Patents, profits and people

A chapter from the book "Fixing Globalization", by Joseph Stieglitz; Published by Aryeh Nir, from English: Shunmit Lifshitz

At the end of January 2004, demonstrators, organized by a group of AIDS activists called ACT UP, took to the streets of Rabat and the streets of Paris to demonstrate against a proposal for a new trade agreement between the United States and Morocco, which would prohibit - so they feared - Moroccan companies from producing antiretroviral drugs AIDS. Demonstrations are not a normal event in Morocco's young democracy, and the fact that there were any protests at all indicates the strength of Moroccans' feelings towards the matter. When I arrived in Rabat a few weeks later, people were still talking about the arrests that had taken place following the demonstration. A few months later, in July of the same year, protests broke out again, this time at the fifteenth international AIDS conference held in Thailand. The protesters burst into the exhibition center and forced the major pharmaceutical companies - Bristol-Myers Squibb, Pfizer, Abbott Laboratories and the Roche Group - to close their stands.

From an economic point of view, Morocco was not the most prominent candidate for a free trade agreement with the United States. Its main export commodity - phosphorus (an essential ingredient in fertilizers), which accounts for almost a fifth of total exports - is not even subject to protective tariffs. But Morocco hoped that the agreement would encourage its shoe exports to the United States, and the United States hoped that closer economic ties would help build friendship. [i] Robert Zoellick, the United States' trade negotiator, proudly said of the agreement with Morocco: "This free trade agreement... Indicates our commitment to deepening the ties of the United States with the Middle East and North Africa.” [ii] This was of particular importance in the Middle East, where other aspects of American foreign policy were subject to controversy, to say the least. Through cooperation with moderate Arab governments, the United States hoped to build goodwill in the region.

However, it became clear that the attempt of the representative of the United States Department of Commerce to establish international friendship was accompanied by problems that were reflected in all their seriousness in the protests that arose. Empty heads who participated in the talks told me that there was almost no negotiation. The American representatives were interested in serving their own interests, and wanted the new agreement to protect the pharmaceutical companies of the United States. The discussion revolved around life versus profits. The United States government, reflecting the interests of its pharmaceutical companies, insisted that the agreement include terms that would delay the introduction of generic drugs, and it got what it wanted.

As in the United States and as everywhere else in the world, in Morocco too the price of generic drugs is much lower than that of brand name drugs. American drug companies know that with the advent of the generic drug, their profits will plummet. Therefore, they came up with clever strategies designed to delay the entry of generic drugs into the market, including limiting the use of data that proves the drug's safety and effectiveness, and prohibiting the generic companies from even starting to produce the drugs until the patent expires. [iii] The protesters were mainly afraid of delaying their entry. to the market for generic drugs to treat AIDS, a delay that could mean that most patients would not be able to afford drugs that could save their lives. Several non-governmental organizations claimed that the restrictions on generic drugs appearing in the agreement could actually extend the patent protection period to almost thirty years, compared to the current period of twenty years, and would even reduce the accessibility of generic drugs in Morocco compared to that which exists in the United States. [iv] It is not clear if This will happen, and it is not clear how many people may die as a result.[v] However, given the power with which the United States government operates, it is to be believed that these measures will actually extend the life of the patent significantly and thus increase profits and reduce access to life-saving drugs.

This was not the only controversial trade agreement signed in Morocco. On April 15, 1994, the Uruguay Round agreements were finally signed in Marrakesh, by the ministers of commerce. Among these agreements was the TRIPS Agreement (TRIPS - Trade-Related Aspects of Intellectual Property Rights), a trade agreement related to aspects of intellectual property rights, which the United States and other advanced industrialized countries tried to promote in order to force other countries to recognize their patents and copyrights.[vi] Patents give inventors monopoly rights over their inventions. The high prices are supposed to encourage innovation; Later in the chapter we will discuss whether they actually do this. However, TRIPS agreements are designed to ensure more expensive drugs. Unfortunately, their high prices have meant that these drugs are beyond the reach of most of those who need them, except for the wealthiest among them. When they signed the TRIPS agreements, the trade ministers were so pleased that they had finally reached an agreement that they did not notice that they had signed a death sentence for thousands of people in the world's poorest countries.

