A New Trade Framework for Global Healthcare R&D

The AIDS crisis has brought to public notice what has always been generally true—that the existing business model for drug development leads to high prices and unequal access. There is now widespread dissatisfaction with drug prices in both the developed (Families USA 2003) and developing world (Correa 2000). Governments and health insurers are fi nding ways to deny access to the newest and priciest products. In the United States and other countries without a universal public health system, the uninsured simply cannot afford the newest medicines. In developing countries, life-saving medicines are priced beyond the reach of most people, a morally offensive outcome (TrueVisionTV 2003). Huge publicity surrounds negotiated price reductions for specifi c drugs in specifi c developing countries, yet the effect on the overall access problem is tiny. Today’s high drug prices are a direct consequence of a business model that uses a single payment to cover both the cost of manufacture of a drug and the cost of the research and development (R&D) carried out by manufacturers to discover it. A 20-year patent-based marketing monopoly is then granted to the drug’s developers to prevent their prices being undercut by ‘generic’ copies produced by manufacturers who do not have R&D costs to recover. Preventing such ‘free riding’ on R&D has become a global trade issue at the World Trade Organisation (WTO) (Drahos and Braithwaite 2002). The implementation of the TRIPS (TradeRelated Aspects of Intellectual Property Rights) agreement and a growing number of regional and bilateral agreements on intellectual property require most countries to implement tough patent systems that discourage or eliminate competition from manufacturers of generic medicines (Box 1). Unfortunately, monopoly-based business models have unpleasant side effects. Since the primary responsibility of any company is to maximise return on investment, it is unsurprising that there is pressure on pharmaceutical companies to set drug prices to whatever level gives the highest return, excluding those individuals who cannot afford to pay, rather than maximising the number of patients treated.