i need a presentation and and essay in 24 hours

Prizes for Pharmaceuticals? Mitigating the social ineffectiveness of the current pharmaceutical patent arrangement

VALBONA MUZAKA

ABSTRACT We routinely refer to pharmaceutical patents as intellectual property rights. The argument in this article is that pharmaceutical patents represent a ‘bargain’ between government, business and society. The pharmaceutical patent system constitutes a social institution with social goals that go well beyond solely providing incentives to proprietary pharmaceutical companies to develop innovative drugs. Therefore we need to assess this institution in terms of what is referred to here as its social effectiveness, that is, its ability to accomplish the social goals it was set up to achieve. Such assessment has to take into account the fact that the pharmaceutical patent system has now become global, a development that has made its social ineffectiveness more apparent and wor- risome. The severity and gravity of unmet global and local public health needs compels urgent scrutiny of the pharmaceutical patent system, as well as of alternatives to it, such as prizes for pharmaceuticals.

The 2001 Doha Declaration on the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement and Public Health is often referred to as an unusual victory for a group of developing countries and civil society groups at the World Trade Organization (WTO), when they were able to re-establish the primacy of the duty to respond to public healthcare needs over the duty to protect the private intellectual property (IP) claims of pharmaceutical companies. Beyond the immediate confines of the WTO, this event can be seen as the encounter of at least two broader and long-term trends. The first emerged within the high-tech industries, including pharmaceuticals, in the USA and the EU during the late 1970s and relates to their demands for higher and globally enforceable IP protection; this trend resulted in the most transformative global IP agreement to date, the WTO TRIPS Agreement in 1995. This agreement was soon followed by additional and continuous demands by the same business actors for ‘improved’ IP protection, achieved since then largely via other channels, such as bilateral and unilateral ones. The second trend, which also emerged during the

Valbona Muzaka is in the Department of European & International Studies, King’s College, University of London, The Strand, London WC2R 2LS, UK. Email: [email protected].

Third World Quarterly, Vol. 34, No.1, 2013, pp 151–169

ISSN 0143-6597 print/ISSN 1360-2241 online/13/000151-19 ! 2013 Southseries Inc., www.thirdworldquarterly.com http://dx.doi.org/10.1080/01436597.2012.755009 151

1970s, relates to multilateral efforts to ensure wide access to effective and affordable drugs considered indispensable for the health of a population. These efforts initially resulted in the World Health Organization’s (WHO) List of Essential Medicines (1977) and, partly on account of the HIV/AIDS crisis being seen as an ‘exceptional disease’ that required exceptional action, in the rapid rise of broader global public health problems on the political agenda during the 1990s. Indeed, the 1990s were full of meetings bringing together a considerable number of state and non-state actors intent on addressing pressing public health needs; the adoption of the UN Millennium Development Goals in 2000 was one outcome of these gatherings, as was the creation of the most high-profile private–public partnership in the area of public health, The Global Fund against AIDS, Malaria and TB in 2002. It was perhaps inevitable that efforts to improve access to affordable medi-

cines and healthcare, on the one hand, and efforts to globally expand IP protec- tion for pharmaceuticals—one direct outcome of which is high drug prices—on the other, would come to a head by the late 1990s and early 2000s. Nonethe- less, the 2001 WTO Doha Declaration on the TRIPS Agreement and Public Health, courageous as it may have appeared at the time, could not and did not resolve the contradictory pulls underpinning these two broader trends. This is so because, by virtue of merely reiterating the TRIPS provisions and flexibilities per- taining to pharmaceuticals and public health needs, the Declaration posed no real challenge and brought no transformative changes to the global pharmaceuti- cal IP protection arrangement that TRIPS set in place. As a result, the 2000s con- tinued to be characterised, on the one hand, by the continued expansion of IP protections for pharmaceuticals—either on account of TRIPS coming into force in much of the developing world, or through bilateral and regional trade and investment agreements, or both—and, on the other, by continued public health efforts to patch over some of the more visible and problematic gaps created by globally expanding this pharmaceutical IP arrangement. These efforts included, for instance, ensuring affordable access to existing but expensive medicines under patent protection, and developing treatments for ‘neglected diseases’ dis- proportionally affecting patients with low or no purchasing power. By some accounts sums dedicated to global health issues such as these continued to grow and reached unprecedented levels just before the recent financial crisis, with estimated donor commitments increasing by 200% to US$45 billion between 2000 and 2006 alone.1

More promising efforts to find a sustainable solution to the issue of afford- able access to medicines—by no means the only global public health issue, but certainly a crucially pressing one—did not in fact materialise in the much- lauded 2001 Doha Declaration, but rather in a related, if relatively less publi- cised, series of proposals made by various state and non-state actors from 2002 onwards, which sought to provide alternative incentives for medical R&D for pharmaceutical patents.2 These proposals found their way into political debates about healthcare reform both in the USA and at the global level—most notably in the WHO—as a means of resolving the access to affordable medicines crisis.3

At the core of these various proposals lies the idea of de-linking medical R&D costs from the monopolistic prices charged under the current pharmaceutical

VALBONA MUZAKA

152

patent system, for instance through the establishment of government-supported prize funds. Even casual observers of US domestic politics know that the 2010 US healthcare reform did not include the establishment of any such prize funds, whereas negotiations among WHO member states over the establishment of a prize fund and a related medical R&D treaty for research on neglected diseases ended in deadlock recently.4

Proposals for the establishment of a global prize fund are not predicated upon the (total or immediate) abolishment of pharmaceutical patents; indeed the cur- rent proposals being debated at the WHO focus specifically on neglected diseases, which have historically attracted a negligible amount of pharmaceutical compa- nies’ R&D funds. Nonetheless, proposals for a global prize fund have met with persistent resistance by the pharmaceutical companies that are the main benefi- ciaries of the current patent system and have done much to bring it about.5 One of the main arguments made to legitimise this system is that pharmaceutical pat- ents are the indispensable economic incentives to invest in costly biomedical R&D, and that without them there would be no biomedical innovation.6 This argument, alongside those associated with the construction of patent monopolies as (natural) rights, has become so entrenched today that it is difficult for many, even those who bear the costs of this system, to envisage an alternative model of biomedical innovation, development and distribution. Yet it is also the case that societies demand higher levels of scrutiny of those entities that claim to provide particularly important goods and of the ways in which they provide them. The pharmaceutical patent system provides a prime example of such an entity, not only on account of the importance of the final good it is meant to generate, i.e. medicines, but also because, like other types of IP protection that exclude and protect, the pharmaceutical patent system is not self-justifying; rather, it requires constant justification and legitimation.7

The main argument in this article is that the global pharmaceutical patent arrangement we have today is socially ineffective. It should not have been set in place as it currently stands; however, faced with its reality and shortcomings, the argument is that the time to develop and set up alternative arrangements, such as those proposed in the medical R&D treaty and global prize funds, is now ripe. There are several ways one can support this position. Economically the pharmaceutical patent system is inefficient, causing, among other things, an under-utilisation of knowledge, misplaced research priorities, monopolistic prices and rent-seeking behaviour on the part of patent-owners. From a philo- sophical–legal perspective, too, it can be argued that pharmaceutical patents, like all (intellectual) property claims, are a matter of positive law and not of inalienable, natural rights; therefore they can be modified or even annulled. The main argument presented here, however, is not primarily economic or philo- sophical–legal in nature; rather, it is developed from a normative and societal perspective, starting from the position that the pharmaceutical patent system is first and foremost an institution with social goals, that is to say, a ‘contract’ between society, business and government designed to achieve certain social goals, although it is most certainly not routinely understood in this manner. This starting point can be defended on account of the fact that historically,

