Jason S. Ganz Prof. Francisco

April 14, 2015 POLS 7670X

THE PHARMACEUTICAL IRONY OF PATENT LAW

The United States' pharmaceutical industry is often at the forefront of distributing new

medicines to market as a means of combating ever-evolving and resisting diseases endemic to its citi-

zens and non-citizens who engage in the pharmaceutical market. Multinational corporations (MNCs)

in the pharmaceutical industry such as Pfizer, GlaxoSmithKline (GSK), and Merck, invest billions of

dollars per year in research and development1 for medicines that counter maladies ranging from erectile

dysfunction to reflex sympathetic dystrophy. The United States, in an attempt to reduce the burden of

health costs upon its less affluent citizens, mandated that all citizens enroll in a healthcare plan or face

fines and liens by the federal government2.

Health insurance plans are paid into by subscribers in order to indemnify the subscriber against

extreme hardship as a result of sickness, injury, or other event, and provide the subscriber with various

doctors and other medical practitioners whose work is subsidized by either the company (after copays

and deductibles)3 or by taxpayers.4 These plans also aid in reducing subscribers' costs for various

medicines, doctors, and specialists – subject to the tier of insurance that each subscriber buys.5 If

health insurance is designed to reduce the financial impact of significant life effects as well as the costs

1“The Global Innovation 1000: Top 20 R&D Spenders 2005-2013,” Strategy&, accessed April 14, 2015, http://www.strategyand.pwc.com/global/home/what-we-think/global-innovation-1000/top-20-rd-spenders-2013.2“The Fee You Pay If You Don't Have Health Coverage,” Healthcare.gov, accessed April 14, 2015, https://www.healthcare.gov/fees-exemptions/fee-for-not-being-covered/. It should be noted that the page does disclose various circumstances in which going without healthcare may be permitted.3“Choosing a Health Insurance Plan,” United HealthCare, accessed April 14, 2015, http://www.uhc.com/individual-and-family/health-insurance-basics/choosing-a-health-insurance-plan.4“Read the Law (See Title IX),” HHS.gov/healthcare, accessed April 14, 2015, http://www.hhs.gov/healthcare/rights/law/index.html.5“Choosing a Health Insurance Plan”

of doctors and medicines, why is the United States one of the most expensive countries in the world for

pharmaceutical purchases when compared to other states in the global north and the global south?

One answer may be the United States Patent and Trade Office's (USPTO) provisions regarding

what may be patented. In the United States, medicines and pharmaceuticals may be patented as a

“chemical patent.” A chemical patent, of which medicines and pharmaceuticals are a subset of, is a

type of utility patent that protects the rights of pharmaceutical manufacturers who invent and produce

compounds for medical use for 20 years.6 Although the patent's primary intent is to protect the right of

the inventor or inventing corporation to exert the presence of the good in the United States market, the

reality is that patent holders have used this exclusivity right to exorbitantly increase prices on drugs that

focus on “orphan diseases.” The National Institute of Health (NIH) defines an orphan disease as “any

disease that affects fewer than 200,000 persons in the United States.”7 Likewise, the NIH defines an

orphan drug as any drug manufactured to treat an orphan disease. 8 By patenting the chemicals in phar-

maceuticals, the pharmaceutical industry can circumvent insurance plans meant to mitigate the ex-

penses of pharmaceuticals – particularly orphan drugs – and maintain profitability.

This paper examines why chemical patents have become so popular in the United States, and

how they have been used to both maximize the profits of various MNCs while exploiting those afflicted

with various maladies. Additionally, by comparing the legal practices of the United States with those

of states in the global south, I will demonstrate how such patents, by preventing the allowing of lower-

cost generic variations in the United States, allow for pharmaceutical companies to produce generic

variants in the global south and sell them at a lower cost to inhabitants of “southern states.”9 In doing

so, the global north's desire to maintain high prices for their chemical innovations through patent exer-