For the critics of globalization, the fight for intellectual property is a fight for values. The TRIPS agreements reflected the victory of corporate interests in the United States and Europe over the broader interests of billions of people in the developing world. This was another example of an agreement where more weight was given to profits than to other fundamental values, such as the environment or life itself. The struggle also symbolized the double standard, the differences in attitudes regarding these values ​​internally and externally. Internally, citizens have often demanded that their elected representatives address, beyond focusing on profits, also the effects on other aspects of society and the environment. Even when the Clinton administration waged a comprehensive fight to promote Americans' access to health insurance, by supporting the TRIPS agreements it reduced the access of the world's poor to affordable medicines.

I believe that the critics of the TRIPS agreements are right. [vii] But the criticism of the intellectual property regime goes even further than that: this regime may not even be consistent with the broad interests of the advanced industrialized countries. In chapter 1 I stated that one of the objections to globalization, as it was managed, stemmed from the fact that it introduced into the world, including the developing countries, a certain version of a market economy - a version that does not necessarily fit their needs, values ​​and circumstances. The TRIPS agreements present an excellent example of this: they are based on the view that stronger intellectual property rights lead to better economic performance. Special corporate interests in the United States and the European Union, relying on this rationale, try to use trade agreements to force developing countries to adopt intellectual property laws that they desire.

Innovation is important; She changes everyone's life. And intellectual property laws can and should play a role in encouraging innovation. But the claim that strong intellectual property rights stimulate economic performance is not always true. This is an example of a situation where special interests—those who profit from strong intellectual property rights—use simplistic ideology to advance their cause. In this chapter we will explain how poorly designed property rights regimes not only reduce access to medicines, but also lead to a less efficient economy and may even slow the pace of innovation. The debilitating effects are particularly severe in developing countries.

It will always be necessary to balance the inventors' desire to protect their inventions and the incentives that such protection brings, and the needs of the public who benefit from wider access to knowledge, the result of which is an increase in the rate of innovation and low prices resulting from competition. In this chapter, I will explain what a balanced regime of intellectual property could look like, a regime that addresses not only corporate interests but also academia and consumers. The pharmaceutical companies claim that without strong intellectual property protection they will have no incentive for research. And without research, the drugs that developing countries would want to emulate simply wouldn't exist. However, the pharmaceutical companies that claim so, are finding an imaginary enemy. Generally, critics of the intellectual property regime do not propose to abolish intellectual property rights. They simply say that a more balanced intellectual property regime is needed.

It is important to encourage innovation, including the discovery of life-saving drugs designed to fight diseases affecting developing countries. In this chapter I will describe alternatives by which this goal can be achieved more efficiently than the current system, and at a lower cost. I believe that the reforms I propose will improve the functioning of globalization not only for the benefit of the developing countries but also for the benefit of the developed world.

Footnotes:

2 The statement of the United States Trade Representative, Robert B. Zoellick, after the Senate approved the free trade agreement with Morocco.

[iii] In the United States, for example, generic drug manufacturers can produce the drugs and put them on the shelves, so they are ready for sale on the day the patent expires. As part of the agreement with Morocco, the manufacturers of generic drugs in Morocco will probably not be able to do this. The pharmaceutical companies also demanded "data exclusivity", under which "clinical information essential for the approval of the medicinal product" is considered protected for a period of time. The pharmaceutical companies demanded to impose restrictions on the use of data, even when these had already been published and were available to the public, and also in cases where the research was partially financed by public funds. It is clear that it is not effective to simply repeat research that has already been done. But even worse, a drug trial requires giving part of the population a placebo or an alternative drug. It would not be ethical to conduct an experiment in which some of the subjects receive a product that is known to be less effective than the existing product on the market. (States could, perhaps, change their regulations so that any drug approved in the United States would automatically be approved in their state; all that needs to be proven is that the generic chemical is actually the same. This is how it is done in the United States. Strong against changing the regulations in this way. What the pharmaceutical industry of the United States is interested in is the result - a postponement of the entry date of the generic drugs on the market.)

