LEDA Home Page Harvard Law School LEDA at Harvard Law School

The Illusory Promise:

Patents’ (Lack of) Power to Incentivize

Drug Development for Poor Countries

Stacy Lau

Class of 2006

May 19, 2006

Submitted in satisfaction of the Food and Drug Law class and the Third Year Written Work Requirement.


Low-income countries suffer infectious and communicable diseases at a greater rate than any other income group. Because people living in these countries are not able to pay high drug prices, pharmaceutical companies do not have sufficient incentive to research and develop cures for infectious diseases. This essay examines strong intellectual property rights and patent enforcement as a solution to this problem. It will provide a description of the Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) negotiations, where high- and low-income countries polarized to the degree that they failed to address incentivizing new cures for infectious diseases. It will then examine the incentive effects of TRIPS on the Indian pharmaceutical industry, and find that Indian companies are beginning to shift their research and development towards high-income markets. Finally, it will conclude that though intellectual property rights are important, ultimately, a market-creating solution is necessary.

Table of Contents




The Problem of Infectious Disease 7

Pharmaceutical Industry Response 12


Arguments for Patents in the Pharmaceutical Context 14

Arguments Against Patents in the Pharmaceutical Context 16

How Much Do Patents Matter for Low-Income Countries? 18


Brief Description of the TRIPS Agreement 20

History and Politics of the TRIPS Negotiations 23

Trips: The Advent of a Broad Patent Regime 23

Implementation of the Doha Declaration: Attempt to Ensure

Access to Essential Medicines 30

Summary and Criticisms 34



Patent Protection in India 39

Current Description of the Indian Pharmaceutical Industry 42

Theoretical Arguments 45

Research and Development of Indian Pharmaceutical Companies 46

Research and Development for Communicable Diseases

In India After TRIPS 50



Through luck, circumstance, and persistence, the Guinea worm disease that had afflicted three million people in 1986 is near eradication.[1] The campaign against the Guinea worm had an almost accidental start. In search of projects for his new charity foundation, former United States president Jimmy Carter spoke with an ex-aide who showed him pictures of the worm.[2] The pictures intrigued Carter and he launched a 20-year effort to eliminate the disease.[3] Before Carter had stumbled across this malady, world leaders did not know that Guinea worm existed.[4] But under Carter’s leadership, various government officials, wealthy philanthropists, private firms and volunteers have mobilized to design and implement new methods of combating the disease.[5]

People suffering other diseases in developing countries have not been fortunate enough to benefit from such a convergence of charity and strong public will.[6] Most citizens of the developed world have not even heard of many of the afflictions that affect mainly low-income countries. Malaria, tuberculosis, and AIDS may be well-known illnesses, but Chagas’ disease and schistosomiasis are under the radar. Additionally, less developed countries do not have the income or political prowess to generate a response that would temper the deleterious impact of these infectious diseases.

Proposed responses to the problem of diseases that affect developing countries can be divided into two categories. The first category is devoted to improving access to existing drugs through government purchase of drugs or drug patents, compulsory licensing by nonpatent-holding manufacturers, and the charity of the pharmaceutical industry.[7] Scholars have also suggested that developing countries be granted internationally-recognized patent rights over their natural resources, so that bio-prospecting pharmaceutical companies must exchange a percentage of revenue or access to drugs for continued use of the countries’ biological materials.[8]

The second category of responses proposes methods of incentivizing development of new drugs for diseases that afflict mainly low-income countries. One strategy to incentivize development of new drugs is for governments to provide subsidies or tax credits to pharmaceutical companies that attempt to invent new drugs for certain diseases. [9] , [10] A second strategy is to support public-private partnerships—collaboration between public sector agencies and private sector pharmaceutical firms[11] —to research and develop drugs for diseases in low-income countries. [12] A third strategy is to enforce product patents for drugs under the Agreement on Trade-Related Aspects of Intellectual Property (“TRIPS”) in order to protect the profits of innovative pharmaceutical companies and incentivize them to further engage in research and development (“R&D”) of new drugs.[13] A fourth and final strategy is to for governments or non-governmental organizations (“NGOs”) to offer a guaranteed market or prize to pharmaceutical companies in exchange for the development of certain drugs.[14]

This essay examines the effectiveness of the TRIPS Agreement and municipal patent law as strategies for incentivizing the development of drugs for low-income countries. It proposes that TRIPS provisions mainly benefit high-income countries such as the United States and large pharmaceutical companies which do not concentrate on inventing drugs to cure infectious diseases; and that TRIPS has a detrimental effect on the incentives of less established pharmaceutical companies in developing countries. First, this essay will describe the scope and effects of infectious disease in low-income countries and the meager response of major pharmaceutical companies. Second, it will explain the theoretical debate on drug patents and their potential to encourage research and development. Third, it will give an account of the negotiations that led to the eventual TRIPS Agreement and Doha Implementation. Fourth, it will examine the legal and economic responses to TRIPS through a case study of India. Finally, it will propose a market-based solution for incentivizing development of drugs for infectious diseases.

The Scope of Infectious Disease in Low-Income Countries and

The Need for New Drug Development

The Problem of Infectious Disease

Hiroshi Nokojimo, the Director-General of the World Health Organization, has declared that “we...stand on the brink of a global crisis in infectious diseases.”[15] Nokojimo made this statement 10 years ago, but its message is no less relevant today. Communicable diseases such as HIV/AIDS, malaria and tuberculosis affect low- and middle-income countries at staggeringly high rates. However, they do not substantially burden high-income countries.[16]

Before launching into a discussion of disease burdens, one must understand terms commonly used by the World Health Organization (WHO).[17] The burden of disease in a country or region is measured by the number of disability-adjusted life years, or “DALYs.” The DALY quantifies the effects of disease within a population as the total sum of life years lost and life years lived in less than full health.[18] Furthermore, the WHO categorizes diseases in three groups. Group I consists of “communicable, maternal, perinatal, and nutritional conditions,” and includes infectious and parasitic diseases such as malaria, tuberculosis, and HIV/AIDS. Group II encompasses noncommunicable diseases such as cancer and cardiovascular disease. Group III consists of intentional and unintentional injuries.[19]

For low-income countries, Group I diseases are by far the most deleterious. As Figure 1 reveals, Group I diseases (shown in reds and oranges) constitute an estimated 56 percent of the illnesses affecting people in low-income countries.[20] By comparison, Group II noncommunicable diseases (shown in black) constitute approximately 33 percent and Group III injuries (shown in blue) 11 percent of the overall disease burden in these countries.[21]

Figure 1. Disease Burden in Low-Income Countries in 2002 (measured in DALYs) [22]

The same compilation of data for high-income countries reveals a stark difference: Group I communicable diseases constitute only approximately 6 percent of the overall disease burden, while Group II noncommunicable diseases constitute 85 percent.[23] The health and pharmaceutical industry in high-income countries are therefore more likely to target noncommunicable diseases. Barring a large epidemic, communicable diseases are not likely to command much response from high-income countries.

Figure 2. Disease Burden in High-Income Countries in 2002 (measured in DALYs) [24]

Moreover, the worldwide burden of infectious and parasitic diseases (measured in DALYs) falls disproportionately on low- and lower-middle income countries, as illustrated in Figure 3. For example, 83.65 percent of total DALYs lost through infectious and parasitic diseases were in low-income countries, while upper-middle-income countries suffered only 2 percent of the overall infectious and parasitic disease burden, and high-income countries suffered less than 1 percent.[25]

Figure 3. Comparison of Burden of Infectious and Parasitic Diseases in 2002 by Income [26]

A look at the prevalence of Group II noncommunicable diseases tells a different story: while low-income countries still suffer the most DALYs lost through noncommunicable diseases (41.22 percent), the burden is much more spread out: high-income countries suffer 14.43 percent of all DALYs lost through noncommunicable diseases. [27]

Figure 4. Comparison of Burden of Noncommunicable Diseases in 2002 by Income [28]

Thus, communicable diseases constitute most of the disease burden in low- and lower-middle income countries and, simultaneously, these countries bear the largest proportion of the world’s communicable infectious and parasitic diseases.[29] High-income countries, in contrast, suffer mainly from noncommunicable diseases.

Pharmaceutical Industry Response

Pharmaceutical companies, like any other business, seek to make a profit. It is therefore no surprise that the vast majority of these drug companies target diseases in high-income countries, where the populace can afford to pay prices that allow the companies to recoup their R&D expenditures.[30]

For instance, only 13 of the 1,233 drugs licensed between 1975 and 1997 were developed to treat tropical (Group I) diseases.[31] Of the 13 drugs, only 4 resulted from the R&D of the pharmaceutical industry; the rest were either newer versions of already-existing drugs, or were the products of military or veterinary research.[32] Another example, reported by the WHO, is that a vaccine used to prevent the very deadly pneumococcal pneumonia and meningitis diseases in low-income countries was initially designed to treat inner ear infections in the United States.[33]

Furthermore, there is no effective vaccine for AIDS,[34] tuberculosis, malaria, shigella, schistosomiasis, leishmaniasis, chagas disease or dengue—all diseases that primarily affect low-income countries.[35] This meager worldwide response to the problem of communicable diseases in developing and least developed countries continues to be reflected in the R&D activities of United States pharmaceutical companies today. A search of the New Medicines Database on the Pharmaceutical Research and Manufacturers of America (“PhRMA”) website returns a list of five drugs being developed for malaria; meanwhile, 12 drugs are being developed for insomnia and 22 for acne and acne vulgaris.[36]

The contrast between the high prevalence of communicable diseases in low- and lower-middle income countries, and the paucity of R&D in response to these deadly diseases is clear. It is vital to stimulate the development of drugs and vaccines to confront these diseases. The American pharmaceutical industry has strongly advocated that patents are fuel for the innovation of new drugs.[37] The next section will explore theoretical arguments for and against drug patents, and question the ability of patents to address the current dearth of treatments for communicable diseases.

The Drug Patent Debate

The debate on drug patents has long been contentious. Proponents of strong patents and vigilant enforcement of intellectual property rights emphasize that patents encourage the development of new drugs by guaranteeing market exclusivity to the developer. They argue that people suffering currently uncurable infectious diseases benefit from the R&D that patents help to incentivize.[38] Detractors respond that monopoly-granting patents only serve to ensure that the low-income sufferers of infectious disease do not have access to beneficial medicines, because they prevent generic manufacturers from offering affordable drugs. This section will describe these arguments in the context of the pharmaceutical industry in greater detail.

Arguments for Patent Protection in the Pharmaceutical Context

The United States Constitution declares that Congress shall “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”[39] This clause is premised on the idea that intellectual property rights stimulate invention: if no patent protection existed, and people could free-ride on others’ inventions, innovators would not invest in R&D.

The argument is especially powerful with respect to the pharmaceutical industry, where the cost of developing each new drug is an estimated $802 million.[40] Because initial expenditures are so high, the argument goes, pharmaceutical companies need some guarantee that they will be able to recoup the costs before embarking upon new drug development. A 1998 study bolsters this position: it reported that without sufficient patent protection, 60 percent of pharmaceutical products would not have been developed.[41]

Moreover, supporters of strong intellectual property rights argue that granting patent rights is a better way to stimulate research and development than the offer of direct monetary rewards, which depends upon the offering governments or NGOs to price and administer the prizes.[42] For pharmaceuticals with complex designs and uncertain market viability, it may be better to leave market, pricing, and distribution power in the hands of drug companies that hold an information advantage and can make better decisions about handling the drug. [43]

Proponents also submit that rather than stifling the production of drugs in developing countries such as India, the institution of patent protection in developing countries would encourage generic drug companies to develop R&D capabilities.[44] These generic drug companies might then focus their resources away from copying drugs for Group II diseases, and towards innovating drugs for communicable diseases in low-income countries.

