Making Pharmaceutical Products Accessible To Developing Countries

Good health is no doubt paramount to the welfare of human beings, been in good health enables one go about their daily businesses which enables them earn a living and help improve their standard of living among many other benefits. It has been no doubt that most citizens of developing countries suffer from diseases such as malaria, AIDS, and other parasitic and infectious diseases than their counterparts in more developed nations. Hence pharmaceutical firms for a long time carried little or no research into such diseases because they feared that the money spent on research and development might not be worth it as citizens of these poor nations might not be able to afford these drugs and also for a fact that most of these diseases are little in existence or not in existence in developed nations who happen to be richer, hence the reason why they focus on diseases such as cancer which is common in these nations compared to developing nations. However it is of no doubt that Pharmaceuticals have brought incredible health benefits to citizens of both developed countries and developing ones. Historically health in developed countries improved due to the role of pharmaceuticals which by contrast is the case for developing countries as a result of misused or underused existing pharmaceuticals. For the reasons mentioned above, the purpose of this essay is to critically assess the role and effectiveness of the World Trade Organization (WTO) in making existing pharmaceutical products accessible to developing countries. By so doing, the author of this essay would first be considering the characteristics of the pharmaceutical market in developing countries, then the effects of protecting intellectual property rights on developing countries' health, the controversy regarding differential drug pricing, and priorities for foreign assistance in health. Also, the prospects for addressing pharmaceutical misuse by improving health care delivery systems and drug regulation would also be discussed.

Pharmaceutical market in developing countries has different characteristics from those in developed nations. Amongst the various characteristics are having small markets in the poorest countries. The Pharmaceutical research and Manufacturers of America (PhRMA) estimates that while only one percent of their market is in Africa, including middle income countries such as South Africa, 7 percent is in Southeast Asia and China, and 7.5 percent is in Latin America even though developing countries spend a higher percentage of their health budgets on pharmaceuticals than do developed countries. (Secondi: 2008:260). Another feature of pharmaceutical market in developing countries is the different disease environment it faces due to poverty and their geography. (Murray and Lopez, 1996), used the concept of disability adjusted life years to compare the burden of different diseases across countries, which not only took into account the amount of lives lost through diseases, but also the number of years the disability caused. WHO (2001) estimates implied that infectious and parasitic disease account for one-third of the disease burden in low income families but only three percent in high income countries. Whereas in contrast the disease burden in high income countries mainly consists of non communicable conditions like cancer and cardiovascular diseases accounts for 82.7 percent compared to 33.2 percent in low income countries. (Secondi: 2008:261). Another characteristic of pharmaceutical markets in developing countries is the weak health care and misuse of pharmaceuticals. In developing nations, mostly in rural areas, medical personnel assigned to public clinics often do not show up, also so many of these clinics lack drugs due to corruption and because salaries of medical care workers take priority in the budget. This situation leads to many relying on private health care system off which in so many cases their medical staff are untrained or not qualified enough or self prescription, which is uncommon in the west but very common in poor countries. The latter situation often leads to patient not taking their drugs completely because if they feel well after partial use, they might be obliged to stop taking them.

