by Adriana Benedict
Last week, the World Health Organization (WHO), World Intellectual Property Organization (WIPO) and World Trade Organization (WTO) released a trilateral study on Promoting Access to Medical Technologies and Innovation: Intersections between public health, intellectual property and trade. According to the official summary of the book, the publication is aimed at policy makers and is divided into four parts:
I. Fundamentals: the background of health policy and medical technology, the work of the three organizations, the burden of disease that challenges health policy, and the factors shaping that policy. Much attention has been paid to diseases such as HIV/AIDS, malaria and tuberculosis, but noncommunicable diseases such as cancer, diabetes and heart diseases are a rising challenge.
II. The Policy Context: the international framework, linking health policy, intellectual property and trade, the contributions of economic analysis, and the use of traditional medical knowledge in research.
III. Innovation in Greater Detail: the evolution of research and development, alternative ways of promoting innovation for neglected diseases, the role of intellectual property rights, with examples.
IV. Access: how to ensure pharmaceuticals and other medical technology reach the people who need them: pricing policies, taxes and import duties, procurement, regulation, technology transfer, local production, patents, compulsory and voluntary licences, trade agreements, and competition policies, etc.
In her remarks at the launch of the publication, WHO Director-General Dr. Margaret Chan emphasized the importance of the public interest not only in public health, but also intellectual property and trade policy. Importantly, Dr. Chan noted that it “is worth considering” an extension of the TRIPS Agreement (WTO Agreement on Trade-Related Aspects of Intellectual Property) transition deadline (currently set to July 1, 2013) for least-developed countries (LDCs) to implement the agreement’s provisions.
In stark contrast, last week the Journal of Economic Perspectives released an empirical study by two Federal Reserve economists calling for the abolition of the patent system. Backing up their assertions with mathematical models, Michele Boldrin and David K. Levine show how “The historical and international evidence suggests that while weak patent systems may mildly increase innovation with limited side effects, strong patent systems retard innovation with many negative side effects.” Explaining why patents are unnecessary in the pharmaceutical industry, Boldrin and Levine note that regulatory requirements and market exclusivity play a significant protective role alongside patents, the first-mover advantage is large (even in the absence of patents) because generic manufacturers need many years to reverse-engineer a generic product, research and development is often publicly financed, and there is an innovation “drought” in new products despite strong patent protections. In lieu of the patent system, Boldrin and Levine recommend either treating stage II and III clinical trials as public goods and allowing commercialization of new drugs as long as they satisfy safety—but not necessarily efficacy (which is what is most costly and time-consuming)—requirements. Boldrin and Levine explain:
“In this way, companies would face strong incentives to conduct or fund appropriate efficacy studies where they deem the potential market for such drugs to be large enough to bear the additional costs. The new policy could begin with drugs aimed at rare diseases, which, because of their small potential market, not currently worth the costs of efficacy testing; without the new policy, they might never make it to market at all. If this new progressive approval approach works for rare diseases, it could be adopted across the board.”
To be sure, abolishing the patent system—as it would require a constitutional amendment—seems far less likely than the LDCs being granted an extension in their implementation of intellectual property systems. Still, I wonder what the WHO/WIPO/WTO report would have to say about the Boldrin & Levine article, which seems to invalidate—or at least heavily undermine—many of the WHO/WIPO/WTO report’s underlying assumptions about intellectual property and innovation. Of course it’s even stranger to consider the implications of the Boldrin & Levine article for the TRIPS LDC extension currently under scrutiny: If Federal Reserve economists think the patent system is flawed beyond repair, should the LDC’s be trying to implement it at all? Perhaps the utility in a new extension would be to buy the LDC’s some time while the rest of us sort out how to solve the “patent puzzle” without entirely derailing it.