By the greater use of compulsory licenses, Brazil could lower drug costs not only in Brazil, but in developing countries overall. At a time when the New York Times is reporting that "the global battle against AIDS is falling apart for lack of money," it is absolutely essential that the price of lifesaving medicines in developing countries be driven down to the absolute minimum possible.
With this in mind, I gave the following presentation on October 11 at a conference of doctors and health care workers in Sao Paulo.
I want to begin by establishing some context that I think is important for understanding what it is that I am trying to communicate today and what it is that I am urging you to do.
If you ask yourself, how did it come to pass that important social reforms were won, an important part of the story is that groups of people banded together to pursue what they perceived to be a collective self-interest. You can’t explain social change if the only possible actor in your head is an individual who is either individually self-interested or individually altruistic. Around the world, human slavery used to be commonplace, now it is not, how did that come to pass? You can’t tell a story that makes sense without collective action based on perceived collective self-interest.
If you look at the anti-slavery movement in the United States, important leaders were themselves former slaves. You might say: that’s no surprise, they knew what they were talking about. But if they were only acting on the basis of their individual self-interest, why bother? They were already free. Why not simply enrich themselves and tend their gardens?
Why is there a labor movement in Brazil or the United States? Why do some people join such a movement? Why do some people apparently spend so much of their free time trying to advance such a movement? Can we really explain their behavior on the basis of individual self-interest? There’s clearly something else going on: a motivation to act on the basis of a perceived collective self-interest.
In the United States, for example, when the government raises the minimum wage, the major political force pushing the change is the labor unions. You might say: that’s obviously in their interest. But very few union members are paid the minimum wage; most are paid significantly more. Raising the minimum is not going to raise the wages of many union members.
You could say, there is an indirect interest, because union members’ wages are determined in part by competition with non-union workers, so if the wages of non-union workers fall too much, it’s going to put pressure on the wages of union workers. That’s certainly true. But it’s important to understand that the unions, in pushing for an increase in the minimum wage, are promoting a collective self-interest that is broad, that extends beyond their own members. In the U.S., people in the labor movement call this "solidarity." I’m trying to advance my interests, but I’m also trying to advance yours; you’re trying to advance your interests, but you’re also trying to advance mine. We’re trying to advance together.
You could say all the forgoing observations should be obvious, and I would emphatically agree. But they are not as commonplace as they should be. You can go to college for years, take lots of classes, read newspapers and books and magazines, listen to radio and TV, and never or rarely see or hear anyone talking about the fact that important social reforms occur because groups of people band together to pursue a collective self-interest.
And thinking in terms of collective self-interest is essential for understanding what I am about to say, and what I am going to ask you to do.
You all know that we are in a new moment in world relations. The relative power of the United States and Europe is declining. Brazil and other "emerging powers" are starting to exercise more influence on the world stage.
What is Brazil going to do with its new influence? The short and obvious answer is: Brazil is going to pursue the national self-interest of Brazil, just like every other country does. If we asked every Brazilian candidate for federal office, do you think that Brazil should pursue its interests? I would expect them all to say yes.
But how shall Brazil define the national self-interest that it pursues? Shall it define that national self-interest narrowly, or broadly? Here you have a real debate.
For example, a few months ago there was a spirited debate in Brazil about Brazil’s role in international diplomacy concerning Iran’s nuclear program. Some politicians and voices in the Brazilian media said: why is Brazil messing around with this? Brazil should mind its own business. This reflected what the U.S. government and much of the U.S. media were saying: why is Brazil interfering in our turf?
But the Brazilian government said: we are minding our own business. If some people in the U.S. government want to use war, the threat of war, or sanctions to prevent Iran from enriching uranium, that’s Brazil’s business, because Brazil enriches uranium, and therefore, it is in the interest of Brazil to defend the right of Iran to enrich uranium. By defending Iran’s rights, Brazil was defending its own. As President Lula said, "When we look at Iran, we see ourselves."
I give this example of a dispute over how broadly Brazil should perceive the self-interest that it pursues because it’s an example that one could easily know about from watching the news or reading the newspaper. Regardless of what one thinks about Iran’s nuclear program, this example shows there is a serious dispute, in Brazil and in the world, about how Brazil should perceive its self-interest, narrowly or broadly.
But there is another very important example which one rarely sees discussed unless one is looking for it, and that is the dispute between countries like Brazil and countries like the United States over what national laws and policies a country like Brazil should have regarding intellectual property claims, in particular, regarding the intellectual property claims of corporations headquartered in the United States and Europe.
The US and Europe have worked to institutionalize globally a particular set of rules and expectations regarding intellectual property claims. This is a fairly recent phenomenon. Twenty years ago, establishing rules regarding intellectual property claims was largely considered a national affair.