Intellectual property rights are defined as governmental protection of private innovation and creativity. The basic form of intellectual property rights includes, patent, trademarks, copyrights and trade secrets. This encourages new inventions such as new drugs, whose development cost can sometimes be very high. This private right can lead to social benefits. Although it is not clear whether the WTO will lead to effective intellectual property rights enforcement in developing countries, many developing countries have provided little or no intellectual property rights protection for pharmaceuticals. This can be done by offering patent on pharmaceuticals. The United States have pushed developing nations to reinforce protection of intellectual property right. The 1994 agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) required the least developed countries to join the rest of WTO member countries in providing patent protection for pharmaceuticals by 2006. The purpose of this agreement is to help make a decision that enables countries that cannot make medicines themselves to export pharmaceuticals made under compulsory licence. The TRIPS agreement increases protection of international property rights and restricts the transfer of technology. As a result developing countries are obligated to alter their national intellectual property laws to comply with the TRIPS agreement. The effect of this hence, limits the available range of trade and industrial policy actions available to developing countries. However the agreement still provides escape hitches. Countries are still free to impose price controls. Besides the public storm of pricing of AIDS drugs led WTO negotiators to extend the transition period for instituting patent protection for pharmaceuticals in the least developed countries to 2016 which can even be extended further. (Secondi: 2008:265). Another effect of this is the WTO provisions which rely on suits brought by countries. Like in the case of South Africa, where the United States dropped its dispute over South Africa's imports of pharmaceutical products from countries with weaker patent laws as a result of public outcry. Furthermore, developed countries and developing countries are split over several issues regarding the benefits and burden of the TRIPS agreement. The main argument is if the TRIPS agreement is focused on bringing benefits to developed nations rather than developing countries. Although developed nations have argued that it is in this best interest of the developing nations that the TRIPS agreement is in place, but developing nations agree to the contrary. Furthermore, some theorists have argued that it is in the benefits of developing nations if the intellectual property right is strong as this will encourage developed countries to bring their ideas, innovation to these countries as they won't have the fear that these would be stolen and used by a third party, without any legal action been able to be taken against them. So if there is a strong and active intellectual property right in least developed nations, more advanced nations can increase foreign investment in the former countries. Like in the case of pharmaceuticals, drugs can be brought in from these developed nations who have better infrastructures and more advanced technology to poor countries without the fear of a third party pirating such drugs without the consent of the trademark owners.

On the other hand, many argue that the TRIPS agreement is counterproductive and self centred and hypocritical towards already developed nations. To many developing countries, an intellectual property right mechanism translates into a barrier of the transfer of technology and a hindrance to economic development and if all products protected by such laws should be available at minimal cost. Even though most developing countries didn't want to sign this agreement at first, but later did so, due to fear of sanctions from the US. A study by Mansfield found that when a country enacted a stronger intellectual property law, firms from the pharmaceutical industry increased the amount of foreign joint venture and direct investment. This study was carried out using firms in the US and sixteen developing nations. The study has been criticised that the index is too subjective in character because the survey includes the firm's personal insight of what element influence investment. Furthermore, it is conceivable that patent right in the developing world have negligible impact on research incentives. They may also raise prices from patented drugs. It is also known that developing countries have long had little intellectual property protection for pharmaceuticals and this might have been a reason for the low amount of research put into diseases such as malaria most likely found in developing countries such as those in sub-Sahara Africa, which is of paramount importance to them. Although the WHO's malaria programme seeks to eradicate this disease, Major efforts are underway to increase international funding for a war on malaria, emphasizing the development of a malaria vaccine. It is believed that an effective vaccine might be just a few years away, but because victims of malaria tend to come from low income countries that cannot afford expensive drugs, they have been little incentive for pharmaceutical companies to focus on research in this field. (Todaro and Smith: 2006:396-397). This lack of patent protection may have resulted at least in part to developing nations reaping the benefits of low prices, yet the cost in terms of reduced research incentives are mainly externalized to the rest of the developing world. Although the TRIPS agreement ought to have overcome part of this problem, it has cast doubts on the future credibility of patent right pharmaceuticals in developing nations, which unfortunately may result in lower research incentives relating to those particular diseases found in poorer nations.

