importation” (Rules 16 and 17) are to be included since they also call for patent confiscation, there are 15 to 16 pages out of 53 pages (or 30% of the total pages) on CL alone, a significant discussion and a signal how serious the Philippine government is intent on coercion and intervention in the medicine sub-sector.

This column repeatedly advocates the importance of personal responsibility. Health is, first and foremost, a personal and parental responsibility, not government responsibility. People can drink, smoke and party everyday, or engage in frequent fights, or live in dirty environment, or live promiscuous lifestyle if they want to. But when their liver, intestine, lungs or other internal organs are punctured and weakened by alcohol, smoke, unsanitary environment and addictive drugs, they have no moral ascendancy to demand confiscation of property rights of private enterprises, price control of those enterprises’ products, and more taxes and health forced collectivism.

If governments are serious in bringing down medicine prices and making health care more affordable to the people, there are plenty of taxes on medicines to cut, if not abolish (import tax, import documentary stamp tax, value added tax, income documentary stamp tax, etc.). There are also plenty of regulations that prevent the entry of more medicine innovators into the country.

Manufacturers of generics and copy-cat drugs compete only in producing and selling old and existing medicines. They do not contribute anything in producing new, more powerful and more effective medicines that can significantly cut treatment period. Unfortunately, these are the medicines that patients are looking for. And governments, by issuing CL and other interventionist and confiscatory policies, are discouraging the development and expansion of more innovative pharmaceutical companies. And governments and their supporting health activist groups say they are “concerned with the sick”?

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