My first article in BWorld, Oct 2007, on IPR

I just rediscovered this image from my old emails a decade ago -- my first article in BusinessWorld. Reposting.

Intellectual Property Rights

BWorld, October 24, 2007, page 5.

Downloading pirated songs from the internet is cool. Dying from counterfeit medicine is not. But the pirates and the slack law enforcement that give you one also give you the other--and there are people who will tell you this is a good thing.

Many governments and humanitarian groups want you to believe that patents and intellectual property rights on medical innovations deprive the poor of important medicines and should be discarded in the name of public health.

But if one's innovation and invention that produces welfare to society, like producing medicines to cure malaria or cancer, using extracts from the leaves and fruits of the most common fruit tree in a particular country, is not respected, why would some guys innovate in the first place? It is protection of patents that brought those useful drugs into existence, along with millions of other products, wonderful and mundane alike: yielding to the slogan "patients over patents" would hurt poor patients the most by depriving them of new inventions.

Say you are an unknown band, performing in bars. You wrote a few good original compositions and your audiences like them. Suddenly your songs have been recorded and patented by someone else, on albums and CDs, with no mention of you and no royalties. How would you feel?

You are a researcher or academic. You presented a paper to a conference. A few months later, you see a paper published in some magazine or journal that contains most of your paper--your methodology, scientific model, data, results and conclusions. How would you feel?

You are an ordinary inventor. You invented a device that can reduce fuel consumption in diesels by 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 mass production. Then, a few months later, your device is patented by someone who is selling it a handsome price, with no mention of you.. How would you feel?

The civil contracts of intellectual property, like deeds to physical property, underpin innovation, creativity and growth, as well as personal and political freedoms. Left-leaning health activists claim that breaking patents would hit multinationals and "Big Pharma" hardest--but these guys are innovators, they can find their way out like investing their money and people into something else, like new cosmetics and perfumes. It's the poor who will suffer most, from bad products, lack of new effective medicines, and economic stagnation.

And how do the consumers feel when they get these rip-offs? If you buy a pirated book or CD and it turns out to be of bad quality, you only lose your money. But if you buy pirated and bad quality medicine, you can lose your health--even your life.

This year Kenya found 20,000 counterfeit doses of anti-malarial Duo-cotecxin, one of many counterfeits in an uncontrolled market where some 35,000 people die of malaria each year. The fake, probably from China, does not just fail to cure the disease, it can increase drug resistance and make patients worse.

Governments around the world like to play the hero by promising to reduce prices, usually by price controls or patent infringement but never by cutting taxes on goods or service. My older brother, our eldest in the family, died of prostate cancer more than a year ago. His earlier hormonal chemo-theraphy cost around P25,000 per session excluding the physician's fee. Of that amount, government VAT collection alone was P3,000 per session. After several sessions, he did not get well. He was later given chemo that cost P90,000 per treatment, of which government's VAT was nearly P11,000 per session. The import tax, corporate income tax, business permit and other related taxes not included yet.

If a government wants to bring down the price of medicines, rice, clothing, fertilizers, farm tractors, or any commodity essential to life and economic growth, the first thing would be to drastically cut, if not abolish, the import duties and direct taxes that hit the poor hardest.

So the next time your government blames foreign companies or international rules for high prices, find out what taxes and covert barriers it is hiding from you--and shout the truth out loud.

Tobacco Tax 1: Telecom and Medicine Taxes Too

Higher tax on tobacco and alcoholic products are among the very few government measures and proposals that I support. In exchange, I wish to see government to drastically reduce if not abolish, income tax, both personal and corporate.

At the House of Representatives, it is rushing the tax on texts, P0.05 per text. It seems to be rushing also the revised taxation of alcohol and tobacco products.

I support further taxation of cigarettes and alcohol.
I do not support tax on text messages.
And I do not support continued taxation of medicines.

Most governments, including the Philippine government, are a bunch of hypocrites.

They say, 'cheaper medicines" but slap multiple taxes on medicines, raising medicine prices by at least 13 percent of their retail price.

They say, "good health" but they are too timid to raise further the taxes on alcohol and tobacco products. I don't smoke, but I drink, and I wouldnt mind if government will raise the tax of my favorite vitamin B, beer.

They say "cheaper telecomm services", but they over-regulate the entry of more telecom players. Singapore with only 4 million people has about 4 or 5 competing players, the same with HK which has only 7 million people. The Philippines with 92 million people has only 3 telecom players. And now the government wants to tax text messages, and introduce new taxes on telecom firms, while some local governments want to impose excise tax on telecom firms in their localities.

I buy the P500 globe pre-paid card. I buy it only for P490 but I get P500 load + 85 free texts, for a total value of P585, or a savings of P95 or 19.4 percent discount. I feel that it's not enough discount, but it's better than nothing.

When I send out the 85 free texts, the telecom firm (Globe) does not get a revenue from it as it is a promo text. Will it still pay P0.05 tax for it? I assume that the answer is Yes because most government regulations are stupid, they cannot distinguish promos from paid services, and there are dozens of promos from each player, like the telecom firms.

Of course, the biggest hypocrisy of governments, especially the RP government, especially under the Gloria government, is large-scale corruption and robbery.

