OpenFiction [Blog]

Bhagwati on pharmaceuticals and IP

Posted in Uncategorized by scarsonmsm on June 9, 2006

Bhagwati does finally come around to discussing the issue of international intellectual property laws and trade, and in contrast to his generally upbeat assessment of free trade, he holds a dark opinion here. He tells in much more condensed form the story that is chronicled in Information Feudalism, how pharmaceuticals and media companies grafted IP issues (via TRIPs) onto trade policy, and used trade sanctions and bilateral negotiations as the big stick to coerce countries into accepting really awful intellectual property regimes as the price for trading with the US. Bhagwati’s view is that intellectual property has no place on the WTO agenda.

While my own interests are more in the media-related aspects of this (which are more closely aligned with OER IP issues), I’ve certainly been aware that one of the outcomes of the above-described maneuver was the decimation of a generic drug industry in India and elsewhere that might have very cheaply produced the AIDS cocktails that could have made a big difference in Africa in the past few decades. As the IP laws were forced to change in the generic-manufacturing countries, the possibility evaporated, and Western pharmaceuticals (until recently brow-beat into it) failed to fill the need for low-cost AIDS medications in Africa. The standard defense of big pharma I’ve heard for this is that low-cost drugs in Africa, whether generic or provided by the drug companies themselves, would inevitably find their way on the black market back to Western countries where they could be sold at a premium, which would undercut the return on R & D that was necessary for the companies to survive and innovate. This has always seemed to be both immoral and questionable reasoning to me, and I’d be surprised if very much of the lower-cost medications more recently supplied have in fact come back to US markets.

But Bhagwati paints an even darker picture with a scenario I’d not heard before:

[Drug companies] see piffling effective demand for drugs in the poor countries. So their strategy is to sell there, producing at very low cost and then charging whatever these poor markets will bear. They would like to raise that return as much as they can by increasing effective demand through the use of aid moneys addressed to health programs… Pharmaceutical firms such as Pfizer want to prevent India and Brazil from selling copies of their drugs in Botswana and Gabon quite simply because their low prices would effectively put a cap on how far the drug companies can raise their prices. Their preferred solution is to get the Gates Foundation, the aid agencies, and others to give money to the poor countries to buy drugs at higher prices instead.

Protecting domestic markets is a poor enough excuse for neglect but extorting money from aid agencies? Heartbreaking to even consider this as a possible reason for the deaths of millions.


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