Dying for Patents

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Dean Baker
October 29, 2001

Over the centuries, people have sacrificed their lives for many reasons—love of country, devotion to their faith, or commitment to a political ideology—but now people are being asked to give their lives for something new: patent protection. 

In case you missed it, this situation may come to pass in the United States, because the German pharmaceutical company Bayer holds the patent on Cipro, the preferred drug for treating anthrax. While Bayer has agreed to cut the government a break on the price it charges for Cipro, it still will not be able to deliver the massive quantities being sought by the government until January. 

By contrast, there are several Indian generic producers who make a high quality version of the drug. They are prepared to deliver as much Cipro as the government needs almost immediately, at approximately one tenth the discount price agreed to by Bayer. Out of respect for Bayer’s patent, the U.S. government has refused to deal with these Indian pharmaceutical producers. 

While it is not likely, it is certainly possible that there will be some massive anthrax attack directed against a major city at any time. If the country lacks the necessary stockpiles of drugs, then we could see hundreds or even thousands of unnecessary deaths.

If this nightmare still sounds too hypothetical, consider the case of the tens of millions of people who are H.I.V. positive in developing nations. At their patent protected prices—which can exceed $10,000 a year, AIDS drugs are completely unaffordable to people in poor countries. However, generic producers can make the same drugs for $300 a year or less. This is still expensive for desperately poor people, but it is a price that can be realistically met with international aid and support from private charities. In short, patent protection can sentence millions of people to death in developing nations.

The pharmaceutical industry doesn’t deny these basic facts, but they quickly fire back that they need patent protection to support their life-saving research. They argue that the patent monopolies allow them to earn enough money to fund the research that produces these drugs in the first place.

This claim is at best half true. Much of the most important research was funded with our tax dollars by the National Institutes of Health (NIH). In many cases, the industry just came along in the final phases of testing in order to claim the patent rights. In fact, according to the industry’s own numbers, more research is actually supported by the government and private foundations and charities, than by the pharmaceutical companies.

Of course the industry does useful research—but the question is what price are we paying for it? In the case of case of Cipro, Bayer’s patent-protected drug ordinarily sells for about 20 times the price that the Indian generic producers would charge. While the difference may not always be that large, even if the patent-protected price is just four times the cost of the generic, it means that we are paying $100 billion a year in higher drug prices due to patent protection.

For this $100 billion in higher drug prices, according to the industry, we are getting about $20 billion in research (net of tax credits). This means that unless the industry research is five times as effective—on a dollar-for-dollar basis—as the research supported by NIH or private foundations, we are losing on this deal. Of course, much of the industry research goes to copycat drugs, designed to get around competitors’ patents, or lifestyle drugs, like Rogaine and other remedies for baldness. Therefore, it seems unlikely that every research dollar spent by the big pharmaceutical companies is worth five dollars spent by NIH or private foundations.

But the really great thing about supporting the research through the public or non-profit sector is that once a drug is developed, we wouldn’t have to deny people access because of patents. The costs of the research would have been paid up front. In meeting the health needs of our population—and the populations of developing nations—the only issue that would need to be considered would be the actual cost of producing the drugs. We would no longer have to worry about the pharmaceutical industry’s claims to have a right to earn monopoly profits. 

Throughout human history, many people have given their lives for questionable causes. But no one should have to sacrifice their lives for patent protection. 


Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.