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Intellectual Property Rights and the Evergreening of Pharmaceuticals A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Boscheck, Ralf Article — Published Version Intellectual property rights and the evergreening of pharmaceuticals Intereconomics Suggested Citation: Boscheck, Ralf (2015) : Intellectual property rights and the evergreening of pharmaceuticals, Intereconomics, ISSN 1613-964X, Springer, Heidelberg, Vol. 50, Iss. 4, pp. 221-226, http://dx.doi.org/10.1007/s10272-015-0546-y This Version is available at: http://hdl.handle.net/10419/172664 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu DOI: 10.1007/s10272-015-0546-y Intellectual Property Ralf Boscheck Intellectual Property Rights and the Evergreening of Pharmaceuticals Escalating healthcare expenditures and the need to ensure access to affordable medicine in both emerging and emerged economies are fuelling calls to contain the so-called evergreening practices of drug producers around the world. But such practices are the necessary outcome of a system that responds to market incentives and appears to be already suffi ciently controlled by established patentability standards and policies that determine patent term extension. The key issues surrounding current trade disputes lie deeper. This article examines the link between technological advances and intellectual property rights in general and the presumably special case of drug supplies. It focuses on strategies for extending the market exclusivity for pharmaceuticals products and evaluates safeguards against such evergreening. On 26 April 2015, celebrations to commemorate the 40th benefi ts of his government’s “Make in India” campaign anniversary of the World Intellectual Property Organiza- and threaten the country’s role of “pharmacy of the devel- tion could not mask the fundamental dissent amongst oping world”. Conversely, the Merkel team reiterated the its member states. Already in October 2014, a meeting of EU’s 2014 Action Plan for the enforcement of intellectual Trans-Pacifi c Partnership (TPP) ministers had failed to re- property rights.3 The EU’s strategy targets commercial solve differences on whether and how to transition coun- scale infringers that discourage innovation, cause fi scal tries from lower to higher levels of intellectual property (IP) losses and undermine European competitiveness and job protection, particularly in the area of pharmaceuticals.1 creation. In the end, the parties agreed to disagree. To Whereas “access to medicine” advocates proposed avoid any further delay in their discussions, negotiators measures based on national income levels, branded drug simply removed crucial provisions regulating data exclu- producers supported a more predictable, time-based sivity and the extension of patent terms for pharmaceuti- transition schedule; others again argued for patent pro- cals from the proposed trade accords. tection to be linked with the United Nation’s Human De- velopment Index – a relative scale with frequently chang- In either case, the seeds for future confl icts had been ing outcomes and policy implications. sown. Except these quarrels are unlikely to be fuelled by the different industrial policy interests of the so-called Similarly, in early April 2015, India’s Prime Minister Ner- emerged and emerging economies,4 or the global con- enda Modi and German Chancellor Angela Merkel dis- cern for ensuring low-cost access to advanced medicine cussed the India-EU free trade agreement and the effect without dampening pharmaceutical research. They will of more stringent patent enforcement.2 Modi expressed rather centre on the legitimacy of additional policy inter- concerns that heightened IP standards would annul the vention in the area of intellectual property rights. This pa- per discusses concerns related to extending patent pro- tection for pharmaceuticals. 1 TPP ministers fail to bridge gaps over pharma IP transition mecha- nisms, Inside U.S. Trade, Vol. 32, No. 4331, 2014. 2 Fears over EU plan for strict drug patent regime, Times of India, 14 April 2015. 3 European Commission: Towards a renewed consensus on the enforcement of Intellectual Property Rights: An EU Action Plan, COM/2014/0392 fi nal, 2014; see also Council Resolution on the EU Customs Action Plan to combat IPR infringements for the years 2013 to 2017, Offi cial Journal of the European Union, 2013/C 80/01, 19 Ralf Boscheck, International Institute for Manage- March 2013. 4 For a perspective, see R. Boscheck: Intellectual Property & Com- ment Development (IMD), Lausanne, Switzerland. pulsory Licensing: The Case of Pharmaceuticals in Emerging Mar- kets, in: World Competition, Vol. 35, No. 4, 2012, pp. 621-634. ZBW – Leibniz Information Centre for Economics 221 Intellectual Property Technological advance, intellectual property and the ken critics seem to exclude the pharmaceutical sector “special case” of pharmaceuticals from their indictments.8 US Federal Judge Richard Pos- ner, for example, after dismissing a high-profi le lawsuit A society’s ability to generate, exploit and share techno- between Apple and Motorola, recently went public with logical advances is widely accepted as the single most his view that “most industries could get along fi ne without important source of economic value creation.5 And yet patent protection. …The prime example of an industry that there is startlingly little advice on which types of markets, really does need such protection is pharmaceuticals.”9 fi rms or even institutional supports are most conducive He provided three reasons: the high cost of drug devel- to innovative performance.6 Unsurprisingly, policy makers opment, the relatively short effective recoupment period make every effort to promote non-specifi c conditions to and the low cost of manufacturing, which allows low- incentivise entrepreneurial risk-taking. Patents are a key priced copies and would make it impossible for inventors example of this. They are typically thought to stimulate to ever recover their investments. But defending intellec- risky research by temporarily excluding followers from tual property rights in pharmaceuticals quickly becomes competing away supra-normal profi ts; they also involve contentious if seen to limit access to affordable medicine the disclosure of information that may allow others to through international trade or for the purpose of domestic circumvent the original design and thereby foster innova- cost containment. tion and diffusion. But while there is little convincing data to support the idea that patents indeed promote higher In fact, for many years, drugs were simply deemed too levels of innovative activity,7 there are some obvious risks important to leave vulnerable to monopoly abuse. Japan and costs associated with them. and Switzerland did not offer product patents for drugs until 1976/77. Spain, Portugal, Greece and Norway fol- Ex ante, overburdened patent offi cers may confer mo- lowed in 1992. At that time, at least 40 developing coun- nopoly status to some pre-existing but unrecognised pri- tries, including India and Brazil, provided no patent pro- or design. Ex post, patents may result in welfare-reducing tection for pharmaceuticals, while others, like Mexico monopolistic pricing, licensing or standard-setting be- and Argentina, recognised only a limited set of intellec- haviour. To remedy the former, technology assessments tual property rights. However, mounting costs and risks may be expanded by encouraging third parties to chal- in drug development and the diffi culty of otherwise se- lenge the validity of patents in court. Addressing the latter curing commercial advantage eventually tipped the bal- requires price discrimination to remove welfare losses or ance in favour of legally enforceable exclusivity. Following compulsory licensing to increase market choice. Each re- the inclusion of the agreement on trade-related aspects sponse is laden with conceptual and practical diffi culties of intellectual property rights (TRIPS) in World Trade Or- related to patenting, reference pricing, parallel trade and ganization (WTO) rules in 1994,10 members were obliged valuation. to honour pharmaceutical patent protection by 2016. The TRIPS Agreement relies on national patentability crite- All of this may explain why patents in general have re- ria with respect to incremental innovation or functional ceived rather critical reviews lately. And yet, even outspo- equivalency and provides for enforcement, dispute set- tlement and transition mechanisms to ensure minimum
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