Another issue that has come up from the signing of the TRIPS agreement has been the aggressive declaration of property rights by drug manufacturers in developed countries over some of their pharmaceutical products which could be very important for health care in developing countries. Where the marginal cost of producing these products is low i.e. can be affordable by developing countries, but because prices protected by the TRIPS agreement are higher, making such products to become very expensive and unaffordable. While they are calls to waive price protection, these pharmaceutical companies will argue that these higher prices backed by the existence of intellectual property rights help them provide funds needed to finance research and development on new drugs. This issue will continually restrict access to many pharmaceutical products by developing countries. (Clunnies-Ross et al: 2009:242-243). A possible suggestion would be for the WTO, to make developed nations fund more research on diseases like malaria, which are mostly found in poor nations and make them easily accessible to them. Although major pharmaceutical companies now provide AIDS drug to poor countries by donating medicines to select programmes or selling drugs at prices that reflect manufacturing costs. Also governments can provide subsidies to pharmaceutical companies so more research can be carried out and price of these drugs can be reduced for citizens of poorer nations. Furthermore other alternative approaches can be considered, such as firms donating products to poor countries rather than charge manufacturing cost as this could strengthen the firms' reputation, rather than posing a challenge in maintaining prices in developed countries. As a matter of fact it is sought that producers donate antiretroviral drugs for AIDS to Africa, but activists insisted on countries paying for the drugs at low prices, stating that firms will not continue the donation once the political heat was off. Furthermore, it is thought that in order to create incentives to firms to continue donating their products, rich countries' governments could provide enhanced tax deduction to pharmaceutical firms that make approved donation of drugs or vaccines to developing nations. It is well worth noting that the United States of America currently provides a tax deduction but based on manufacturers cost, which is often very low. (Secondi: 2008:268).

However there are a number of public policy issues regarding the availability of and use of pharmaceutical products in developing countries. One of which is differential pricing. A potentially difficult issue with limiting intellectual property rights in developing nations is the political effects on prices in the developing world. If sanctioning weak or no intellectual property right in developing nations weakened political support for intellectual property right s in developed nations or put pressure on prices there, this could have a major impact on research incentives for global diseases. (Secondi: 2008:268). It can be argued that price discrimination can improve both access and research and development incentives. As it allows those who value the product at more than the marginal cost of production to obtain it, therefore the product reaches more people than under a single worldwide monopoly price. This also permits firms to capture almost full social surplus for their products, which in turn provides them a greater incentive to develop the product. Also given the markets in the poorest countries are so small, profit maximizing prices are likely to be above marginal cost if selling at a lower price and has any appreciable effects on prices in developed countries. This has led to many calling not just for differential prices in developing countries, but also the use of compulsory licensing of patents to reduce prices closer to marginal cost in developing countries. But an objection to this demand has been that it could possibly reduce research and development incentives. However, some time ago, the World Health Organization (WHO), the World Trade Organization (WTO), the Norwegian Foreign Ministry, and the US-based Global Health Council held a 3-day workshop about “Pricing and Financing of Essential Drugs” in poor countries. They came to a conclusion that there was broad recognition that differential pricing could play an important role in ensuring access to existing drugs at affordable prices, particularly in the poorest countries, while the patent system would be allowed to continue to play its role in providing incentives for research and development into new drugs. They also came to the conclusion that if different prices are to be charged to developed and developing nations, they have to be a bilateral agreement between patent holders and manufacturers or through a market mechanism. Also In 2001 Human Development Report (HDR), the United Nations Development Program (UNDP) called to introduce differential rich versus poor country pricing for essential high-tech products as well. The Health GAP Coalition commented on the report: “On the issue of differential pricing, the Report notes that, while an effective global market would encourage different prices in different countries for products such as pharmaceuticals, the current system does not. where the main cost to the seller is usually research rather than production, such tiered pricing could lead to an identical product being sold in developing countries for just one-tenth-or one-hundredth- the price in Europe or the United States. However, drug companies fear that knowledge about such discounting could lead to a demand for lower prices in rich countries as well. They have tended to set global prices that are unaffordable for the citizens of poor countries (as with many AIDS drugs). Furthermore, differential pricing of essential drugs is an instinctively obvious part of any comprehensive response to the AIDS crisis. Developing an effective regime of price discrimination between developed and developing nation's pharmaceutical markets, however, raises complicated economic, legal and political challenges. Low-priced drugs in developing countries could prompt forms of physical and informational arbitrage that could undermine prices and profits in lucrative developed nation's markets. Also, the pricing of AIDS drugs highlights legal tensions between public health concerns and private intellectual property rights under the WTO TRIPS agreement.

