Solomon: Sharp Scalpel, Weak Painkillers
Today, President Barack Obama will give his final State of the Union address. He will likely reflect with pride on how far we have come as a nation and call our attention to the even longer road ahead. He will speak about our revival following the still-recent global financial crisis, about these past eight years’ political milestones and about the pervasive violence and hatred that have yet to be eradicated. He will also likely use his last months of administrative influence and political capital to urge Congress to pursue the legislative initiatives he wishes to see implemented after he leaves office. Among these initiatives is the Trans-Pacific Partnership.
The trade agreement, involving the United States and 11 Pacific-Rim nations, underwent extensive negotiations over the last seven years and was finalized on Oct. 5, 2015 . Given Senate-approved fast-track authority in June 2015, Obama signed the TPP along with other world leaders on Jan. 4. In the upcoming weeks, Congress will debate its ratification, and it may be some time before the TPP becomes binding.
Since its inception, the White House has fiercely protected this trade deal, endorsing the potential benefits of removing trade barriers, enacting labor standards, promoting environmental preservation and establishing stronger protections for intellectual property rights. However, the TPP has faced quite a bit of intense opposition and for good reason. The TPP’s contenders fear increased off-shoring of U.S jobs and reduced wages, exacerbated income inequality and perhaps most importantly, newer, harsher obstacles in the distribution of generic drugs.
A large portion of the TPP seeks to strengthen pharmaceutical patents. These patents, like most intellectual property rights, have certainly been useful in promoting rapid medical advancements and preserving international health security. Ideally, the promise and strength of these patents serve to catalyze innovation, stabilize global markets and increase business competition.
However, countries with severe public health concerns, like India, Thailand and several developing African countries, have hitherto been able to bypass trade-related aspects of intellectual property rights. Certain loopholes in the World Trade Organization’s policies and international agreements have allowed for the production of generic counterparts, whose significantly cheaper prices have made treatment of HIV/AIDS and other grave illnesses much more accessible to poor communities.
The National Association of Chain Drug Stores reported that in 2008, the “average price of a brand-name drug was $137.90, while the average generic prescription cost $35.22.” With generics costing 30 percent to 80 percent less than brand-name drugs , they are often the only kind of medicine impoverished families can afford.
This difference in price isn’t reflective of a difference in quality. Generic drugs are chemically equivalent to their brand-name alternatives — containing the same active ingredients, dosage and directions for use — and just as effective. They cost less, because according to the WHO, generic drugs are “manufactured without a license from the innovator company and marketed after the expiry date of the patent or other exclusive rights.” These drugs are marketed under a “non-proprietary or approved name” and sell for far less because the producing companies spend less on patents and licensing costs.
And, unless they are produced in violation of any other national laws, they can be legally sold. So far, the WHO-administered Trade-Related Aspects of Intellectual Property Rights agreement allows governments to not mandate appropriate labeling and accept generic substitutions. The WHO even claims that competition between brand-name pharmaceuticals and their generic counterparts is a more effective price-lowering tool than government intervention.
However, the TPP’s increased protections of intellectual property rights will severely inhibit the production of these generic drugs, limiting access to basic medicine in a lot of developing countries.
Of course, the argument against protection of any kind of intellectual property right is a difficult one to make. But when we protect intellectual property rights, we also protect wealth. Because the TPP strengthens patents and magnifies the legal consequences of violating them, it benefits large pharmaceutical companies and hurts poor communities in the developing world.
On some level, these protections make sense. The research and development spending required for the invention of a medical product is quite extensive and expensive. Currently, there are an estimated 13,000 drugs found on the global market, of which approximately half are no longer under patent. Considering the costs of producing a drug and bringing it to market, which in 2014 was on average $2.6 billion, it isn’t hard to believe that companies would be less likely to be incentivized into such spending without patent protection.
But the solution isn’t just strengthening those patents. Sure, we want companies to keep investing in the research and production of medicine, but not just for those who can afford it. We do have other options, like mandatory collective management or compulsory licenses that allow individuals or companies to use another’s intellectual property if they pay a set fee for the license. We could also simply agree to spend a lot more to subsidize these drugs and sell them to developing countries at prices they can afford. But right now, all we have is the TPP. And that isn’t enough.
I’m not saying the TPP shouldn’t be ratified. Free trade has economic benefits backed by years of research and valid data, and the protection of pharmaceutical patents makes sense both in terms of intellectual property rights and in terms of economic incentive. We shouldn’t, however, be premature in our decision to pass the deal and close the books, not before we establish solid solutions that will serve as a cushion to catch those whom the TPP will let fall. We shouldn’t start the surgery before administering the anesthetics.