Opinion: Negotiation is best way to make drugs affordable

Co-operation, not coercion, may be the best way for developing countries to expand access to vital affordable drugs. That is the finding of an analysis by University of Ottawa and University of Denver researchers, including myself, published in Health Affairs.

We examined two strategies that countries can use to provide cheaper medicines: compulsory licensing, a legal manoeuvre governments can use to expropriate patent rights forcibly that may block access to less expensive generic medicines; and international negotiation, when governments haggle with medicine suppliers over prices.

Fierce ideological battles - which are silly because what matters to patients is medicine - have been fought over which is better by those who advocate property rights, and hate compulsion, and supporters of health rights, who embrace it. Neither cares much for the legitimate arguments of the other.

We trawled through data sets of all HIV/Aids antiretroviral medicine purchases reported to the World Health Organisation and the Global Fund to Fight Aids, Tuberculosis and Malaria over roughly a decade, and compared prices obtained by compulsory licensing and negotiation by individual countries, groups of countries, or global organisations.

Both strategies save money, but countries that used compulsory licensing to manufacture or import generic antiretroviral medicines paid more than those who negotiated for the best branded or generic deal.

Using the prices that existed before compulsory licensing as a reference, we found that developing countries that changed to a compulsory licence saved a median 71 per cent, while similar countries which negotiated for better prices saved 79 per cent.

This pattern persisted in direct comparisons. In the 30 compulsory licensing cases we tracked, the median price was 48 per cent above that obtained through negotiating globally.

The extra savings also came without the legal manoeuvring that compulsory licensing requires. Unhappily, the price gap was largest for the least developed nations, which had the least money. For them, compulsory licensing meant median prices were 83 per cent higher. While exceptions do exist, compulsory licensing mainly yields poor value.

Our study also found that global trade can save money compared with autarchy. Countries that manufactured medicines locally under compulsory licences paid dearly: typically 83 per cent more than similar peer countries.

But this comparison is not a clear win for either strategy, since local manufacturing is pursued for other reasons: industrial self-sufficiency at best, graft at worst. Either way, building a local pharmaceutical industry is not cheap.

Our study does not mean there is no place for compulsory licensing, but it should not be presumed to be the best way to save the most money.

It has a place, for two reasons. First, the very threat of compulsory licensing probably matters. Consider labour negotiations: a union might hold a strike vote, or an employer might threaten a lockout, but if they are not stupid, both should realise their interests lie in bargaining to avoid either scenario. Coercion is better feigned than implemented. So too for compulsory licensing: some countries used it before agreeing voluntary deals.

Second, there are valid policy reasons for worrying about the sustainability of buying the cheapest generic medicines. Most of these come from Indian companies, but evidence is mounting through criminal prosecutions and regulatory actions that even the best-known Indian pharmaceutical companies have safety or quality control problems. Further, as medicine patenting in India gains pace, in coming decades, there may be fewer generic medicines on the international market. Either phenomenon could drive countries to compulsory licensing more readily.

My view is that ideological arguments are distracting. The data show that patents are not incompatible with discounted medicine pricing if there is flexibility on both sides.

The temptation should be resisted to speak of compulsory licensing in epic terms when it means the same to intellectual property as compulsory purchase does to physical property. It is a safety valve, to be used when negotiations fail, which is legally legitimate if rough.

As the world enters an era defined less by HIV/Aids and more by non-communicable diseases of ageing, both patient advocates and the pharmaceutical industry would be wise to remember, when negotiations get tough, that they need each other.

. . .

The writer is Canada research chairman in law, population health and global development policy and professor in law and medicine at the University of Ottawa

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