Arguments Against Patent Protection in the Pharmaceutical Context

Scholars who believe there should be no patent protection for pharmaceutical products say that the costs of monopoly-granting patent protection outweigh the benefits. The most obvious cost is the decrease in access to drugs that would have been developed even if there were no patent incentive.[45] Because patents grant a monopoly to their holders,[46] preventing others from entering the market, pharmaceutical companies with patents can charge a higher price for drugs.[47] Indigent and lower-middle income people, who might have been able to pay the marginal cost of producing the drug, are not able to access patented drugs at the monopoly price, leaving a large deadweight loss.[48]

Others question the effectiveness of patents at incentivizing drug development. There is no conclusive evidence that patents do foster innovation.[49] Skeptics of patent protection argue that pharmaceutical companies may have even greater incentive to innovate if they could not rely on 20-year monopolies to bring in profits. Moreover, the existence of strong patents distorts company expenditures, encouraging R&D in patentable areas and discouraging R&D in more theoretical but nonpatentable areas.[50] Thus, instead of devoting their efforts towards the advancement of medical knowledge and development of useful products, pharmaceutical companies preoccupied with patents may be performing less efficient or beneficial R&D.

A final source of cost is the legal and administrative expense of registering patents and defending against patent litigation. Many pharmaceutical companies register patents as a legal defense mechanism,[51] which wastefully funnels resources away from R&D. Moreover, in order to introduce a new pharmaceutical product into the market, one must negotiate numerous licenses with firms that have patented each portion of the research.[52] This unwieldy process—often referred to as the “tragedy of the anticommons”—is an impediment to bringing important pharmaceutical products into the market. Therefore, ironically, patents may interfere with purely market-driven decisions.

How Much Do Patents Matter for Low-Income Countries?

The virile debate over drug patents begs the question of whether intellectual property laws have a substantial impact on drug development relative to other policies such as tax incentives or prizes.[53] In other words, how much does the debate over patents matter?

Some scholars argue that the critical roadblock to access to drugs is not the existence of patents, but the scarcity of financing for health and medicines.[54] Amir Attaran and Brigitte Granville state that 94 percent of the WHO’s 2002 Model List of Essential Medicines is not patented, and that within 53 African countries, only 22 percent of anti-retrovirals are patented.[55]

However, while Attaran and Granville’s argument that patents do not have much impact on diseases in low-income countries does ring true with respect to access to essential medicines, it does not necessarily address the incentives for development of these drugs. For example, American pharmaceutical companies which developed antiretrovirals mainly for a high-income country market may have chosen not to patent the drugs in Africa because they would be too difficult to enforce. But this difficulty of patent enforcement may disincentivize these same American companies from developing drugs specifically for markets in Africa. Moreover, the introduction of patent protection in developing countries has uncertain effects on the incentives driving their pharmaceutical industries.[56] While it is difficult or even impossible to measure the true impact of patents on incentives to develop drugs for low-income countries, it is worth examining the correlative effects of international and municipal patent laws on pharmaceutical industries in developing countries.

Unfortunately, developed countries such as the United States have largely undervalued the importance of provision of essential medicines to the low-income in developing countries when advocating their own side of the patent law debate. Commentator Anupam Chander observed, “To hear developing countries such as South Africa, the Philippines, and Brazil describe [the international TRIPS negotiations], this is a battle to provide drugs to millions of people suffering from HIV/AIDS. To hear the U.S. describe it, however, this is a battle over Viagra.”[57] The strong pro-patent stance of high-income countries during the TRIPS negotiations resulted in an international patent law that is not sufficiently favorable for low-income countries suffering the bulk of communicable disease.

TRIPS and Drug Licensing: An Inadequate Solution

This section of the essay will argue that the patent debate figured heavily in the negotiations for TRIPS, a strong international patent regime. However, this debate centered mainly around the incompatibility between developed countries’ interests in drugs created for high-income markets, and developing countries’ concern over access to these drugs. Consideration over the effects of patents on private incentives for development of drugs for low-income markets was missing from the debate.

Brief Description of the TRIPS Agreement

The predominant international patent law is TRIPS, which mandates that every World Trade Organization (“WTO”) member establish patent protection for pharmaceuticals developed in other countries.[58] Thus, patent supporters won the debate with respect to this far-reaching international law. However, in order to account for important health needs, TRIPS allows countries to bypass monopoly prices for pharmaceuticals by authorizing them to issue compulsory licenses.

Under TRIPS, all developing countries party to the WTO[59] must grant patent protection for “any inventions, whether products or processes, in all fields of technology . . .”[60] from other countries by January 1, 2005. Domestic patent laws must provide at least 20 years of protection.[61] But patent protection can be set aside under certain circumstances. Article 31 of the TRIPS Agreement allows all WTO members to grant compulsory licenses—for any reason[62] —to their respective governments or to authorized third parties.[63] Limits upon the use of compulsory licenses include that: the patent holder must be paid adequately given the circumstances and economic value of the license,[64] the scope and duration of use must be “limited to the purpose for which it was authorized,”[65] and the proposed user must have attempted and failed to gain authorization from the patent holder on “reasonable commercial terms and conditions”—except in “situations of national emergency or other circumstances of extreme urgency.”[66] Furthermore, under Article 31(f), use of compulsory licenses must be authorized “predominantly for the supply of the domestic market of the Member authorizing such use.”[67]

Article 31(f) meant that countries with pharmaceutical manufacturing capacity could grant compulsory licenses to engineer and supply generic medicines within their own borders, but that exports of these generic medicines to low-income countries without manufacturing capacity was limited. The 2001 declaration of the Fourth Ministerial Conference in Doha, Qatar (“Doha Declaration”), sought to remedy this problem, proclaiming that the TRIPS Agreement “can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular, to promote access to medicines for all.”[68] It confirmed that public health crises such as HIV/AIDS, tuberculosis, malaria, and other epidemics fell under the national emergency exception to the requirement that licensing countries first seek permission from the patent holder.[69] Finally, the Doha Declaration recognized the plight of WTO members with insufficient pharmaceutical manufacturing capacities, and resolved to find a solution.[70]

On August 30, 2003, the WTO adopted a decision allowing members with manufacturing capacity to issue compulsory licenses to produce drugs for eligible importing members[71] without manufacturing capacity.[72] This provision limits the production of drugs only to the “amount necessary” to fulfill the needs of eligible importing members.[73] The exporting member must pay “adequate remuneration,” taking into account the economic value to the importing member.[74] In addition, importing members must take “reasonable measures within their means” to prevent re-export of the pharmaceutical products imported into their territories under this system.[75] Therefore, as of 2003, developing countries with manufacturing capacity—such as India, China and Brazil—could issue compulsory licenses to produce generic versions of patented drugs, and provide them at a lower price to low-income countries that do not have the ability to produce the drugs on their own.

While the TRIPS Agreement, Doha Declaration and the Implementation of the Doha Declaration recognize the needs of low-income countries for access to pharmaceuticals, negotiations for these agreements were dominated by high-income countries with economic interests in protecting their profitable pharmaceutical industries. The necessity of new drug development for diseases that affect primarily low-income countries did not factor enough into the negotiations; the scanty arguments on incentivizing drug development for low-income countries which did factor into the negotiations were based upon debatable evidence.

History and Politics of the TRIPS Negotiations

TRIPS: The Advent of a Broad Patent Regime

In the late 1970s, dissatisfied with intellectual property treaties administered by the World Intellectual Property Organization (“WIPO”), developed countries initiated a movement for the reform of international intellectual property law.[76] In early 1987, the movement coalesced, and developed countries brought up two concerns before the other signatories of the General Agreement on Tariffs and Trade (“GATT”):[77] 1) the narrow scope of intellectual property rights in domestic laws; and 2) the inadequate enforcement of rights that do exist.[78] At that time, approximately 50 member countries did not grant patent protection for pharmaceutical products; and some of these countries also declined to protect pharmaceutical processes.[79] Meanwhile, more than 99 percent of the world’s patents were owned by entities from developed and industrialized countries.[80]

During the Uruguay Round of GATT negotiations, chaired by Ambassador Lars E.R. Anell of Sweden, the United States, Switzerland, Japan and the European Community[81] suggested expanding existing patent regimes, incorporating into the GATT Agreement intellectual property principles from current treaties and filling the gaps where necessary. [82] Other countries, however, believed an intellectual property regime should not be implemented under GATT, which was a trade regime.[83] They protested the U.S. suggestion because, unlike the existing scheme of consensual, reciprocal acknowledgement of patent rights, the U.S. proposal did not recognize the diversity of each country.[84] Furthermore, some countries were worried about the trade distortions or abuses that might occur with intellectual property legislation under GATT.[85]

Over the course of the next few years, developed country participants dominated negotiations over TRIPS. For instance, from 1986 to 1989, less developed countries vociferously opposed the inclusion of intellectual property provisions in the GATT. They argued that the U.S. position espousing the necessity of strong patents for incentivizing investment was based on loss reports submitted by corporate exporters and industry associations.[86] These loss reports did not represent the interests of developing or least developed countries,[87] as no particular inquiry was made into the effects of patents upon developing country economies. However, despite their skepticism, developing countries yielded to the United States and adopted these reports as a basis for the accord.[88]

Scholars argue that developing countries gave ground because developed countries such as the United States offered concessions and levied threats of trade sanctions during bilateral exchanges outside of the GATT forum.[89] For example, § 301 of the U.S. Trade and Tariff Act of 1984 gave the US government power to retaliate against countries that did not provide adequate intellectual property protection.[90] In October 1988, the U.S. imposed 100 percent tariffs on imports from Brazil, which had violated U.S. drug patents.[91] The next year, the U.S. put Brazil, India, Mexico, China, Korea, Saudi Arabia, Taiwan and Thailand on a “Special 301” Priority Watch List.[92] In response to this pressure, Korea began to provide pharmaceutical patent protection in 1986, Mexico in 1991, and Brazil in 1996 (after initiating patent legislation in 1993).[93] Repercussions of these trade measures were clearly felt during the TRIPS negotiations, for, as they were occurring in the GATT forum, countries with greater trade influence held more sway.[94]

After obtaining their broad goal of including intellectual property provisions in the GATT, developed countries also ensured their own proposals took precedence in the negotiations. In 1990, developing countries remarked that other countries had not sufficiently accounted for developing country proposals.[95] They stressed their concern for freedom of national development, free from international obligation, and pointed out that currently-developed countries did not institute patent protection until they had reached a certain level of industrial and technological development.[96] The representative from India weighed in to this issue, remarking upon the importance of the pharmaceutical industry to the Indian economy and advocating for developing countries to have the option to exclude certain industrial sectors from patentability.[97]

Developed countries responded almost blithely to this assessment, saying that developing countries “were now in a position to profit from the experience which had been gained at some expense in the industrialized countries”; they pointed to their own histories, where industries with reduced patent protection had suffered.[98] They also noted that pharmaceutical patent protection helped their own economies grow.[99] Developing countries were not convinced that the experiences of developed countries could be extrapolated so easily to their own situations.[100]

The intersection of international patent protection and the development of pharmaceuticals for low-income countries entered the discussions at several points.[101] Representatives recycled the typical arguments for and against patent protection. Developing countries believed patent protection would reduce access to life-saving drugs. Meanwhile, developed countries retorted that the paucity of private R&D into tropical diseases was a result of low levels of pharmaceutical patent protection in developing countries.[102] The final TRIPS Agreement, as described above, favors the developed countries’ position.

