PILL PAUPERS 


How to get cheaper drugs for poor countries 

IT HAS been another week of long arguments at the World Trade 
Organisation over how to implement last year's Doha agreement on getting 
cheaper drugs for poor countries. The main dispute has been over how far 
to extend compulsory licensing, a tool that confers the right to 
manufacture patented drugs without the patent-holder's consent. Because 
America is holding out for a narrow ambit for any new provisions on 
compulsory licensing, restricting them to drugs for such diseases as 
AIDS, malaria and tuberculosis, it looks unlikely that a deal will be 
struck by the original target date of the end of this year. Yet even if
agreement is reached at the eleventh hour, the entire argument misses a 
bigger point: that this is not the right long-term solution to the 
problem of getting cheaper drugs to poor countries.

 Few of the world's poorest countries are in any position to use 
compulsory licensing as it stands. Because they lack not only the 
administrative and legal capacity but also any domestic drug industry to 
exploit it, they instead import generic drugs from countries such as 
India, which has a thriving trade in copycat drugs because it is not yet 
obliged to recognise patents. This will end by 2006, when India and most 
other developing countries have agreed to enforce drug patents.

 Even if this is got round through expanded new provisions on compulsory
licensing, generic manufacturers in India and elsewhere may no longer be
prepared to invest in producing knock-offs of new drugs only for Africa 
and other poor places, when their more lucrative home markets are no 
longer open to cheap copies. Worse still, fears of compulsory licensing 
are sure to reduce the incentives for big drug firms to do research into 
cures for many of the diseases that most afflict poor countries. If they 
know that the profits from any drug they find will immediately be 
whittled away through compulsory licensing, they will be even less 
likely than they are now to look for the drugs in the first place.

There are better ways than compulsory licensing of balancing the 
interests of patients in poor countries with the need to maintain 
incentives for continued investment and development of new medicines. 
One idea, favoured by European governments, is differential pricing, 
under which drug firms would be urged to charge different prices in 
different markets, based on some measure of need and purchasing power. 
There have been attempts to introduce deeply discounted pricing for poor 
countries, but these are small efforts, restricted to a handful of anti-
retroviral and anti-malarial medicines.

There are also two big problems that may stop differential pricing going 
much further. One is that drug companies worry about the risk of drugs 
that they sell cheaply in poor countries making their way back to rich-
country markets. A second is that governments could exploit the fact 
that companies are selling drugs more cheaply in developing countries as 
an excuse to press firms to cut their prices at home. The result of 
either would be that drug companies might see their profits in rich-
country markets undermined by their sales of drugs at cheaper prices in 
poor countries.

The ideal solution would be to stop searching for ingenious ways to get 
drug companies to bear the costs of selling essential drugs more cheaply 
to poor countries. Instead, rich-country governments, which have 
recognised the moral and economic imperative to enable poor countries to 
afford such drugs, should put up the necessary cash. They will have to 
be prepared to pay full prices, set high enough to ensure that drug 
companies have an incentive to develop new medicines, including those 
for typical poor-country ailments. That would be expensive, certainly: 
but it would be a better use of overseas-aid budgets than any number of 
white-elephant infrastructure projects.