State will undercut itself with new intellectual property policy

South Africa’s new Bio-economy Strategy advanced by Science and Technology Minister Derek Hanekom aims to turn more of the country’s material resources into sophisticated commercial goods, focusing on the entire innovation chain from research and development to product commercialisation. It is hard to imagine how that will happen when the Department of Trade and Industry is poised to introduce a new policy on intellectual property (IP) that will undermine exactly the kind of incentives critical to making the Bio-economy Strategy succeed. When it comes to South Africa’s economic development, the government is all too often at odds with itself.

For science, technology and innovation to become key in driving South Africa’s economic growth prospects, as Hanekom lays out, output needs to be shifted from a predominantly resource-based economy to one that is knowledge-based. And that cannot happen without a strong respect for IP rights. Any inventor needs assurances that their ideas, once put into the public domain to be capitalised upon, will receive adequate protection. Predictable laws and institutions that attract and encourage investment are fundamental to economic growth.

The Bio-economy Strategy clearly recognises this when it says: "Novel bioproducts that were locally developed or licensed continue to face regulatory hurdles that are unnecessary in some cases. In addition, bio-entrepreneurs who seek to transact IP with international partners are often not given suitable guidance or support regarding exchange-control policies. These factors have, in the past, motivated local innovators to take their products to other countries, resulting in loss of IP and job-creation opportunities."

If only the department were so perceptive. In September last year, it released the controversial Draft National Policy on Intellectual Property, which paints IP rights as a major barrier to access to medicines and says "compulsory licensing should be introduced". Compulsory licences allow the government to break a patent and give a licence to a local manufacturer to produce a drug. This amounts to state-sanctioned theft of property.

If patents are a major barrier to access to pharmaceutical products, why are products that are off-patent not reaching patients? In 2011, Dr Richard Laing, a medical officer at the World Health Organisation (WHO), with 18 years of experience working in Zimbabwe’s ministry of health, concluded that, "at present, patents do not appear to be a major barrier to access to essential medicines on the WHO model list in low and middle-income countries".

This holds true in South Africa. For the vast majority of our citizens, the real problem is not a lack of access "to drugs" but to "quality healthcare". Because of this, breaking patents will not affect on Sunday’s morbidity and mortality burden as much as civil society groups envisage.

A recent University College London (UCL) report on medical innovation warns that advances in medical science risk being slowed by attacks on the global patent system. The report says: "Given continuing biomedical and pharmaceutical innovation coupled with extended healthcare coverage and delivery, child and ‘working age’ adult mortality due to infectious and many forms of noncommunicable disease could be virtually eliminated by 2050". In order to achieve this goal it requires "the maintenance and strengthening of the economic and social mechanisms required to channel resources into costly high-risk research and generate productive innovations. A central message of this report is that intellectual property rights have a vital role to play in this last context."

The lead author of the UCL report, David Taylor, concludes that "neither public nor private money will go into research and development without appropriate IP protection … (and) threats to IP will not stop innovation but it will slow it unnecessarily". In other words, if we weaken drug patents, we will discourage companies and investors from developing the next generation of medicines.

The Bio-economy Strategy says: "It is essential that all government departments involved in aspects of the bio-economy be committed to the (strategy). Regulations that are not aligned with the (strategy) need to be reviewed". The department can start by scrapping the draft policy, as it undermines not only the Bio-economy Strategy, but South Africa’s National Development Plan — with which the Bio-economy Strategy is explicitly aligned — and the property rights clause in the constitution.

• Urbach is director and economist at the Free Market Foundation.

This article was first published by the Business Day on 28 February 2014  -

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