Myths on Pharmaceutical Innovation Policymakers should be aware of

Why price controls, compulsory licensing, and weaker patent rights are not the way out of COVID...

While we are approaching the end of a dramatic 2020, there is still no indication that with the old year, the global COVID pandemic will also become history. Despite countless efforts to find a cure and vaccines for the virus, many parts of the world and especially Europe currently face a second wave of cases.

With no doubt, the global pandemic was and is the most predominant issue of this year. Not only has the term ‘unprecedented’ been used ten times more frequently than in previous years, but also the interest in public health, epidemiology, and virology currently see record highs. Increased public interest in these important areas of research should be lauded.

Unfortunately, many interest groups use this situation to ask for policies they have been wishing for a long time and try to hijack the crisis to get radical proposals such as Europe-wide price controls on medical drugs and the erosion of patent rights passed. Policymakers should be careful not to fall for the often propagated myths by populist advocates that often portrait all too easy solutions to complex problems.

Doctors without Borders (MSF) has launched a drug access campaign that shows a biased view of the pharmaceutical market and demands solutions that would harm scientific innovation. The "Campaign for Access to Essential Medicines" aims to increase the availability of medicines in developing countries through strong price controls and weaker patent rights. The accusation is: pharmaceutical manufacturers and researchers enrich themselves at the expense of those who can afford medicines the least.

But in reality, intellectual property rights and patents do not prevent innovation. On the contrary, they make medical progress possible. Pharmaceutical companies develop drugs, protect their inventions, and yes: make profits with them. Because a patent provides the inventor with a monopoly for a certain period of time; it can forbid other companies to commercially exploit its innovation.

If patent rights are removed from the equation, the economic incentive to innovate is gone - and life-saving drugs, whose development costs billions of euros, remain absent from the market. What many readers will not know: Innovative drugs are being sold in underdeveloped countries by industry often at cost. For example, the British drug giant GlaxoSmithKline has set an upper limit on the price of its drugs in developing countries and demands a maximum of a quarter of the price of the products sold in rich countries.

For twenty years the Swiss manufacturer Roche has been giving its antimalaria drug ACT to state buyers without a profit margin. More than 850 million doses were sold and distributed in over 60 countries.

The idea of so-called compulsory licenses for COVID drugs has been widely discussed. A government would take a manufacturer’s patent and give it either to another manufacturer or produce the drug or vaccine themselves. While it’s seen as a cheap way of getting drugs and vaccines to patients, its introduction would delay a COVID-19 vaccine or cure even further. 

Nevertheless, the first countries are thinking about such a proposal, including Israel, Canada, Ecuador, and Chile. Proponents of such an approach should rather focus on successful public-private partnerships one can see in the area of Ebola and Malaria. The production and delivery of a vaccine require know-how and functioning supply chains. It is therefore questionable whether a product manufactured under a compulsory license would actually be cheaper and, above all, available more quickly than the original vaccine. However, what is certain is that the trust of investors in the rule of law and the patent system would be massively damaged. It would get harder for biotech and pharmaceutical companies to raise the billions they need to find new cures and treatments for the 95% of diseases we can’t cure yet. Investors would fear that whenever a company is close to a breakthrough, a government would just take their patent and compensate them below-market rate.

With COVID-19 we are facing one of the biggest public health crises ever. Innovation and medical breakthroughs are therefore more necessary than ever. Policymakers should keep in mind that further price controls, weakening the patent system, and compulsory licensing won’t get us a day closer to the end of this pandemic.