Health | World

WSJ to the WHO: In Defense of Patents

In an oped titled “Health At Any Cost” the Wall Street Journal Asia argues that “poor delivery is what ails the poor, not high drug prices.” The article is prompted by the WHO Intergovernmental Working Group on public health taking place this week (coverage here, article for subscribers only). In what is an unabashaed defense of patents, the author Franklin Cudjoe writes:

Unfortunately for us in the poorest nations, these health activists are missing the forest for the trees. Inadequate infrastructure, not prices, is the chief obstacle blocking access to high-quality medicine to poor countries.

Imported drugs often sit for months in Africa’s dirty, non-air-conditioned storage facilities - either losing quality or expiring before reaching patients. Hospitals lack doctors, nurses, equipment and sometimes even electricity to effectively administer available medication. Roads are often in disrepair, making it particularly difficult to reach rural populations, where disease rates are the highest.

So far, so good. Cudjoe is absolutely right is saying poor delivery is the biggest immediate hurdle to improved health outcomes in Africa and Asia. But then he goes a bit too far. He criticizes recent compulsory licensing in Brazil and Thailand, saying:

By most estimates, it costs Western pharmaceutical companies around $800 million to develop a new drug and bring it to the market. The risk of losing a product through compulsory licensing will only discourage investment in future research.

Yet antipatent activitists, with their myopic fixation on price, are relentlessly bullying bureaucrats to follow their advice. Let’s hope the WHO won’t succumb to the misconception that compulsory license can cure Africa’s health problems. Instead, economic development remains the continent’s best hope for eradicating the diseases of poverty.

While Cudjoe does point out the forest from the trees, his own analysis simply side steps part of the problem.

First, he fails to recognize that the problem of health is both poor delivery and high drug prices. It is true that “better health systems come with economic development”, but in focusing solely on that aspect, he fails to acknowledge the importance of the later challenge.

Second, in suggesting that pharmaceutical companies would be unwilling to invest in research when faced with the possibility of compulsory licensing, he is being disingenous. The $800 million estimate he uses comes from a study funded by big pharma itself, and has been vehemently contested by many. Regardless of its accuracy, what is clear is the drug R&D is decided on drug sales, and therefore is almost never directed to the needs of poor developing countries. Cudjoe’s assertion that firms may reduce investment in poor country diseases is wrong because such investment simply does not happen (see a detailed 4-part analysis of drug R&D and the patent system, starting with part 3).

Finally, in dismissing the value of compulsory licensing he does not realize that compulsory licensing is more a political and bargaining tool for negotiating lower drug prices than it is an actual instrument of policy. The issuance of licenses in some countries makes the threat of further licenses credible, allowing Brazil, India, or any other country to negotiate lower prices with big pharma. Cudjoe may, of course, say that high prices are not the main problem, but if countries can receive lower prices, why should they not?

Cudjoe’s analysis is, in summary, rather disappointing. Rather than address the criticisms leveled at the patent system and understand the reasons for high drug prices, he simply dismisses them in favor of another problem. He would do better to appreciate the problems of the patent system. High cost is one of them, but hardly the most important one. The biggest problem is simply that the patent system stifles innovation. The analysis of Joseph Stiglitz on the healthcare market is illuminating (covered on TDZ here):

It is a matter of simple economics: companies direct their research where the money is, regardless of the relative value to society.

Most people do not pay for what they consume; they rely on others to judge what they should consume, and prices do not influence these judgments as they do with conventional commodities.

The market is thus rife with distortions. It is accordingly not surprising that in the area of health, the patent system, with all of its distortions, has failed in so many ways.

The two issues brought forth - poor delivery and high drug costs - should not be treated as being related when they are separate and independent problems. The first is a challenge to delivering solutions that are available. In contrast, the patent system has a set of problems entirely its own that relate to the innovation of future treatments. Cudjoe would do well to address both rather than select one over the other. In exhorting the WHO to focus on the former and ignore the latter, he actually does “his” poor countrymen a great disservice.

It bears mentioning that Mr. Cudjoe runs the Imani Center for Policy and Education in Ghana, an organization backed by, amongst others, The Heritage Foundation - a well known conservative US think-tank. The article’s defense of big pharma should not, therefore, come as a surprise.

© 2007 The Discomfort Zone.