6Leena Lalwani, “Introduction to Understanding Patents,” University of Michigan Library - Research Guides, November 4, 2014, accessed April 16, 2015, http://guides.lib.umich.edu/content.php?pid=35640&sid=288824.7J.K. Aronson, “Rare Diseases and Orphan Drugs,” British Journal of Clinical Pharmacology (Mar., 2006): 243-44, accessed April 16, 2015, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1885017/pdf/bcp0061-0243.pdf.8ibid9Joseph Cox, “Surprise! Big Pharma Don't Want Developing Countries Having Access to Cheap Medicine,” VICE, 2013, accessed April 16, 2015, https://www.vice.com/en_uk/read/american-lobbyists-are-fighting-to-halt-the-availability-of-affordable-medicine-to-the-3rd-world.

tion will be exposed as “global south” states engage in actions that improve their societies through eco-

nomic awareness, even at the cost of MNC interests and possible profits.10

WHEN DID CHEMICAL PATENTS BECOME BIG BUSINESS?

Less Developed Countries (LDCs), defined by Veena Mishra as states with “domestic, infant

high-tech industries,11” protested against intellectual property rights during the 1995 Uruguay round of

negotiations in the GATT treaty.12 Developed countries countered this assertion, stating that the protec-

tion of intellectual property would stimulate research that could be beneficial to both developed states

(DCs) and LDCs. The byproduct of these talks was the Trade Related Intellectual Property Rights

(TRIPS) section of GATT13. The 2006 installation of TRIPS was a compromise that set minimum

global standards for protection of intellectual property and patents on pharmaceuticals while setting

safeguards to prevent large states from usuriously exploiting their intellectual property rights against

LDCs.14 What TRIPS ultimately achieved was building a dichotomy between DCs and LDCs, that

caused unintended actions by LDCs seeking to engage in social welfare behaviors.

MNCs in the DCs viewed TRIPS’ provisions regarding extending protections of intellectual

property from seven years to twenty years as necessary measure in order to maintain profitability

within LDC markets15. This twenty year regulation is in line with the duration of chemical patents in

the United States.16 Pharmaceutical MNCs view longer-term patent protection as a necessity due to

various reasons ranging from research and development costs for diseases not commonly found in the

10ibid11Veena Mishra, “TRIPS, Product Patents, and Pharmaceuticals,”Economic and Political Weekly 36, no. 48 (December 1, 2001): 4464.12ibid13ibid14Ellen F.M. 'T Hoen, “TRIPS, Pharmaceutical Patents and Access to Essential Medicines: Seattle, Doha and Beyond,” in economics of aids and access to hiv/aids care in developing countries. issues and challenges, ed. Jean-Paull Moatti et al. (Paris: World Health Organization, 2003), 39, 42, accessed April 19, 2015, http://www.anrs.fr/content/download/1423/9502/file/Economics%20if%20AIDS%20and%20acces%20to%20HIVAIDS%20care%20in%20developing%20countries.%20Issues%20and%20challenges.pdf.15Mishra 446416Lalwani “Understanding Patents”

pharmaceutical MNC’s home country, to inadequate protection of the manufactured chemical, and the

perception that the twenty-year limitation TRIPS provides is insufficient17. This final development has

led to a sort of movement called TRIPS Plus. TRIPS Plus is a global north movement that proposes

that the twenty year exclusivity be extended, and greater restrictions be imposed upon LDCs regarding

the licensing of pharmaceuticals and the production of reduced-cost generics.18

TRIPS, and by extension the informal TRIPS Plus movement, has put LDCs in an unfortunate

situation where diseases alien to MNCs home countries are not treated due to various circumstances

that are often out of the general population’s control. While inadequate protection may be associated

primarily with LDCs with authoritarian regimes19, the problem exists in developing countries with

democratic regimes as well. India, a federal republic20 with the fourth-fastest fastest growing economy

in the world21, faces a problem with getting necessary medications to its less affluent populations while

maintaining good relations with large pharmaceutical MNCs who use foreign direct investment (FDI)

to produce their medicines within its borders22.

Due to reduced manufacturing costs and more relaxed antitrust laws, companies such as Bayer

and Merck manufacture in India23. If a company can reduce costs while maintaining the same gross

revenue, then the net profit from the patented good increases. By exploiting the exclusivity rights that

chemical patents provide, an MNC can produce the product in an LDC at a lower cost of manufacture,

sell it in DCs and LDCs to persons who can afford the medicine24, and maximize profits at the expense

of the less affluent as well as local pharmaceutical businesses.

