IPR and medicines, Part 1

My research on intellectual property rights (IPR) and medicines started only in September 2007, when Minimal Government co-sponsored with the International Policy Network (IPN, London) in holding a "Symposium on Intellectual Property, Innovation and Health" in September 4, 2007 at the Manila Hotel.

Our speakers there were Prof. Bibek Debroy from Delhi, India (2nd from left) and Philip Stevens (beside me), previously with the IPN. Dr. Epictetus Patalinghug of the University of the Philippines, College of Business Administration (UP CBA) was the forum moderator.

Below are among my first articles on the subject of IPR and medicines. I dug them from my other and inactive blog.
-------

SEPTEMBER 19, 2007

Intellectual property and Parallel importation

Along with discussions on weakening intellectual property and patent of pharmaceutical companies so that medicines and health products will be made more affordable to the poor, are moves by some governments on “parallel importation”. The goal of this type of international trading, in the words of a friend, is to “erode the ‘differential’ or ‘tiered’ pricing currently implemented by pharmaceutical companies in the country”, so that many poor people in the Philippines will be able to afford the same patented, non-pirated, medicines by the same pharmaceutical companies in India and elsewhere.

And parallel importation is not a violation of Intellectual Property Rights (IPR), nor a violation under the TRIPS accords in the WTO. This is true, I agree. But I think it is a violation of another cornerstone of a free society: free trade and free market.

Prof. Bibek Debroy, in the recent IPN-MG Symposium on intellectual property, innovation and health, held last September 4 at Manila Hotel, mentioned that in India alone, there are more than 8,000 pharma companies, both domestic and multinationals. The Pharmaceutical and Health care Association of the Philippines (PHAP), currently the "face of evil" in the minds of the public representing the "greedy, super-profit-hungry pharma companies" in the country, has only about 70 member-companies. I am wondering why it can't have 700+, even 7,000+ members, of "greedy pharma companies"?

One clear answer is the Philippine government’s over-regulation and taxation that prevents the entry of more competitors, more players. So that in the absence of real, harsh competition among pharma manufacturers and pharma trading companies in the country, in the absence of real free trade and free competition, you have the state, through the Philippine International Trading Corporation (PITC), playing "hero" through parallel importation through its accredited importers and traders. And as I have discussed earlier, there are favoritism by the state of who can be accredited and who cannot be accredited, as importers/traders. Free trade is blind to political favoritism. Free trade only favors the efficient and the reliable, and it kills the lazy, non-innovative and non-reliable players.

In addition, free trade, free importation, is anathema to import tax, value-added tax, other government charges, on the goods and services (in this case, medicines) whose prices the government wants to bring down. Taxes and other government charges immediately jack up the prices of those goods and services upwards, making them more "non-affordable" to the poor, the same people that government claims it wants to help.

To summarize: if the goal is to reduce or abolish any price differential between local and foreign products (strict assumption of homogeneous or the same product, counterfeit products not included), "parallel importation" is better than "zero or restricted importation". But "parallel importation" is inferior to free trade. And import taxation + regulated entry are inferior to zero import taxes and free entry, free exit environment, also referred in economics as "perfectly contestable market".
------

OCTOBER 09, 2007

Intellectual property and medicines

The Senate has reported out last October 1, Senate Committee Report #6 (by the 3 Committees: Trade and Industry, Health and Demography, and Finance) and the substitute bill, SB 1658 (incorporating the 7 related bills) re "affordable medicines" bill. The document, 33 pages long, pdf format, can be viewed here, http://www.senate.gov.ph/lisdata/60495394!.pdf

The discussion by the 3 Committees is quite comprehensive, except the repeated biases against the "monopolist multinational pharma companies".

My beef on intellectual property rights is this: if we want to encourage innovators and inventors to keep inventing more modern, more effective, drugs and medicines, then keep the IP laws supportive ofthe innovators.

Now if we don't care much about invention of new, more effective drugs, then weakening IP laws and reward the fruits of earlier inventions to copy-catters that just wait on the fringes, is the way to go.

These copy-catters are just watching for "more popular" medicines that hit the drugstores and prescribed by many doctors, wait for their patent to expire, then they also come to "manufacture" those drugs. In short, there is no innovation by copy-catters.

Now, what about the very expensive Philippine drug prices, compared to their prices in India and Pakistan? The Committee Report was silent on the fact that while drugs in RP are taxed (import tax, VAT, other taxes), they are not taxed in India and Pakistan. Also, lots of competitions there. More than 8,000 pharma companies in India alone, in the Philippines, less than 80? So what we have here is more taxation, less competition -- perfect formula for increasing the price of anything!