But in 1994, when the World Trade Organization was created, the US and other developed countries successfully added something called the TRIPS agreement to the founding rules of the WTO. The TRIPS agreement extended to developing countries in the WTO strong protections for the intellectual property claims of corporations based in the US and Western Europe. The promise of the WTO for developing countries was that it would guarantee their access to sell in the markets of the rich countries. So, essentially the US and Europe used the leverage of access to their markets to impose a global set of rules on the treatment of intellectual property claims.
It’s important to understand that the addition of the TRIPS agreement to the WTO had nothing to do with the classical theory of "free trade." There is a longstanding, spirited debate about the theory of free trade, and whether the grand claims that have been made about how removing restrictions on international commerce would promote economic growth were oversold. But the TRIPS agreement has nothing to do with the principles of free trade.
When a government grants a patent or a copyright, it’s granting a legal monopoly, barring anyone from producing something besides the patent or copyright holder. Granting a patent or copyright doesn’t lower prices through increased competition, the way free trade is supposed to; it raises prices by removing competition. The grant of a monopoly through a patent can raise the price of a patented drug hundreds or thousands of times above what the competitive market price would be.
There are arguments to be made in favor of patents and copyrights – one can argue that they encourage innovation, for example, by increasing the reward for the person who gets there first. But the virtues of free trade are not among these arguments.
Note that I refer to "intellectual property claims," and not to "intellectual property rights." I believe that you have the same distinction in Portuguese. The brand-name pharmaceutical companies love to talk about "intellectual property rights," as if these are an inherent fact of nature. But patents and copyrights are not natural rights, given by God or human nature. They are rights granted by governments, with specific purposes. Historically, they were supposed to promote the public’s interest in the creation of useful inventions. Having a particular policy with respect to patents or copyrights is a policy choice, which should be evaluated according to whether it promotes the public interest more or less than alternative policies.
To see that these are not natural rights, as most people would understand it, you can compare them to things that we would all consider to be natural rights. For example, I have a natural right not to be killed. Note that it is permanent. I have a right not to be killed today, next year, 20 years from now, as long as I am alive. There’s never going to be a law that says, you can’t kill me now, but you can kill me in 20 years.
Patents and copyrights aren’t like that. They expire. Even in the U.S., even under TRIPS, patents and copyrights expire. That indicates that they are not natural rights. They are contingent. They are rights granted by government for a particular time and purpose.
Dr. Jonas Salk, who developed the polio vaccine, was once asked who owned the patent for the vaccine. Salk replied, "Well, the people, I would say. There is no patent. Could you patent the sun?" Note that Salk didn’t say, well, I gave away my rightful patent because I love humanity. He responded that the idea that it there would be a patent on the polio vaccine struck him as ridiculous. That suggests that patents are not natural rights. A natural right should be self-evident.
Because the TRIPS agreement was an add-on to the WTO pushed by the rich countries, an add-on that had nothing to do with "free trade," an add-on that implied a big transfer of resources from poorer nations to richer nations who held patents and copyrights, it has been very controversial. But far and away the most controversial aspect of the TRIPS agreement has been its impact on the availability of essential medicines in developing countries.
As you all know, some life-saving drugs are covered by patents, and there might not be another drug available that has the same effect that isn’t covered by a patent. In this case, if you want the life-saving effect, you have to pay a high price. This is a big problem in the rich countries, but of course it is a much bigger problem in developing countries. In some poorer countries, if a life-saving drug is covered by patent, that is likely to mean that many people simply won’t be able to afford it. They won’t get the life-saving effect, and they will die.
Developing country governments knew this at the time the TRIPS agreement was created. So a mechanism was put in to allow governments to curb the power of patents to protect the public interest. The main mechanism is the compulsory license. When a government issues a compulsory license, it gives someone else besides the patent-holder the legal ability to produce, while paying a small royalty to the patent holder. That competition drives down the price.
But after the TRIPS agreement was signed, the same forces in the developed countries that wanted the TRIPS agreement in the first place, particularly the brand-name pharmaceutical companies, fought to limit the ability of governments to use this mechanism in practice. Working through the developed country governments, they threatened trade sanctions and other punishments against countries that wanted to use these mechanisms.
So in November 2001, under pressure from developing country governments and treatment advocates, the WTO issued the Doha Declaration on the TRIPS Agreement and Public Health. It reaffirmed the ability of member states to limit patent rights to achieve better access to essential medicines. It specifically affirmed the right to issue compulsory licenses.
The Doha Declaration increased the political space for developing countries to exercise their rights. But it did not end efforts by multinational pharmaceutical companies and Western governments to bully countries into not exercising their rights.