17F.M. ‘T Hoen 42-4318F.M. ‘T Hoen 4319F.M. 'T Hoen 4220“The World Factbook - India (Government),” Central Intelligence Agency, last modified April 21, 2015, accessed April 23, 2015, https://www.cia.gov/library/publications/the-world-factbook/geos/in.html.21Joshua Robinson, “The 20 Fastest-Growing Economies This Year,” Bloomberg Business, February 25, 2015, accessed April 23, 2015, http://www.bloomberg.com/news/articles/2015-02-25/the-20-fastest-growing-economies-this-year.22Nidhi Chauhan, Competition Assessment of Pharmaceutical Sector in India (New Delhi: Competition Commission of India, 2012), 14, accessed April 23, 2015, http://cci.gov.in/images/media/ResearchReports/nidhifeb12.pdf.23ibid24Daily Mail Reporter, “Pharmaceutical Chief Tries to Stop India Replicating Its Cancer Treatment,” Daily Mail, January 24, 2014, accessed April 23, 2015, http://www.dailymail.co.uk/news/article-2545360/Pharmaceutical-chief-tries-stop-India-replicating-cancer-treatment.html.

Local pharmaceutical businesses within LDCs such as India are also affected by chemical

patents held by Western states. Economic liberalization and globalization within India has resulted in

more drugs entering the Indian area, but with mergers, buyouts, etc., such mergers have resulted in ei-

ther forced divesting of monopolized manufacturing techniques, or reductions in research and develop-

ment that could aid India25 – and by extension other LDCs. This liberalization has spread to rent-seek-

ing doctors and pharmacists who use their influence to prevent the use of less expensive generics in fa-

vor of more expensive “branded” drugs.26. Rent-seekers are persons who seek benefits through the po-

litical arena on the basis of being part of a particular class of people, getting tariffs on produced goods,

or getting anti-competition provisions and regulations, with the “rent” being any payment made in ex-

cess of what is required to maintain the production factor.27

These local pharmaceutical companies are forced to do one of two things: enter a “joint ven-

ture” one of the major companies and acquire a license to manufacture the patented chemical28, or stop

producing the pharmaceutical altogether. Although India's Patents Act, 1970 states “any process for the

medicinal, surgical, curative, prophylactic diagnostic, therapeutic or other treatment of human beings or

any process for a similar treatment of animals to render them free of disease or to increase their eco-

nomic value or that of their products,29” pro-West protocols such as TRIPS that allow for twenty-year

lifespans for patents at the global level30 must be followed with varying levels of rigidity depending on

a state’s “level of development.”31

HOW STATES AND MNCs DEAL WITH PATENT LAW: PERSPECTIVES

25Chauhan 1526Chauhan 2427David R. Henderson, “Rent Seeking,” Library of Economics and Liberty, accessed April 23, 2015, http://www.econlib.org/library/Enc/RentSeeking.html.28Chauhan 1429“India Patent Act 1970 - Section 3,” Intellectual Property India, accessed April 23, 2015, http://www.ipindia.nic.in/IPActs_Rules/updated_Version/sections/ps3.html.30“Intellectual Property: Protection and Enforcement,” World Trade Organization, accessed April 23, 2015 https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm.31ibid

States have varying ways of dealing with the issue of patent law at the state and systemic level.

India deals with chemical patents by banning the ability for an MNC to patent any medical device, in-

clusive of pharmaceuticals32, and encourages its pharmaceutical manufacturers to produce generics at

lower costs than the original medicine. Conversely, Global North MNCs view southern states’ bypass-

ing patent laws as preventing the flow of capital and infringing on the ability to capitalize on innova-

tion as a result of profit limitations and the onslaught of generics.33 At the same time, liberally eco-

nomic global north states have their own issues with patent laws and ability to get medicines to their

residents. Thus, patents play roles with the various actors in the pharmaceutical trade.

