Unhealthy intellectual property reforms will devastate the economy

It has taken three years of deliberation for the Department of Trade and Industry (DTI) to draw up its sweeping proposal of how to reform South Africa’s intellectual property (IP) regime. Unfortunately, the policy proposals will hinder trade and industry more than encourage it.

The “Draft National Policy on Intellectual Property” has a distinct focus on pharmaceutical products. Its presumption is that patents are a major barrier to access to medicines, and, therefore, are a major obstacle to health and development.

Nothing could be further from the truth. In 2011, Dr. Richard Laing, a medical officer at the World Health Organization (WHO), with 18 years 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”. He recognised that the problem was not patents, but access to quality healthcare.

South Africa’s leading killers – TB, influenza, pneumonia, and intestinal infectious diseases – can readily be treated with available off-patent medicines at little or no cost, yet patients continue to die from these diseases because of numerous failures that exist throughout the complex continuum of health care.

The development of new medicines is crucial to combating disease. The key factor on which their development depends is robust patent protection. Generally, an average medicine costs more than R10bn and takes more than ten years to bring to market. To justify such enormous risk and expenditure, drug manufacturers depend on a small but predictable “window of opportunity” to capitalise on their innovations before generic versions can be produced.

The reduced predictability and availability of intellectual property protection proposed by the DTI would undermine existing conditions and create uncertainty which will certainly discourage companies from investing significant resources in the development of new medicines in this country.

The DTI proposes “introducing” compulsory licensing, whereby the government can break patents during a public health emergency, and allow parallel importation, which is buying cheaper copies of a medicine abroad for use in South Africa. But these measures are already permitted under the Medicines and Related Substances Control Amendment Act of 1997 and Section 56 of the Patents Act.

Itwas these very provisions that civil society groups targeted in 2000 when they argued before the courts that the intellectual property rights regime was restricting access to anti-retroviral (ARV) medicines used to treat HIV/AIDS in South Africa. The outcome was a compromise and innovator companies voluntarilyagreed to license out production and/or distribution of their ARV drugs. It is likely that this weakening in the guarantee of a return has also contributed to the decline we see today in the number of innovative companies developing new anti-retrovirals and investing in South Africa.

The DTI policy also proposes a substantive patent search and examination regime. A fine idea in principle but South Africa has limited financial resources and a chronic shortage of skilled personnel. Any additional layers of bureaucracy would compound the already severe delays in bringing new innovative medicines into the healthcare system and thus discourage investment even further.

The same goes for the proposal to introduce a new pre-grant opposition system. Under current law, patents can be challenged after they have been granted. Opening them up to multiple challenges during the application process would probably exacerbate costs and cause more delays in getting beneficial new medicines to patients, especially if challenges are frivolous.

Pharmaceutical companies expend large amounts of resources in bringing a drug to market. It is not in their interest if it then cannot be used to make a profit. As an alternative to coercive measures, governments and civil society organisations should consider entering into mutually agreeable collaborations as opposed to one being forced by the other into a sale or to forfeit their property. Pharmaceutical companies, just like all others, are willing to negotiate, for example, to offer a reduction in price if the purchaser agrees to buy a specified volume. This is a normal commercial arrangement when both parties enter into a mutually beneficial agreement.

Counter-intuitively, the architects of the proposed DTI policy are using countries like India and Brazil as their premise. South Africa cannot afford to copy ill-conceived industrial policies that drive IP-intensive industries out of the country. The presence of IP-intensive industries are critical to generate long-term economic growth and one of the most important to humankind that affects so fundamentally the quality of health and the fitness of a country’s workforce, is the innovative biopharmaceutical sector. Any amendments to this country’s existing IP policies should bear this firmly in mind and refrain from proposing short-sighted measures that will have devastating, long-term effects, not only on all the people who depend on new and reliable pharmaceutical products, but also the future economy of the country as a whole.

This article was first published by the Business Day, 25 October 2013 http://www.bdlive.co.za/opinion/2013/10/25/intellectual-property-reforms-will-hurt-economy

Author Jasson Urbach is a director of the Free Market Foundation and of the Health Policy Unit.

 

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