In August 2001, Brazilian Health Minister Jose Serra announced the Brazilian government would issue a compulsory license for the manufacture of the antiretroviral drug nelfinavir, whose brand name was Viracept. This announcement came after unsuccessful negotiations between the Brazil and Roche, the patent holder, to lower the price in Brazil. A week later, Brazil and Roche reached an agreement that Roche would sell the drug in Brazil at a 40% discount, and Brazil withdrew its threat to issue the compulsory license.
I realize that you are at the height of your election campaign. I saw the commercials on TV this morning. I mention Serra’s name, rather than just saying "Brazil’s Health Minister," not because I am a Serra supporter, which I am not, but because I want to document that, at least to the level of threats, the use of compulsory licenses is a longstanding Brazilian government policy, supported by both major political blocs. In the Brazilian context, this is a mainstream idea. What is at stake here is whether or not Brazil will pursue the policy of compulsory licenses aggressively.
With one exception in 2007, the pattern for Brazil’s use of compulsory licenses has been that set by Serra in 2001: it never actually issued one, but used them as a threat to force the drug companies to lower prices in Brazil. As Mariangela Simao, the director of Brazil’s program against HIV-AIDS, told National Public Radio in 2008, "the Brazilian way is always to negotiate prices."
In May 2007 Brazil issued a compulsory license for the anti-AIDS medication Efavirenz, for which Merck had a patent. Brazil had been negotiating with Merck for three years to bring down the price of Efavirenz in Brazil. Brazil complained that Merck was charging Brazil $1.59 per capsule while Thailand was paying only 64 cents per capsule.
Thailand had issued a compulsory license for Efavirenz in November 2006. Thus, when Brazil took its action in May 2007, it benefited in two ways from the previous action by Thailand: Thailand set a precedent by issuing a compulsory license for Efavirenz, and Thailand set a benchmark for how low the price of the drug could go which Brazil was able to use in negotiating with Merck and then in justifying politically its action to issue a compulsory license.
This positive spillover effect of the Thai compulsory license on Brazil – what economists might call a "positive externality" – illustrates why for years treatment advocates have been lobbying countries like Thailand and Brazil to issue compulsory licenses: not just to lower the prices of lifesaving medicines in their own individual countries, but also to lower the prices of lifesaving medicines in developing countries overall. They wanted to set precedents that would make it easier for other countries to act.
In the set of developing countries, Brazil is relatively privileged. It can stand up to the U.S. and get away with it. Some poor country in Africa might not be able to do the same. This fact creates a responsibility – privilege creates responsibility.
It might seem reasonable at first glance for Brazil to prefer to negotiate with the drug companies more rather than move directly towards promoting the production of generics. But that path has a cost for Brazil and for other developing countries. Brazil negotiated with Merck for three years before issuing a compulsory license. During those three years, Brazil was paying significantly more than it could have. If Brazil simply negotiates a lower price in Brazil, that may not lower the price as far as it could go, and the effect of the lower price may be largely limited to Brazil. If Brazil would aggressively promote production of generic alternatives, it would result in lower prices for Brazil, and lower prices for others.
Brazil, like India, has a generic pharmaceutical industry, but many countries don’t. It doesn’t do you any good to have the right to issue a compulsory license if you have no-one to give the compulsory license to who can produce a generic version of the drug. When developing countries issue compulsory licenses to produce generic versions of lifesaving medicines, the recipient of the compulsory license is often the Indian generics manufacturer Cipla. This is a role that Brazilian generics manufacturers could perhaps be playing, helping to improve the accessibility of lifesaving medicines in other countries. There have been some announcements by Brazil in the past that it would provide lifesaving medicines to poorer countries, but as actually implemented, these policies seem to have been very limited in scale compared to the need.
If Brazil would issue more compulsory licenses, drug prices in Brazil would be lower, from both direct and indirect effects. Thailand’s compulsory license helped bring about lower drug prices in Brazil. If Brazil issued more compulsory licenses, others would too, and Brazil would benefit. As we all know, money is scarce. If Brazil negotiates a 60% reduction in the price of a drug, one might be tempted to think, hey, Brazil got a pretty good deal. But if the price of the drug could have been reduced 90%, then 30% of what Brazil was spending on the drug is money that Brazil left on the table for some foreign corporation to have, instead of using that money, which belongs to the Brazilian people, for the benefit of the Brazilian people.
There is a rich debate about patents and copyrights. It is argued that patents and copyrights are necessary to encourage innovation, that drug companies wouldn’t spend money on research without the prospect of patents and copyrights.