Some globally “south” states such as India’s have used state-level patent law to circumvent

global trade agreements. Although TRIPS has an exemption allowing smaller LDCs time to transition

into a more “western” economic patent adherence34, larger LDCs such as India can use their manufac-

turing capabilities to reduce the impact of TRIPS35. India has dealt with TRIPS and patent laws by out-

lawing “evergreening,” or the patenting of a new drug that is simply a slight modification of an old

drug in order to protect markets, further invest in research and development, and maximize profitabil-

ity.36 One such drug that India has outlawed the “evergreening” of is the cancer drug Nexavar, and has

done this by issuing a compulsory license that lowers the generic version’s price to 8,800 rupees ($141

USD) per month versus the Bayer version’ s 280,000 rupees ($4,486 USD).37

India’s promotion of the manufacturing of generic drugs serves two purposes. First, India

wishes to provide drugs that are otherwise inaccessible to the majority of its population at a cost that is

32India Patent Law 197033David Henry and Joel Lexchin, “The Pharmaceutical Industry as a Medicines Provider,” The Lancet 360 (November 16, 2002): 1591-92, accessed April 27, 2015, http://www.researchgate.net/profile/David_Henry3/publication/11024377_The_pharmaceutical_industry_as_a_medicines_provider/links/02e7e51adb83a07324000000.pdf.34Aaditya Mattoo and Arvind Subramanian, “The WTO and the poorest countries: the stark reality,” World Trade Review3, no. 3 (November 2004): 391-92.35Mattoo and Subramanian 39236Roger Collier, “Drug Patents: The Evergreening Problem,” Canadian Medical Association Journal 185, no. 9 (June 11, 2013): E385, accessed April 27, 2015, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3680578/pdf/185e385.pdf.37Ben Hirschler, “Bayer Fails to Block Generic Cancer Drug in India's Top Court,” Reuters, December 12, 2014, accessed April 27, 2015, http://www.reuters.com/article/2014/12/12/us-bayer-india-ruling-idUSKBN0JQ1XA20141212.

somewhat bearable, yet still allows Indian manufacturers to have business while the original manufac-

turer makes more profits through minor tweaks.38 Second, India is a country with a very large gap be-

tween its wealthy and poor residents, which promotes its “genericization” of pharmaceuticals due to

many ethnicities within India, as does promotes distribution networks to rural areas.39 The result of In-

dia’s actions is India’s pharmaceutical industry will be worth $55 billion USD in 2019-2020, and the

Inida’s generic pharmaceutical industry will be worth $26.1 billion USD by 201640.

The explosive growth of India’s generic pharmaceutical industry is not without controversy

from both MNCs and orthodox liberal economists. Pharmaceutical MNCs have taken various actions

to address their disdain towards India’s outlawing of evergreening. During a December 3, 2013, inter-

view with the Financial Times, Marijn Dekkers, Chairman of Bayer, stated:

I don't know if you've even been to India, there are a lot of poor Indians obviously, and the hospitals aren't that close by [laughs] to where they live, so we found that this was extremely politically motivated and essentially, I would say, theft. Of the Indian government, of a capability of a company that is patented, and therefore a patent right. So now, is this going to have a big effect on our business model? No, because we did not develop this prod-uct for the Indian market, let's be honest. I mean, you know, we developed this product for western patients who can afford this product, quite honestly.41

Dekkers sought to uphold patent law with perhaps the least diplomatic wording that he could have used

to justify the high costs of pharmaceuticals. Dekkers put a value on the earnings potential of India’s

residents as commodities for his corporation, and additionally, demonstrates the economic superiority

that Westerners are perceived to hold in the eyes of global-north MNCs due to their greater storage

quantity of money.

