Almost one year ago, the Secretary-General of the United Nations convened a High-Level Panel on Access to Medicines, which is especially limited among the poor in parts of the developing world still suffering the burden of tropical diseases (such as river blindness, sleeping sickness, leprosy, and rabies). According to World Health Organization, 1.7 billion people in 185 countries needed treatment for neglected tropical diseases in 2014.
In the 21st Century, such numbers are shocking. However, the panel’s recommendations would have many harmful effects on the development of new medicines that benefit patients in both the developing and developed world. Indeed, it identifies the wrong culprit in the ongoing health catastrophe in the developing world.
Rather than allow the current decentralized system of primarily private for-profit—supplemented by some government and philanthropic—funding for researching, developing, and distributing new medicines, the panel recommends governments take over this function. And not even governments acting independently, but a sort of supra-national cartel would dictate how the world’s R&D budget would be spent.
Specifically, the panel advocates that governments “negotiate global agreements on the coordination, funding, and development of health technologies.” The funding would come from “transaction taxes and other innovative financing mechanisms.” (Only a panel mostly comprised of public-sector veterans would describe tax hikes as “innovative financing.”)
The report estimates $240 billion was invested in medical R&D in 2009 and 2010, of which $144 billion was from the private sector, $72 billion from the public sector, and $24 billion from the non-profit sector. Ninety percent was from highly developed countries, especially the U.S., which the panel recognizes holds a “central position in health technology innovation.”
The purpose of a multi-lateral government cartel seizing control of this capital would be to cause a “delinkage” between R&D spending, prices, and consumer costs. In other words, investors would no longer be allowed to execute business plans that channeled R&D funding to profitable therapies.
Patents, which ensure investors who develop useful drugs can have a period of market exclusivity to earn financial rewards for their effort, would be quashed in favor of arbitrary political decisions about R&D and prices. Blaming patents for developing countries’ lack of access to medicine is wrong-headed.
In an article published earlier this year in the American Economic Review, Professor Iain Cockburn of Boston University, and colleagues, examined the timing of launches of 642 new drugs in 76 countries during 1983 through 2002. Their analysis shows price regulation delays launch, while longer and more extensive patent rights accelerate it.
In other research looking specifically at one country with weak patent protection for new medicines, Cockburn and a colleague examined when the 184 new medicines approved by the U.S. Food and Drug Administration between 2000 and 2009 became available in India. It took more than five years for half of those drugs to become available there, after having been approved in the United States. Ten years after being launched in the U.S. or elsewhere, almost one quarter of the new medicines were still not available in India. The authors also compared when the drugs were available in other developed countries. For example, in 2010, 160 of the new medicines were available in Germany, but only 111 in India.
In any case, the World Health Organization publishes a list of “essential medicines,” which it defines as “those drugs that satisfy the health care needs of the majority of the population.” Updated every two years, 95 percent of the drugs on the list are not patented. So the U.N. panel proposes to undermine the one legal protection – patents – that has proven effective at driving investment in medical R&D, even though patents are not the barrier to access.
The problem is not in the current medical R&D system. Rather, developing countries suffer from a lack of economic freedom. Economic freedom leads to income growth, which reduces the burden of many illnesses even without medical intervention. Few Americans fear infection by rabies or leprosy, because our affluence ensures we live in an environment in which outbreaks are almost impossible.
Instead of threatening investors who put their capital at risk researching and developing new medicines, the U.N. should encourage developing nations to adopt policies – including laws protecting intellectual property – that will increase their citizens’ economic freedom, incomes, and health.
This article was published at The Beacon.