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

153

doctrinally and in some cases (e.g. the USA) constitutionally, patent protection has been set in place to serve the social good. Building on this starting point and on insights from the institutionalist litera-

ture, the second part develops the concept of social effectiveness as a way of evaluating the legitimacy of the patent institution. By revisiting the origins of the patent ‘contract’ and germane dimension of societal benefit, the argument in this section is that the legitimacy of the pharmaceutical patent system can best be assessed through its ability to accomplish the specific social goals it is meant to achieve: innovative life-saving drugs that benefit and are accessible to society as a whole. Because the pharmaceutical patent system has now become global, the argument here is that the ‘contract’ that it now represents necessarily includes patients and people in other countries who have been made to partake in the global pharmaceutical system. It is in respect of this part of society that the social ineffectiveness of this system becomes especially obvious. Having elaborated an alternative way in which the effectiveness and legitimacy of the current pharmaceutical patents can be assessed, the third section provides an often-neglected historical perspective that embeds the pharmaceutical patent sys- tem in the socio-political context from which it emerged in Europe and the USA. The specific way in which the ‘social contract’ nature of the pharmaceuti- cal patent system was expressed in these countries, especially in the form of governments’ commitment to (quasi) universal healthcare, goes some way to explaining why the legitimacy of the pharmaceutical patent system has largely remained unquestioned (not so in the USA), although this arrangement has now come under threat even in this part of the world. The global pharmaceutical pat- ent system currently in place is essentially based on the extraction of the patent system from a very specific socio-legal-economic context and its imposition on other parts of the world where such contexts are ontologically different. The interposal of institutions in realities detached from those in which they devel- oped is always problematic; in the case of the pharmaceutical patent system this move has, among other things, made its social ineffectiveness and the need to move towards alternatives particularly acute. Before making these arguments, it is necessary briefly to lay out the nature of the current pharmaceutical patent system in question and of the alternative prize fund proposals, to which the following section turns.

Pharmaceutical patents after TRIPS and prize fund alternatives

The current pharmaceutical patent system is not global in the sense that, once a patent is granted in one country, it is valid in all countries. Pharmaceutical pat- ents have largely remained territorial in nature, but the obligation to protect pharmaceutical products and processes through patents is now legally binding on all the 155 countries party to the WTO TRIPS agreement. Before TRIPS came into force (in 1995 and 2005 for developed and developing countries, respec- tively) pharmaceutical patent duration varied greatly among countries. The length of a pharmaceutical patent was significantly shorter than the 20 years currently demanded by TRIPS. Indeed, in many developing countries it was as short as five years.8 Importantly many countries did not provide pharmaceutical

VALBONA MUZAKA

154

patents at all, while others only provided pharmaceutical process patents. The case of Indian Patent Act 1970 is often used as an example of how this latter regime helped usher in one of the most vibrant and successful pharmaceutical generic sectors in the world.9

While some flexibility with regard to patentability criteria exists in TRIPS, countries no longer have the option not to grant patents for pharmaceutical product or process innovations. Provided certain thresholds of novelty, inven- tiveness and utility are met for a new drug or molecular entity, a pharmaceutical patent now grants its holder exclusivity for a period of 20 years, during which only the patent-holder, or its licensees, have the right to produce, use or sell the drug under patent. Insofar as patents exclude the rest, indeed even the actual inventor (if s/he is not the patent-holder), pharmaceutical patents are monopolis- tic privileges rather than rights, as they are referred to commonly. They are granted by patent offices, either for a new bio-molecular entity (product patent), or for the process used to produce it (process patent), and in most cases, for both. In fact, it is not unusual for a patented drug to reach the market protected by ‘patent thickets’ of over 100 different patent families.10 Patents thus cover a myriad of bio-molecular entities and processes that relate to new drugs and enti- ties that reach the market and many others that do not. This ‘patent fencing’ is a conscious strategy on the part of pharmaceutical companies; indeed, research has shown that, far from being tools to spur dynamic innovation, patents have been used since the beginning of the 20th century primarily as a strategic corpo- rate tool to control competition and markets.11

The negotiation of the WTO TRIPS agreement can likewise be seen as a successful strategy on the part of large pharmaceutical companies, alongside other IP-reliant business actors based largely in Europe and USA, to lock in their competitive advantage and fence off lucrative existing and emerging markets on a global scale.12 This was to be merely the beginning, for, upon TRIPS completion, ‘TRIPS plus’ standards for pharmaceuticals in the form of patent extensions, patent linkages and clinical test data exclusivity agreed in a number of bilateral and regional trade agreements have further expanded the rights of pharmaceutical IP-owners.13 The result of these efforts has been a pharmaceuti- cal patent system that extends a ‘one-(large)size-fits-all’ model across various countries where complex legal, social, political, economic and health conditions prevail. As will become clearer, this particular patent system developed largely in Europe and the USA, alongside the rise of the modern pharmaceutical sector and public health structures that, taken together, constitute a particular arrange- ment of the patent ‘social contract’ between society, business and government. But, as the TRIPS negotiating history indicates,14 very little attention was paid to the social purpose and the social consequences of extending a particular pharmaceutical patent arrangement to the rest of the world. Among others, arguments about the necessity of patent protection to spur innovation were key to justifying TRIPS, as were those that framed the lack of patent protection as ‘theft’ and ‘piracy’. However, charges of ‘theft’ were not legally valid, insofar as some countries’ laws did not recognise property over pharmaceutical prod- ucts and international law allowed such variances.15 Moreover, charges of ‘theft’ and ‘piracy’ are difficult to sustain in the case of intellectual property

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

155

claims. As we shall see, considering pharmaceutical patents for what they are— a ‘social contract’ that grants a limited statutory privilege or monopoly towards specific ends—can turn claims of ‘theft’ on their head. While the fact that TRIPS was driven by the narrow interests of a small group

of powerful business actors may or may not have been known during negotia- tions, none of the participants and observers could convincingly feign ignorance of the social and economic risks of a national patent system, let alone of the global patent system that was being negotiated. At least since the late 19th cen- tury, state and non-state actors have entered into continuous and acrimonious conflicts, domestically and internationally, over the beneficial and harmful effects of patent monopolies.16 As for pharmaceuticals, ample evidence existed about rent-seeking behaviour and malpractices in the pharmaceutical sector in Europe and the USA, including withholding unfavourable clinical trial results, anti-competitive behaviour, high marketing expenditures, high-profile legal cases, political lobbying, and so on.17 For our purposes two of the most impor- tant consequences of the pharmaceutical patent system, namely high drug prices and lack of research on ‘unprofitable’ diseases, were also clearly visible in the US market. It is well known that US drug prices are the highest in the devel- oped world and issues of access have also been notable there, which is why the legitimacy of the pharmaceutical patent system has been highly visible and political, inspiring a number of investigations, reports and bills attempting (so far, unsuccessfully) to rectify it.18

