This article first appeared in The Edge Malaysia Weekly, on April 25 - May 1, 2016.
With a combined population of over 600 million, an abundance of natural resources, a developing service sector and a well-educated workforce, Asean has become a magnet for foreign direct investment (FDI) in recent decades. The flow of FDI to this region is predicated upon the existence of strong intellectual property rights (IPR).
It is generally agreed that IPR spur investment, innovation and creativity given its role in protecting financial and intellectual investments. However, controversy often arises when it comes to the effects of strong IPR on healthcare.
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement of 1995 is the global minimum standard for intellectual property protection. It obliges member states to give 20-year patent protection for pharmaceuticals and offers adequate protection for confidential information submitted as a prerequisite for gaining market approval for a new drug.
This agreement has been seen by many as a tool that hampers the ability of developing countries to intervene in public health matters. Critics argue that it limits the ability of generic pharmaceutical companies to produce cheaper drugs and hinders the development of local pharmaceutical industries.
However, numerous studies have shown that increased trade openness — of which robust IPR is a prerequisite — improves health outcomes. For example, a strong and effective patent system will support, protect and stimulate innovation. It will also encourage technology transfer and increase the availability of products in new markets. Such incentives ensure that pharmaceutical companies continue to invest in new markets, both in terms of products and human capital.
In order to balance the benefits of safeguarding IPR with access to medicines for the general population, the Doha Declaration on TRIPS states that countries are allowed to “adopt measures necessary to protect public health and nutrition”. This enables developing countries in Asean to benefit the most from freeing up barriers to free trade, for it potentially minimises the costs of protecting IPR — especially in times of crisis.
Even though the Doha Declaration allows for this flexibility, IPR standards that are in place should be strictly adhered to, with deviation as an exception and not the norm. For example, governments should not issue compulsory licensing (when a government allows someone else to produce the patented product or process without the consent of the patent owner) without a clear case for public need.
These exceptions have been misused in the past by those wanting to prop up crony-led companies as opposed to addressing medical emergencies such as epidemics.
On the flip side, companies should not abuse IPR by “evergreening” (minimal modification of existing drugs with the aim of extending patents). In August 2015, The Economist ran a series of articles on the need to fix patents. Some articles pointed out that patents are supposed to spread knowledge and spur innovation, but are sometimes used to lock in incumbents’ advantages and therefore reduce competition.
Similarly, an initial proposal within the Trans-Pacific Partnership agreement (TPP) to extend data protection for biologic drugs was estimated to cost Australian taxpayers a few hundred million dollars per annum. It has been argued that the TPP should not distinguish between biologics and other pharmaceutical products, and that such extensions amount to not just more expensive products but also crosses the line in which protection for innovation is replaced by entrenched monopolies.
The flexibility provided by the Doha Declaration should form the underlying philosophy for IPR and healthcare. Corporate entities are not charitable organisations, and tend to be predominantly focused on the bottom line. But as any medical practitioner will tell you, healthcare is more than just about ringgit and sen. This is exemplified by GlaxoSmithKline’s recent announcement that it will stop filing patents in 50 least developed and low-income countries.
The role of the government is to provide the necessary framework to address deficiencies within a system and to incentivise research in neglected areas of healthcare. One such programme is Advanced Market Commitments (AMC), where guarantees are given as a tool to encourage research into healthcare issues that do not have an attractive market.
These efforts tend to be more sustainable and equitable when the 3P (public, private, philanthropy) approach is used. One example of AMC was the scheme to provide subsidised pneumococcal vaccines in developing countries. The World Bank supported the governments of Italy, the UK, Canada, Russia and Norway, and the Bill & Melinda Gates Foundation, in committing US$1.5 billion to help cut the cost of a US$70 vaccine to US$3.50 for 60 poor countries.
The increasing efforts at breaking down walls between Asean member nations provide opportunities to lock into place IPR that will stimulate competition, improve economies of scale, break down monopolies and reduce healthcare costs over the long run. However a balance is needed — tip it one way and it becomes prohibitive to innovation, tip it the other and it stifles competition.
Dr Helmy Haja Mydin is a consultant respiratory physician in Pantai Hospital Kuala Lumpur and a founding associate of the Institute for Democracy and Economic Affairs (IDEAS)
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