[v] The agreements are complex and difficult to decipher, so there remains uncertainty about the results. The lack of clarity may be intentional. The developing country can claim that it has achieved "flexibility", for example in the application of intellectual property protection - generic drugs can be produced if there is a real health need - while a representative of the United States Department of Commerce can report to his client, the pharmaceutical industry, that he has achieved many concessions in extending the actual patent life. When the developing countries try to take advantage of the "flexibilities" that they think they managed to introduce into the agreement, the United States uses its enormous economic power in order to stop them - as Brazil and South Africa discovered when they tried to produce generic versions of AIDS drugs in the years after the signing of the agreement on "aspects related to trade in intellectual property rights ”, known as TRIPS.

6 As part of the TRIPS agreement, all member countries of the World Trade Organization were obliged to maintain an intellectual property regime that meets certain "high" standards - essentially these were the standards set by the advanced industrialized countries. Still, each country was required to be responsible for managing its own patent and copyright offices.

7 There was another criticism of the TRIPS agreements: they were unfair to developing countries in two respects. They gave the advanced industrialized countries the protection they sought, but did not give the developing countries protection for their traditional knowledge (see discussion below). Although the TRIPS agreements may reduce the access of the developing countries to knowledge and oblige them to pay billions in royalties, they were supposed to be part of the "grand deal" described in chapter 3, in which the developing countries will receive greater access to agriculture and a reduction of agricultural subsidies by the advanced industrialized countries. But the developed countries did not fulfill their part of the deal.

It is possible to get out of the global economic crisis, it is possible to change the global economic policy, it is possible to fix globalization!

Fixing Globalization is a brave and witty book, which sharply criticizes the failed conduct of the main institutions of globalization. How globalization failed precisely in the countries it was supposed to serve, and why it missed the important goals it set for itself.

A new and particularly important book by the Nobel laureate economist Joseph Stieglitz

Stieglitz, the experienced and knowledgeable economist, is known as someone who is not afraid to alert many and forcefully express his opinions, no matter how blunt they may be. In this book, he presents new and extreme ways to deal with the debts oppressing the developing countries, recommends a new system of global reserves that will help overcome international financial instability, and offers original suggestions on how to overcome the impasse in dealing with the most critical ecological threat - global warming.

He is convincing with his arguments in favor of reforming the international institutions - the United Nations, the International Monetary Fund and the World Bank - as well as in favor of international trade agreements and intellectual property laws. Stieglitz passionately claims that fairer treatment of developing countries is not only morally correct, but works for the benefit of the entire developed world. Above all, he claims, we must change our way of thinking. Today more than ever, globalization binds the countries and peoples of the world into a community whose members depend on each other, and obliges us to think and act globally.

Joseph Stieglitz is considered a popular figure among those working against globalization, mainly because he is an establishment man who knows the world's financial institutions well from the inside and decided not to hide his positions, even when he was part of those institutions. Thanks to his status, the movement for the fight against globalization is receiving wide and serious attention around the world.

Joseph Stieglitz, winner of the Nobel Prize in Economics, is one of the most well-known and important economists of our time. He served as an economic policy advisor for the Bill Clinton administration between 1995-1997 and served as senior vice president and chief economist at the World Bank between 1997-2000. Stieglitz is particularly known for his criticism of globalization and international institutions such as the International Monetary Fund, a criticism he voiced while serving as Senior Vice President and Chief Economist at the World Bank.

After his retirement from the bank, Stieglitz founded the "Initiative for Policy Dialogue" (IPD), which aims to help developing countries examine policy alternatives and allow citizens greater influence in determining economic policy. Today Stieglitz is a professor at Columbia University and associate editor of The Economists' Voice magazine.