Other northern MNCs have dealt with India’s evergreening laws in less draconian ways. Pfizer,

the maker of pharmaceuticals such as Viagra, has embraced India’s growing market by putting manu-

facturing facilities in India as a means of both creating jobs and allowing for innovations to grow

38Collier E385-E38639“Indian Pharmaceuticals Industry Analysis,” India Brand Equity Foundation, October, 2014, accessed April 27, 2015,http://www.ibef.org/industry/indian-pharmaceuticals-industry-analysis-presentation.40ibid41Claire Cassedy, “Transcript of Bayer CEO Marjin Dekkers quote at the December 3, 2013 FT Event, regarding India compulsory license of Nexavar,” Knowledge Ecology International (blog), February 7, 2014, accessed April 27, 2015, http://keionline.org/node/1924.

within the Indian market. These industries have used India’s relative political and economic stability

compared to other developing states as a means of reducing costs while promoting pharmaceutical in-

novation.42 By hiring newly minted scientists from universities that major in science and engineering,

more progressive MNCs, not only can the wealthiest ten percent – approximately 100 million within

India – afford the top-tier private healthcare they had access to, but India’s ever-growing middle class

of approximately 300 million people can afford an increasing number of aging out medicines. How-

ever, this leaves a balance of 800 million without a means of acquiring medicines due to the fact that

India spends approximately $28 per person per year on medical needs, of which $3 per person per year

is spent on pharmaceuticals.43 When states have a large underclass, and patent laws and cultural per-

spectives on social care limit aid44, how can patents be circumvented?

Ironically, much of patent law’s shortcomings can be circumvented by the distribution of previ-

ous-generation pharmaceuticals in lieu of forcing the original, or even genericized, product. 45 LDCs

such as South Africa are often the beneficiary of these patent-lapsed leftovers, many of which treat en-

demic diseases such as HIV.46 MNCs such as Merck and GlaxoSmithKline have engaged in “corporate

philanthropy,” or donating products in a corporate capacity to poorer states47. The benefits, at least on

the surface of giving these obsolete medicines a second life, is that they improve a corporation’s public

image by painting them as philanthropic to disadvantaged groups, while in some cases allowing for the

state to maximize profits on newer drugs48. Thus, everyone benefits from the ability to used lapsed

drugs to aid the less affluent.

42Janice M. Mueller, “The Tiger Awakens: The Tumultuous Transformation of India’s Patent System and the Rise of Indian Pharmaceutical Innovation,”UNIVERSITY OF PITTSBURGH LAW REVIEW 68, no. 3 (2007): 499-501.43Mueller 542-54344Mueller 54445“Health Action International to the Global Fund: Say No to Medicines Donations!!,” Health Action International, July 15, 2003, accessed May 2, 2015, http://www.haiweb.org/pubs/pressreleases/15jul03_DonationsPositionStatement.pdf.46Henry and Lexchin 159347Henry and Lexchin 159048Henry and Lexchin 1590-1591.

Patent law’s shortcomings provide various perspectives at the state, corporate executive, and

corporation levels. Whereas executives seek to maximize profits at the expense of human lives,49 many

corporations wishing to gain footholds in LDCs and developing countries see the use of philanthropy as

a means of building goodwill with the societies that live within a state, as well as building goodwill

back home. However, this mechanism of patent law, donating outdated drugs has its own sets of prob-

lems, not the least being continued dependency on developed states.

THE DEPENDENCY PROBLEM: ADDICTED TO DONATIONS

MNCs in developed states have patent laws at the state50 and systemic51 levels to protect them

from unlicensed forgeries and generics. MNCs often license generics to manufacturers in order to re-

duce the cost of the medicine, particularly after the patent has run out; or MNCs donate medicines to

LDCs as a gesture of goodwill. This “philanthropy” towards LDCs may improve an MNC’s image, but

results in various issues not dissimilar to issues states have with perpetual indebtedness to international

organizations such as the International Monetary Fund (IMF). A perpetuating dependency combined

with a reduced incentive for the dependent state to innovate on its own.

The main problem that both the IMF has regarding LDCs is the global-north based mechanisms

that these organizations employ as conditions for aiding LDCs. Theodore H. Cohn calls the IMF a

“keystone international economic organizations” (KIEOs)52 because of “their influence in monetary

functions, development, and trade.”53 These organizations provide financial aid to less developed

countries in exchange for modifications to infrastructure that are more in line with western and liberal

economic ideologies in order to help repay loans from the IMF and from private banks fed to the IMF.54

49Cassedy FT 201350Lalwani – Patents51Intellectual Property – WTO52Theodore H. Cohn, Global Poltiical Economy, 6th ed. (New York: Longman, 2012), 22. 53ibid54Cohn 142

The combination of an inability to repay IMF loans55, and policies that focus on liberal economic inter-

ests and privatization56 rather than small-scale economics, has resulted in a perpetual dependency.