In light of this evidence it was clear that the longstanding issue of neglected diseases and of access to affordable medicines in the developing world would become more rather than less problematic once TRIPS came into force world- wide. The example of anti-retrovirals is often used as an illustration of how the IP protection afforded to pharmaceuticals through TRIPS frustrates efforts to improve access to affordable medicines in the developing world. Despite the fact that HIV/AIDS has attracted considerable efforts and funds compared to other, no less important, diseases, only three million HIV/AIDS patients out of around 30 million living in low and middle income countries had access to some form of antiretroviral therapy in 2007.19 Importantly even this level of coverage has been possible thanks to generic competition, largely from Indian generic companies, which brought the initial price of US$12 000–14 000 per- son/year (ppy) to $100–300 ppy. However, as a result of the global pharmaceu- tical patent system now in place, there is considerably less possibility for the generic production of more effective existing second and third-line anti-retrovi- rals and their prices are expected to remain high for the duration of their pat- ents. The issue of unaffordable drugs under patent protection is not simply an anti-retrovirals problem. For example, the cost of two key hepatitis-C drugs is currently $16 000–18 000 for a 48-week treatment, a prohibitive sum for most of the 200 million infected.20 As patent protection rules become increasingly restrictive, the supply of cheaper generic versions of new, patented drugs will effectively diminish. In addition to the issue of high prices, various neglected diseases that claim a considerable number of lives are still awaiting the develop- ment of drugs and diagnostic tools.

VALBONA MUZAKA

156

It was the growing realisation that more restrictive IP protection for pharma- ceuticals would exacerbate these problems in the developing world that led to the high-profile IP–access to medicines debate in the late 1990s and early 2000s.21 The more promising events to come out of these developments was not so much the 2001 Doha Declaration on public health, but a series of pro- posals related to alternative medical R&D mechanisms. The most notable of these was a proposal for a New Global Medical R&D Treaty made by a group of leading scientists, academics, NGOs, government officials and parliamentarians in a letter to the WHO in February 2005.22 This proposal was based on ideas that had been circulating within healthcare policy circles since the late 1990s and, in a more systematic manner, since 2002, inspiring simultaneously US Senator Sanders’ ambitious but unsuccessful Medical Innovation Prize bill of January 2005 and the WHO proposal a few weeks later.23 On the grounds that the current patent and R&D system for pharmaceuticals impose a number of costs, such as rationed access to medicines, skewed research priorities, barriers to research, excessive marketing costs and anti-competitive practices, the proposal put forward an ambitious alternative model of rewarding investment in priority biomedical research financed through mandatory payments tied to a country’s GDP and secured through mechanisms such as public funds, tax credits, R&D tax on sales and philanthropic spending. At the core of this and subsequent pro- posals lay the idea of delinking drug prices from the current patent and R&D financing system, thereby making new drug formulations (and processes) widely available for production and use to researchers and generic companies alike, rather than restricting them to patent-holders alone. That the WHO should be the forum where alternative biomedical R&D

models are considered is as intuitive to public health activists as it is heretical to patent interests. Indeed, it was only at the height of the IP–access to medi- cines contests in the late 1990s that the WHO was brought into the fold.24 By the time the 2005 New Global Medical R&D Treaty proposal was made, the World Health Assembly (WHA) had already established a commission (CIPIH) to examine the relationship between IP protection, innovation, public goods and public health.25 In this organisational context it was Kenya, and soon thereafter Brazil, that by January 2006 were demanding a WHO initiative to create a new and bold global framework for essential medicines R&D. As a result of these efforts, the 2008 WHO Global Strategy and Plan of Action agreed to explore a range of incentive schemes for medical R&D, including prizes, patent pools and gov- ernment funds.26 The idea of a prize fund seemed to enjoy considerable support, not least because Senator Sanders (and presidential candidate John Edwards) persisted with the idea of using prizes to stimulate R&D in the USA, and notable economists such as Joseph Stiglitz wrote a number of widely read articles in support of prizes to reward medical R&D.27 Despite this broad support, the 2010 Report of the WHO Expert Working Group on R&D was disappointing on this front for many developing countries and health NGOs (although it was welcomed by the USA and the EU), coming under heavy criticism for being influenced by private pharmaceutical interests.28

In an unusual turn of events the WHA restarted the process in May 2010. The new Consultative Group on R&D produced a bolder set of recommendations in

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

157

April 2012, including recommendations for a binding Global Framework on R&D, open knowledge innovation frameworks, patent pools to share knowledge, and prizes as incentives for drug discovery and development.29 In brief, the Global Framework on R&D is aimed at diseases that disproportionally affect developing countries, requesting each country to make a minimum financial contribution (0.01–0.02% of its GDP) to a global R&D fund. Product developers would be paid to carry out the research and products thus financed, for instance through prize funds, would then be sold at generic prices immediately following their regulatory approval. Despite the very long list of supporters of this proposal, both the EU and the USA have opposed it, the latter particularly aggressively, opposing the idea of a binding mechanism of this nature and the ‘global public good’ arrangement it represents.30 As a result of such resistance, at the time of writing the WHA had agreed only to hold open-ended meetings to analyse the feasibility of these recommendations. As some reports have it, phar- maceutical companies and prominent health contributors such as the Bill and Melinda Gates Foundation also oppose this binding mechanism,31 presumably on account of the challenge it poses to ideas of IP as a natural right on which many of them (directly or indirectly) depend. However, as the next section makes clear, the pharmaceutical patent system is an institution with social goals; its resilience is a result of the strong interests vested in it, and not of its social effectiveness. Indeed, its current inability to meet these goals makes the negotia- tion of alternative models an urgent necessity.

Pharmaceutical patents and social effectiveness

Justifying and regulating private property claims over tangible goods has preoc- cupied lawyers, philosophers and economists for centuries, relying simulta- neously on individual rights and societal perspectives. While the critique of private tangible property is generally launched from a social/general welfare platform (ie property must ultimately serve a social function),32 in the case of intellectual property claims, the social good has, on the contrary, been used to justify it.33 Justifying intellectual property is challenging because what is to be owned, that is, ideas, knowledge and other products of human intellect, are not scarce in the way tangible goods are. Analogies to tangible property are there- fore misleading because, unlike tangible goods and objects which can be appro- priated individually and thus visibly separated from the commons, knowledge is intangible and not appropriable in this way; once created, knowledge can be used by anybody. Knowledge is in fact a classic case of a public good, being both non-appropriable and non-rivalrous in nature.34 The institution of IP coun- ters such nature: by virtue of excluding others and granting control over knowl- edge to IP-holders alone, it deliberately creates scarcity and enables the commodification and appropriation of otherwise plentiful, non-rivalrous intellec- tual goods.35 Because they ultimately determine who gets what and who is excluded altogether, IP claims such as patents are important forms of social and economic power and, hence, are inherently political and contested. Of course, such large-scale exclusion demands constant justification.