But then again, government hypocrisy can be directly proportional to the hypocrisy of the public and the media that are supposed to be fiscalizing it. So what if the government is a theft and a hypocrite, so long as they get their own share of political favors?

Aside from taxation, other forms of government intervention are regulations. Regulations by nature, are prohibitions. The regulators are saying, "Don't move, don't start anything, unless you get our permission, our certification, our signatures. And unless you pay us taxes, duties, fees (and sometimes, fines).

I like this quote very much from former US President Ronald Reagan. He said,

If it moves, tax it.

if it continues moving, regulate it.

if it stops moving, subsidize it.

Amen.
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More on medicines and telecom taxation

The best healthcare program in any society is preventive.

Don't over-smoke, don't over-drink alcohol and soda, don't over-sit in sedentary lifestyle, don't over-eat fatty food, don't engage in frequent fights and rumbles, don't live in dirty places or do not allow dirty things around your house, don't eat without washing your hands well, don't live promiscuous lifestyle, don't rest too much and work little and expect public healthcare anytime.

That is why I always argue that healthcare, first and foremost, is personal and parental responsibility. Government responsibility is secondary, like in cases of spread of infectious diseases, taking care of those with physical and mental defect, those who are very poor and have congenital diseases, etc.

And that is why I don't believe in health socialism. The productive and those who take care of their body should not be over-taxed to pay for the healthcare of those who over-drink, over-smoke, over-fight, etc. who contract lifestyle-related diseases. Let the latter pay for their own medication and healthcare, otherwise they suffer certain diseases because they wished for it, they desired for it, they perfectly knew that all those cigarettes and alcohol and illegal drugs and high cholesterol food, etc. will mutilate their heart or intestine or other internal organs someday, and yet they continued doing it.

Then government resources will be focused on a few, deserving sickly people who need public healthcare. I won't mind paying taxes so the govt can take care of patients with epilepsy or autism or the blind. But health socialists and many politicians and government bureaucrats want across the board subsidy for all. 

That is why more private healt insurance should be encouraged to foster more competition among those players, and to foster personal responsibility in healthcare. Government health insurance can stay as 2nd-tier or back-up insurance in cases of hospital confinement and serious health problems.

About the telco tax, the usual alibi is that the telcos are making big profit. If this is so, then it only means one thing: there is lack of competition in the telecom industry. I posted it earlier: Singapore with only 4 million people has 4 to 5 major telco players, while the Philippines with 92 million people has only 3 major players. Even Indonesia has about 6 to 7 major players competing against each other. I was told by my friend who goes to Jakarta often, phone calls there are a lot cheaper there. It's cheaper for her to call her friend in Manila from Jakarta, than when she calls her friend in Manila from Manila.

The solution therefore, is not additional government regulations like additional taxes. Rather, less government regulations and more competition. Let more big telcos come in. Orange of UK, Verizon of the US, etc. are big enough telcos to pose serious competition to the incumbents. If the government is serious in bringing down the cost of telecomm calls and text messages, more competition, not more bureaucratism, is the quick and cheap solution.

But then again, we are talking about hypocrites here. Public servants, backed up often by equally hypocrite public and media (and a number of socialist-inspired civil society groups) only want more taxes, more power of intervention. Their hatred of capitalist competition is directly proportional to their self-serving ego that they can plan and manage things from the top. 

I still wish to hear more civil society groups and media lambasting government hypocrisy in slapping high taxes on medicines and health care. 
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I got at least 2 testimonies from 2 of my friends in facebook.

One wrote (he's my friend from UP undergrad, now a Consul General in one country in Europe), he's mid-40s:

My obese self from last year had blood pressure which could run up to a whopping 190/110. Now it's consistently around the 125/75 level. For those who need to lower their blood pressure, there's no need to lose 50+ pound...s like I did. Just eat healthily, take daily walks, and manage stress: that should do wonders for your blood pressure and overall state of health.

Another friend wrote, also mid-40s:

Been living healthy, never been sick for the past 18 years or so, never been taking any medicine, never saw a doctor, just eating healthy food, no soda, regular walk and exercise...

For this type of people, PhilHealth and their private HMO (if they have one) should be making lots of money: they keep contributing every year but never get sick. The pharmas (multis or local) are also not making money from them because they take little or zero medicines. 

Just affirms the importance of personal responsibility in healthcare. Government responsibility in healthcare, while giving health insurance to the poor, also gives millions of pesos of stolen and laundered money to many politicians and some govt. health personnel.

Meanwhile, I heard one time when I was stil working in the House of Reps a decade ago, that a big portion of the leadership of the Committee on Ways and Means was under the payroll of Lucio Tan. One indicator was that the Chairman or senior vice-chairman can be absent on Committee deliberations on many tax bills, but NEVER on tax bills on cigarettes. 

Recently, the EU and the US want to sue the RP govt. to the WTO for double standard in the application of excise tax on liquor and spirits. The excise tax for local alcoholic products is 30% but 50% for imported products. For me, this is wrong. Excise tax is a domestic tax, and there should be only one rate for all products in the domestic market. If the govt. wants to practice alcohol protectionism, it can do it by raising the import tax, but not the excise tax. But when govt. raises the import tax for alcoholic products, it will encourage more alcohol smuggling. This is because even the most corrupt Customs and Malacanang officials want cheaper imported wine, whiskey, beer, etc. for their own belly and their friends'.