MNCs behave in an analogous fashion when providing free pharmaceuticals to LDCs in the

name of goodwill. It comes across as good public relations for the donor state and MNC, and the recip-

ient state gains access to otherwise unattainable medicines57, but no economic actor in a liberal global

economy performs actions for purely altruistic purposes. Donor MNCs are often reimbursed by the re-

cipient state for the costs of the medicines, and in the event the medicine is compiled on-site, compila-

tion and the production costs.58 MNCs such as GlaxoSmithKline are careful to note that this “good-

will” is done only to handle broadly present diseases, and done through NGOs, 59 perhaps as a way of

distancing themselves from potential liabilities from recipient states, and states wishing to build phar-

maceutical factories that build generics.

As mentioned earlier in this paper, some developing countries such as India are robust enough

in terms of labor and government measures to supplant much of the need for these “handouts.” How-

ever, these donations in the poorest of LDCs serve the more pernicious purpose of preventing the

growth of a generics industry that could provide higher quality drugs at a lower cost. 60 The World

Health Organization (WHO) estimates that in countries without a sufficiently robust generics industry,

the cost for an individual engaging in the private sector is often 2.5 to 6.5 times the ideal price for that

generic.61 Furthermore, the medicines that these countries do send have at least one year of shelf life

remaining unless otherwise requested62, which allows for a sufficient stockpile to be made that can – at

55Prof. Osman Yagoub Mohamed Dawelbait, “Debt Crisis in Africa,” Journal of Economics and Sustainable Development 6, no. 8 (2015): 23-27, accessed May 5, 2015, http://iiste.org/Journals/index.php/JEDS/article/download/21903/22244. 56Cohn 32157Henry and Lexchin 1590-159158Access to Affordable Essential Medicines (New York: World Health Organization, 2008), 36, accessed May 5, 2015, http://www.who.int/medicines/mdg/MDG08ChapterEMedsEn.pdf. 59GSK Public Policy Positions: Product Donations (Clifton, NJ: GlaxoSmithKline, 2012), 1, accessed May 5, 2015, http://www.gsk.com/media/280890/product-donations-policy.pdf. 60Access To Affordable Essential Medicine 37-3861Access to Affordable Essential Medicine 4362GSK Public Policy Positions: Product Donations

least in the short-term – prevent the investment of infrastructure to build generics-producing factories,

or provide a “dumping ground” for drugs whose shelf-lives are no longer viable in western markets 63.

In this way, the donation of pharmaceuticals can be considered foreign aid not unlike more tra-

ditional forms of foreign aid. Although foreign aid can take on the form of a grant or a loan through bi-

lateral treaties (usually grants), or multilateral treaties (always loans) 64. Pharmaceuticals, being a

“high-tech” good due to the amount of research and development required to test and manufacture

them, require highly skilled technicians and other workers in order to manufacture these goods to stan-

dards that are ever-evolving that unskilled persons in many LDCs simply cannot provide65. These

skills, which exist in the form of high levels of education through either self-drive, or state-driven in-

vestment in academics, are what allow developing countries such as India and the Asian Tigers to gen-

erate an educated and hard-working labor force66 that generate industrial clusters67 that allow for the

avoidance of perpetual dependency on foreign aid. In contrast, states which do not put a high emphasis

on educating the general population – particularly authoritarian and totalitarian states in Central Africa

that favor a small selectorate, or voting body;68 and smaller winning coalition, or favored persons

within the selectorate that legitimize the leader's power69.