In conclusion, it can be seen, that characteristics of the pharmaceutical market in developing countries have been discussed, such as small markets and different disease they face, due to their impoverish states and geography, e.t.c. Also intellectual property right was clearly defined some effects of protecting intellectual property rights on developing countries health along with the TRIPS agreement signed by the members of the WTO was discussed. Although, the TRIPS agreement was clearly to help nations that cannot make medicines themselves able to transfer pharmaceutical products under patent laws to developed nations who have more advanced technology and infrastructure in producing these drugs. This also led to the discussion of the controversies brought by this agreement in which developing countries argued that the TRIPS agreement is hypocritical towards already developed nations, although a study by Mansfield mentioned already showed that developing nations did benefit from this agreement, although that study was criticized. Also discussed was the effect of patent on prices of drugs, the essay mentioned that because of this high prices, pharmaceutical firms might not have the incentive to carry out research on diseases found in poorer countries because of fear of the citizens of this poor countries not been able to afford these drugs. Examples of such diseases mentioned was malaria, which majority of the cases are found in sub Sahara Africa. Furthermore it was also stated that such a problem can be dealt with if subsidies are provided to this firms or provision of deductable taxes to these firms not only to help research on these drugs but also, develop the product even further. It was also noted that the USA already has such policy in place. On further recommendation, the WTO could greatly increase the benefits brought by pharmaceuticals firms to developing nation by implementing system to provide better access to existing pharmaceuticals and to manage their use as well as by investing in the global public good and research and development on diseases that affects the poor. Also it was mentioned that most of the health budget of developing countries was channelled towards salary. This can be re directed toward a more cost effective public health measures, such as vaccinations. Finally, the issues of differential drug pricing that were discussed in detail on how different prices are charged in both developed and developing nation. Arguments for and against this problem were also stated but it is well worth noting that if developed countries and international community could encourage differential drug pricing, because most citizens of developed countries are wealthier than their counterparts in developing nations, hence can afford to pay more for drugs but if differential drug pricing is encouraged, it means that this will be taken into account hence lower prices would be charged in developing nations. And also allow more favourable tax treatment on appropriate drug donations as this clearly provides incentives to firms to research and develop drugs.

Bibliography

  1. Anthony Cluines-Ross, David Forsyth and Mozammel Huq (2009) 1st edition. McGraw Hill Higher Education (UK) Giorgio Secondi (2008),The Development Economics Reader. Routledge, London and New York.
  2. Giorgio Secondi (2008), The Development Economics Reader. Routledge, London and New York.
  3. Todaro P. Michael & Smith C. Stephen (2006), Economic Development 9th edition. Pearson Education Limited England. Alan O. Sykes,” TRIPS, Pharmaceuticals, Developing Countries and the Doha Solution”, Chicago Journal of International Law 3(2002) 47-49.
  4. Alan O. Sykes,” TRIPS, Pharmaceuticals, Developing Countries and The Doha Solution”, Chicago Journal of International Law 3(2002) 47-49.
  5. Charles R. Kennedy, Frederick H.deB. Harris and Michael Lord, “Integrating Public Policy and Public affairs in a Pharmaceutical Marketing Programme: The AIDS Pandemic”, Journal of public policy and Marketing 23 (2004) 128-139.
  6. Edwin Mansfield, “Intellectual Property Protection Direct Investment and Technology Transfer 2” International Finance Corporation Discussion paper 27 ( 1995) Kremer, M.(2002) “Pharmaceuticals and the Developing World”, Journal of Economic Perspectives 63 (2002) 67-90
  7. Kremer, M.(2002) “Pharmaceuticals and the Developing world”, Journal of Economic Perspectives 63 (2002) 67-90
  8. Su Evelyn, “The winners and the losers: The Agreement on trade-related aspects of Intellectual Property Rights and its Effect on Developing Countries”, Houston Journal of International Law 23 (2000-2001) 169-208.
  9. http://samvak.tripod.com/pp151.html
  10. http://jiel.oxfordjournals.org/cgi/content/abstract/5/4/883
  11. http://www.wto.org/english/tratop_e/TRIPS_e/tripsfactsheet_pharma_2006_e.pdf

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!