4 Apr
2020

People in rich countries have no right to free IP

Wealthy nations struck a patent bargain with the pharmaceutical industry long ago and should not break it because of the covid-19 pandemic, argues Mark Summerfield

IAM recently reported the launch of the ‘Open COVID Pledge’, an initiative of a group of scientists and IP lawyers, drawn primarily from academia, calling on owners of IP rights that may be applied in the fight against the covid-19 pandemic to make those rights available to all on a non-exclusive, royalty-free basis.  Most prominent among such rights, of course, are patents on drugs and therapies held by innovating pharmaceutical companies.

But is the Open COVID Pledge a valuable initiative to lower barriers in the fight against COVID-19, or – as I am inclined to think – a misguided attempt to undermine a long-established bargain between developed nations and the pharmaceutical industry?

Developing new drugs is expensive.  A 2014 analysis by the Tufts Center for the Study of Drug Development estimated the average cost of bringing a new pharmaceutical product to market at around $2.7 billion. The major reason for this high cost is risk.  Around 90% of all experimental medicines fail.  The capitalised costs of failure thus comprise most of the development cost associated with each successful drug. 

Ultimately, society pays for the costs of drug development through the prices charged by pharmaceutical companies for successful products.  Whether the cost is covered by the individual sufferers of diseases treated by these drugs, by insurance companies using funds raised collectively through premiums, or through government purchases or subsidies funded by taxpayers, the basic bargain remains the same. 

Private sector pharmaceutical companies take on high up-front risk and expense to bring new medicines from invention to pharmacy shelves with a goal of obtaining a return on their enormous R&D investment through years of sales of the most valuable successful results.

Once a medicine has been proved safe and effective, competitors can bring generic versions of drugs to market at a fraction of the costs incurred by innovating companies, potentially forcing prices down to a level at which the up-front R&D costs can no longer be recouped.  Patent protection is therefore a vital element of the business models of innovating pharmaceutical companies.

The significance of patents in drug development is widely recognised by policy makers and legislators.  Many jurisdictions provide for extensions to the standard 20-year maximum patent term to compensate for the delays inherent in trialling new drugs and obtaining regulatory approval before they can be brought to market. 

While there is inevitably a tension between the profit motive of pharmaceutical companies and the social objective of providing affordable healthcare to the community, no alternative to the established model of private capital backed by the limited protection of patent rights has been seriously considered in developed free-market economies.

Nonetheless, governments in many countries have (or are able to grant themselves) significant powers to ensure supply of patented products when the national interest demands it.  There have already been instances of steps being taken to enliven these powers in the face of the covid-19 pandemic. 

For example, the Australian opposition has urged the government to consider invoking ‘Crown use’ provisions to ensure availability of required medical supplies.  Canada has passed emergency legislation that includes a temporary reinstatement of compulsory licensing for purposes of responding to a “public health emergency”.  The Israeli government has taken the boldest step to date, invoking special provisions under section 104 of the country’s patent law to issue a compulsory licence permitting importation of generic versions of AbbVie’s patented HIV (antiretroviral) drug Kaletra – even before a single covid-19 death had been recorded in Israel and despite a lack of evidence that the drug has any efficacy against coronavirus. 

One thing that all these mechanisms have in common, however, is that they require payment of compensation – ie royalties – to any patentee whose rights are appropriated.

The model Open COVID License, by contrast, grants “to every person and entity that wishes to accept it, a non-exclusive, royalty-free, worldwide, fully paid-up license” to exploit all patent (and other) intellectual property rights “for the sole purpose of ending the “COVID-19 Pandemic” … and minimizing the impact of the disease, including without limitation the diagnosis, prevention, containment, and treatment”.

According to data from the John Hopkins Corona Virus Resource Center, at the time of writing covid-19 has been responsible for nearly 53,000 deaths worldwide, while modelling results released by the White House indicate that between 100,000 and 240,000 Americans could die even with stringent social distancing guidelines being maintained. 

While these figures are certainly grim, they pale before the numbers of deaths caused by other infectious diseases every year, mostly in developing countries. 

According to the World Health Organization (WHO), over 4,000 people die from tuberculosis every day, with 1.5 million deaths in 2018 alone.  The WHO has also declared stopping infectious diseases to be one of its urgent health challenges for the next decade, observing that: “Diseases like HIV, tuberculosis, viral hepatitis, malaria, neglected tropical diseases and sexually-transmitted infections will kill an estimated 4 million people in 2020, most of them poor.”

There is no question that the covid-19 pandemic is impacting lives, livelihoods and the global economy in ways that are unprecedented in most of our lifetimes.  But, arguably, what most sets it apart from other global health emergencies is the extent to which it is affecting developed nations.

The developing world relies largely upon international organisations, volunteers, charitable foundations and the goodwill of private corporations (including pharmaceutical companies) to make slow progress against infectious diseases.  But it took only a few weeks from the emergence of covid-19 as a threat to developed nations for pressure to be applied to IP owners to give away their rights in the cause of defeating the disease.

Those of us living in wealthy countries are happy for innovating pharmaceutical companies to take risks and make investments during more comfortable times. However, now that we feel threatened, the Open COVID Pledge asks them to forego their return on those investments entirely, so that we can return more quickly and safely to normality.  In my opinion, this is an unreasonable request.

Don’t get me wrong – I am a great believer in the triple bottom line.  We have every right to expect pharmaceutical companies to be good corporate citizens and to incorporate human welfare and social equity into their decision-making.  We should welcome whatever voluntary contributions they may choose to make, whether or not these come in response to public pressure. What’s more, if they betray our values, by engaging in obstruction, profiteering or restrictive practices that place lives at risk, then governments should step in and deploy all the powers at their disposal necessary to protect and serve their communities. 

But what we cannot do is have our cake and eat it.  We struck our patent bargain long before covid-19.  The time has come to pay the piper, not to propose that he permit us to renege on the deal.

Mark Summerfield

IP and technology consultant | Patentology

Australia