By July 1990, a mature proposal for the structure and provisions of TRIPS, called the “Anell Draft,” was on the table. By that time, it was clear that the basic provision requiring each country to adopt 20-year patent protection for all products and processes was firmly in place. However, the terms of the grant of compulsory licenses were still in dispute. Specifically, the proposed law enumerated certain purposes for which compulsory licenses could be granted,[103] rather than allowing countries to issue compulsory licenses for any reason.

Compulsory licensing was one issue where the views of developing countries largely prevailed over developed countries in the TRIPS negotiations. Though prior to TRIPS, many countries authorized compulsory licensing for various enumerated purposes, the United States sought to limit compulsory licensing under TRIPS. Its initial proposal in 1987 stated, “Governments should generally not grant compulsory licenses to patents...”[104] But developing countries reacted negatively to this and to other proposals limiting grounds for compulsory licensing, including the 1990 Anell Draft.[105] The next draft of the TRIPS Agreement, the “Brussels Draft” of 1990, refrained from listing prerequisites or permissible grounds for granting compulsory licenses.[106]

The TRIPS Agreement, as discussed above, delineates the procedures for granting compulsory licenses, but allows countries to grant them for any reason—a victory for developing countries. However, as of yet, the TRIPS Agreement’s broad allowances for compulsory licenses have not greatly impacted the provision of medicines to low-income countries. Governments must still pay “adequate remuneration” to patent holders. And so far, very few countries have issued compulsory licenses for pharmaceuticals, though Brazil has used the threat of compulsory licenses to lower prices on AIDS drugs[107] and Malaysia has announced it would issue licenses for AIDS drugs.

Another concession made on behalf of developing countries was the provision allowing them ten years to implement a new patent regime.[108] Although the TRIPS Agreement provided a strong mandate of patent protection, American pharmaceutical companies were unhappy with this provision and dissatisfied with the overall outcome of the negotiations.[109] Lou Clemente, senior vice president for corporate affairs at Pfizer Inc., complained that Pfizer’s “reaction is mixed at best” and that the ten-year allowance “is going to be a severe disincentive for further investment.”[110] Up through December of 1993, American pharmaceutical companies had been urging the Clinton Administration to reconsider the TRIPS compromise—to require the intellectual property provisions to take effect earlier.[111] But these provisions were left unchallenged, partly because negotiations had already taken seven years, partly because the Clinton Administration was more willing to compromise than the Bush Administration,[112] and partly because developed countries had already achieved their main goal: standardized worldwide patent protection of all products and processes that fulfill typical patent requirements. The negotiations ended on December 15, 1993, as Peter Sutherland, director-general of the GATT pounded his gavel.[113] TRIPS became law on January 1, 1995.

The ability of low-income countries to develop and access drugs under compulsory licenses was left unresolved by the TRIPS Agreement.[114] Article 31(f) of TRIPS stated that compulsory licenses must be used “predominately” for the supply of the country that obtained the license. Thus, developing countries like India with maturing pharmaceutical industries could grant a compulsory license to produce drugs for their own domestic market. Low-income countries, on the other hand, could not take advantage of the provision for compulsory licenses if they did not have the manufacturing capacity. The Implementation of the Doha Declaration (“Implementation”) addressed this issue.

Implementation of the Doha Declaration: Attempt to Ensure Access to Essential Medicines

Negotiations over access to medicines under TRIPS took place in the Centre William Rappard, a stately, cream-colored building with a Florentine courtyard in Geneva, Switzerland.[115] During meetings from June 18 through June 22, 2001, the TRIPS Council for the first time discussed at length the issues that would amount to the Implementation.[116] A debate on access to medicines—proposed by the African Group—ensued, and representatives of WTO member countries each made a statement before the council.[117]

In the time that had elapsed between the initial TRIPS discussions in the mid-80s and early-90s and 2001, the AIDS crisis had deepened significantly in African and South American countries, and this was a focal point in many of these countries’ statements.[118] The Chairperson, Ambassador Boniface Chidyausiku of Zimbabwe, opened the statement from his country with the story of a young South African, Nkosi Johnson, who died of AIDS.[119] The developing country ambassadors intended their references to AIDS to highlight TRIPS Article 7, which says intellectual property rights should be “conducive to social and economic welfare, and a balance of rights and obligations,”[120] and Article 8, which says countries may “adopt measures necessary to protect public health and nutrition.”[121] A strong vein in the statements of developing countries was that public health and the human right to life should never be subsumed by concern over property rights. A statement by Pope John Paul II, supporting the developing countries’ position, summed up this sentiment: “The law of profit alone cannot be applied to that which is essential for the fight against hunger, disease and poverty.”[122]

Facing potential public condemnation for their insensitivity to the HIV/AIDS epidemic,[123] developed countries largely agreed that countries facing national health emergencies could use compulsory licensing to obtain access to antiretrovirals.[124] The only exception was Japan, which took the relatively extreme view that strong patent protection was especially required for drugs that treat tropical diseases, because pharmaceutical companies needed more incentive to research and develop these drugs.[125] The speeches given by developed country representatives, reiterated the importance of intellectual property rights to innovation.[126] Developed countries also argued that lack of health infrastructure, medical education, and medicine distribution programs were more at fault for the dearth of access to drugs than were patent laws.[127]

Though developed countries recognized the problem of the AIDS epidemic and were generally willing to allow low-income countries in states of emergency to purchase drugs from developing countries under compulsory licenses, they were wary about sacrificing the interests of their pharmaceutical industries. Up until that point, the U.S. had been aggressively suing other countries for trade infringement; in 1997, the U.S. took the South African government to court over its rationalization of drug licensing and prescription.[128] The elephant looming behind the developed countries’ hard line position, however, was the fact that Canada had recently overridden Bayer’s patent on Cipro, a drug used to treat anthrax.[129] A trade delegate admitted to some anger over this double standard.[130] The United States, of course, loudly condemned Canada’s decision in order to protect its own position against compulsory licensing during the Doha negotiations.[131]

One issue which threatened to impede a consensus over compulsory licensing was the scope of diseases addressed by the Doha Declaration.[132] The United States was concerned that a broad view of the scope of diseases would allow developing countries to produce and export lifestyle drugs like Viagra and diet pills under compulsory licenses.[133] It proposed to limit the scope of diseases addressed by the eventual Implementation to an enumerated list; however, developing countries rejected this idea.[134] Meanwhile, the WTO General Council was eager to reach a consensus so that the public health issue would not dwarf other agenda items—such as agriculture—at the upcoming Cancun Ministerial Conference in September 2003.[135] Developing countries, which had formed a large coalition,[136] eventually prevailed in the negotiations over the scope of diseases—implementing legislation under the Implementation does not limit the diseases for which compulsory licenses could be granted.

Developing countries similarly prevailed in preventing the Doha Implementation from being limited to a certain income class.[137] Again, these countries had formed a common cause, as they all had an interest in leaving the route toward import of drugs as open as possible.[138] The Doha Implementation currently allows any country facing a health crisis, no matter its income class, to qualify to import drugs under a compulsory license as long as it has “insufficient or no manufacturing capacities in the pharmaceutical sector for the product.”[139] This version of the Doha Implementation was adopted in August 2003. The TRIPS Council is currently in the process of permanently amending the TRIPS Agreement to incorporate the Doha Implementation.[140]

Summary and Criticisms

In sum, through TRIPS, developed countries such as the United States, Switzerland, Japan and the European Community succeeded in advancing their goals: widespread patent protection for all categories of products and processes (including pharmaceuticals) was implemented in the international regime. Members of the WTO became subject to the same requirement to provide patent protection for every product and industry. Despite the efforts of some countries to avoid a one-size-fits-all approach,[141] no permanent structural concessions—such as the voluntary exclusion of certain industries from patent protection—were made for developing countries.[142] This may have occurred because the experiences and beliefs of developed countries had dominated the negotiations.

Developing countries reversed this outcome during the discussions on the Doha Declaration, where the tension between public health and patent rights was again at issue. They acquired the ability to export to low-income countries generic versions of patented drugs under compulsory licenses. And, over the objections of the United States, importing countries and drugs subject to such licenses were not limited to an explicit list. Thus, though developed countries won widespread patent rights, after the Doha Implementation, the pendulum appears to have swung back toward the middle.

On the other hand, TRIPS and the Doha Implementation failed to address several important issues. For instance, the Implementation does not account for the compulsory licensing and manufacture of drugs for low-income countries that are not members of the WTO,[143] though they may be most ravaged by communicable disease. Also, though developed countries repeatedly advocated the importance of patents for the development of new drugs, they only rarely mentioned their impact on the development of drugs for primarily low-income markets. Developing countries, preoccupied with access to drugs rather than incentives for development, failed to discuss whether patent protection would help or hinder R&D for drugs curing communicable diseases.

The ironic result from the standpoint of one who believes patents incentivize innovation is that TRIPS and the Doha Implementation do not protect patents for communicable diseases that affect mainly low-income countries. Rather, they allow countries to obtain compulsory licenses for drugs without consulting their patent holders in cases of national emergency—such as the AIDS, malaria and tuberculosis crises currently affecting low-income countries.[144] This outcome reveals the relative positions of high-income countries, which were worried about safeguarding innovation and profits for Viagra and diet drugs but not for malaria drugs, and low-income countries which took a hard line stance in favor of access over property rights. Thus, if patent protection does incentivize innovation, TRIPS and the Doha Implementation fail to do so with respect to communicable disease.[145]

One solution to this problem is to partially reverse the outcome of TRIPS and the Doha Implementation by providing patent protection for drugs developed mainly for low-income countries, and withdrawing patent protection within low-income countries for drugs developed mainly for high-income countries. Jean Lanjouw suggests a policy where inventors must choose patent protection in either high-income countries or low-income countries, but not both.[146] This policy would be enforced through a mandatory declaration when a patentee petitions for a foreign filing license: the patentee must declare that the license would not be used to restrict the sale or manufacture of drugs for global disease through patent infringement lawsuits in developing countries.[147]

Under this scheme, when pharmaceutical companies develop drugs for diseases such as cancer or AIDS, they would automatically choose to have patent protection in high-income countries where they could attain the most profit. But at the same time, they could not enforce patents against developing countries, so poor countries would be able to obtain these cancer and AIDS drugs at lower prices. This would not distort incentives of pharmaceutical companies to invent global drugs because the high-income markets, where the companies would have patent protection, provide enough return for the investment. The scheme also purports to incentivize the R&D of drugs for low-income countries by providing patent protection in these countries for drugs that cure specified diseases.[148] Therefore, for low-income countries, both access to drugs that cure global diseases like cancer or AIDS, and incentives to R&D drugs for local, communicable diseases, would be preserved. TRIPS and the Doha Declaration do almost the opposite: they provide patent protection for cancer drugs and consequently decrease access, but waive it for epidemics, theoretically lowering incentives to innovate for communicable diseases.[149] Therefore, there does not seem to be any basis for concluding that pharmaceutical companies in developed countries would shift their R&D to develop drugs for communicable diseases solely because of TRIPS.