For these states, pharmaceutical donations, along with other forms of foreign aid from states

and international organizations, these donations are private goods, or goods that are typically shared

amongst a small winning coalition in order to enrich the loyalty those persons have to the leader.70 Be-

cause these leaders can give high quality private goods to their “chosen persons,” and these goods may

be of greater value than what the general population can generate as a result of factors such as educa-

63GSK Public Policy Positions: Background64Thomas Oatley, International Political Economy, 4th ed. (Chapel Hill, NC: Pearson / Longman, 2010), 309. 65Robert Gilpin, Global Political Economy: Understanding the International Economic Order (Princeton, NJ: Princeton University Press, 2001), 204-5. 66Christian P. Scherrer, Ethnicity, Nationalism, and Violence: Conflict Management, Human Rights, and Multilateral Regimes (Hiroshima: Ashgate, 2003), 19. 67Scherrer 1968Bruce Bueno de Mesquita et al., The Logic of Political Survival (Cambridge, MA: MIT Press, 2003), 42. 69Bueno de Mesquita et al 5170Bueno de Mesquita 87

tion level71 and publicly available infrastructures. In those instances, why deal with the general popula-

tion when the ability to receive aid to convert into desired goods is of greater value than what your pop-

ulation can provide?

Patent laws therefore build dependencies by smaller states as a result of forces such as MNCs

and authoritarian regimes that specialize in the allocation of private goods to “desired persons.” While

MNCs may work through NGOs in order to facilitate the transfer of pharmaceuticals to globally-south

states, the reality exists that so long as MNCs oversaturate developing markets to the point that there is

no incentive for developing countries to attempt to build factories that can provide competition, along

with many LDCs possessing authoritarian leaders who possess power not by population, but rather by

consolidation of power and luxuriating the lives of a select few, these laws promote LDC dependency

on larger states that result in an inability for LDCs to develop modern pharmaceutical technologies.

The NGOs who act as middlemen, although altruistic in their actions, are the MNC puppets, and can be

held somewhat liable as well.

NGOs AND THEIR ROLE IN PATENT LAW PROTECTION

At the surface, NGOs such as Doctors Without Frontiers that administer medicines within

global-south communities may be perceived as wholly altruistic, favoring traveling and the moral feel-

good of aiding those in politically or economically unstable LDCs 72, but their efforts are limited by

MNC behavior, and in turn, patent laws that protect the intellectual property rights of patent holders.

These NGOs can be limited in terms of not only what the MNC that manufactures the pharmaceutical

may wish to provide, but also by state laws that can relegate to whom a drug may go to as well. Al-

though not complicit in their actions, MNCs do play a role in the upholding of chemical patents.

71Scherrer 19. In this instance, the opposite of the highly-educated populace exists, key example being Mobutu Sese Seko's installation of “Authenticite” during his reign in Zaire in order to build up a sense of nationalism and a cult of personality. (See Ghislain C. Kabwit, “Zaire: The Roots of the Continuing Crisis,” The Journal of Modern African Studies17, no. 3 (Sep., 1979): 389.)72“About Us,” Medicins Sans Frontieres, accessed May 7, 2015, http://www.msf.org/about-msf.

NGOs such as Doctors Without Frontiers administer life-saving medicines to persons within

these economically and politically unstable areas, but they do so as agents to MNCs (who act as the

principles)73. Functioning as the MNC's distribution agents, these NGOs are relegated as to what

medicines they may distribute to what region of the world based on various parameters ranging from

whether a country allows for evergreening74, to whether there are moral or ethical implications that pre-

vent a medication from being used in a certain country (i.e.: South Africans being deprived of menin-

gitis medicines on the basis of AIDS-related infections)75, and even overly complex patent laws in the

recipient state that prevent medical aid from being widely disseminated where needed.76. South Africa

stands as the benchmark of when NGOs are hamstrung by stipulations enforced by MNCs, yet the

NGOs must continue to perform altruisms for less affluent individuals.

South Africa has thirteen differing patent laws on antiretroviral drugs alone77 as a result of a

complex patent system that allows for patents to be filed without any veracity of the pharmaceutical's

actual effectiveness78. As a result, importing pharmaceuticals can cost as much as 35 times the retail

cost79. Once these NGOs receive the pharmaceuticals, whether by actual donation or by purchase,

NGOs become a sort of “rent” collector,80 able to choose whom to exploit based on criteria such as

AIDS and then use the patents to maximize MNC profits.81 Regardless of whether the NGO wishes to

profit off of the desperation of the least developed states, they become – if not necessarily the rent-

seekers – a rent-collector that enforces the MNC interests.

