U.S. Betrayed by WTO Patent Policy

Published January 1, 2003

President George W. Bush’s diligence in enlisting allies to fight terrorism and disarm Saddam Hussein is paying off, but the United States all but capitulated in its efforts to protect vital pharmaceutical and biotech patents during recent trade talks.

While Bush’s recent diplomatic successes have been getting front-page attention, U.S. Trade Representative Robert Zoellick quietly has been stripping away patent protection for America’s pharmaceutical and biotechnology industries–apparently to appease the anti-capitalist delegates who dominate the World Trade Organization negotiations on global health.

That’s especially ironic because the Bush administration has stood up to the opponents of democratic capitalism in other crucial forums when the pressure was far greater. But Zoellick privately has told confidantes he is conceding on the patent protection issues because the pharmaceutical and biotech industries–unlike steel or agriculture–lack congressional support.

Although stopping the spread of global disease is a compassionate part of the Bush global doctrine, Zoellick’s latest concessions are a cave-in to activists more concerned about killing off free-market medicine than about saving lives.

Copy Any Patent

Their latest move–one Zoellick unwisely has acceded to–is to allow any country to import or make copies of any patent product any time to cover any public health problem. Indeed, James Love, the head of an anti-patent organization called the Consumer Project on Technology and an advisor to a number of African trade ministers, argues the new rule, if ratified at a forthcoming WTO meeting in Geneva, will take a sledgehammer to patent protections in the affluent world as well as in the Third World.

He notes correctly it is as much about an outbreak of asthma in America as it is about the current rampage of AIDS through most of Africa. It “goes beyond AIDS, malaria, and tuberculosis,” Love says. “Any health care item could be included. We want to use this in the United States, in Germany, and in Switzerland.”

The activists’ push for removing patent protections received its first big boost at the WTO’s negotiations on Trade-Related Aspects of Intellectual Property Rights on public health in Doha, Qatar, in November 2001.

There, a coalition of Third World countries and left-leaning non-governmental organizations such as Oxfam International pressured the United States and Europe to agree to revise international patent-protection rules to cope with massive public health epidemics. The deal allowed poor countries to seize any patent or import any generic drug needed in such emergency situations. It also banned pharmaceutical firms from challenging generic production of their drugs before their patents ran out.

Transfer of Wealth

Despite warnings at the time, U.S. negotiators failed to understand that it would open a Pandora’s box–that Third World nations and their activist allies would use it to rip off whichever patented drug they desired even if there was no genuine epidemic. That’s already happening in countries like India and Argentina, where large knockoff drug industries are flourishing.

In effect, the Doha agreement and the expansion of it that Zoellick is now pursuing constitute a gigantic transfer of wealth from the United States to poorer countries. Unfortunately, it is a transfer subsidized not only by American drug companies, which conduct the time-consuming and costly research that produces today’s miracle drugs, but by American consumers, who pay the true cost of the research each time they go to a pharmacy.

The fact is that existing patents are no barrier to obtaining essential medicines in developing countries. Thousands of drugs necessary to public health were never patented or are now off-patent. Donated or discounted brand-name HIV drugs already supplied by major U.S. pharmaceutical makers now are cheaper than the generic versions.

Countries such as South Africa that have been offered the chance to produce their own AIDS drugs have passed. Worse, many of the drugs that are shipped into Africa are adulterated, diverted, stolen, and then sent off to more lucrative markets.

The real goal is simply to scam American drug firms and American consumers. A case in point is Egypt, where both generic producers and the health ministry have claimed the right to make a copy-cat version of the popular Pfizer drug Viagra by claiming erectile dysfunction now constitutes a public health crisis.

It’s a sure bet that much of the knockoff Egyptian Viagra would be shipped northward across the Mediterranean to Europe and sold for an immense profit. That’s what happened recently to $20 million worth of discounted HIV drugs sent to Africa. Instead of helping AIDS victims there, they quickly were stolen and resold in Europe for top dollar.

Long-term Harm

The activists’ next step is to encourage patent infringement in the name of public health in America and Europe, thereby making intellectual property protection of new drugs pointless.

The result might mean lower prescription drug prices for consumers in the short term, but inevitably it will stifle private-sector innovation as profits dry up. Then the number of blockbuster new drugs to reach the market will dwindle and prices on more mundane drugs will rise steeply.

Robert Goldberg is a senior fellow at the Manhattan Institute for Policy Research and director of the Center for Medical Progress.