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  • Writer's pictureBohan Gao

Innovation: The Pharmaceutical Paradox



By: Bohan Gao Edited By: Ashlyn Bi September 28, 2023

 

Citizens should not bear the burden of governmental negligence. In modern-day society, the pharmaceutical industry holds a vital role in ensuring the health and safety of our global citizens. However, the excessive—and rising—costs of drugs have brought attention to the precarious balance that must be maintained between incentivizing pharmaceutical innovation and guaranteeing accessibility for consumers. To establish a balance between these two aspects, the member countries of the World Trade Organization need to reduce intellectual property safeguards. At the same time, they should implement extensive transparency protocols and enhance public funding for pharmaceutical enterprises.

The first obstacle to accessibility is intellectual property protections. Firstly, TRIPS, or the Agreement on Trade-Related Aspects of Intellectual Property Rights, as defined by the World Trade Organization, is the “most comprehensive multilateral agreement on intellectual property (IP).” Essentially, it is the international legal agreement on IP between all current member nations of the WTO. The TRIPS agreement is the driving factor behind the lack of drug affordability in the status quo as it allows developers to enforce patent productions to monopolize production and boost profit (Gostin et al). Thus, as the choice to agree to a voluntary license remains with the patent-holder—and few companies voluntarily give up their IP rights—existing international IP law drastically slows countries’ production of drugs, vaccines, and COVID-19 products (Labonte and Johri).

Even further, these intellectual properties enable Big Pharma to keep medicine inaccessible. According to Professor Chaudhry at the University of Dayton, pharmaceutical giants monopolize access to crucial medicines through patents. Just look at insulin, discovered nearly a century ago but still unavailable in a significant generic version, is now vastly inaccessible for those with diabetes. Chaudhry continues that countries in Africa, Asia, and Latin America have been fighting a “global system of rent-taking” (rentierism) that generates disproportionate benefits for Big Pharma. IP rights allow international and multinational pharmaceutical giants to “capture rent” by dodging competition for years. But what is even more detrimental is that these protections favor rich countries in the global North at the expense of countries in the global South. As a result, according to the Brookings Institute, only 5% of people living in developing nations had been vaccinated as of January 2022—the height of the COVID pandemic. Current IP regulations are so harmful to developing nations that, according to The Wall Street Journal, South Africa has called to lift barriers for vaccines at the World Trade Organization (Shah).

In addition to reducing IP protections, imposing complete transparency measures in terms of pricing and R&D spending can drive down costs by finally holding pharmaceutical companies accountable. For instance, requiring companies to disclose information relating to the costs of pharmaceutical R&D means that they will be liable for their pricing decisions.

Research has discovered that the cost data touted by Big Pharma are often “inflated, misleading or otherwise opaque” (Chaudhry). Looking at data from pharmaceutical companies RotaTeq and Rotarix, Stanford professors Donald Light and Rebecca Warburton found that R&D costs were far lower than reported and that the companies were able to recover their investments within eighteen months, meaning they would be able to sell for one-tenth the price and still make a profit. In truth, current drug development is mainly dependent on publicly funded research. Nevertheless, although pharmaceutical companies have consistently justified their high pricing by citing the cost of research and development, no other research-focused industry employs this reasoning. Instead, these industries increase their research efforts to produce improved products. This disparity raises a thought-provoking question: What sets the pharmaceutical industry apart, and is it justified in doing so?

According to The Jacobin, the answer is no. Researcher Natalie Shure finds that, in the status quo, “two-thirds of all upfront drug R&D costs are funded by public investments.” Even as this occurs, pharmaceutical profit margins can reach up to 40%, resulting in one in three citizens skipping critical doses due to costs. When governments fund the most expensive and risky research instead of private companies, it becomes unreasonable for prices to remain overly high. At the same time that this information is a huge reason to lower exorbitant drug prices, it also reveals that increased public funding is the key to maintaining a profit incentive for pharmaceutical companies to innovate and research riskier medicines.

Striking a balance between encouraging pharmaceutical innovation and ensuring accessibility to life-saving drugs is challenging. Through the reduction of intellectual property protection, the introduction of vital transparency protocols, and the augmentation of public funding for pharmaceutical enterprises, we can secure both the prosperity of the pharmaceutical sector and the accessibility of essential medications. In navigating this dilemma, we can finally shape a future where medical advancements and accessible innovations coexist because moving forward should not mean leaving people behind.

 

Works Cited

Chaudhry, Faisal. “A Secret Reason Rx Drugs Cost so Much: A Global Web of Patent Laws Protects Big Pharma.” The Conversation, theconversation.com/a-secret-reason-rx-drugs-cost-so-much-a-global-web-of-patent-laws-protects-big-pharma-122028

Gostin, Lawrence O., et al. “Facilitating Access to a COVID-19 Vaccine Through Global Health Law.” Journal of Law Medicine & Ethics, vol. 48, no. 3, SAGE Publishing, Jan. 2020, pp. 622–26, doi:10.1177/1073110520958892

It’s Time to Socialize Big Pharma. 13 July 2020,

Johri, Mira. “COVID-19 Drug and Vaccine Patents Are Putting Profit Before People.” The Conversation,

Shah, Saeed. “Developing Countries Push to Limit Patent Protections for Covid-19 Vaccines.” WSJ, 17 Sept. 2020, www.wsj.com/articles/developing-countries-push-to-limit-patent-protections-for-covid-vaccines-11600355170.


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