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Thailand’s ill see benefits from ‘compulsory licensing’

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Thailand’s ill see benefits from ‘compulsory licensing’
Robert Weissman
McClatchy-Tribune News Service
April 4, 2008

The rationale for Sally Pipes’ fanciful opinion piece (“Thailand’s misuse of `compulsory licensing’ allowed corrupt officials to steal millions,” March 21) would have been a lot clearer to readers if she had revealed that her think tank is funded by the pharmaceutical industry. Her organization, the Pacific Research Institute, has received more than $1 million from Eli Lilly since 2000. Several members of its board are tied to the industry through investment funds or lobby shops.

Pipes derides Thailand for issuing compulsory licenses on several AIDS, heart disease and cancer drugs. A compulsory license is a lawful government authorization of generic competition for products while they remain on patent.

Untruthfully, Pipes says Thai patients have not seen benefits as a result. In fact, the Thai compulsory licenses have lowered the price of an important HIV/AIDS drug (brand name: Kaletra) by about three-quarters, enabling the government to triple the number of people receiving this life-saving treatment. More will go on the treatment as need grows and generic competition continues to reduce prices. The generic version of a heart-disease drug (brand-name: Plavix) is one-seventieth the cost of the brand-name product, which will enable the government to offer the drug in the public health system. Previously, it has been unavailable.
The price reductions obtained by Thailand have also benefited people in other developing countries. After Thailand issued its compulsory license on Kaletra, for example, the maker of the brand-name version, Chicago-based Abbott Laboratories, lowered its middle-income-country price from $2,200 a year per person to $1,000.

Pipes refers to the billions of dollars in aid now being devoted to providing AIDS drugs to people in Africa and other poor countries. She fails to acknowledge that it was compulsory licensing, the threat of compulsory licenses and generic competition that made it possible for aid programs to save the lives of millions of people with HIV/AIDS.

Ten years ago, AIDS medicines for developing countries were priced the same as in rich countries – more than $10,000 a year per person, making an AIDS diagnosis a death sentence for almost everyone in poor countries. Now, thanks to generic competition, those same drugs can cost less than $100 a year. The lower prices from generic competition made it possible for aid donors to invest in saving the lives of those with HIV/AIDS.

Pipes at least acknowledges that Thailand’s compulsory licenses are permissible under international law, though she wrongfully asserts that the right to undertake compulsory licensing is limited to poor countries and public health crises. In fact, the United States (and other rich countries) routinely issue compulsory licenses, including in the pharmaceutical sector.

The small grain of truth in Pipes’ misleading diatribe is that it is expensive to develop new drugs, and that we do need incentives to promote needs-driven medical research and development.

International discussions are under way under the auspices of the World Health Organization to investigate models to spur R&D and promote access to essential medicines, and the United States should continue to engage in these conversations in good faith. One promising idea being discussed is prize funds, which would offer rich rewards for those who make important medical discoveries, but not require patients to pay high prices.

There is growing interest in the U.S. Congress in searching for such win-win arrangements. Senate Resolution 241/House Resolution 525, for example, proposes a U.S. trade policy aiming to promote pharmaceutical innovation and access alike.

We do need fair-share contributions to R&D by middle-income countries like Thailand (whose per-capita income is about one-sixteenth that of the United States). But we can and must find ways to support R&D that do not result in the rationing of life-saving medicines in developing countries, and denial of life-saving treatment to people simply because they are poor.

Robert Weissman is director of Essential Action, a public health advocacy and corporate accountability group based in Washington. Funding for Essential Action’s Access to Medicines campaign comes from the Ford Foundation and the Open Society Institute.

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Note: In the commentary above, Weissman is responding to the following article by Sally Pipes of the pharmaceutical industry-funded Pacific Research Institute.

SALLY PIPES: Thailand’s misuse of ‘compulsory licensing’ allowed corrupt officials to steal millions
McClatchy-Tribune News Service
March 24, 2008

SAN FRANCISCO — When it comes to public health, Thailand’s former government leaders would like the world to think that they’re a collection of 21st-century Robin Hoods.

Last year, the unelected military-backed government gave Thailand’s state-run pharmaceutical firm, the Government Pharmaceutical Organization (GPO), permission to manufacture generic versions of drugs that fight heart disease and AIDS, even though the medicines were still patented by Western firms.

Robbing the rich to give to the poor, right?

Not really. Sick Thai citizens have yet to see any benefits and the move has set a dangerous precedent that will stifle medical innovation and endanger the health of millions.

Thai officials broke the patents by using “compulsory licenses,” a legal maneuver afforded to poor countries by the World Trade Organization (WTO) in the event of a public health crisis. If a local government can’t afford a pertinent patented drug, it can issue a compulsory license to produce it before the patent has expired.

But these provisions were never intended to be used by countries that could afford the medicines but are simply choosing to pay less in order to make other purchases – like tanks for example.

Last year, for instance, Bangkok spent $9 million on pay raises for military leaders. Since 2006, the nation has increased its defense budget by over 30 percent.

The reality is that the former military government officials used compulsory licenses to pursue their own economic development. Their scheme is just protectionism by a different name – and world governments and trade bodies should see it for what it is.

Giving the GPO permission to manufacture patented drugs is part of the Thai government’s plan to establish itself as a globally competitive producer of generics. Of course, there is nothing wrong with the government wanting to encourage its own industry – but not when that’s done at the expense of patients and other countries who abide by both the letter and the spirit of the law.

So far, the gambit has proven quite lucrative. In 2005, Thailand’s GPO reaped $35 million in profits by copying medicines. Only 2 percent of that went toward research and development.

The literally billions of dollars in free medicines and development projects pouring into sub-Saharan Africa don’t come for free. Those must be funded by sales from the developed world and, at least in part, from countries like Thailand that can afford to pay some small part of the cost of innovation – even if not at the same scale countries in the U.S. and Europe can afford.

Activists justify compulsory licenses by claiming that drug makers focus on diseases affecting only rich countries.

But that’s simply not true. Over 100 drug-development projects that specifically target diseases plaguing the Third World are currently underway. Western pharmaceutical firms have already devised life-saving treatments for HIV/AIDS, tuberculosis, and malaria. And they often offer patented drugs to poor countries for free or at a steep discount.

In fact, even in Thailand, the affected companies were all offering their products at steep discounts to the Thai government. When one looks at the potential savings to the Thai government between those prices and potential generic prices the distinctions are insignificant to a national budget – less than the price of one tank.

Compulsory licenses can have a use in rare instances. But using them as a deceptive tool for building up one’s own industry perverts the spirit of the trade agreement and will ultimately prove harmful to patients.

The newly elected Thai government is wisely examining this issue and appears more interested in pursuing a thoughtful, long-term policy of economic development that will serve its citizens far better than quick-fix political schemes that result in Thailand becoming a hero to anti-capitalist activists, but a pariah to the world economic community.

Sally C. Pipes is president & CEO of the Pacific Research Institute, (www.pacificresearch.org), a nonprofit, nonpartisan think-tank that champions free market policy solutions.

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April 4th, 2008 at 10:03 am

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