Scrooge and intellectual property rights

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Begin forwarded message:

From: "Robert J. Berger" <[email protected]>
Date: December 26, 2006 9:28:01 PM EST
To: Dewayne Hendricks <[email protected]>, David Farber=20=20
<[email protected]>
Subject: Scrooge and intellectual property rights

Scrooge and intellectual property rights

Joseph E Stiglitz, professor Columbia University, New York, NY 10025,=20=20
USA

http://www.bmj.com/cgi/content/full/333/7582/1279

A medical prize fund could improve the financing of drug innovations

At Christmas, we traditionally retell Dickens's story of Scrooge, who=20=20
cared more for money than for his fellow human beings. What would we=20=20
think of a Scrooge who could cure diseases that blighted thousands of=20=20
people's lives but did not do so? Clearly, we would be horrified. But=20=20
this has increasingly been happening in the name of economics, under=20=20
the innocent sounding guise of "intellectual property rights."

Intellectual property differs from other property=97restricting its use=20=
=20
is inefficient as it costs nothing for another person to use it.=20=20
Thomas Jefferson, America's third president, put it more poetically=20=20
than modern economists (who refer to "zero marginal costs" and "non-=20
rivalrous consumption") when he said that knowledge is like a candle,=20=20
when one candle lights another it does not diminish from the light of=20=20
the first. Using knowledge to help someone does not prevent that=20=20
knowledge from helping others. Intellectual property rights, however,=20=20
enable one person or company to have exclusive control of the use of=20=20
a particular piece of knowledge, thereby creating monopoly power.=20=20
Monopolies distort the economy. Restricting the use of medical=20=20
knowledge not only affects economic efficiency, but also life itself.

We tolerate such restrictions in the belief that they might spur=20=20
innovation, balancing costs against benefits. But the costs of=20=20
restrictions can outweigh the benefits. It is hard to see how the=20=20
patent issued by the US government for the healing properties of=20=20
turmeric, which had been known for hundreds of years, stimulated=20=20
research. Had the patent been enforced in India, poor people who=20=20
wanted to use this compound would have had to pay royalties to the=20=20
United States.

In 1995 the Uruguay round trade negotiations concluded in the=20=20
establishment of the World Trade Organization, which imposed US style=20=20
intellectual property rights around the world. These rights were=20=20
intended to reduce access to generic medicines and they succeeded. As=20=20
generic medicines cost a fraction of their brand name counterparts,=20=20
billions could no longer afford the drugs they needed. For example, a=20=20
year's treatment with a generic cocktail of AIDS drugs might cost=20=20
$130 (=A365;

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170) compared with $10 000 for the brand name version.1 Billions of=20=20
people living on $2-3 a day cannot afford $10 000, though they might=20=20
be able to scrape together enough for the generic drugs. And matters=20=20
are getting worse. New drug regimens recommended by the World Health=20=20
Organization and second line defences that need to be used as=20=20
resistance to standard treatments develops can cost much more.

Developing countries paid a high price for this agreement. But what=20=20
have they received in return? Drug companies spend more on=20=20
advertising and marketing than on research, more on research on=20=20
lifestyle drugs than on life saving drugs, and almost nothing on=20=20
diseases that affect developing countries only. This is not=20=20
surprising. Poor people cannot afford drugs, and drug companies make=20=20
investments that yield the highest returns. The chief executive of=20=20
Novartis, a drug company with a history of social responsibility,=20=20
said "We have no model which would [meet] the need for new drugs in a=20=20
sustainable way ... You can't expect for-profit organizations to do=20=20
this on a large scale."2

Research needs money, but the current system results in limited funds=20=20
being spent in the wrong way. For instance, the human genome project=20=20
decoded the human genome within the target timeframe, but a few=20=20
scientists managed to beat the project so they could patent genes=20=20
related to breast cancer. The social value of gaining this knowledge=20=20
slightly earlier was small, but the cost was enormous. Consequently=20=20
the cost of testing for breast cancer vulnerability genes is high. In=20=20
countries with no national health service many women with these genes=20=20
will fail to be tested. In counties where governments will pay for=20=20
these tests less money will be available for other public health needs.

A medical prize fund provides an alternative. Such a fund would give=20=20
large rewards for cures or vaccines for diseases like malaria that=20=20
affect millions, and smaller rewards for drugs that are similar to=20=20
existing ones, with perhaps slightly different side effects. The=20=20
intellectual property would be available to generic drug companies.=20=20
The power of competitive markets would ensure a wide distribution at=20=20
the lowest possible price, unlike the current system, which uses=20=20
monopoly power, with its high prices and limited usage.

The prizes could be funded by governments in advanced industrial=20=20
countries. For diseases that affect the developed world, governments=20=20
are already paying as part of the health care they provide for their=20=20
citizens. For diseases that affect developing countries, the funding=20=20
could be part of development assistance. Money spent in this way=20=20
might do as much to improve the wellbeing of people in the developing=20=20
world=97and even their productivity=97as any other that they are given.

The medical prize fund could be one of several ways to promote=20=20
innovation in crucial diseases. The most important ideas that emerge=20=20
from basic science have never been protected by patents and never=20=20
should be. Most researchers are motivated by the desire to enhance=20=20
understanding and help humankind. Of course money is needed, and=20=20
governments must continue to provide money through research grants=20=20
along with support for government research laboratories and research=20=20
universities. The patent system would continue to play a part for=20=20
applications for which no one offers a prize .

The prize fund should complement these other methods of funding; it=20=20
at least holds the promise that in the future more money will be=20=20
spent on research than on advertising and marketing of drugs, and=20=20
that research concentrates on diseases that matter. Importantly, the=20=20
medical prize fund would ensure that we make the best possible use of=20=20
whatever knowledge we acquire, rather than hoarding it and limiting=20=20
usage to those who can afford it, as Scrooge might have done. It is a=20=20
thought we should keep in mind this Christmas.3 4 5 6



[email protected]





Competing interests: JES was chief economist of the World Bank from=20=20
1997 to 2000 and a member and then chairman of President Clinton's=20=20
Council of Economic Advisers from 1993 to 1997. He won the Nobel=20=20
Prize for economics in 2001.
References



M=E9decins Sans Fronti=E8res. People not getting the treatment they need=20=
=20
to stay alive. Newer AIDS drugs unaffordable and unavailable. Geneva:=20=20
MSF, 29 November 2006.
Andrew J. Novartis chief in warning on cheap drugs. Financial Times=20=20
29 September 2006.
Stiglitz JE. Making globalization work. New York: WW Norton, 2006.
Hollis A. Optional rewards for new drugs for developing countries.=20=20
Geneva: World Health Organization, 5 April 2005. www.who.int/entity/=20
intellectualproperty/submissions/Submissions.AidanHollis.pdf.
Pogge T. Human rights and global health: a research program.=20=20
Metaphilosophy 2005;1/2(36).
Love J. Submission of CPTech to IGWG. 15 November 2006. www.who.int/=20
entity/public_hearing_phi/summary/15Nov06JamesLoveCPTech.pdf

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Robert J. Berger - Internet Bandwidth Development, LLC.
Voice: 408-882-4755 eFax: +1-408-490-2868
http://www.ibd.com