Historically the main justification for patent monopolies has been cast in public

VALBONA MUZAKA

158

interest grounds (though some early patents were also granted at the whim of the monarch).36 The very first patent statute enacted in Venice in 1474 awarded patents on authorities’ assessment of social considerations and utility for the municipality, thus constituting an early version of the balance between public benefit and private rewards to encourage intellectual activity.37 In time, these considerations materialised in the utilitarian position that justifies patents on account of them providing adequate incentives for the creation of socially valu- able intellectual goods, in our case medicines.38 This utilitarian position helped justify patent monopolies when the patent system was being fashioned in its modern form during the end of 18th and the 19th centuries, amid otherwise strong anti-monopolist attitudes at the time.39 Thomas Jefferson, one of the key authors of the American patent system, captured well its social essence and is worth quoting at some length: ‘Society may give an exclusive right...as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society...Con- sidering the exclusive right to invention as given not of natural right, but for the benefit of society, I know well the difficulty of drawing a line between things which are worth to the public the embarrassment of an exclusive patent, and those which are not’.40

Although individual rights claims have also been influential,41 it is the utili- tarian ethos that IP is meant to serve the public good that continues to underpin the patent system in most European states and the USA, where the modern pharmaceutical patent system was first established. Indeed, in the US Constitu- tion IP protection is explicitly a matter of positive law (rather than natural law, recognised in the Bill of Rights) that is meant to serve the social good.42 To be sure, the utilitarian position is not uncontested: innovation is driven by many motives in addition to the award of IP, and historically creative periods have often preceded rather than followed the appropriation of intellectual property.43

The spectacular level of discovery and innovation, including in bio-pharmaceuti- cals, emerging from universities in the USA and Europe before they were encouraged to patent provides obvious and recent support for this claim.44

Arguments that seek to justify patents on economic grounds are probably the weakest, insofar as patent excludability causes an under-utilisation and ineffi- cient use of knowledge.45 Indeed, two of the most prominent patent econo- mists—Fritz Machlup and Edith Penrose—separately came to the conclusion that no economist could make a conclusive case for instituting a patent system.46

Nonetheless, this economically inefficient use of knowledge is also excused on utilitarian grounds, that is to say, in order to have more intellectual goods that serve society, we may have to bear with this system (insofar as the con- tested premise that it provides incentives for intellectual activity is accepted). It is worth adding three other arguments that further substantiate legitimating the pharmaceutical patent institution by invoking claims to the social good. First, patents are enshrined in public law and enforced by the state, which in turn needs to justify them to its citizens who are not allowed to do with knowledge as they see fit. Second, in giving exclusivity to a few, the patent system needs justification insofar as innovation is collaborative and cumulative, that is, it

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

159

depends upon knowledge and ideas generated by others in the past and in the present. Innovation is not creation from nothing, therefore intellectual products are better seen as the result of collective human effort, as social products.47

Pharmaceutical innovation is not different from other forms of innovation in this respect, as it relies on accumulated knowledge and on the collective efforts of scientists in both publicly and privately funded laboratories. Third, by giving the reward to a few for their particular contribution to knowledge, justification is needed of why the patent-holder should have the exclusive right to most or all the market value the invention will garner. Market value is a socially created phenomenon,48 and the value an innovation may extract from it may have little or no connection to the contribution to knowledge that individual innovation makes, or the amount of work, money and effort involved. If anything, this argument is especially pertinent in the case of pharmaceuticals that, thanks to health insurance schemes and healthcare institutions, do not operate in a ‘free market’ fashion. The patent system does not, in fact, deal well with these issues, but it can face them to the extent that it can invoke the social good as a justifi- cation for its existence. As it is this utilitarian position that underpins the existence of the (pharma-

ceutical) patent system, we are to come to terms with the fact that patents are justified on account of the benefits they bring to users of intellectual goods, that is, to society at large. The mere fact that the pharmaceutical patent system has survived and that it exists today cannot be taken as proof that it is justifiable and legitimate. If public benefit legitimises it, then more needs to be said on what such legitimation may consist of. As is widely recognised in the institu- tionalist literature, legitimacy is socially constructed; it rests in the ‘eyes’ of society or, at the very least, of the social groups that created and have stakes in a particular institution.49 Legitimacy is the perception that an entity or institu- tion is desirable, proper or appropriate within a socially constructed system of values.50 As we have seen, pharmaceutical patents are time-limited social privi- leges that society grants to inventors for its benefit, in this case, access to affordable and effective drugs. The legitimacy of this institution is therefore dependent on whether it achieves this end in a proper and adequate manner. This is what is recognised as moral legitimacy,51 at the core of which lies a pro-social concern that a given entity is not only appropriate and acceptable, but also right for society as a whole. This sort of legitimacy is different from that attributed to a construct of pharmaceutical patents as (natural) rights. Invok- ing patents as rights, as many often do, requires considerably less justification, because the language of rights has the effect of making the patent institution appear self-evident, removing it from the control of those who created it in the first place by making alternatives to it—such as prize funds—appear unthink- able or unacceptable.52

The pharmaceutical patent system is first and foremost an institution with social goals, a ‘social contract’ that grants inventors a limited statutory privilege enshrined in law and enforced by the state to the benefit and interest of society as a whole.53 We can derive from this that it is legitimate only to the extent to which it achieves its social goals in a proper and adequate manner, that is, to the extent to which it is socially effective. Effectiveness is an inherently subjective

VALBONA MUZAKA

160

and political concept, depending on who is doing the evaluating and what institu- tional goals are being assessed. It is often the case that the effectiveness of the patent system is defended on account of the number of patents issued as an indi- cator of the innovation it helps create. However, the social effectiveness of the pharmaceutical patent system cannot be assessed simply in terms of the number of patents issued. As Drahos has noted, ‘the patent social contract is not aimed at the grant of more and more patents, but rather at the diffusion of more and more significant inventions’.54 The increase in patent numbers in pharmaceuti- cals cannot be taken as a sign of significant inventions, but rather, as is the case currently, of lax patenting standards.55 In other words, we cannot assume a priori that society at large necessarily benefits from having a patent system that gener- ates a large number of patents. Nor can this be justified on the gross number of drugs reaching the market, for, as we shall see, they may not be accessible to parts of society who need them, or they may represent (wasteful) duplicates of existing drugs, and hence do not enhance the social good. In light of the arguments above, given that the pharmaceutical patent institu-

tion exists ultimately to serve the social good, and given the nature of pharma- ceuticals, its social effectiveness can be assessed in terms of its ability to successfully promote the development of drugs that 1) seek to treat all the vari- ous health conditions prevailing in a society; 2) are available in affordable terms; and 3) are produced in the least wasteful manner possible. This may appear a tall order but the alternative, i.e. legitimating the pharmaceutical patent system because it generates some drugs, is unsustainable if parts of society have no access to them. Pharmaceutical innovation without access is meaningless from a societal point of view. In other words, a new drug may represent a scien- tific breakthrough that technically satisfies the criteria of novelty and non-obvi- ousness but, if it is not affordable to members of a society, it can hardly justify the patent protection the society grants it. In this case considering alternative models becomes a necessity. We cannot justify the pharmaceutical patent system simply because it manages to develop some new drugs if the latter only benefit a particular group in society while the rest are excluded, either because they can- not afford the new drugs, or because no drugs are developed for the conditions that may disproportionally affect them. Only when the pharmaceutical patent system manages to accomplish both these goals (with the least waste possible) can we conclude that it is a morally legitimate and socially effective institution. Given that society is central to both the existence of the patent institution and

to evaluations of its legitimacy and effectiveness, it is worth recalling that, now that the pharmaceutical patent system has gone global, the society to which it is accountable necessarily has to expand to that level. Stretching the pharmaceuti- cal patent system in other countries is not merely a legal exercise in changing certain laws; it extends to these countries the patent ‘contract’, with all its rights and obligations. So, when pharmaceutical patents are sought in countries as dif- ferent as China, Bahrain, Chile, Jordan, Brazil, Kenya, South Africa, India and Malaysia, the patent ‘contract’ necessarily extends to encompass people and patients living in these countries. This said, such understanding of ‘society’ is organic, because the dynamics of the current pharmaceutical patent system set up through TRIPS are such that patents sought in countries with vibrant generic

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

161

pharmaceutical sectors (eg India, China) essentially have the effect of drying up the supply of affordable medicines to much of the rest of the world that relies on them.

