Patently Misanthropic
It doesn't take a genius to recognise that something is wrong with the international pharmaceutical market. We in the West have the means to prolong the lives of an estimated six million people with AIDS in the 'developing' world and yet monopolistic pricing strategies ensure this does not happen.
Meanwhile, the global drugs research system is skewed to the extent that an estimated 90 per cent of the world's health problems receive just 10 per cent of the annual research budget - largely because there are problems in areas where the market for drugs is not deemed potentially profitable. The poor nations of the world have the greatest health problems, yet receive the least attention. Something needs to be done, and the solution is relatively simple.
The arguments over the provision of cheap drugs to poorer regions are probably familiar to many. For years sick people living in poverty have been unable to access medicines that could prolong their lives due to inflated prices. The liberal press proclaims this as an outrage and demands the provision of cheaper, generic versions of the drugs to such people by effectively encouraging companies capable of producing these generic drugs to violate international patents.
However, the pharmaceutical companies counter with the reasonable argument that such a move would result in patents not being worth the paper they are written on, with the inevitable consequence being a fall in the international level of drugs research. The patent system guarantees that a firm that discovers a new, viable drug will reap the rewards of its discovery by being the sole provider of it to the global market.
The promise of abnormal profits provides the incentive that results in billions of pounds' worth of research every year. Without that incentive, the research will dry up. The debate therefore reaches something of an impasse: we want people to be able to benefit from cheap drugs but, at the same time, we don't want the levels of drugs research to fall back. There are therefore two different problems - how to deal with the market for drugs, and how to deal with the market for drugs research.
At the heart of this is the fact that drugs research, in isolation, can be seen as a public good - albeit one that would not be provided whatsoever by the free market were it not for the patent system attaching it to the market for drugs provision, since nobody would be individually prepared to pay the billions of pounds necessary to fund research when anybody could benefit from it once it has been carried out. We therefore need to devise a system whereby drugs research will be carried out without simultaneously distorting the market for the drugs themselves, as the present system does.
To deal with the actual drugs market first, the solution is simple: allow competition. Provided all drugs being put on the market are properly monitored for quality by the WHO, a competitive drugs market can only benefit those currently unable to purchase treatment for their illnesses due to a lack of funds - people such as the AIDS sufferers of Malawi, where the cheapest course of drugs costs roughly £75 more per year than the average per-capita income of £105.
By scrapping the patent system that presently restricts the entry of new firms into the market, the ability of large pharmaceutical firms to take high profit margins would be eroded, immeasurably improving the quality of life of some of the most desperate people on earth.
The present system allows the patent-holding firms to occasionally license one or two other firms to market generic drugs in some of the areas of the world most affected by AIDS. This is woefully inadequate - there is no prospect of unlicensed producers entering the industry, and hence no barrier against those firms that are permitted to produce also taking abnormal profits. Only when the drugs market is truly opened up to all firms wishing to enter it can the prices charged for life-saving treatments even start to become affordable for those who need them most.
Of course, scrapping the patent system, as already noted, will result in an end to the present system for funding drugs research. We therefore need to devise a new way to fund such research, in which an incentive is still provided to develop new cures for the health problems faced by the world.
Since it has already been observed that, in isolation, drugs research constitutes a public good, it seems logical that the world's public should fund it. The best way for this to happen would be firstly for a small international drugs research tax to be introduced which was progressive so that those most able to pay pay the most.
The proceeds of this tax would then be used firstly to establish some form of WHO research tribunal, which would then pay out the substantial remainder of the funds raised to drugs companies as a bounty for the successful development of life-saving treatments.
The value of any particular bounty payment would depend on the tribunal's assessment as to the value to society as a whole of the research in question. If it is deemed that the research is likely to save a great number of lives, the payment could be in the order of billions of pounds.
However if the research is only likely to result in, for example, minor improvements in the quality of life of those in the West (as much of today's research does), the payment would be small.
Once the research has been carried out, it would be freely available for any drugs company that liked to take advantage of it - in accordance with the newly-competitive drugs retail market outlined above.
We therefore have a system whereby cheaper generic versions of drugs can be purchased by those suffering most from serious diseases, without sacrificing the incentives necessary in order to ensure that vital drugs research is still carried out.
In fact, a close inspection of this system also reveals that it addresses another problem too - that presently research is largely carried out only for conditions that afflict the affluent western world, rather than the unprofitable but more needy 'developing' world.
Since the WHO tribunal would allocate bounty payments according to the value of research to society, we would have a state of affairs whereby the incentives are greatest to produce a drug that will save lives where lives are easiest to save by developing new drugs. There can be little doubt that the areas of the world that suffer most from health problems are, on the whole, its poorest areas.
So two problems have successfully been addressed: that of the lack of availability of cheap drugs in the world's poorest areas, and that of the world's drugs research presently taking place according to its profitability rather than its potential to improve the well-being of society as a whole. Of course, this solution does come at a price. Since the research tax system needed to fund it would be based on ability to pay, we in the west would have to foot a high proportion of it.
At present, drugs research is funded by the sick, and the products of it enjoyed solely by the rich. We have the ability to change matters and improve the lives of quite literally millions of people the world over. The price is worth it.
30th Oct 2003