Patents on life-saving drugs. Remembering AIDS.

«During the AIDS epidemic of the 1990s and 2000s which ravaged Africa and other parts of the world, the principal anti-retroviral treatments were all under patent with big multinational pharmaceutical companies such as Pfizer, GlaxoSmithKline and Boehringer, which kept prices much too high for most patients or for the governments to afford. In South Africa, basic treatment costs were more than two thousand rand ($250) per month in 2002 at a time when per capita GDP was $250 a month. To maintain these prices, the companies refused to allow the manufacture of generic versions. Tens of thousands of people were dying and campaigners were desperate for a change. (…)

On 16 October 2003, the Competition Commission ruled against big pharma and in favor of Hazel Tau and the hundreds of thousands of other AIDs sufferers:

Pharmaceutical firms GlaxoSmithKline South Africa (Pty) Ltd (GSK) and Boehringer Ingelheim (BI) have contravened the Competition Act of 1998. The firms have been found to have abused their dominant positions in their respective anti-retroviral (ARV) markets.

As a result of this decision, major pharmaceutical companies agreed to license their patents to generic manufacturers on reasonable terms – and not only in South Africa but across sub-saharan Africa. Prices dropped immediately and have continued to fall. Between 2000 and 2014, Médecins Sans Frontières estimated that prices fell 99% to around $100, and much of that is due to this victory.

This was an example of the benefits of removing patent monopolies, but we also have a striking example of the costs of introducing them. For the twenty years before the TRIPS agreement of 1994, India had forbidden patents for pharmaceutical products. However, under the agreement – to which India is a signatory – patent protection must be provided for pharmaceuticals, to allow the holders to raise prices. Until then, without patents, any firm in India could manufacture a given drug: and they did. India had a booming industry in generic medicines – those that can be produced by anyone (often without the fancy brand names), because there are no patents. Drugs were cheap and even poor people could afford them, but in theory this meant less revenue for the original creators. India is therefore a good test case for what these trade-offs mean in practice, and thanks to a case study that focused on a major category of anti bacterials called Quinolones, we have some numbers.

The paper estimated the cost to the nation in just this one segment would be some $350–500 million a year, falling primarily on consumers but also upon local manufacturers. Yet the gain to the owners of the patents was a mere $50 million a year (gains to patent owners can be much lower than the costs to consumers because increased prices mean lower sales and those lost sales are a loss both to consumers who get no medicines and to manufacturers who get no revenues – this is the so-called deadweight cost of economists, in this case a very appropriate term, since lost access to drugs could literally mean death). So the net cost to India of introducing patent monopolies was $300–$450 million a year. And these are just the dollar numbers. Think of the costs in misery, of the people who can no longer afford treatment, whose illnesses are prolonged or whose lives were shortened unnecessarily.»

This is an excerpt from: The Open Revolution: Rewriting the rules of the information age, by Rufus Pollock

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