Evaluating the current pharmaceutical patent system

In attempting to evaluate the social effectiveness of the current pharmaceutical patent system in the terms defended above, it is worth starting with the way in which the pharmaceutical patent system and the pharmaceutical sector devel- oped in Europe and the USA before its more recent expansion. This step is nec- essary because the development of the modern pharmaceutical patent system is in fact inseparable from the development of socialised medicine and of the modern pharmaceutical sector in Europe and the USA. The current pharmaceuti- cal system is essentially based on the extraction of the patent component from this very specific socio-legal-economic context and its imposition on other parts of the world where ontologically different contexts prevail. The interposal of such a system in realities detached from those in which it developed is bound to be ridden with challenges and problems, especially because neither the level of development in the pharmaceutical sector, nor that of the public healthcare sector, corresponds to that of the countries from which the pharmaceutical pat- ent system was extracted. A detailed analysis of the way in which the patent ‘contract’ materialised

in Europe and the USA is not possible within the confines of this article. Nevertheless, it is possible to sketch its key features, starting with develop- ments in the pharmaceutical sector. The modern pharmaceutical sector was born in Europe during the 19th century, building upon centuries-long accu- mulated knowledge and new developments in the modern physical and life sciences. One of the main turning points for the sector was the discovery in the middle of the 1800s that some simple organic chemicals derived from coal tar had important medical properties. It was this discovery that ushered in the modern chemical, dyestuff and pharmaceutical sectors, primarily located in Germany, Switzerland, the UK and, to a lesser extent, France.56 A number of consequent discoveries such as vaccines, anaesthetics, vitamins and antibiotics, proved important to the nascent pharmaceutical sector, but it was not until the end of World War II that it came into its own in Europe and, by this point, the USA. Its stellar performance from the 1950s until the 1970s, driven by the development of cardiovascular and central nervous system drugs, semi-synthetic antibiotics, non-steroidal anti-inflammatory drugs and contraceptives, had by the 1980s earned it the label of a ‘sunrise’ indus- try,57 although since then its performance has faltered somewhat, despite promising developments in biotechnology. In the meantime the overall patent system was having anything but a smooth

ride; in fact, free trade ideals proved strong enough to convince some European states to abolish their patent system altogether during the 1860s and mid-1870s, albeit only for a short time.58 The 1883 Paris Convention signalled the begin- ning of an international patent system of sorts, but states retained considerable sovereign discretion over their patent laws,59 significantly reduced with the

VALBONA MUZAKA

162

coming into force of the TRIPS agreement nearly a century later. Another cru- cial change to take place in the late 1800s relates to corporations successfully lobbying European and the American governments to be granted patent protec- tion for work created collectively by their employees.60 Patents since then have largely been used as strategic tools in the hands of (large) companies. Indeed, it was partly because of the role patents had played in facilitating the cartel activ- ity that came to be associated with Japanese and German militarism that patents had fallen out of favour again by the end of World War II.61 Patents were not abolished but, especially in the USA, they came under judicial attack until the 1970s, a period dubbed as ‘the patent’s Dark Ages’.62 As we saw earlier, many countries offered little if any pharmaceutical patent protection during this per- iod. Incidentally, this was also the ‘golden age’ of pharmaceutical innovation, for the strengthening of patent protection from the 1980s onwards, initially in the USA and later worldwide, has not led to an increased rate of pharmaceutical innovation. Any history of the development of the pharmaceutical sector and of pharma-

ceutical patent protection would be seriously incomplete without taking full account of the substantial contribution made by academia and major support from public funds. Nearly all the inventions by the end of the 19th century had been introduced by academics and physicians: the undisputable success of the German pharmaceutical companies early on, the rise of the US pharmaceutical sector post-World War II, and the re-emergence of the European pharmaceutical sector during the 1950s and 1960s were achieved to a large extent through close cooperation with academic institutions and the transfer of large sums of public money to fund basic research.63 Such a contribution further highlights the social nature of pharmaceutical innovation and the patent system, but it is not the only, or even the main, way in which public funds have essentially guaranteed the legitimacy of the pharmaceutical patent system in Europe and (to a lesser extent) the USA. Such legitimation has largely been a result of the emergence of socialised

medicine, which was part and parcel of the way in which the ‘social contract’ nature of the pharmaceutical patent system found expression in Europe and the USA during the 20th century. To be sure, the mercantilist state was aware that accumulation of power required a large and healthy population, and Enlighten- ment ideals predicated on reason to design and even guarantee social progress were pivotal to the eventual emergence of socialised medicine. Nevertheless, the more concerted efforts that led to the establishment of modern public health came as a response to the ‘evils’ of industrialisation and, more importantly, to the fears of revolutionary movements that were brewing in Europe in the mid- 1800s.64 The late 19th century health reforms enacted in England, France, Germany and the USA were far from satisfactory, but they paved the way for the emergence of public health, whereby the state took upon itself the responsi- bility of providing healthcare for its population. Of course, the type of public healthcare arrangements in place has varied from country to country, as has its financing (tax, insurance contribution) and the coverage on offer. The pharmaceutical component of these arrangements varies, too, but most

European countries have universal public health insurance schemes that cover

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

163

all or a substantial part of drug prices, which in turn are regulated.65 With hos- pitals and health insurance schemes buying and reimbursing most drug costs, patented drugs have enjoyed an almost guaranteed cash flow which essentially has underwritten the growth of the pharmaceutical sector and protected it from the vagaries of the business cycle in the developed world.66 This is quite pecu- liar to the pharmaceutical sector; routinely, while governments have the duty to strike the right balance between public benefit and private reward through patent rules, they are not expected to ensure that private (pharmaceutical) companies make a profit. Nonetheless, this has been precisely the effect of (quasi) universal health insurance schemes, in the process removing, until recently at least, the need to question the legitimacy of the pharmaceutical patent system in this part of the world, insofar as new drugs were being developed and society had affordable access to them. A notable exception in the developed world has been the USA, where public health coverage is the weakest both in terms of popula- tion and costs, but here, too, the widespread (though not universal) establish- ment of private health insurance similarly provides a secure market for drugs. However, in the absence of price controls, the issue of affordable access and of the legitimacy of the pharmaceutical patent system more broadly has been highly visible and political in the USA, inspiring a number of efforts and bills attempting to rectify it. The particular way in which the ‘social contract’ nature of the pharmaceu-

tical patent materialised in practice in Europe (and to a lesser extent the USA) has important social consequences when extended to the rest of the world, where pharmaceutical facilities are under-developed, and public health- care arrangements are partial or non-existent. The US example offered plenty of warning signs for those looking for them, as issues of access have been notable there: for instance, compared with insured patients, uninsured patients in the USA pay higher drug prices when they can afford drugs, but as much as 60% go without because they cannot.67 Unsurprisingly this problem is many times more pronounced in the developing world. Studies have repeat- edly shown that patients there often face drug prices higher than those in the developed world, and certainly higher than their average per capita income.68

