IPR and medicines, Part 2

It looks like this is my first ever long article on IPR and medicines. I wrote it 3 1/2 years ago. Time flies :-)

SEPTEMBER 17, 2007

Why intellectual property is important

Some groups have successfully argued and convinced the public that intellectual property (IP) through patents can be skipped and overruled when we're talking about public welfare, public health in particular. The catchword, "patients over patents" summarizes it. Intellectual property is an important matter that should be respected. Here are some of my reasons why.

You are a lesser-known singer or band, performing in some bars and music lounges. You made a few good original compositions and your audience applaud you for it. Then just a few weeks past, your song/s has/have been recorded and patented by someone, on albums and CDs, no mention about you, no royalties, etc. How would you feel?

You are an ordinary researcher or academic. You presented a paper in a conference, local or international. A few months after, you see a paper published in some magazines or journals that contains practically 75% or more of your paper -- your methodology, scientific or mathematical model, data, results and conclusions. How would you feel?

You are an ordinary inventor, say you invented a device that can reduce fuel consumption for diesel engines by at least 35%, and you're selling it for a few bucks because you don't have a wide marketing network, or you don't have the capacity for its mass production. Then a few months later, your device, slightly revised in terms of design and exteriors, is patented by someone and selling it here and abroad for a handsome price, no mention about you or royalty for you. How would you feel?

You are an agri-based biotech company. You have developed a rice variety that can help its consumers boost their immunity against malaria, tuberculosis, diarrhoeal diseases. It took you about 30 years of painstaking research and development, employing among the brightest scientists and most dedicated researchers in the world. Naturally the price of your rice is high, about 10x the price of ordinary rice. Then government comes in to compel you to shorten your patent on such rice variety, if not outrightly skip your intellectual property right to such invention, because many poor people cannot afford to buy that rice, because public health is at stake. How would you feel?

Property rights is the cornerstone of a free society. Remove property rights so that some bully can expropriate your property anytime, from your cellphone to TV and car, to your song and poetry composition to mechanical and biotechnology invention, and society will be in chaos. It will be a society where hard work to buy one’s needs and priorities will be discouraged, and bullying and robbery is encouraged. It will be a society where innovation and inventiveness have no incentives because piracy and expropriation is the name of the game.

IP piracy by many private enterprises of a patented product or service, say piracy of a high-selling musical CD, is difficult to be controlled by the IP owner or the patent holder. The IP owner usually makes certain allowance for losses from such piracy because the cost of full enforcement (of running after all those thousands of pirates) is much bigger than the cost of limited enforcement. It's different, however, if the pirate is the government, in the form of dishonoring patent and IP in the name of “public welfare”. Here there is only one, single entity of a pirate, not tens of thousands of entities, and the coverage of piracy is widespread, covering the whole country.

Governments around the world always want to play "hero" by promising to reduce the price of something, through some confiscatory means (say, patent infringement), but NEVER in abolishing or reducing the taxes of that commodity or service. If governments want to bring down the price of medicines, rice, clothing, fartilizers, farm tractors, etc., the first thing it can do is to abolish or drastically cut the import tax, value added tax, and other taxes imposed on those goods or services.So if the goal is to immediately reduce the price of imported medicines so that the sick and dying will have greater access to those important medicines, one simple way to achieve this is via free trade, zero import and related taxes, zero non-tariff barrier/s.

Currently, one method employed by some governments, like the Philippine government, is "parallel importation", or the importation of patented or licensed, not pirated, product or service, without the permission of the IP owner. It’s not exactly the state but the private enterprises who will do the importation. One drawback as usual, is that it’s the government that will accredit or authorize the importers. So, some guys (like cronies or relatives of the accrediting agency) can be accredited, others cannot be accredited. This is equivalent to non-tariff barrier (NTB), and it defeats the spirit of free trade.

Due to absence of real free trade, of no-conditionalities, no taxation trade, some people start to invent certain adjectives to importation, like “parallel” importation. On a lighter note, perhaps we can expect someday terms like “perpendicular” importation, “intersecting” importation, “convex/concave” importation, and so on. But at least, “parallel” importation can be considered a “lesser evil” compared to outright government subsidizing medicines (or rice or farm tractors) and distributing them as dole-outs.

Some opposition against IP rights and patent.

One, it is “eliminating competition” because it grants the patent holder monopoly rights for a certain product for a certain period (usually 20 years). This may be true if there is only 1 or a few companies operating in the economy. But then this can happen only when the government accredits or give business permit or give franchise to only 1 or a few companies. But if government allows all companies, local or foreign, that want to enter the market to offer more competition, and each player is holding a certain patent on each and every product category, then this is not eliminating, but expanding, competition.

Two, where most consumers of health (or food or telecoms, etc.) products are poor, the monopoly price associated with patents further limits access to patented health-care products required by poor people. This is true if, again, there is only 1 or a few sellers if patented products. Because a monopolistic or oligopolistic market structure almost always ensures that consumers will have to shell out more money than in a situation where there is wide competition among sellers and patent holders.

Three, public health precedes all consideration, including IPR and profit. People’s health is a function of the quality of food they eat, the hygiene and sanitation of their houses and workplaces, the air quality they breath, the quality of water they drink, and so on. So it’s not only medicines and medical services that determine public health. Would this imply that government should also skip private property to ensure “health for all” citizens?

If the answer is Yes, this is very dangerous and can deliver society to socialism. Because this would mean that government can confiscate private villages, subdivisions and condominiums so that the homeless and sickly poor can live in good communities. This would mean that government can expropriate and “nationalize” popular and big food chains so that the hungry and the poor can eat good quality food. This would mean that government can take over private hospitals, especially the expensive “hospitals of the rich” so that the sick and dying poor can be given quality medical care.

You violate IPR, you dishonor private property. So if you want to help the poor to have access to better health care, better housing, better drinking water, better education, and so on, there is one tested “formula”: let the consumers have more choices. So that suppliers and producers will be forced to compete with each other and offer good quality products and services to attract customers.

And finally, there is no substitute to personal responsibility. Taking care of one’s body, of one’s family, is first and foremost a personal responsibility, not government responsibility. The state can give endless subsidies in medicines and hospitalization, courtesy of endless taxation, but if you drink and smoke and abuse your body regularly, you can be sickly in a short period of time. Then you demand more subsidies (ie, more taxes and income confiscation from other people) so that the state can give you “quality health care”. This is spreading the cancer of irresponsibility and wastes, from the individual to society as a whole.