The next section of this essay will conduct an inquiry into the effects of TRIPS on the incentives of pharmaceutical companies in developing countries to produce drugs for low-income markets by examining the experience of India.[150]

Case Study of the Developing Pharmaceutical Industry in India

The negotiations over TRIPS and the Doha Implementation highlighted several points about patent protection and the development of drugs for low-income countries. Representatives of developed countries argued that if low-income countries provided patent protection for pharmaceuticals, drug companies would be more likely to invest in R&D for communicable diseases. Moreover, they advocated, the pharmaceutical industries in developing countries would branch out into R&D to serve low-income country markets instead of making generic copies of products developed in the United States or Switzerland. This section of the essay examines these contentions, reporting empirical evidence of the activities of pharmaceutical industries in India pre- and post-TRIPS.[151]

Patent Protection in India

India is not a stranger to pharmaceutical patents. Its Patent and Design Act of 1911 extended robust patent protection for the first time to pharmaceuticals.[152] However, the combination of a strong patent law and a local pharmaceutical industry still in its infancy invited trouble.[153] Western multinational corporations (“MNCs”) entered the Indian pharmaceutical market on the supply side. Exploiting a loophole in the Patent and Design Act, these MNCs imported pharmaceuticals from abroad and patented them in India.[154] Drug prices rose to an unreasonable level. From 1947 to 1957, MNCs held 99 percent of the pharmaceutical patents in India.[155] The local pharmaceutical industry was stunted.[156]

The Indian Patents Act of 1970, which came into force on April 20, 1972,[157] reflected this negative history with pharmaceutical patents. The Patents Act corrected for the problems encountered under the 1911 Act by providing less protection for pharmaceuticals.[158] Product patents could not be granted under this law for substances intended or capable of being used as medicines or drugs.[159] Methods or processes for the manufacture of pharmaceuticals were patentable[160] for the lesser of 7 years from the date of patent or 5 years from its grant.[161] In comparison, patents for all other inventions are for 14 years from the date of patent.[162] Furthermore, anyone may apply for a compulsory license 3 years after a patent has been sealed if “the patented invention is not available to the public at a reasonable price.”[163]

This relatively weak patent statute helped India nurture a domestic generic pharmaceutical industry, where Indian pharmaceutical companies reverse-engineered drugs developed in other countries instead of relying on their own R&D. This resulted in relatively low drug prices. For instance, in 1999, of a mix of 36 industrialized and developing countries India offered the lowest prices for acyclovir, atenolol, ciprofloxacin, diclofenac, nifedipine and ranitidine.[164] Overall, generic drugs from India cost approximately 5 percent of their brand name versions in the United States and European Union.[165] Importantly, the influx of market competition from India helped to lower the price of antiretroviral drugs by up to 98 percent.[166] The domestic pharmaceutical industry flourished. However, the Indian Patents Act was clearly incompatible with TRIPS requirements[167] —especially with respect to the provision of 20-year patents for all products.

After TRIPS came into force, India committed to rewriting its patent provisions by the 2005 deadline to comply with TRIPS and bolster its credibility within the WTO.[168] In exchange for delaying implementation of TRIPS provisions to 2005, India was required to provide a “mailbox” to accept patent applications for pharmaceuticals between January 1, 1995 and January 1, 2005.[169] In addition, India had to grant “exclusive marketing rights” for drugs patented in other countries in between 1995 and 2005.[170] These provisions ensured that by 2005, India’s pharmaceutical patent regime would look the same as if India had granted pharmaceutical product patent rights in 1995.

The Patents Amendment Act, passed on March 3, 2005, extended patent protection for food, drugs, and pharmaceutical products.[171] Moreover, it increased the patent term for international applications filed under the Patent Cooperation Treaty to 20 years.[172] To accommodate compulsory licenses allowed under the Doha Implementation, the Patents Amendment Act makes compulsory licenses for the export of patented drugs available to any country with insufficient manufacturing capacity.[173] Overall, though the Indian government took advantage of the flexibilities that TRIPS provided,[174] the Patents Amendment Act ensures much stronger patent protection for pharmaceuticals than the Act of 1970.

Effects of the Patents Amendment Act on Incentives for R&D for Communicable Diseases

Current Description of the Indian Pharmaceutical Industry

The Indian pharmaceutical market has an overall value of $7.3 billion, which is approximately 1.5 percent of the $480 billion global pharmaceutical market.[175] This small slice of revenues, however, is misleading in terms of global impact. Because Indian drug companies produce cheaper, generic versions of drugs, they serve more than 20 percent of the global consumption.[176] Moreover, though the Indian pharmaceutical industry ranks as only the 14th largest in the world, it is the fourth largest pharmaceutical industry in terms of production volume.[177]

The industry has several unique characteristics. First, until the implementation of the Patents Amendment Act of 2005, the market has relied upon the production of generic versions of drugs patented in other countries. For example, “in 1993, 20 percent of the generics marketed by the top 15 Indian pharmaceutical firms were based on brand name drugs . . . covered by pharmaceutical product patents in Europe.”[178] This reverse engineering of foreign drugs allowed the Indian pharmaceutical industry to flourish with relatively low R&D expenditures.

Second, in comparison to other developing countries, India relies relatively little on foreign pharmaceutical imports but also exports a large percentage of its pharmaceutical products. In 2003, for instance, Indian drug companies exported 40 percent of their finished products and 60 percent of their active pharmaceutical ingredients (“API”).[179] Moreover, it is one of the few developing countries that are self sufficient in its health care needs,[180] with 70 percent of the market consisting of domestically produced drugs.[181] The dominance of domestically produced drugs is directly a result of the protectionist policies India had in place for the past few decades. For instance, the Indian government disfavored the import of finished products and supported the indigenous manufacture of bulk drugs in the early 1960s.[182] Government policies also favored domestic pharmaceutical companies over MNCs—so that between 1971 and the present, the market share of MNCs has fallen from 75 to 35 percent.[183]

Partly because India suffers many of the same communicable diseases as other low- and middle-income countries,[184] pharmaceutical companies in India have manufactured and developed a large share of the world’s vaccines. Among the current projects of pharmaceutical companies are: a rota-virus vaccine to treat infant diarrhoel diseases, combination flu vaccines, Hepatitis B and DPT vaccines, a dengue vaccine, an experimental malaria vaccine, and a candidate vaccine for HIV/AIDS.[185] Furthermore, people afflicted with AIDS in Africa and the Caribbean rely upon HIV/AIDS drugs produced in India for low prices.[186]

Therefore, because India is one of the largest volume drug producers and exporters in the world, because India has focused its manufacturing on drugs for infectious as well as noncommunicable diseases, and because up until 2005, most of the industry’s production focused on copying patented drugs, the impact of TRIPS on India’s incentives for drug development for infectious diseases is an important issue.

Theoretical Arguments

There are several theories about the impact of pharmaceutical product patents on incentives for India to develop drugs for communicable afflictions. The pro-patent theory claims patent protection in developing countries would skew innovations away from preferences of developed countries.[187] An increase in patent protection leads to an increase in innovation, and to a better fit between the new inventions and the preferences of the patenting country.[188] In other words, patent protection in India or Africa would help guarantee markets in those regions, making it more likely that R&D for these regions would occur.

A twist on this argument in the context of the Indian pharmaceutical industry is that once Indian drug companies can no longer create generic versions of foreign patented drugs, they will be forced to expand to other markets, including those in low-income countries.[189] Catering to these markets would necessitate inventing new drugs for infectious disease.[190] As the scholar Jean Lanjouw says,

“[P]erhaps the main reason for thinking that the introduction of product patents in India will increase the amount of innovative R&D done by Indian firms has nothing to do with the traditional explanation based on enhanced returns. It is simply that they will soon be prevented from following a strategy which has been profitable, imitation, and must switch to something else in order to grow.”[191]

If this “something else” is the provision of drugs to cure communicable diseases, then low-income countries would indeed benefit from patent protection.

On the other hand, anti-patent adherents advocate that TRIPS would have very little effect on the incentives of Indian pharmaceutical companies to create drugs for low-income markets because, like other drug companies, they will seek greater markets for noncommunicable disease cures in high-income countries.[192]

The rest of this section will inquire into the effects of TRIPS on the incentives of Indian pharmaceutical industry by delving into available scholarly research, and market reports from a major Indian drug company, Ranbaxy.[193] However, some qualifications must be made. The analysis below depends upon the correlation between the pre- and post-TRIPS time periods and R&D expenditures of Indian companies. Any correlation does not prove that TRIPS caused R&D expenditures to shift, because there are many other explanations for the level of R&D to change during this time period. Other explanations for the increase in R&D expenditures during the late 20th and early 21st century are the advancement of science, which would make R&D easier for pharmaceutical companies to carry out, growing markets for drugs treating communicable diseases, and government policies encouraging R&D. Similarly, factors other than patent legislation may cause any decrease in R&D in India as well.

Research and Development of Indian Pharmaceutical Companies

Overall, studies reveal that the more established Indian companies have been increasing their R&D since the Indian government instituted a strong pharmaceutical patent law in compliance with TRIPS.[194] Patent trends in India reveal an increase in the significance of pharmaceutical research from the late 1980s to 1997.[195] Moreover, across the Indian pharmaceutical industry, R&D expenditures have increased slightly, from 1.3 percent of total sales in 1991 to 1.9 percent in 1994, when TRIPS was signed.[196] The percentage of R&D has hovered around 1.9 or 2 percent of sales through 2000.[197] One scholar contends that over the next five years, Dr Reddy’s and Ranbaxy, large pharmaceutical companies in India, intend to increase their R&D from 6 percent to more than 10 percent of sales.[198]

More recent reports from Ranbaxy confirm this increase in R&D. Figure 5 shows Ranbaxy’s recent and R&D expenses over the past three years. As Figure 5 reveals, Ranbaxy has been steadily increasing its R&D expenditures, from approximately $4.73 million per quarter in early 2002 to $33.85 million per quarter in late 2005.[199] Meanwhile, Ranbaxy’s overall capital expenditures have generally been decreasing: from $113 million in 2004 to $83.63 million in 2005.[200]

Figure 5. Ranbaxy R&D Expenditures from 2002 through 2005 (in millions of dollars) [201]

One thus could not attribute the increase in R&D to Ranbaxy’s overall growth or expansion. This appears to confirm the pro-patent contingent’s argument: that the institution of product patents in India will push Indian pharmaceutical companies toward developing new drugs on their own.

This outcome is consistent with the experiences of other countries that recently implemented pharmaceutical patents. For instance, South Korea’s patent law came into force in 1986, and from 1986 to 1990, South Korean companies’ market share increased from 87.3 percent to 89.2 percent.[202] Research-based pharmaceutical companies in Mexico, where an international patent law came into force in 1991, tripled their investment.[203] Finally, in China, where an international patent law became applicable in 1993, the pharmaceutical industry experienced 17 percent annual growth afterward.[204]

On the other hand, it is difficult to say how much of this growth in R&D is due to increased patent protection. Merck,[205] in comparison, has increased its R&D expenditures from $2.677 billion in 2002 to an expected $3.778 billion in 2005.[206] Furthermore, it has an expected R&D expenditure of $4.596 billion in 2010.[207] One might argue that Ranbaxy’s R&D expenditures are merely riding a general trend of pharmaceutical growth (or inflation). But, it is unlikely that Ranbaxy’s R&D growth by a multiple of 7 over the past three years was not part of a conscious strategy.

A more plausible argument is that the increase in the Indian pharmaceutical industry R&D is also largely a result of favorable government policies. The Drug Policy Control Order of 1995 stated that innovative drugs and processes invented and manufactured in India would not be subject to price control for at least five years.[208] New drugs would be exempt from price control for ten years.[209] In addition, the Indian government provided some companies a ten year tax holiday on their R&D income.[210]

In sum, large pharmaceutical companies in India increased their R&D investments as TRIPS was nearing implementation. The amount of this industry movement that can be attributed to TRIPS is disputable. However, scholars who have studied the issue generally observe a correlation between TRIPS and increased R&D expenditures in India, and attribute this correlation at least partially to the influence of patent protection.