The lack of universal or even partial public health schemes in much of the developing world means that demand for drugs is highly sensitive to drug prices, that is, patients go without medication even when drugs to treat their condition exist. Estimates suggest that only the top 10% of the population of the developing world constitutes an important ‘consumer’ in the world pharma- ceutical market.69 Indeed, less than 20% of the world pharmaceutical market is accounted for by developing and less developed countries, with Africa claiming only around 1% of the total.70 But the bottom quintile of the pharmaceutical market is by far the most populous and its meagre share of the market is directly linked to the skewed drug prices and purchasing power ratio for patients in this group, rather than to its disease burden. For the majority of patients living in this part of the world the pharmaceutical patent is socially ineffective on account of the unaffordable drugs it generates. Here, a justifica-

VALBONA MUZAKA

164

tion is still needed for setting in place a (expensive) pharmaceutical patent sys- tem that protects new drugs citizens are unable to afford. Pharmaceutical companies typically decouple the issue of rationed access to

medicines from patents, relying on the nature of pharmaceutical R&D to justify the latter. As discussed, patents in this position are justifiable because they pro- vide the necessary financial incentives (via profits) to develop new drugs that would not otherwise be developed because of the increasingly lengthy and costly nature of the R&D process. The cost to develop a new successful drug stands at about $ 1.3 billion, but this figure is marred by accounting and meth- odological controversies, as well as by the fact that it is exclusively based on data furnished by pharmaceutical companies themselves.71 An independent inquiry in the USA in 2001, for instance, pegged the cost per new drug at a substantially lower $71 million (in 2000 dollars).72 Even if we accept the indus- try R&D figures as justification for higher and global IP protection, we are still faced with the fact that ever stronger pharmaceutical patent protection from the 1980s onwards has been accompanied by a lower, rather than higher, rate of pharmaceutical innovation. The absolute number of pharmaceutical patents has in fact increased but, as noted earlier, this is an indication of poor quality pat- ents, rather than of increased innovation.73 As a matter of fact, the (average) annual number of new molecular entities (NMEs) reaching the world market dur- ing 2000–06 was 23, down from 44 in the 1990s, 48 in the 1980s and about 93 in the 1960s.74 In 2009 there were only 26 NMEs launched into the global mar- ket.75

Moreover, the fall in NME numbers has been accompanied by the increasing number of ‘me-too’ drugs on the market since the 1980s. These are versions of successful (i.e. profitable) existing drugs that claim patent protection on account of making incremental improvements on existing drugs, a patenting strategy also known as ‘ever-greening’. Clearly, ‘me-too’ drugs are competitive vis-à-vis other similar drugs in terms of usage, but they often enter the market at the same or even higher price level than their nearest therapeutic substitute already in the market,76 offering patients none of the benefits expected from competi- tion. What is more, because they usually go through all the R&D clinical trial phases, ‘me-too’ drugs utilise pharmaceutical R&D resources in a manner that is both uneconomic and unethical, as is the use of resources wasted on fierce legal disputes over the merits of ‘me-too’ patents and patent thickets in courts that have proliferated as a result. From a social perspective, ‘ever-greening’ is waste- ful and socially ineffective. The social ineffectiveness of the current pharmaceutical system is clearest in

its failure to develop drugs that disproportionally affect patients with no or insignificant purchasing power. Its inability to direct R&D towards developing cures for ‘unprofitable’ diseases is perhaps the most familiar failing of the phar- maceutical patent system. A recent study which surveyed the world’s 11 largest pharmaceutical companies found that, of the 1393 medicines introduced in the past 25 years, only 13 treated tropical diseases (less than 1%), which are the biggest killers in some developing countries.77 Some industry representatives have argued that ‘Third World diseases… [are] a social problem’ which they ‘should not be expected to solve’.78 This argument seeks to obscure the

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

165

inherently social character of the pharmaceutical patent system. At the very least, if the pharmaceutical patent system cannot cater for these diseases, then societies disproportionally affected by them have the right to experiment with and put in place other arrangements. For, as soon as the patent system is extended to these other countries, the obligation is also contracted to deliver on the other side of the patent bargain: drugs that meet the health needs of the patients in these countries and access to them in affordable terms. If these obli- gations are not fulfilled, as is currently the case, a reassessment of who stands accused of ‘theft’ may well be in order.

Concluding thoughts

The legitimation of the current pharmaceutical patent system cannot be left only to groups with a vested interest in it, who naturally insist on its continuity and expansion. Given the ‘social contract’ that lies at the heart of the pharmaceutical patent system, its legitimacy is to be granted by society at large. The pharma- ceutical patent institution needs to continuously justify itself to members of society who find patented drug prices prohibitive, to those for whose health conditions no R&D has been pursued, to generic producers who are not allowed to go about their business, and to researchers who cannot continue their line of research. These groups constitute large portions of society (although legitimation would still be needed had they been a minority). As we have seen, the global system set in place through TRIPS is not socially effective. The majority of recent global public health initiatives mainly seek to deal ad hoc with its most visible shortcomings, at the same time as the global pharmaceutical patent system continues to expand. The most promising alternative at the moment, creating a global prize fund for biomedical R&D in neglected diseases and a binding Global Medical R&D Treaty, is currently blocked at the WHO. Given its limited scope (limited to neglected diseases), resistance to it by patent interests and states with a strong pharmaceutical sector is perhaps more ideological in nature, although, as we have seen, patent-funded research too is an explicit form of governmental intervention. The concern seems to be that such a prize fund would in time inspire other challenges to the current pharmaceutical patent system. Yet, in light of the arguments presented here regarding the latter’s social ineffectiveness, this is a very good reason for supporting the proposal.

Notes 1 D Fidler, sars, Governance and the Globalization of Disease, Basingstoke: Palgrave, 2004; and K Schnei- der & L Garrett, ‘The end of the era of generosity? Global health amid economic crisis’, Philosophy, Eth- ics, and Humanities in Medicine, 4(1), 2009, pp 1–7.

2 The first fully formed proposal was made by Tim Hubbard and Jamie Love in 2002. S Gombe & J Love, ‘New medicines and vaccines: access, incentive to investment, and freedom to innovate’, in G Krikorian & A Kapczynski (eds), Access to Knowledge in the Age of Intellectual Property, New York: Zone Books, 2010.

3 J Love & T Hubbard, ‘The big idea: prizes to stimulate R&D for new medicines’, Chicago–Kent Law Review, 82(3), 2007, pp 1519–1544.

4 S Shashikant, ‘Member states to discuss expert recommendations on health R&D’, at http://www.twnside. org.sg/title2/intellectual_property/info.service/2012/ipr.info.120501.htm, accessed 15 July 2012.

