Friday, March 28, 2008 The truth about compulsory licensing By Nonoy Oplas Speak Up
WHEN you work hard to pay for your kids' education or buy a house or take that long-awaited vacation, you have to surrender a big portion of your income to the state in taxes. The government administrators who invented and implemented that compulsory payment obviously have priorities different than yours.
But imagine if it were the same story if you invented something revolutionary or miraculous, like an immune system-boosting rice variety, or a medicine that could cure AIDS or prostate cancer. Imagine if the state expropriated your property rights to such an invention, leaving you with basically nothing to show for your investments, your risk-taking, and your years of testing and re-testing.
Under such a system, if you had failed to invent what you wanted, you would have simply have lost money and other career opportunities. But if such a system were in place, your success would mean that the state simply takes the fruits of all your efforts and sacrifices, and hands them off to a bureaucrat, a crony corporation, or a copycat.
Sound too unbelievable? Think again. It's called "compulsory licensing," and it allows governments in developing nations to use a patented invention or medicine without the approval of the patentee. The rationale is that many people are too poor to afford life-saving medicines and medical treatments.
The products and medicines targeted for compulsory licensing are only the effective ones. States don't issue them for medicines at the bottom of physicians' and patients' list.
Rather, the state will issue compulsory licenses for only the top five or 10 most effective medicines, which are normally priced higher precisely because the amount of investment and risk necessary to bring them to the drugstore shelves were very high.
How easy is it for reckless bureaucrats to abuse compulsory licenses? Just ask Thailand.
In 2006, the Thai government declared that the country could not afford several brand-name drugs to treat AIDS and heart disease. This was hardly plausible as the government refused massive discounts from the drugs' patent-holders. And Thai leaders had rejected drug-purchase money offered by the Global Fund to Fight AIDS, Tuberculosis, and Malaria.
The state-owned Government Pharmaceutical Organization (GPO) issued compulsory licenses for selected medicines, suspended the drugs' patents, and started making knock-offs. Local copies like these seldom win safety certification from the World Health Organization. And the GPO in particular has a tragic track record -- in 2005, scientists reported that the firm had given Thais afflicted with AIDS poor-quality medicines that may have increased the number of drug-resistant cases.
That same year, the GPO took in $35 million in profits from copied medicines.
Here in the Philippines, legislation for "cheaper and affordable medicines" won't strengthen the compulsory licensing system currently provided by the Intellectual Property Code. A bill now in the bicameral conference committee is reworking the code for compulsory licenses because "it takes a long period of time to get approval because of procedural delays caused by appeals by the patent owners" (Senate Committee Report No. 6).
The new system of "government use" compulsory licenses lets the government skip the normal approval procedures and just appropriate a patented drug for whatever purpose without notifying the patent holder. In addition, government agencies using compulsory licenses will be exempted from temporary restraining orders and preliminary injunctions, except when issued by the Supreme Court.
This legislation is sure to discourage the entry of more medicines into the Philippines. Medical companies probably won't spend hundreds of millions of dollars and years of clinical trials to invent effective and safe medicines if the state can expropriate its products at any time for whatever frivolous reasons.
What these proposals will attract are copycat drug companies selling unsafe medicines.
If governments are sincere about making quality medicines more available and affordable, the first thing they should do is drastically cut or abolish taxes on medicines.
Secondly, they should strengthen their intellectual property rights systems. That will attract and protect innovative drug companies. Increased competition will compel them to provide big discounts, making safe and effective medicines more affordable.
Countries using compulsory licenses are courting disaster by flooding their markets with ineffective and harmful medicines.
(Nonoy Oplas is president of Minimal Government Thinkers, Inc., a think tank that advocates small government, small taxes, free market, and more personal responsibility. He belongs to a network of free-market oriented think tanks and institutes in Asia and other parts of the world.)