Research and Development for Communicable Diseases in India After TRIPS

How much post-TRIPS R&D in India is for communicable diseases? The scholarly reaction is mixed, but the industry reply appears to be: not much. Interviews of Indian pharmaceutical executives, for instance, revealed that companies would be focusing their R&D spending on global diseases rather than diseases specific to low-income countries.[211] Of 20 companies encompassing 90 percent of the R&D investment in India, nine reported that they were not committing any R&D for tropical diseases or for least developed countries; and 11 allocated a total of $6.9 million for diseases that affect low-income countries.[212] This constitutes approximately 16 percent of R&D expenditures in India.[213] About half of these expenditures, furthermore, were meant to help develop better products for global diseases.[214] Industry reports from Ranbaxy show that in planned to begin clinical studies of two new drug delivery systems in 2004—for dermatology and urology therapies.[215] There was no mention in the most recent Cipla or Ranbaxy reports of any new drugs for communicable diseases.[216] Furthermore, while in the past, the vast majority of Indian drug exports went to developing countries suffering similar types of diseases, Cipla, Ranbaxy, DRL, Lupin, and other companies have begun to export drugs more to developed markets.[217]

From the evidence available so far, the pro-patent theory that TRIPS would incentivize companies to invest more in R&D for communicable diseases appears to have been wrong. There are numerous reasons why the Indian pharmaceutical industry has not immediately turned to R&D of communicable diseases after it could no longer copy foreign brand name drugs. The first and most apparent reason is that if Indian companies plan to spend money on new drug development, they, like American drug companies, will seek the largest possible market: that in global and noncommunicable diseases.

The second reason is that Indian companies, in a new market atmosphere where they can no longer rely on reverse engineering patented drugs, will exploit their strengths, such as excellent technical skills and low overhead costs.[218] Cost-cutting MNCs and foreign companies, which have already left the low-margin vaccine and infectious disease industry, are creating service provider partnerships with Indian companies.[219] This is likely to be seen—especially by smaller and mid-size drug companies—as a safer method of adapting to the new environment than is embarking upon a costly and novel area of drug development.[220]

Third, while Ranbaxy, DRL and Wockhardt responded to the new patent regime by pursuing more technological capability, other companies are seeking less technical routes. For example, Sun is focusing on state-of-the-art processes and innovative delivery systems.[221] Finally, yet other companies are concentrating their resources on traditional medicines and generic drugs.[222]

Therefore, the fallacy of the pro-patent argument is that it assumes Indian pharmaceutical companies would be compelled to turn to new markets if they could no longer copy patented foreign drugs. That Indian pharmaceutical companies are not currently capable of creating or manufacturing drugs without reverse engineering them is a somewhat misguided assumption. After the advent of TRIPS and the Indian Patent Amendment Act, drug companies in India in fact had many options. Besides competing with American and Swiss companies for high-income markets, they could partner with MNCs as service providers or pursue less technological endeavors. Just as any other drug company, without any incentives besides patent protection, Indian pharmaceutical companies do not have sufficient reason to create drugs specifically for low-income markets, except out of charity or a sense of social obligation.[223]

Analysis and Conclusion

The world has a responsibility to address the problem of communicable diseases in low- and lower-middle income countries.[224] Scholars have proposed a variety of solutions which address both access to drugs and incentives for creating new drugs to combat infectious illnesses. One of the most contentious issues has been the enforcement of patents through a standardized international regime, TRIPS. The TRIPS negotiations lasted for seven years, during which the age-old intellectual property arguments clashed with international law principles such as the right to development. High-income and lower-income countries each formed coalitions and polarized, with the former espousing incentive effects of patents and the latter calling for greater access to life-saving drugs. The result was that effects upon incentivizing drugs for infectious diseases were hardly discussed. The outcome of the TRIPS negotiations, which provided strong patent protection for Viagra diet pills, and weak or uncertain protection for life-saving vaccines, presents a conundrum: compulsory licensing allows access to these existing important drugs, but would theoretically lead to a failure to incentivize the production of new essential medicines for infectious diseases.

Lanjouw’s solution—of providing patents for global diseases only in high-income markets and providing patents for communicable diseases in low-income markets—solves the theoretical problem. Low-income countries would have access to drugs for global diseases, and pharmaceutical companies would innovate drugs for communicable diseases, which they would not have incentive to create if not for a patent. Regardless of whether this idea would work in practice, the tenor of the TRIPS negotiations make it clear that this solution would not be politically feasible. If anything, powerful constituents such as the American pharmaceutical industry want to protect the worldwide viability of their patents for blockbuster drugs, even in the least developed countries, because they fear competition for the manufacture of these drugs. At the same time, the American pharmaceutical industry is likely to compromise on patents for little-known diseases like schistosomiasis because drug companies do not rely on these products for revenues.

The case study of India highlighted the problem of incentivizing R&D for infectious disease and others. In India, the institution of a patent regime apparently succeeded at encouraging R&D and domestic innovation. However, contrary to patent supporters’ insinuations, the provision of patents did not incentivize Indian companies to direct R&D towards communicable diseases. Rather, Indian pharmaceutical companies either chose to invest in capturing the most profitable markets in high-income countries, or took a safe route by pairing with MNCs or working in areas that required less technological capability. Preliminary evidence indicates that Indian pharmaceutical companies have even been shifting their resources away from research on communicable diseases in order to concentrate on global disease.

As this essay has shown, standardized international patent protection under TRIPS does not—and was not truly meant to—incentivize innovation of drugs for communicable diseases, either theoretically or empirically. It is dangerous to mistake either side of the TRIPS negotiations as avid advocates of incentivizing innovation of drugs for communicable diseases, because despite a few throwaway statements to that effect, they were preoccupied with other things. One thus should not lethargically rely upon existing patent regimes to bolster development of drugs, because the one-size-fits-all approach of TRIPS is not tailored towards incentivizing R&D for communicable diseases.

The principles discovered through examination of the TRIPS negotiations and the Indian pharmaceutical industry is that the problem is really about markets. The American pharmaceutical industry sought to protect its profitable market, and the Indian drug companies sought to find a new, similarly profitable consumer base. Thus, as aforementioned scholars have indicated, there is a lack of drugs for communicable diseases because there is not enough of a market for them. Patent rights can provide some certainty for pharmaceutical companies and some price bargaining power with other countries’ governments, but they cannot create a market that did not exist in the first place.

Kremer and Glennerster (2005) offer a solution to the lack of markets for communicable diseases: the promise of a monetary prize for the development of a drug serving primarily low-income countries.[225] Like the patent regime, these prizes are “pull programs” as opposed to “push programs,” which means they grant ex post rather than ex ante incentives.[226] Pull programs have the advantage of motivating scientists and businesses to work as cost-efficiently as possible and focus on the most promising projects, whereas push programs, which provide grants and subsidies for research, might encourage companies to exaggerate their likelihood of success.

Kremer and Glennerster argue that in addition to the small size of markets in low-income countries, market failures exist with respect to communicable diseases because the surplus benefit of curing such disease—a healthy and risk-free society—does not accrue in each person who must buy the cure.[227] In other words, not everyone who should buy a drug will buy it, when the high price reflects the value to society, not just to the individual. But society experiences a loss when the individual fails to buy the drug. Moreover, though governments are major purchasers of vaccines and other drugs that benefit low-income countries, they exercise too much bargaining power against pharmaceutical companies and force prices down.[228]

The scheme envisioned by Kremer and Glennerster involve a sponsor, such as a charitable organization, the World Bank, or an industrialized country government, which would commit in advance to a certain price for each of the people immunized by the pharmaceutical company’s vaccine.[229] A pharmaceutical company, seeking profit, would do R&D for the enumerated infectious disease as long as the offered price is high enough.

An advantage of this system in comparison with a strong patent regime is that it has a more predictable outcome with respect to incentivizing R&D for infectious diseases. Either a pharmaceutical company would end up developing the drug and selling it to the sponsor, or no pharmaceutical company would develop the drug and the sponsor would keep the money, without any harm done. Under a patent regime, in contrast, companies may only be incentivized to create blockbuster drugs for high-income countries; and the patent has many market-distorting effects such as the grant of a monopoly and funneling of research only towards products that can be patented. And as in the case of the Indian pharmaceutical industry, the grant of patents can have unforeseen consequences on third party inventors.

Kremer and Glennerster should be cautious about the political feasibility of their proposal, however. They list the United States as a potential sponsor because it has already offered rewards through Project Bioshield.[230] But Project Bioshield, meant to protect the American populace against biological warfare, is supported by citizens in fear of terrorist attacks. Whether citizens will stand behind a prize of several billion dollars for the cure of a disease that does not especially affect Americans is more dubious. Kremer and Glennerster’s suggestion of World Bank loans to low-income countries that wish to provide a prize are a more likely alternative.

The outcome of the debate over TRIPS and the effectiveness of patent protection has not been happy; none of the parties are completely satisfied, the fragmentation of interests during the negotiations created uncertainty, and the Indian pharmaceutical example shows we are not closer to incentivizing development of drugs for communicable diseases. The story of the Guinea worm at the beginning of this essay illustrates the extent to which the cure of an epidemic depends upon opportunity, the personal interest of an influential leader, and mobilization toward a goal. Only with these elements can we begin to make inroads in the problem of infectious disease.

[1] Donald G. McNeil, Jr., Dose of Tenacity Wears Down a Horrific Disease , N.Y. TIMES , March 26, 2006. Fewer than 12,000 cases of Guinea worm were reported last year. Id.

[2] Id.

[3] Id.

[4] Soon after Carter found out about the Guinea worm, he spoke with Mohammad Zia ul-Haq, then president of Pakistan. General Zia had no knowledge of the disease, despite that 2,000 villages in Pakistan had Guinea worm. Id.

[5] For example, the DuPont Chemical Company developed a fine mesh to filter out flies that carried Guinea worm larvae. Philanthropists include the Bill and Melinda Gates Foundation, which donated $16 million to Carter’s Guinea worm eradication campaign. Id.

[6] And even these two factors are not quite enough; the well-funded international drive to eliminate polio has met resistance—even from the populace it is attempting to benefit. The northern states of Nigeria halted the polio vaccination campaign in their region amid rumors that the vaccine contained AIDS or would sterilize girls. As a result, several years later, 18 polio-free countries experienced outbreaks. Though the polio effort is better-financed than any other disease eradication campaign ($4 billion dollars have been spent so far), complete elimination of polio has continued to elude public health officials. Celia W. Dugger and Donald G. McNeil, Jr., Rumor, Fear and Fatigue Hinder Final Push to End Polio , N.Y. TIMES , March 20, 2006.

[7] Michael Reich, The Global Drug Gap , 287 SCIENCE 1979, 1979-80 (March 17, 2000).

[8] Shayana Kadidal, Note, Plants, Poverty, and Pharmaceutical Patents , 103 YALE L.J. 223, 254 (1993); see also John Merson, Bio-prospecting or Bio-piracy: Intellectual Property Rights and Biodiversity in a Colonial and Postcolonial Context , 15 OSIRIS 282, 295 (2000) (advocating multilateral UN agreements such as the Convention on Biodiversity and WTO/TRIPS protocols). But see Sabrina Safrin, Hyperownership in a Time of Biotechnological Promise: The International Conflict to Control the Building Blocks of Life , 98:64 AM. J. INT’L L. 641, 642 (asserting that overall, the “developed countries’ patent-based systems and the developing countries’ sovereign-based systems have overreached in permitting or asserting ownership rights over genetic material”).

[9] See Walsh McDermott, Pharmaceuticals: Their Role in Developing Societies , 209 SCIENCE 240, 244 (arguing that to induce the pharmaceutical industry is to help cure diseases in developing countries, there must be proper incentives for scientists such as financial subsidies and waivers of legal restrictions).

[10] William Jack and Jean O. Lanjouw, Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute? 19 WORLD BANK ECON. REV. 45, 48 (2005) (suggesting both tax credits and subsidies for attempts at innovation).

[11] See Roy Widdus and Katherine White, INITIATIVE ON PUBLIC-PRIVATE PARTNERSHIPS FOR HEALTH, FINANCING STRATEGIES FOR PRODUCT DEVELOPMENT AND THE POTENTIAL ROLE OF PUBLIC-PRIVATE PARTNERSHIPS vii (2004), http://www.who.int/intellectualproperty/topics/ppp/en/CombatingDiseases-Abridged.pdf.