VALBONA MUZAKA

166

5 S MacDonald, ‘Exploring the hidden costs of patents’, in P Drahos & R Mayne (eds), Global Intellectual Property Rights: Knowledge Access and Development, Basingstoke: Palgrave Macmillan, 2002; and P Dra- hos & J Braithwaite, Information Feudalism: Who Owns the Knowledge Economy?, London: Earthscan, 2002.

6 HE Bale, ‘The conflicts between parallel trade and product access and innovation: the case of pharmaceuti- cals’, Journal of International Economic Law, 1(4), 1998, pp 637–653; and G Mossinghoff & T Bomb- elles, ‘The importance of intellectual property protection to the American research-intensive pharmaceutical industry’, Columbia Journal of World Business, Spring 1996, pp 39–48.

7 J Waldron, ‘From authors to copiers: individual rights and social values in intellectual property’, Chicago– Kent Law Review, 68, 1993, pp 841–887.

8 WHO, Intellectual Property Protection: Impact on Public Health 2010, at http://www.who.int/medicines/ areas/policy/AccesstoMedicinesIPP.pdf, accessed 14 July 2012.

9 E Henderson, ‘TRIPs and the Third World: the example of pharmaceutical patents in India’, European Intellectual Property Review, 11, 1997, pp 651–663.

10 European Commission, DG Competition, The Pharmaceutical Sector Inquiry Report, Brussels: European Commission, 2009.

11 Drahos & Braithwaite, Information Feudalism; and B Coriat & O Weinstein, ‘Patent regimes, firms and the commodification of knowledge’, Socio-Economic Review, 10 (2), 2012, pp 267–292.

12 C May, A Global Political Economy of Intellectual Property Rights: The New Enclosures?, London: Routl- edge, 2000; and SK Sell, Private Power, Public Law: The Globalization of Intellectual Property Rights, Cambridge: Cambridge University Press, 2003.

13 SK Sell, ‘TRIPS-plus free trade agreements and access to medicines’, Liverpool Law Review, 28, 2007, pp 41–75; and V Muzaka, The Politics of Intellectual Property Rights and Access to Medicines, Basingstoke: Palgrave MacMillan, 2011.

14 A number of such accounts exists. See, for instance, MP Ryan, Knowledge Diplomacy: Global Competi- tion and the Politics of Intellectual Property, Washington, DC: Brooking Institution Press, 1998; Drahos & Braithwaite, Information Feudalism; and J Watal, Intellectual Property Rights in the wto and Developing Countries, The Hague: Kluwer Law International, 2001.

15 Henderson, ‘TRIPs and the Third World’. 16 C May & SK Sell, Intellectual Property Rights: A Critical History, London: Lynne Rienner, 2006; and

Drahos & Braithwaite, Information Feudalism. 17 M Angell, The Truth about the Drug Companies: How They Deceive Us and What to Do About It, New

York: Random House, 2004; D Healy, Let Them Eat Prozac: The Unhealthy Relationship Between the Pharmaceutical Industry and Depression, New York: New York University Press, 2004; and M Goozner, The $800 Million Pill: The Truth about the Cost of New Drugs, Berkeley, CA: University of California Press, 2004.

18 For a recent congressional investigation on alleged influence by the pharmaceutical industry on the 2010 Affordable Care Act, see D Armstrong, ‘Drugmakers’ deal with Obama said to be probed by House’, Bloomberg, 4 May 2012.

19 WHO, 2008 Report on Global aids Epidemic, at http://data.unaids.org/pub/GlobalReport/2008/ jc1510_2008_global_report_pp129_158_en.pdf, accessed 14 July 2012.

20 WHO, Global Alert and Response: Hepatitis C, 2010, at http://www.who.int/csr/disease/hepatitis/who- cdscsrlyo2003/en/index4.html, accessed 14 July 2012.

21 Muzaka, The Politics of Intellectual Property Rights and Access to Medicines. 22 Letter to the World Health Assembly Executive Board and World Health Organization, Committee on

Intellectual Property, Innovation and Health, 24 February 2005, at http://www.who.int/intellectualproperty/ submissions/CPTech.pdf, accessed 16 July 2012. See also J Andrew, ‘WHO members urged to sign Kyoto-style medical treaty’, Financial Times, 25 February 2005.

23 Love & Hubbard, The Big Idea. 24 Muzaka, The Politics of Intellectual Property Rights and Access to Medicines. 25 See the wha Resolution, wha 56.27 of 28 May 2003, establishing CIPIH. 26 who, ‘Global strategy and plan of action on public health, innovation and intellectual property’, 24 May

2008, wha 61.21. 27 Gombe & Love, ‘New medicines and vaccines’. 28 See, for instance, ‘Expert report on R&D financing triggers inquiry consultations’, at http://www.twnside.

org.sg/title2/health.info/2010/health20100102.htm. See also ‘wha agrees to roadmap to take forward work on R&D financing’, at http://www.twnside.org.sg/title2/intellectual_property/info.service/2010/ipr. info.100509.htm, both accessed 15 July 2012.

29 See its report at http://www.who.int/phi/CEWG_Report_5_April_2012.pdf, accessed 16 July 2012. 30 J Love, ‘Hillary and Obama set to kill medical R&D treaty at who meeting’, Huffington Post, 20 May

2009; Z Carter, ‘Obama administration blocks global health fund to fight disease in developing countries’,

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

167

Huffington Post, 25May 2012; and Shashikant, ‘Member states to discuss expert recommendations on health R&D’.

31 N Karunakaran, ‘Dark side of giving: the rise of philanthro-capitalism’, Economic Times, 25 March 2011; and J Love, ‘KEI statement on wha resolution on consultative expert working group on R&D: financing and coordination’, 4 July 2007, at http://keionline.org/node/1422, accessed 16 July 2012.

32 A Ryan, Property and Political Theory, London: Blackwell, 1986. 33 Waldron, ‘From authors to copiers’. 34 J Stiglitz, ‘Knowledge as a global public good’, in I Kaul, I Grunberg & MA Stern (eds), Global Public

Goods: International Cooperation in the 21st Century, Oxford: Oxford University Press, 1999; and J Hughes, ‘The philosophy of intellectual property’, in AD Moore (ed), Intellectual Property: Moral, Legal and International Dilemmas, Oxford, Rowman & Littlefield, 1997.

35 NS Kinsella, ‘Against intellectual property’, Journal of Libertarian Studies, 15, 2001, pp 1–53; and May, A Global Political Economy of Intellectual Property Rights.

36 May & Sell, Intellectual Property Rights. 37 F Braudel, Civilisation and Capitalism, 15th–18th Century, Vol 1, The Structures of Everyday Life: The

Limits of the Possible, London: Routledge and Kegan Paul, 1981. 38 K Arrow, ‘The economics of information: an exposition’, Empirica, 23(2), 1996, pp 119–128. 39 J Boyle, The Public Domain: Enclosing the Commons of the Mind, New Haven, CT: Yale University

Press, 2008. 40 T Jefferson, ‘Letter to Isaac McPherson’, 1813, at http://memory.loc.gov/ammem/collections/jeffer-

son_papers/mtjser1.html, accessed 17 July 2012 My emphasis. 41 P Drahos, A Philosophy of Intellectual Property, Aldershot: Ashgate, 1996. 42 US Constitution, Article I, §8, Clause 8. 43 HE Daly & JB Cobb, For the Common Good, Uckfield: Beacon Press, 1989. 44 U Pagano & A Rossi, ‘The crash of the knowledge economy’, Cambridge Journal of Economics, 33,

2009, pp 665–683. 45 K Arrow, ‘Economic welfare and the allocation of resources for invention’, in R Nelson (ed), The Rate

and Direction of Inventive Activity: Economic and Social Factors, Princeton, NJ: Princeton University Press, 1962; and MA Heller & RS Eisenberg’, ‘Can patents deter innovation? The anti-commons in bio- medical research’, Science, 280, 1998, pp 698–701.

