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Encouraging IPR: Pivotal to quality healthcare

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Dr. Amir Ullah Khan, Visiting Professor, ISB and Director, Research, Aequitas Health Consulting cautions that access to quality healthcare won’t be achieved by discouraging patents and recommends letting the private sector play a stronger role in provision of drugs and vaccines

Dr. Amir Ullah Khan

Given the current climate, the new government is talking about increasing involvement of the private sector and on the other side there is harsh price cutting. So the government needs to be clear in terms of its stance. There is a direct correlation between IPR and access to healthcare. It has been observed that countries with strong access to medicines have a strong IP regime and vice versa.

Intellectual Property Rights are granted to protect and incentivise
innovation. In sectors such as healthcare, innovation is key for reduction of drug prices. New compositions, molecules and formulations are by and large more effective and less expensive and therefore are tools used to universalise healthcare.

For the poor, drug prices constitute a share of medical out of pocket expenses that are often seriously debilitating. As the demand for healthcare increases, the pressure on Universal Healthcare provision requires affordable and far more easily available drugs. Towards this end, each country ought to be working towards providing the best incentive to pharma research by way of encouraging higher outlays in research and development, particularly for neglected diseases.

Medicines, their molecules and formulations are patented by drug companies that invest large sums of money in research and development. These investments often exceed one billion dollars. Therefore, drug manufacturers claim patents, disallowing others from making the same drug. The patent law gives inventors twenty years of absolute ownership after which any other manufacturer can produce and sell the same drug.

This is what the intellectual property regime provides as incentive to innovators for sharing their inventions, their algorithms and their templates. Once the patent period is exhausted then the right to manufacture goes to every capable manufacturer and this is how human knowledge gets expanded with more people incentivised to share their secrets and contribute to public knowledge.

The most efficient market incentive for investors and innovators has been the granting of patent rights through the patent mechanism. Inventors are encouraged to invest in research and development of new therapeutic and diagnostic methods. Research is then shared and published in the public domain on the guarantee that it would not be copied and abused. Patenting has resulted in millions of dollars’ worth of investment in upstream activity by drug firms working on the frontiers of diagnostics and therapy. It is therefore immediately obvious that any limitation or cessation of property rights would further hurt the investment climate in countries that resort to quick fixes.

FDI flows definitely get impacted by any measure that gets technology owners worried, with instances such as compulsory licences. The note of caution that needs to be highlighted when studying health outcome is that the poor or the emerging economies spend very little on health, especially in terms of public expenditure. However, the out-of-pocket expenses are usually very high. While out of pocket expenses are high, they are not high because drug prices are high. The reason behind this is inability to pay. It is not about prices, it is about increasing healthcare coverage and allowing uniform access to all and it seems convenient to attribute every problem to patenting issues. It is indeed important for any study that looks at health outcomes to also look at how overall expenditure on health care increases in any country. Investment in healthcare, increase in public expenditure on healthcare, and on public health has a significant impact on the improvement of health outcomes.

What is interesting is that with the exception of North America, the countries which rely on compulsory licenses are all those that have very low budgets for health.

They are also countries that suffer from large fiscal deficits and which is why their usual inclination is to pressurise drug firms into either reducing drug prices, or by intimidating them through the use of compulsory licenses. Most of these countries also use severe drug price controls to curb prices. The pharma sector is almost always particularly vulnerable. Drug prices are so easy to clamp down upon given the emotion and ideological basis that abounds.

The hidden costs of drug discovery never get accounted or noticed, but are a critical component in the discovery of new therapeutic methods and more affordable treatment. By discouraging a technological climate in the country, the usage of draconian measures like compulsory licensing goes towards curbing innovation, lowering the number of patent filings, disturbing the investment climate and in driving away firms looking for new opportunities.

Patenting and protection of intellectual property has a direct impact on growth. Patents have a close correlation with per capita income as well as innovation. If we do not have an innovation climate, then new solutions cannot emerge. In the healthcare system in India where lots of people die due to neglected diseases on one hand and non-communicable diseases on the other, a large proportion of the problem will always persist.

There is nothing that stops the state from bringing drugs under bulk procurement. This is how costs can be cut and one can meet large requirements as well as address private sector sustainability issues. Tamil Nadu’s success with procurement and inventory management is indeed a great example. If one arbitrarily cuts costs and issues compulsory licenses then one is actually striking at the root of innovation.

When it comes to provision of medicines and medical devices, private sector’s role is irrefutable. There are many other ways in which the cost of medicines and equipment can come down. The bottom line is that you cannot proceed in providing universal healthcare without providing good healthcare infrastructure, larger public investments in health, or without letting the private sector play a stronger role in provision of drugs and vaccines.

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