[12] Reich at 1981. See also Amir Attaran and Brigitte Granville, Who Needs to Do What? , in DELIVERING ESSENTIAL MEDICINES: THE WAY FORWARD , 176, 187 (Amir Attaran and Brigitte Granville, eds., 2004) (suggesting that rich countries finance existing public-private partnerships to encourage the private sector to invest in R&D); Barend Mons, et al., Partnership Between North and South Crystallizes Around Malaria , 279 SCIENCE 498, 498 ( Jan. 23, 1998).

[13] Traci Phillips, Copyrights and Wrongs , 4 MARQ. INTELL. PROP. L. REV. 96, 97 (stating it is in developing countries’ best interest to provide intellectual property protection); Jim Attridge and Rifat Atun, Economic Regulatory Frameworks for the Pharmaceutical Sector in Middle-Income Countries , in DELIVERING ESSENTIAL MEDICINES: THE WAY FORWARD , 67, 91 (arguing that strong patent protection for medicines is essential for the long-term development of the pharmaceutical sector).

[14] Michael Kremer, Patent Buyouts: A Mechanism for Encouraging Innovation , Q. J. ECON 1137, 1138 (November 1998) (proposing a mechanism where government would offer to buy patents at a private auction-determined value multiplied by a fixed markup. The pharmaceutical patents would then be released into the public domain).

[15] The World Health Report: Fighting Disease Fostering Development , World Health Organization, 1996, http://www.who.int/shr/1996/en/whr96_en.pdf .

[16] References throughout this essay to low-, middle-, and high-income countries are based upon World Bank classifications of all 184 World Bank member countries and countries with populations of over 30,000 people. Low-income countries are those that have a per capita gross national income (GNI) of $825 or less. Examples of countries in this category are Afghanistan, Bangladesh, and Somalia. Lower-middle-income countries have a GNI per capita of $826 to $3,255. Liberia, China, and Honduras are lower-middle-income. Upper-middle-income countries have a $3,256 to $10,065 GNI per capita. South Africa, Mexico, and the Czech Republic are upper-middle-income. High-income countries have a GNI per capita of $10,066 or higher. They include the United States and Japan. Data and Statistics: Country Classification , World Bank, at www.worldbank.org/countrydata/countrydata.html (Click on “Quick Reference Tables” then “Country Classification”). See also World Bank List of Economies (April 2006) , at http://siteresources.worldbank.org/DATASTATISTICS/Resources/CLASS.XLS , for income classifications of each country.

[17] The WHO is a United Nations agency whose goal is “the attainment by all peoples of the highest possible level of health. About WHO , World Health Organization, http://www.who.int/about/en/ .

[18] Colin D. Mathers, et al., Measuring the Global Burden of Disease and Risk Factors, in GLOBAL BURDEN OF DISEASE AND RISK FACTORS 1, 3 (April 2006), at http://files.dcp2.org/pdf/GBD/GBD01.pdf.

[19] Id. at 53.

[20] Author’s calculations based on data from Revised Global Burden of Disease (GBD) 2002 Estimates , WHO, at http://www.who.int/healthinfo/bodgbd2002revised/en/index.html (Under “Estimates by Income Level,” click on “Disability adjusted life years”).

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] While low-income countries suffer mainly and disproportionately from Group I diseases, Group II diseases are also a major concern. Four Group II diseases were among the top 10 causes of death in 2001 in both high- and low-income countries: ischemic heart disease, cerebrovascular disease, lower respiratory infections, and chronic obstructive pulmonary disease. Colin D. Mathers, et al., The Burden of Disease and Mortality by Condition: Data, Methods, and Results for 2001, in GLOBAL BURDEN OF DISEASE AND RISK FACTORS 45, 70 (April 2006), at http://files.dcp2.org/pdf/GBD/GBD03.pdf.

[28] Revised Global Burden of Disease (GBD) 2002 Estimates , supra note 20.

[29] Among the reasons why low-income countries suffer disproportionately from communicable diseases is that they tend to have warm climates and associated organisms that carry these diseases, poor water sanitation and educational systems, inadequate health care, and lack of drugs that could prevent or cure the diseases. Professor William Fisher, Lecture: Drugs, Law & the Global Health Crisis (March 14, 2006).

[30] See Michael A. Riddiough and Jane Sisk Willems, Federal Policies Affecting Vaccine Research , 209 SCIENCE 563, 563 ( Aug. 1, 1980) (stating that the manufacture of vaccine R&D and production are influenced by the size of the potential market for a given vaccine product and the prospect of adequate selling prices); Peter Aldhous, Fighting Parasites on a Shoestring , 264 SCIENCE 1857, 1858 (1994).

[31] Bernard Pécoul, et al., Access to Essential Drugs in Poor Countries: A Lost Battle? 281(4) JOURNAL OF THE AMERICAN MEDICAL ASSOCIATION 361, 364 (Jan. 27, 1999).

[32] Id. See also , David Turnbull, The Push for a Malaria Vaccine , 19 SOC. STUD. SCIENCE 282, 291 (1989) (stating that the highest stake for finding a malaria vaccine for the U.S. was military).

[33] WHO, STATE OF THE WORLD’S VACCINES AND IMMUNIZATION 109 (1996), at http://www.who.int/vaccines-documents/DocsPDF/www9532.pdf.

[34] Jon Cohen, Are Researchers Racing Toward Success, Or Crawling? 265 SCIENCE 1373, 1374 (Sept. 2, 1994) (stating that the AIDS vaccine enterprise has been “catering to the needs of the developed world” which comprises fewer than 10% of the world’s new HIV infections. As a result, the industry focuses only on “a small number of potential vaccine approaches” and this creates “important gaps” in ongoing research). This is despite the fact that “We know more about the biology of [AIDS] than for most other microorganism and infectious diseases. . .” Peter Piot, The Science of AIDS: A Tale of Two Worlds , 280 SCIENCE 1844, 1844 (June 1988).

[35] Ruth Levine, et al., MAKING MARKETS FOR VACCINES: IDEAS TO ACTION 11 (Center for Global Development 2005).

[36] New Medicines Database , PhRMA, at http://newmeds.phrma.org/ (Scroll down “Search by Indication” and click on a disease to view the products being developed for that disease).

[37] Preserving Incentives for Innovation , PhRMA, http://www.innovation.org/index/cfm/InnovationToday/KeyIssues/Preserving_Incentives_for_Innovation.

[38] See, e.g., Patent Protection Crucial for the New Generation of HIV/AIDS Medicines , (July 13, 2004), at http://www.pfizer.com/pfizer/are/news_releases/2004pr/mn_2004_0713.jsp.

[39] United States Constitution, Art. 1, §8.

[40] Joseph A. DiMasi, et al., The Price of Innovation: New Estimates of Drug Development Costs , 22 J. HEALTH ECON. 151, 166 (2003), at http://www.cptech.org/ip/health/econ/dimasi2003.pdf.


[42] A strong argument advocating the offer of prizes in return for the development of drugs for low-income countries is presented in Michael Kremer and Rachel Glennerster, STRONG MEDICINE: CREATING INCENTIVES FOR PHARMACEUTICAL RESEARCH ON NEGLECTED DISEASES ( Princeton University Press 2004) . Kremer and Glennerster believe that the main reason why drugs are not designed for low-income countries is the lack of markets for these drugs. They propose that governments or NGOs should commit themselves to binding contracts to pay a specified amount of money for drugs that treat communicable diseases and pass predetermined efficacy standards.

[43] John Stuart Mill noted that patent “leaves nothing to anyone’s discretion; because the reward conferred by it depends upon the invention’s being found useful, and the greater the usefulness, the greater the reward.” Steven Shavell and Tanguy van Ypersele, Rewards Versus Intellectual Property Rights , XLIV J. L. ECON. 525, 527 (Oct. 2001) (citing John Stuart Mill, PRINCIPLES OF POLITICAL ECONOMY WITH SOME OF THEIR APPLICATIONS TO SOCIAL PHILOSOPHY 563 (1872)), at http://www.law.harvard.edu/faculty/shavell/pdf/44_J_Law_Econ_525.pdf .

[44] TRIPS, AIDS, and Generic Drugs , http://www.avert.org/generic.htm.

[45] The predominant example is AIDS medications developed primarily for high-income markets, and sold for high prices in low-income countries. See Michael Balter, Global Program Struggles to Stem the Flood of New Cases , 280 SCIENCE 1863, 1864 (Nov. 1998) (quoting Peter Piot, executive director of the UN’s special program on AIDS, who is preoccupied with low-income countries afflicted by AIDS but which cannot afford treatment: “This is my single biggest concern. For the least developed countries, where health expenditures are $10 or $20 per capita per year, at this point I don’t see a solution. For all the other problems linked to HIV, I see the road and I see which direction to go, but for this problem I don’t see it”).

[46] See E. Bement & Sons v. National Harrow Co. , 186 U.S. 70, 91 (1902) (stating “. . . the general rule is absolute freedom in the use or sale of rights under the patent laws of the United States. The very object of these laws is monopoly. . .”).

[47] On the other hand, free market competition may not result in lower drug prices. See Amir Attaran, Understanding Patents and Out-Licensing in the Procurement of Anti-Retroviral Medicines , in DELIVERING ESSENTIAL MEDICINES: THE WAY FORWARD 162, 164-65 (finding that unqualified generic medicines often cost more than brand name products).

[48] Raife Giovinazzo, Essay: Patents, Copyrights and the Supply of Invention (Dec. 2003) [draft], at http://home.uchicago.edu/~rgiovina (click on “Essay: Patents, Copyrights and the Supply of Invention”).

[49] Proponents of patent protection tend to cite anecdotal examples, such as the correlation between the United States’ strong patent laws and dominant pharmaceutical industry. See, e.g., Dr. Mike Magee, Patents (citing William Clinton Address, World Economic Forum (Jan. 29, 2000)), at http://www.healthpolitics.com/media/prog_05/transcript_prog_05.pdf ; see also Preserving Incentives for Innovation , PhRMA, at http://www.innovation.org/index.cfm/InnovationToday/KeyIssues/Preserving_Incentives_for_Innovation.

[50] Stephan Kinsella, There’s No Such Thing As a Free Patent (Mar. 7, 2005) (citing Murray N. Rothbard, MAN, ECONOMY, AND STATE (Mises Institute 2004)), at http://www.mises.org/fullstory.aspx?Id=1763.

[51] N. Stephan Kinsella, Against Intellectual Property , 15:2 J. LIBERTARIAN STUD. 1, 14 (Spring 2001), at http://www.mises.org/journals/jls/15_2/15_2_1.pdf.

[52] John H. Barton, Reforming the Patent System , 287 SCIENCE 1933, 1933 (Mar. 17, 2000).

[53] See Michael Kremer, Pharmaceuticals and the Developing World , 16(4) J. ECON. PERSPECTIVES 67, 68 (Fall 2002) (arguing, “While intellectual property rights undoubtedly prevent some from obtaining needed pharmaceuticals, eliminating these rights would not help the majority of those without access to drugs”).

[54] Amir Attaran and Brigitte Granville, Who Needs to Do What? in DELIVERING ESSENTIAL MEDICINES: THE WAY FORWARD 176, 176 (asserting that “patents are rarely the primary barrier to accessing medicines in low-income countries, and are only infrequently the barrier in lower- and upper-middle-income countries”).

[55] Id.