46 ET Penrose, The Economics of the International System, Baltimore, MD: Johns Hopkins University Press, 1951; F Machlup, ‘An economic review of the patent system’, 1958, reprinted in F Abbott, T Cottier & F Gurry (eds), The International Intellectual Property System: Commentary and Materials, Part I, London: Kluwer Law, 1999.

47 Kinsella, ‘Against intellectual property’. 48 EC Hettinger, ‘Justifying intellectual property’, in Moore, Intellectual Property. 49 MC Suchman, ‘Constructing an institutional ecology: notes on the structural dynamics of organizational

communities’, paper presented at the annual meeting of the American Sociological Association, Atlanta, GA, 21–23 August 1988; and JW Meyer & B Rowan, ‘Institutionalized organizations: formal structure as myth and ceremony’, in WW Powell & PJ DiMaggio (eds), The New Institutionalism in Organizational Analysis, Chicago, IL: University of Chicago Press, 1991.

50 MC Schuman, ‘Managing legitimacy: strategic and institutional approaches’, Academy of Management Review, 20, 1995, p 574.

51 Ibid; and Powell & DiMaggio, The New Institutionalism in Organizational Analysis. 52 LG Zucker, ‘Organisations as institutions’, in SB Bacharach (ed), Research in the Sociology of Organisa-

tions, Greenwich, CT: jai Press, 1983. 53 Peter Drahos also speaks of patents as a social contract. See P Drahos, The Global Governance of Knowl-

edge: Patent Offices and their Clients, Cambridge: Cambridge University Press, 2010. 54 Ibid, pp 78–79. 55 A Jaffe & J Lerner, Innovation and its Discontents, Princeton, NJ: Princeton University Press, 2004. 56 B Achilladelis, ‘Innovation in the pharmaceutical industry’, in R Landau, B Achilladelis & A Scriabine,

Pharmaceutical Innovation—Revolutionizing Human Health, Philadelphia, PA: Chemical Heritage Press, 1999.

57 P Ramirez & A Tylecote, Technological Change in the Pharmaceutical Industry: A Literature Review from the Point of View of Corporate Governance, copi Report prepared for DG XII of the European Commis- sion, Sheffield University, 1999.

58 Machlup, ‘An economic review of the patent system’. 59 HC Anawalt, ‘Intellectual property scope: international intellectual property, progress, and the rule of law’,

in O Granstrand (ed), Economics, Law and Intellectual Property: Seeking Strategies for Research and Teaching in a Developing Field, London: Kluwer Academic, 2003.

60 C Fisk, ‘Authors at work: the origins of the work-for-hire doctrine’, Yale Journal of Law and Humanities, 15, 2003, pp 1–69.

VALBONA MUZAKA

168

61 Drahos & Braithwaite, Information Feudalism. 62 D Silverstein, ‘Patents, science, and innovation: historical linkages and implications for global competitive-

ness’, Rutgers Computer and Technology Journal, 17(2), 1991, pp 261–319. 63 Achilladelis, ‘Innovation in the pharmaceutical industry’; and Ramirez & Tylecote, Technological Change

in the Pharmaceutical Industry. 64 G Rosen, A History of Public Health, Baltimore, MD: Johns Hopkins University Press, 1993. 65 P Danzon & E Keuffel, ‘Regulation of the pharmaceutical industry’, paper presented at the National

Bureau of Economic Research Conference on Regulation, Cambridge, MA, 9–10 September 2005. 66 A Jungmittag, G Reger & T Reiss (eds), Changing Innovation in the Pharmaceutical Industry: Globaliza-

tion and New Ways of Drug Development, Berlin: Springer, 2000. 67 AK Rai, ‘The information revolution reaches pharmaceuticals: balancing innovation incentives, cost, and

access in the post-genomics era’, University of Illinois Law Review, 1, 2001, p 187. 68 FM Scherer, The Pharmaceutical Industry, Amsterdam: Elsevier, 2000; PM Hammer, ‘Differential pricing

of essential aids drugs: markets, politics and public health’, Journal of Economic Law, 5(4), 2002, pp 883–912; and N Gallus, ‘The mystery of pharmaceutical parallel trade and developing countries’, Journal of World Intellectual Property, 7(2), 2004, pp 169–183.

69 Hammer, ‘Differential pricing of essential aids drugs’. 70 UK ipr Commission, Integrating Intellectual Property Rights and Development Policy, Final Report, 2002,

at http://www.iprcommission.org/papers/pdfs/final_report/CIPRfullfinal.pdf. 71 JA DiMasi & GH Grabowski, ‘The cost of biopharmaceutical R&D: is biotech different?’, Managerial and

Decision Economics, 28, 2007, pp 469–479; and Goozner, The $800 Million Pill. 72 Public Citizen, ‘Rx R&D myths: the case against the drug industry’s R&D “scare card”’, 2001, at http://

www.citizen.org/congress/reform/drug_industry/, accessed 15 July 2012. 73 Jaffe & Lerner, Innovation and its Discontents; and J Bessen & DK Levine, Patent Failure: How Judges,

Bureaucrats and Lawyers put Innovators at Risk, Princeton, NJ: Princeton University Press, 2008. 74 M Borrus, The Global Pharmaceutical Market, Berkeley, CA: University of California Press, 2002; and

PriceWaterhouseCoopers, Pharma 2020: The Vision—Which Path will You Take?, 2007, at http://www. pwc.com/gx/en/pharma-life-sciences/pharma-2020/pharma-2020-vision-path.jhtml, accessed 17 July 2012.

75 Centre for Medicines Research, The CMR International Pharmaceutical R&D Factbook, Chicago, IL: Thomson Reuters, 2010.

76 ZJ Lu & WS Comanor, ‘Strategic pricing of new pharmaceuticals’, Review of Economics and Statistics, 80(1), 1998, pp 108–118.

77 UK ipr Commission, Integrating Intellectual Property Rights and Development Policy. 78 Roy Vagelos, quoted in K Silverstein ‘Millions for Viagra, pennies for the poor’ The Nation, 19 July

1999.

Notes on Contributor

Valbona Muzaka is Senior Lecturer in International Political Economy, Depart- ment of European & International Studies, King’s College, University of Lon- don. Previously she was a Lecturer at the University of Southampton, and a visiting researcher at the Department of Political Science, University of Stock- holm. Her research interests include issues related to the governance of intellec- tual property rights, global public health, global trade and global governance more generally. She is the author of The Politics of Intellectual Property Rights and Access to Medicines (2011).

SOCIAL INEFFECTIVENESS OF THE PHARMACEUTICAL PATENT ARRANGEMENT

169