I’d like to introduce a guest column by Dr Kristina Lybecker, Associate Professor of Economics at Colorado College in Colorado Springs. Kristina is an economist with a PhD from the University of California at Berkeley. She specialises in innovation and intellectual property rights and has been writing on these issues for 12 years. She is currently employed full-time at Colorado College.
Sometime in the near future India’s Supreme Court will judge whether Glivec, a blood and stomach cancer drug hailed as a breakthrough in cancer treatment, deserves a patent in India. In doing so, the Court will rule on an important section in India’s patent law that seeks to prevent frivolous patenting and one that Novartis, the company behind Glivec, is accused by critics to have fallen foul of. For recent coverage on the case, see here.
Many believe that a judgement against Novartis would be a win for affordability and access. For not only will it keep cheaper generic versions of Glivec on the market, it will also uphold a section that, at least in spirit, was written to prevent endless patenting by innovators for minor tweaks delaying generic entry.
But in truth, the barrier-to-access dilemma is far more complicated and nuanced than patent protection for more than one reason.
In a recent study, Danzon, Mulcahy, and Towse (2011) examine pharmaceutical prices in emerging markets, paying particular attention to the importance of income, competition, and procurement efforts. See here. Their findings indicate that within-country income inequality contributes to relatively high drug prices in middle and low income countries. Generic products and the number of therapeutic competitors only weakly impacts prices to retail pharmacies. Their analysis indicates that generic competition may not be the route to lower drug prices for developing nation consumers as previously assumed.
Governmental tax and tariff policies are significant contributors to inflated pharmaceutical prices. In a study of fifty-three low income countries, Bate, Tren, and Urback (2005) find that when all duties and taxes are accounted for, the cost of medical treatments and equipment can be inflated by over thirty percent. This type of government intervention is widely utilized to both protect local industry through high import barriers and raise government revenue. According to a 2003 study by the European Commission, total taxes and duties vary widely, from a low of 0.01 percent in Malaysia to a striking 60 percent in India, with a global average of 18 percent.
The lack of a publicly-funded health care system also presents a significant barrier to access. In most countries publicly-supported health care systems pool the costs of healthcare across the broader population so that individuals do not face a catastrophic financial burden from the costs of treatments for cancers and other diseases. Unfortunately this is not the case in India. India has consistently chosen not to invest in the health of its citizens, as reflected by the fact that it spends less on health benefits than most other low or middle income countries in the world.
In addition, India is a perfect candidate for price differentiation. Poor and vulnerable Indian patients should not be expected to pay the same prices for drugs as their wealthier neighbors. Price differentiation, different prices based on income and ability to pay, would provide patients of all income levels with access to the life-saving medicines that they need.
Advance market commitments may be another avenue for ensuring access for the world’s poorest. With this mechanism, lower pharmaceutical prices are secured through a commitment to large bulk purchases. The study by Danzon, Mulcahy, and Towse (2011) focuses specifically on the benefits generated by different procurement methods, finding an important link to affordable access. Commitments to larger purchase amounts may significantly lower drug prices, allowing for both affordable medicines for patients and a guaranteed market for innovative companies. Such agreements enhance access and provide a reliable supply of therapeutic medicines for patients in need.
Fundamentally, the Glivec decision isn’t about access. It’s about innovation and fostering an environment in India that encourages breakthrough therapies and protects innovation. The research that brought us Glivec, and that which brings us all breakthrough medical advances, is incentivized by strong intellectual property rights. For those in India who are genuinely concerned about access to affordable medicines, look first to India’s own policies.
Footnote : In the interests of transparency, the writer states that she has been commissioned to work for the pharmaceutical industry on issues of innovation, corruption, counterfeiting and intellectual property rights. However, she has not been compensated or otherwise rewarded for this piece which stems from her intellectual interest in the topic and closely relates to her academic research.
Pic sourced from http://www.coloradocollege.edu
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