[56] Though some scholars argue that patent protection in developing countries would channel resources towards finding new markets such as drug production for low-income country diseases, see supra page 11, others acknowledge that effects are uncertain. See, e.g., Keith Maskus, INTELLECTUAL PROPERTY RIGHTS IN THE GLOBAL ECONOMY 160 (IIE 2000) (noting, “It is remarkable how little is known about the potential effects of changing global policy regimes [by providing pharmaceutical patent protection], despite the fact that the pharmaceutical sector is the most extensively studied of all IP-sector industries”).

[57] Anupam Chander, The Fight over Patent Protection for Pharmaceuticals: A Major Ongoing Negotiation Will Set the Rules (March 6, 2003), http://writ.news.findlaw.com/commentary/20030306_chander.html.

[58] Modification of WTO Rules on Protection of Pharmaceuticals , 97 AM. J. ECON. L. 981, 981 (2003).

[59] Least-developed country members do not need to provide patent protection for pharmaceutical products until January 1, 2016. Declaration on the TRIPS Agreement and Public Health (Nov. 14, 2001), Doc. WT/MIN(01)/DEC/2 (Nov. 20, 2001) (“Doha Declaration”), paragraph 7.

[60] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994), Art. 27(1).

[61] Agreement on Trade-Related Aspects of Intellectual Property Rights, Art. 33.

[62] Doha Declaration, paragraph 5(b), states: “Each Member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.”

[63] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994), Art. 31. The phrasing is in the form of an assumption: “Where the law of a Member allows for other use of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government...” Id.

[64] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994), Art. 31(h).

[65] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994), Art. 31(c).

[66] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994), Art. 31(b).

[67] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994), Art. 31(f).

[68] Doha Declaration, paragraph 4.

[69] Doha Declaration, paragraph 5(c).

[70] Doha Declaration, paragraph 6.

[71] “Eligible importing members” include any least-developed country member, and any other member that has notified the Council for TRIPS that it intends to participate in the system as an importer. Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, WT/L/540 (Aug. 30, 2003) (“Implementation of Doha Declaration”), paragraph 1(b).

[72] Implementation of Doha Declaration, paragraph 2(b).

[73] Implementation of Doha Declaration, paragraph 2(b)(i).

[74] Implementation of Doha Declaration, paragraph 3.

[75] Implementation of Doha Declaration, paragraph 4.

[76] RESOURCE BOOK ON TRIPS AND DEVELOPMENT , United Nations Conference on Trade and Development 3 (Cambridge University Press 2005).

[77] After the signing of the GATT, the WTO was created.

[78] Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 25 March 1987, MTN.GNG/NG11/1, at http://www.wto.org.


[80] Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 12-14 July 1989, MTN.GNG/NG11/14, http://www.wto.org.

[81] These developed countries, especially the United States and Switzerland, had the most profitable pharmaceutical industries. They formed a coalition to advance “broad strategic objectives throughout the negotiations.” RESOURCE BOOK ON TRIPS AND DEVELOPMENT, at 4.

[82] Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 17 November 1987, MTN.GNG/NG11/4, at http://www.wto.org.

[83] Id.

[84] Id. Developing countries continued to be dissatisfied with the direction of negotiations 3 years later. See Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 2, 4, and 5 April 1990, MTN.GNG/NG11/20, at http://www.wto.org (developing countries stated that proposals tended “to go beyond . . . trade-related aspects of intellectual property and into matters that were questions of domestic policy”).

[85] Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 14 December 1987, MTN.GNG/NG11/5, http://www.wto.org.


[87] One person from a developing country commented, “The governments have simply reproduced these reports without the slightest verification. . . . We now see a new paradigm: the losses of private companies are losses of the developed countries. And the losses of the developed countries are losses for all countries, for all peoples of the world.” Id.

[88] Id.


[90] Jean O. Lanjouw and Iain M. Cockburn, New Pills for Poor People? Empirical Evidence after GATT, 29(2) WORLD DEVT , 265, 268 (2001).

[91] Id.

[92] Id.

[93] Id. at 268, 269.

[94] Sell, at 222.


[96] Id. Cf. , Steve Lohr, The Intellectual Property Debate Takes a Page from 19th Century America, N.Y. TIMES, October 14, 2002, at C(1). Lohr notes that in the 19th century, American law offered copyright protection only to citizens and residents of the U.S. The U.S. did not provide copyright protection for foreign works until 1891, when it had a bustling literary trade of its own, and wanted copyright protection for American authors abroad. See also , Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 11-12 May 1989, MTN.GNG/NG11/12, at http://www.wto.org (where representatives noted that some European countries had only recently adopted patent protection for pharmaceuticals, and that others would not adopt patent protection until 1992 or 1995).

[97] Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 12 September 1989, MTN.GNG/NG11/14, http://www.wto.org .

[98] Id.

[99] Id. Patent protection in developing countries would likely help high-income, developed countries again. For, “the overwhelming majority of patents granted by developing countries are granted to foreigners,” and “a significant number of patents granted in any given developed country are granted to nationals of that country.” A. Samuel Oddi, The International Patent System and Third World Development: Reality or Myth? 1987 DUKE L. J. 831, 843 (1987).

[100] Id.

[101] See, e.g. id, (where a delegate noted that most countries granted only product patents, and the grant of process patents would be a marked shift in regime).

[102] Meeting of 2, 4, 5 April, supra note 77.

[103] Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Chairman’s Report to the GNG, 23 July 1990, MTN.GNG/NG11/W/76, at http://www.wto.org . Listed conditions under which compulsory licenses could be granted were: 1) to “remedy an adjudicated violation of competition laws,” 2) where the “invention claimed in a later patent cannot be exploited without infringing an earlier patent,” or 3) where exploitation of the patent did not satisfy the needs of the local market within 3 years from the date of the grant of the patent application. Id.

[104] Suggestion by the United States for Achieving the Negotiating Objective, United States Proposal for Negotiations on Trade-Related Aspects of Intellectual Property Rights, Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, MTN.GNG/NG11/W/14, 20 Oct. 1987, Nov. 3, 1997.


[106] Id. at 465-66.

[107] See, e.g. Roger Bate and Richard Tren, Brazil’s AIDS Program: A Costly Success , American Enterprise Institute for Public Policy Research (Dec. 12, 2005), at http://www.aei.org/publications/pubID.23576/pub_detail.asp.

[108] Harpal Kaur, TRIPS AND ECONOMIC GROWTH IN DEVELOPING COUNTRIES: A BLOCKAGE OR CATALYST FOR DEVELOPMENT? 22 (Harvard University 2003) (arguing for transition periods to remain flexible).

[109] Thomas J. Lueck, The World Trade Agreement: Corporate Reaction; Trade Accord Draws a Mix of Reviews , N.Y. TIMES , December 15, 1993, at D6.

[110] Id.

[111] Keith Bradsher, Compromises Edge GATT Nearer New Pact , N.Y. TIMES , December 5, 1993, at p. 26.

[112] Id.

[113] Peter Behr, 117 Nations’ Representatives Approve Historic Trade Pact , WASH. POST , Dec. 15, 1993, at A41.

[114] Constantine Michalopolous, Developing-Country Issues for WTO Multilateral Trade Negotiations , TRADE, DEVELOPMENT AND POLITICAL ECONOMY 102 (Palgrave 2001) (stating general concerns with the TRIPS negotiations).

[115] Pictures of the building are available at http://www.wto.org/french/res_f/booksp_f/wto_building_f.pdf.

[116] Based on the author’s review of TRIPS Council meeting minutes from 1998-2005. Meeting minutes can be found on http://www.wto.org.

[117] Special Discussion on Intellectual Property and Access to Medicines , TRIPS Council, Minutes of Meeting on 18-22 June 2001, IP/C/M/31, at http://www.wto.org.

[118] See, e.g., id., Statements of representatives of Zimbabwe, Brazil, and Tanzania.

[119] Id.

[120] Agreement on Trade-Related Aspects of Intellectual Property, Art. 7.

[121] Agreement on Trade-Related Aspects of Intellectual Property, Art. 8.

[122] Comments of the Holy See, Special Discussion on Intellectual Property and Access to Medicines.

[123] In fact, the WTO had been criticized for its slow response to the AIDS crisis. The WHO, in contrast, responded by setting goals such as the 3x5 initiative to put 3 million people on treatment by 2005. Professor Sofia Gruskin, Director, Program on International Health and Human Rights, Francois-Xavier Bagnoud Center for Health and Human Rights, Lecture: The Role of Human Rights in HIV Testing: Current Challenges (March 2, 2006).

[124] Comments of Representative of Canada, Council for Trade-Related Aspects of Intellectual Property Rights, Meeting on 19 and 20 September 2001, IP/C/M/33, at http://www.wto.org.

[125] Statement of Representative of Japan, Special Discussion on Intellectual Property and Access to Medicines.

[126] See, e.g., Statement of Representative of United States, at Meeting on 19 and 20 September 2001 (presenting a text sponsored by Australia, Japan, Canada and Switzerland).

[127] See, e.g. , Statement of Representative of Canada, at Meeting on 19 and 20 September 2001.

[128] Louisiana Lush, Why Do the Poor Lack Access to Medicines? in DELIVERING ESSENTIAL MEDICINES: THE WAY FORWARD , 7, 7 (Amir Attaran and Brigitte Granville, eds., 2004).

[129] Anthrax Scare Draws New Focus on IPRs & Access to Medicines , 5(36) BRIDGES, Oct. 23, 2001, at http://www.ictsd.org/weekly/01-10-23/story2.htm .

[130] Elizabeth Olson, Drug Issue Casts a Shadow on Trade Talks , N.Y. TIMES , Nov. 2, 2001, at W(3).

[131] Anthrax Scare Draws New Focus on IPRs & Access to Medicines, supra note 118.

[132] In December 2002, the United States blocked a consensus because it could not agree with the other countries on the scope of diseases. Council for Trade-Related Aspects of Intellectual Property Rights, Meeting of 25-27 and 29 November, and 20 December 2002, IP/C/M/38, at http://www.wto.org.

[133] See Frederick M. Abbott, The WTO Medicines Decision: World Pharmaceutical Trade and the Protection of Public Health , 99 AM. J. INTL. L. 317, 327 (2005).

[134] Id. at 328.

[135] Id. at 327.

[136] See, e.g., Meeting on 18-22 June 2001 (where India, Zimbabwe, Brazil, the African Group, Bolivia, Venezuela, South Africa and Tanzania associated with each others’ positions).

[137] See Abbot, at 334-38.

[138] Id . at 334.

[139] Implementation, paragraph 2(a)(i). Least developed countries do not need to establish that their lack of manufacturing capacity. Id.

[140] See Council for Trade-Related Aspects of Intellectual Property Rights, Meeting on 25-26 and 28 October 2005, IP/C/M/49, http://www.wto.org.

[141] See Negotiating Group on Trade-Related Aspects of Intellectual Property Rights, Meeting of 11, 12 and 14 December 1989, MTN.GNG/NG11/17, at http://www.wto.org (where several participants agreed that there mere provision of temporary arrangements for developing countries was too narrow a solution to the development issue, and suggesting that in order for the agreement to be truly multilateral, special provisions for developing countries, such as those with respect to pharmaceutical patents, should be more permanent).

[142] See William Jack and Jean O. Lanjouw, Financing Pharmaceutical Innovation: How Much Should Poor Countries Contribute? 19(1) WORLD BANK ECON. R. 44, 63 (2005) (arguing that “TRIPS changes the structure of contributions so that a greater share of total net revenue comes from sales in poorer countries”).

[143] Abbot at 338.

[144] Even the United States agreed that compulsory licenses should be granted for these epidemics when necessary, and that exporting countries with manufacturing capacity could provide drugs for AIDS, malaria and tuberculosis to least developed countries that could not produce them on their own. Id. at 329-30.

