Some big pharmaceutical companies are up in arms about developing countries importing less expensive generic versions of drugs for which these companies hold a patent monopoly. But the procedure is perfectly legal, even under the World Trade Organization's pro-pharmaceutical-monopoly rules. The only question is whether these huge corporations - who used their political muscle in Washington to prevent our government from lowering the price of Medicare prescription drugs -- will intimidate other governments that are trying to provide essential medicines to their citizens.
Thailand became the latest target of this bullying last winter when it issued compulsory licenses for three drugs. Two were anti-AIDS drugs (efavirenz and lopinavir/ritonavir) and the third is used to treat patients with cardio-vascular disease (clopidogrel). A compulsory license allows for the production or import of a generic version of a patented drug, without the permission of the patent holder. It is completely legal, and in fact the United States has used compulsory licenses many times.
But the U.S. government has sided with the big pharmaceutical companies and put Thailand on a special Priority Watch List, which could potentially lead to trade sanctions against Thailand. Actual sanctions are unlikely, but Washington and its pharmaceutical allies have made a serious threat. Now that pressure is reportedly being used to block similar licenses for three cancer drugs.
Thailand is a developing country of 65 million people, with income per person of about $10,000, or less than one-fourth that of the U.S. The government estimates that the use of generic efavirenz will enable it to provide this anti-AIDS medicine to an additional 20,000 people, as compared to using the pharmaceutical giant Merck's branded version (called Stocrin).
The vast majority of developing countries have not exercised their rights to compulsory licensing, because of the pressure from PhRMA (the U.S. trade association of the big branded pharmaceutical companies) and the many politicians that are under its influence. This is a tragedy. Former President Bill Clinton, speaking in support of the governments of Thailand and Brazil in issuing compulsory licenses, noted that no company will live or die because of high price premiums for AIDS drugs in middle-income countries, but patients may.
The pharmaceutical companies argue that they need to protect their patents in order to fund the research and development that produces new drugs. This is partly true - although the majority of pharmaceutical research goes to produce copycat versions of other drugs that already exist. These copycat drugs can generate big profits but don't necessarily provide any advantage over existing drugs. The system is so inefficient that Americans are currently paying about $150 billion dollars through monopoly pricing to the companies, in order to get about $25 billion worth of research - much of which is not especially helpful.
So big PhRMA is really making an argument for more comprehensive reform: if the economic and social costs of funding research through private monopolies is so high, maybe we should put more into public and non-profit research (which already accounts for a substantial amount of the research these companies use). In fact, if our own government were to fund the research that the branded pharmaceutical companies now carry out, and allow the results to be used for generic drugs, the research would more than pay for itself. The government would save more than the cost of this research through lower prices for the drugs it buys through Medicare and Medicaid. And the drugs would be available immediately as generics to the rest of the world.
Such economically sensible reforms may be some years off, given the power of the pharmaceutical lobby. But the least we can do right now is to stop this lobby from bullying other governments that are trying to do the right thing for their citizens.