OPINION:
COVID-19 has resulted in several imprudent trade policies. Since the onset of the pandemic, ill-advised import barriers and export restrictions on medical supplies and food have largely dominated the conversation.
But the recent policy proposal put forth by India and South Africa could prove even more dangerous. The written proposal, sent to the World Trade Organization (WTO), requested that critical intellectual property protections be waived until the pandemic ends.
Such a move threatens to derail progress toward developing therapies that could stop COVID-19 in its tracks. That’s precisely why the United States and the European Union are pushing back. Both have come out against the latest WTO proposal and its attacks on intellectual property. But it’s the market — not politics — that truly demonstrates what it’s worth.
Unfortunately, India and South Africa’s policy proposal was predictable. Many countries have been eager to discuss measures against intellectual property protections — rather than debate tariffs and nontariff barriers on goods like soap and hand sanitizer, for instance.
But, as the EU explained in response to the proposal, there is simply no evidence that intellectual property is getting in the way of fighting COVID-19. Quite the opposite, actually — it’s proven to be a lifesaver.
A host of drugs under patent protection — including favipiravir, ribavirin, lopinavir, remdesivir and ritonavir have been “re-purposed” for COVID-19. Gilead’s remdesivir, which was initially tested to treat Ebola in 2015, particularly stands out in this regard. The treatment showed promise in the early stages of the pandemic, secured emergency authorization from the FDA in May and received full FDA approval in October.
Facing a time crunch against COVID-19, re-purposing these medicines has helped bypass the typically expensive and arduous process of drug development. New drugs cost approximately $2 billion and take 10 to 15 years to bring to market. If remdesivir had not been brought to market under patent years ago, it would not have been available to patients right now.
Sustaining biopharmaceutical innovation is an upward battle. The probability of a drug making it to market is a mere 12%. Patents help provide a fair chance for innovators to recoup research and development costs and invest in future projects. But even once a drug under patent makes it to market, it’s still at risk of falling victim to price controls.
Japan’s approach to pricing of medicines is a prime example of this dynamic. The country relies on a “Health Technology Assessment” (HTA) regime to calculate the expected benefits of new medicines. Japan uses the HTA to underprice innovative treatments, many of which come from the United States.
As a result, this valuation scheme leaves U.S. biopharmaceutical firms in a bind. They can either sell innovative therapies at cut-rate prices or opt to not market them in Japan altogether. Either way, this drop in, or absence of, revenue impedes firms’ ability to invest in the development of cutting-edge medicines that patients around the world depend on.
But phase one of the U.S.-Japan trade deal failed to tackle these unfair practices. And only time will tell whether or not a Biden administration will help rectify them during phase two negotiations.
Unfortunately, Japan is hardly alone in its embrace of government price controls. The United Kingdom employs a politicized valuation process to determine which new drugs it will offer patients. Its government-run health care system — the National Health Service (NHS) — systematically blocks the sale and coverage of the latest medicines.
In the last decade, U.K. patients could access only two-thirds of new medicines released. The NHS banks on eventually gaining access to cheaper generic medicines. But, of course, there needs to be a novel medicine from which to develop these generics — and that depends on robust IP protections that incentivize U.S.-led innovation. After all, it’s hard to reverse engineer nothing.
Any future U.S.-U.K. trade deal would prove a success if it required the NHS to implement a market-based drug-pricing plan that doesn’t undermine American innovation. The recent U.S.-Korea trade deal provides a baseline model for such an agreement. Though Korea’s adherence leaves much to be desired, leaders certainly deserve credit for taking this step in the right direction to appropriately valuing the hard-fought efforts of drug innovators.
To combat COVID-19, the global economy needs more — not fewer — intellectual property protections. And within countries, prices need to reflect the workings of markets, not politics.
• Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, a nonresident senior fellow at the Atlantic Council, and host of the podcast TradeCraft.
