Thailand vs. Pharma-Giants: Challenging the Justification for IP

November 13, 2007 by Janet Chong

In an attempt to control the HIV/AIDS epidemic in Thailand, the Thai government decided to bypass the patents on anti-retroviral drugs (ARVs) by issuing compulsory licenses to manufacture generic copies of these drugs. The result of this gutsy move is affordable, locally-made alternatives that are dispensed to patients for free via the government’s universal healthcare scheme. Moreover, as the retrovirus developed resistance toward existing ARVs, the Thai government responded by taking further controversial measures, issuing more compulsory licenses to enable mass-production of copies of second-line defence ARVs that are developed by pharmaceutical giants and protected by patents in Thailand.

What is interesting about the Thai government’s action is that it is perfectly in accordance with international trade regulations. Under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), members to the agreement have the right to grant compulsory licenses in the face of a national emergency and the freedom to determine the grounds on which such licenses are granted. In addition, the members have the right to determine what constitutes a national emergency. Therefore consultation with pharmaceutical companies is not mandatory prior to issuing compulsory licenses if Thailand feels that it is threatened by a health crisis. When Thailand saw the wholesale of drugs as the only solution after numerous failed attempts to negotiate lower ARV prices with the drug companies, it seized the benefit of the TRIPs provisions and has not looked back since.

The immediate issue arising from the Thai policy is whether a developing country with an inadequately funded public healthcare, when facing a severe national health threat, should be allowed to violate the patent protection of drugs. Proponents of the policy argue that because multi-national pharmaceutical companies derive huge profits from selling less essential drugs (such as Viagra) and spend more money on advertising than on research and development, essential drugs should be made available and affordable worldwide. Opponents of the policy, on the other hand, maintain that governments should not infringe on patents at will just to finance a cheaper health scheme. This is an apparent battle of the conflicting interests of the stakeholders of IP - the right holders who wish to reap the economic benefits of their labour, and the users who desperately need an invention vital for survival in a circumstance of enormous bargaining power disparity. But ultimately the conflict of interest is only a symptom of a larger problem: the Eurocentric concept of
IP has clashed with the priorities of a developing country.

The economic theory justifies IP on the assertion that IP provides an incentive to increase the pool of knowledge in human society. Specifically, patent law is based on the concept of a bargain between the state and the inventor: the former granting the latter a time-limited monopoly in exchange for full disclosure of the innovation and knowledge. But what good is this knowledge if it is inaccessible, due to a patent-induced economic barrier, to those who truly need it? Also, it is possible that the original creator had an altruistic ambition throughout the inventive process. Are we justified to ignore how she wants her invention to be used, even when the invention belongs to a profit-driven drug company by virtue of her employment?

Despite right holder’s argument that governments cannot ratify an economic system such as IP (and presumably benefit from it) and then justifiably dismiss it when inconvenienced by it, the reality is that a government’s priority changes when faced with a national threat. When a state policy is crucial (or even worse, the only option) to combat a grievous infliction of a developing country and it happens to conflict with patent protection, it makes sense that this bargain with the state is no longer valuable to the state, albeit that the offending policy would give rise to worrying future ramification (an example is Abbott withdrawing all its future products from the Thai market).

It is a gamble for Thailand to address its healthcare problem by taking on the giants of the pharmaceutical industry. If it succeeds, the country could single-handedly revolutionize the economics of the industry; but if it fails, it risks isolating itself from drugs that its people might need in the future. But does a developing country have real choices - to not treat its people, or treat them at the risk of bankrupting the healthcare system to observe patent protection? The best solution has yet to surface.