[145] PhRMA defended their slow response to the AIDS crisis by arguing that strong intellectual property protection and limits to compulsory licensing were necessary for their provision of drugs to low-income countries. See Letter from Miranda Ip to The Bush Administration, Nov. 28, 2000, at http://www.stanford.edu/class/siw198q/modelppr/aidsdrugs-mip.htm.

[146] Jean O. Lanjouw, A New Global Patent Regime for Diseases: U.S. and International Legal Issues , 16(1) HARV. J. L. TECH. 1, 6-7 ( Fall 2002).

[147] Id at 8.

[148] Id. at 19.

[149] TRIPS and the Doha Implementation do provide for “adequate remuneration” for compulsory licenses, but the definition of “adequate” remains open-ended. Some TRIPS Council representatives have suggested that the term “adequate” should take into account the urgency of the need for the drug and the importing countries’ ability to pay. In the face of such uncertainty, it is unclear that this “adequate” remuneration would incentivize pharmaceutical companies to enter the low-income market if they haven’t found sufficient incentive to enter it before TRIPS or the Doha Implementation. See Comment: Federal Circuit Upholds Patents for AIDS Treatment Drug—Burroughs Wellcome Co. v. Barr Laboratories, Inc., 108 HARV. L. REV. 2053, 2057 (1995) (cautioning against uncertainty in patent rights).

[150] Without the support of pharmaceutical companies from developed countries, reliance on pharmaceutical companies in developing countries is a necessity. See R.G. Buckles, It is Appropriate to Create New Pharmaceutical Products within Developing Countries, PROC. R. SOC. LOND. B209, 165, 166 (1980) ( arguing for local production when there are no markets in the developed world for products required in the local region).

[151] India will provide a good basis for analyzing the effects of TRIPS and the Doha Implementation because it had very weak patents for pharmaceuticals before TRIPS.

[152] Yingyong Tanthanapongphan, PHARMACEUTICALS: POLICIES AND IMPLICATIONS FOR DEVELOPING COUNTRIES 40 (Harvard University 2003).

[153] But see , Traci Phillips, Copyrights and Wrongs , 4 MARQ. INTELL. PROP. L. REV. 96, 97 (2000) (arguing it is in developing countries’ best interest to offer IP protection).

[154] Id . at 40-41.

[155] Id. at 41.

[156] India has since been reluctant to trust MNCs and foreign investment. Michael Santoro, Should LDCs Love MNCs? 32(3) J. INT’L BUS. STUD. 94, 95 ( Third Quarter 2001).

[157] Introduction, Office of the Controller General of Patents, Designs and Trademarks, at http://www.patentoffice.nic.in/ipr/patent/mop2.pdf.

[158] Tanthanapongphan at 42.

[159] The Patents Act (1970) Chapter II(5)(a).

[160] The Patents Act (1970) Chapter II(5)(a).

[161] The Patents Act (1970) Chapter VIII(53)(1)(a).

[162] The Patents Act (1970) Chapter VIII(53)(1)(b).

[163] The Patents Act (1970) Chapter XVI(84)(1).

[164] K. Bala and Kiran Sagoo, Patents and Prices , 112 HAINEWS (April/May 2000), at http://www.haiweb.org/pubs/hainews/Patents%20and%20Prices.html . Ciprofloxacin, nifedipine, acyclovir and atenolol are on the WHO list of essential drugs. Ranitidine is included in the essential drugs lists of some developing countries. Id.

[165] Indian Parliament Approves Controversial Patents Bill , International Center for Trade and Sustainable Development, Mar. 23, 2005, at http://www.ictsd.org/weekly/05-03-23/story1.htm.

[166] India/Africa: Threat to Generic Drugs , AFRICA FOCUS BULL. , Mar. 7, 2005, at http://www.africafocus.org/docs05/ind0503.php.

[167] To bolster India’s domestic pharmaceutical industry, the government also imposed a number of protectionist schemes, such as high tariffs for foreign pharmaceutical imports. See Tanthanapongphan at 51-57.

[168] See Indian TRIPS-Compliance Legislation Under Fire, 9(1) BRIDGES (Jan. 19, 2005) (reporting comments of Indian Commerce and Industry Minister Kamal Nath), at http://www.ictsd.org/weekly/05-01-19/story2.htm.

[169] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994) Art. 70.8.

[170] Agreement on Trade-Related Aspects of Intellectual Property Rights (1994) Art. 70(9).

[171] The Patents (Amendment) Act (2005) § 4.

[172] The Patents (Amendment) Act (2005) § 38(a).

[173] The Patents (Amendment) Act (2005) §92(A)(1).

[174] Prabhu Ram, India’s New “TRIPS-Compliant” Patent Regime: Between Drug Patents and the Right to Health , 5 CHI-KENT J. INTELL. PROP. 195, 206 (2006).

[175] Cheri Grace, The Effect of Changing Intellectual Property on Pharmaceutical Industry Prospects in India and China: Considerations for Access to Medicines , Health Systems Resource Centre 13 (June 2004). Other estimates are quite different. See, e.g., Indian Pharmaceutical Industry: An Overview, at http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-industry/ (estimating the market to be worth $4.5 billion).

[176] Id.

[177] Dinar Kale, Learning to Innovate: The Indian Pharmaceutical Industry Response to Emerging TRIPS Regime 4, Druid Academy Conference (Winter 2005).

[178] Alka Chadha, TRIPS and Patenting Activity: Evidence from the Indian Pharmaceutical Industry , Department of Economics, National University of Singapore 6 (2005), at http://nt2.fas.nus.edu.sg/ecs/pub/wp/wp0512.pdf .

[179] Grace, at 14.

[180] Indian Pharmaceutical Industry: An Overview, supra note 173.

[181] Patents, Pills and Public Health: Can TRIPS Deliver? The Panos Institute (2002).

[182] Hemant N. Joshi, Analysis of the Indian Pharmaceutical Industry with Emphasis on Opportunities in 2005 , 27(1) PHARM. TECH. N. AMER. 76, 76 (Jan. 2003).

[183] Id.

[184] For example, India had 1,780,000 confirmed cases of malaria in 2003. World Health Organization, India: Overview of Malaria Activities and Programme Progress, at http://rbm.who.int/wmr2005/profiles/india.pdf . See also AIDS Out of Control in India , CBS NEWS, April 11, 2004, at http://www.cbsnews.com/stories/2004/04/08/60minutes/main610961.shtml.

[185] Grace, at 22-23 (stating that India is “quickly becoming a global leader in new vaccine development”).

[186] See, e.g., Amelia Gentleman and Hari Kumar, AIDS Drug Provokes Patent Battle in India , HERALD TRIB. , May 11, 2006, at http://www.iht.com/articles/2006/05/10/news/aids.php (highlighting the importance to people in the African and Caribbean of AIDS drugs manufactured in India).

[187] Ishac Diwan and Dani Rodrik, Patents, Appropriate Technology, and North-South Trade , National Bureau of Economic Research, NBER Working Paper No. 2974, 1, 13 (May 1989), at http://www.nber.org/papers/w2974.pdf.

[188] Id. at 30.

[189] See generally , Jean O. Lanjouw and Iain Cockburn, Do Patents Matter?: Empirical Evidence After GATT , National Bureau of Economic Research, NBER Working Paper No. 7495 (2000).

[190] TRIPS, AIDS, and Generic Drugs , at http://www.avert.org/generic.htm (providing as an example of new inventions for developing countries, Cipla and Ranbaxy’s Fixed Dose Combination tablets).

[191] Jean O. Lanjouw, The Introduction of Pharmaceutical Product Patents in India: “Heartless Exploitation of the Poor and Suffering?” National Bureau of Economic Research, NBER Working Paper 6366, Jan. 1998.

[192] See, e.g. , Shyama V. Ramani and Augustin Maria, TRIPS: Its Possible Impact on Biotech Segment of the Indian Pharmaceutical Industry 675, 676 (Feb. 12-18, 2005) (finding that TRIPS is unlikely to have a substantial impact on Indian biopharmaceutical companies’ incentives to innovate)..

[193] Ranbaxy is the largest Indian pharmaceutical company. Overview, Ranbaxy Laboratories Limited, at http://www.ranbaxy.com/profile.htm.

[194] Grace, at 36.

[195] Lanjouw and Cockburn (2001) at 275 (observing that over the 1980s, pharmaceutical innovations accounted for 15 percent of inventions patented in the U.S. by Indian scientists; by the 1990s, this percentage rose to 25 percent, and spiked in 1997).

[196] Grace, at 37.

[197] Id.

[198] Id. at 23.

[199] Id.

[200] Morgan Stanley Report, Ranbaxy Laboratories, April 11, 2005 [on file with author] (converted from Indian rupees to American dollars by author).

[201] Morgan Stanley Report, Ranbaxy Laboratories, October 24, 2005 [on file with author] (converted from Indian rupees to American dollars by author).

[202] Joshi, at 86.

[203] Id.

[204] Id.

[205] Merck is a large American pharmaceutical company.

[206] Morgan Stanley Report, Merck & Co., May 17, 2005 [on file with author].

[207] Id.

[208] Hannah E. Kettler and Rajiv Modi, Building Local Research and Development Capacity for the Prevention and Cure of Neglected Diseases: the Case of India , Bulletin of the World Health Organization 742, 744 (2001), at http://www.who.int/bulletin/archives/79(8)742.pdf.

[209] Id.

[210] Id.

[211] Lanjouw and Cockburn (2001) at 282.

[212] Id . at 281.

[213] Id.

[214] Grace, at 40.

[215] Morgan Stanley Report, Ranbaxy Laboratories, 2004 [on file with author].

[216] On the other hand, a few smaller Indian companies plan to focus on markets that are not big enough to attract larger pharmaceutical companies. Grace, at 3. But evidence is too scanty to discuss this much further within the scope of this essay.

[217] Sean Eric Smith, Opening Up to the World: India’s Pharmaceutical Companies Prepare for 2005 , Asia/Pacific Research Center 28 (May 2000).

[218] Ramani, at 686.

[219] Grace, at 23. See also , Federation of Indian Chambers of Commerce and Industry, Competitiveness of the Indian Pharmaceutical Industry in the New Product Patent Regime , FICCI Report for National Manufacturing Competitiveness Council, March 2005, noting that many major pharmaceutical companies wish to outsource manufacturing to Indian companies which have much lower costs than western drug companies. This is also highly feasible because India contains the most FDA-approved manufacturing plants outside the U.S. Indian companies secured $75 million worth of manufacturing contracts in 2004. Id.

[220] Many companies, for instance, believe new drug discovery is too ambitious a short term goal and have pursued more modest programs by lending their skills to the ongoing projects of MNCs. Smith, at 25. Even large companies like DRL and Ranbaxy have opted for alliances with foreign firms. Id. at 26.

[221] Id. at 26.

[222] Id. at 26-27.

[223] Cf. New Medicines in Development: HIV/AIDS , PhRMA, Nov. 30, 2005, at http://www.innovation.org/index.cfm/FutureOfInnovatin/NewMedicinesinDevelopment/HIV-AIDS (listing charitable contributions of pharmaceutical companies in combating AIDS).

[224] In addition to purely moral considerations, the Universal Declaration of Human Rights, adopted by the General Assembly of the United Nation, states that “Everyone has a right to life, liberty, and security of person.” Universal Declaration of Human Rights, Art. 3 (1948). Moreover, under the International Convention on Civil and Political Rights, each country has the obligation to “take steps to ensure” the rights therein, including the right to life.

[225] See generally, Kremer and Glennerster (2005), supra note 42.

[226] Id . at 3-4.

[227] Id. at 29. The authors also mention lack of strong patent enforcement as a market failure that disincentivizes pharmaceutical companies from investing in markets without regulatory regimes.

[228] Id. at 43.

[229] Id. at 68.

[230] Id. at 120.