UNC-Chapel Hill ECON 560 - Trade, TRIPS, and pharmaceuticals (8 pages)

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Trade, TRIPS, and pharmaceuticals



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Trade, TRIPS, and pharmaceuticals

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Pages:
8
School:
University of North Carolina at Chapel Hill
Course:
Econ 560 - ADV INT'L ECONOMICS Lecture 3
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Series Trade and Health 5 Trade TRIPS and pharmaceuticals Richard D Smith Carlos Correa Cecilia Oh Lancet 2009 373 684 91 Published Online January 22 2009 DOI 10 1016 S01406736 08 61779 1 See Comment Lancet 2009 373 273 See Comment Lancet 2009 373 363 This is the fth in a Series of six papers on trade and health Health Policy Unit Department of Public Health and Policy London School of Hygiene and Tropical Medicine London UK Prof R D Smith PhD Centre for Interdisciplinary Studies on Industrial Property and Economics Law University of Buenos Aires Buenos Aires Argentina Prof C Correa PhD and UNDP Regional Centre Colombo Sri Lanka C Oh PhD Correspondence to Prof Richard D Smith Health Policy Unit Department of Public Health and Policy London School of Hygiene and Tropical Medicine Keppel Street London WC1E 7HT UK Richard Smith lshtm ac uk The World Trade Organization s Agreement on Trade Related Aspects of Intellectual Property Rights TRIPS set global minimum standards for the protection of intellectual property substantially increasing and expanding intellectual property rights and generated clear gains for the pharmaceutical industry and the developed world The question of whether TRIPS generates gains for developing countries in the form of increased exports is addressed in this paper through consideration of the importance of pharmaceuticals in health care trade outlining the essential requirements implications and issues related to TRIPS and TRIPS plus in which increased restrictions are imposed as part of bilateral free trade agreements TRIPS has not generated substantial gains for developing countries but has further increased pharmaceutical trade in developed countries The unequal trade between developed and developing countries ie exporting and importing high value patented drugs respectively raises the issue of access to medicines which is exacerbated by TRIPS plus provisions although many countries have not even enacted provision for TRIPS exibilities Therefore this paper focuses on options that are available to the health community for negotiation to their advantage under TRIPS and within the presence of TRIPS plus Introduction The e ect of stringent intellectual property protection in the pharmaceutical market is contentious focused in recent years on the World Trade Organization s WTO Agreement on Trade Related Aspects of Intellectual Property Rights TRIPS In January 1995 the TRIPS agreement established global minimum standards for the protection of intellectual property including a minimum 20 years patent protection on pharmaceuticals Compliance was postponed until 2005 for developing countries and 2016 for least developed countries The agreement greatly expanded intellectual property rights including rules on the protection of test data for the e ectiveness and safety of drugs This change in intellectual property rights generated clear gains for industry and the developed world but the crucial question is whether it generated gains for developing countries in the form of increased exports This question is addressed in this paper by consideration of the importance of pharmaceuticals in health care trade and then the essential elements implications and issues related to TRIPS and the new emerging issue of TRIPS plus in which increased restrictions are imposed as part of bilateral free trade agreements are outlined concentrating on options open to the health community in negotiating to their advantage under TRIPS and within the presence of TRIPS plus The experience in Malaysia in dealing with these issues is discussed providing an example from which lessons might be learnt and extrapolated to low income and middle income countries Global pharmaceutical market Pharmaceuticals are the most important health related products that are traded accounting for 55 of all health related trade the share of the next most substantially traded health related goods small devices and equipment is 19 1 In 2006 the global 684 pharmaceutical market was valued at US 650 billion of which the generic market contributed less than 10 60 billion growing at a compound yearly growth rate of 10 between 1999 and 2006 and forecast to grow to 900 billion by 2011 equivalent to a compound yearly growth of 7 over the next 5 years This reduction is mainly the result of increased competition from generic products and the e ects of cost containment measures across major markets although there are expectations of strong growth in the ten European markets that joined the European Union in 2004 and continued double digit market growth in China which will become the seventh largest sales market by 2010 The global market is highly polarised with North America Europe and Japan accounting for around 75 of sales 2 A clear divide exists within the global market between developed countries producing and exporting high value patented pharmaceuticals and developing countries importing these products and involved in the production of low value generic or alternative medicines This di erence leads to many developing countries having a trade de cit in modern medicines which often results in an overall health sector de cit There is little evidence that this pattern has reversed through adoption of improved intellectualproperty rights For instance Thailand over the past decade has increased dependency on pharmaceutical imports despite strengthened intellectual property rights market exclusivity and di erential pricing 3 The promise of increased foreign direct investment seems elusive and the comparative advantage of adoption of stronger intellectual property rights tends to last only as long as the next developing country does not adopt them once these rights are harmonised globally no advantage accrues to one country compared with another The pharmaceutical market is also characterised by substantial concentration within a few very large www thelancet com Vol 373 February 21 2009 Series transnational corporations the ten largest account for nearly 50 of the total market table 1 This market consists of the major element of foreign investment in health 5 The top 20 transnational corporations based in the USA the UK Germany Switzerland and France each have an average of more than 100 foreign a liates in more than 40 countries including 19 developing countries with average sales of over 20 billion 6 However the sales market is similarly concentrated with North America Europe Japan and Latin America accounting for more than


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