It is argued in response that there are alternative mechanisms for funding research that would be more efficient. Indeed, in the U.S. the government already spends more on biomedical research than the drug companies do, and the current patent system encourages unproductive and even destructive behavior by drug companies. Unproductive behavior includes a research focus on lucrative copycat drugs or lifestyle drugs at the expense of drugs that would be more socially useful but not as profitable. Destructive behavior includes a tendency to mislead governments and the public about the safety and efficacy of their patented drugs, because the profits from doing so are so high.
But regardless of what one thinks about these arguments in general, making lifesaving medicines available in developing countries does not require taking on the whole system of patents as it now exists. There is already a legal mechanism for making these drugs available, and the drug companies are not going to come crashing down or stop developing new drugs if developing countries make use of this mechanism. Drug companies created new drugs before the TRIPS agreement was put in place, and they will continue to do so if the power they gained from the TRIPS agreement is reduced by the widespread implementation of legal mechanisms to curtail the power of patents in the public interest.
Nationally and internationally, health budgets are finite. This past week, the Global Fund to Fight AIDS, Tuberculosis and Malaria failed to reach even its lowest "austerity level" fund-raising target which it had said it needed just to keep putting patients on treatment at current rates. The New York Times described this as "another signal that the global battle against AIDS is falling apart for lack of money." This shows why the price of AIDS drugs must be driven down to the absolute lowest level possible in developing countries: the status quo, the road that we are now on, is that some people are going to die for lack of treatment.
So, I hope you see now why I started out talking about collective self-interest. Brazil can advance further by advancing together with other developing countries.
In the dispute over international diplomacy around Iran’s nuclear program, Brazil showed that it was capable of effectively advocating a broad notion of self-interest. It might seem remarkable that in such a high-profile confrontation with the U.S., Brazil did not back down. And yet, with respect to making life-saving medicines more widely available, Brazil is pursuing a far more cautious course.
I think that part of the reason for this is that issues of war and peace get more publicity than issues of economic violence. Political violence grabs our attention in a way that economic violence does not. If you deny someone lifesaving medicines, you kill them as surely as if you dropped a bomb on their house. But if you drop a bomb on them, more people will notice.
I think Brazilian doctors and health care professionals have a unique role to play here, a unique role in bringing these issues to public attention and in shaping public opinion and the opinions of policymakers. If you look at the remarkable success of efforts to change policies in many countries to discourage smoking, public health advocates played a big role. At some point in the past whether people smoked cigarettes was largely considered a lifestyle choice of individuals; a bad thing, perhaps, but not something that public policy should be overly concerned about. Public health professionals had a lot to do with turning this around.
I think Brazilian doctors and health care professionals could play a similar role here, moving public opinion and policymakers in the direction of a more robust campaign to make lifesaving medicines affordable, not just in Brazil, but around the world.
This is not a pie-in-the-sky utopian project. In April 2010, Ecuador issued a compulsory license for lopinavir/ritonavir, an AIDS medication. When Ecuador announced its intention to issue compulsory licenses last fall, it was praised by the health ministers of the UNASUR countries, including Brazil. So this is not a wild, radical idea; it’s an idea that the Brazilian government officially supports. The question is how aggressively Brazil will pursue it.
At the time Ecuador issued this compulsory license, the patented version of the drug cost Ecuador’s public health sector roughly $1,000 per patient per year. As a result of the compulsory license, Ecuador was expected to be able to access generics for half that cost. For a country like Ecuador, saving $500 per patient per year is a very big deal. Actually, saving $500 per patient per year should be a big deal for every country. If it were revealed that a developing country health ministry were handing over $500 per patient per year to a foreign corporation for nothing, would this not be a scandal? But in a sense, that’s what Ecuador was doing before it issued the compulsory license.
So, this is my appeal, that you take this up. I know that all your plates are already full. It’s the way of the world. It’s the already-busy who move things forward. I’m asking you to consider, as Brazilian doctors and health care professionals, what you can do to help move public opinion and government policy in Brazil in the direction of a more aggressive policy towards making lifesaving medicines more widely available. About what you can do, you know better than me. But any effort, large or small – a presentation, an article, a letter to the newspaper, resolutions by professional organizations – could help tip the balance.
This is a critical time to try to expand this discussion in Brazil, as the country is about to change Presidents. The new President is going to have some choices to make in foreign policy. One of those choices will be how aggressively to push back against the intellectual property regime promoted by the United States. Public opinion, especially opinions expressed by advocates in the health sector, could shape the outcome. Both major political blocs in Brazil have had a policy of pushing back somewhat; both could have done more.
The last few years have already seen significant changes in the international dynamics around these issues; the limited efforts so far have led to some big decreases in prices. If the government of Brazil would make this a priority, it could have a huge impact in the world.