73GSK Public Policy Positions: Product Donations74“South Africa: Stand Strong Against Aggressive Pharma Campaign,” Medicins Sans Frontieres, January 21, 2014, accessed May 9, 2015,http://www.doctorswithoutborders.org/news-stories/press-release/south-africa-stand-strong-against-aggressive-pharma-campaign-1. 75Henry and Lexchin 159076Amir Attaran, DPhil, LLB and Lee Gillespie-White, LLB, “Do Patients for Antiretroviral Drugs Constrain Access to AIDS Treatments in Africa,”Journal of the American Medical Association 256, no. 15 (October 17, 2001): 1887-89. 77Attaran and Gillespie-White 188778South Africa: Medicin Sans Frontieres79ibid80Jerome H. Reichman and Rochelle Cooper Dreyfuss, “Harmonization Without Consensus: Critical Reflections On Drafting a Substantive Patent Law Treaty,” Duke Law Journal 57 (Oct., 2007): 95-96. 81ibid

Additionally, because NGOs are forced to pay the exorbitant costs of newly patented goods in

LDCs82, they remove a section of the market that cannot afford the patented and more expensive

medicine, and remove the obligation for the MNC to lose profits in the name of humanity. As a result,

NGOs indirectly aid the agendas of MNCs and executives such as Mr. Dekkers either as a guaranteed

buyer of the overpriced good, or they must use leftover free product pursuant to various stipulations 83.

As a result, their actions – regardless of whether they serve as an ethical user of outdated technology –

or as a rent-collecting agent for a MNC – protect patents and exclusivity by legitimizing high prices as

a result of the state, or as a result of the MNC wishing to exploit LDCs. Patent law, need not necessar-

ily be a weapon by the global north in order to control the global south's economic growth; it can be

used to maintain “southern pockets” even within otherwise global-north states.

PATENT LAW AND INSURANCE: CREATING SOUTH WITHIN THE NORTH

At the summary level, the economic world is divided into a global north of developed countries,

and a global south of less developed countries and developing countries. Although easy to digest for

comparative purposes, otherwise globally-north countries possess pockets of global south that due to

patent laws within the home-state, result in a reduction of generics,84 and by extension, increased diffi-

culty in acquiring medicines compared to more traditionally global south states such as India 85. Many

of these diseases are orphan diseases in the global north, which means that the scarcity of the disease

makes it unprofitable for pharmaceutical MNCs to produce the drug unless the selling price is ex-

tremely high86. When this is combined with a state-mandated insurance program that, depending on

the tier purchased, prevents accessibility to more expensive drugs or specialized doctors,87 a dichotomy

82South Africa: Medicins Sans Frontieres83Henry and Lexchin 159084“Health Action International to the Global Fund: Say No to Medicines Donations!!,” Health Action International, July 15, 200385See India Patent Law 1970, Mueller 542-544, and Collier E385 for how larger developing states have dealt with this issue. (See earlier in this paper for the writeup derived from these sources.)86Aronson 243-4487Choosing a Health Insurance Plan

between the haves and have-nots forms that can be worse than the dichotomy in LDCs where practices

such as evergreening are prohibited.

Liberal economic states such as the United States provide some of the strongest protections of

intellectual property rights on the basis that if intellectual property is not strongly protected, that inno-

vation will be greatly limited. Under current United States Patent Law, a competing product cannot

merely be a simple improvement of an already existing product88. 35 U.S.C. 115 of the Manual of

Patent Examining Procedure states:

(b) REQUIRED STATEMENTS.—An oath or declaration under subsection (a) shall contain statements that—

(1) the application was made or was authorized to be made by the affiant or declarant; and(2) such individual believes himself or herself to be the original inventor or an original joint inventor of a claimed invention in the application.

<...>(In the Event the Patent is filed before September 15, 2012, the text is as follows)The applicant shall make oath that he believes himself to be the original and first inventor of the process, machine, manufacture, or composition of matter, or improvement thereof, for which he solicits a patent; and shall state of what country he is a citizen. Such oath may be made before any person within the United States authorized by law to administer oaths, or, when made in a foreign country, before any diplomatic or consular officer of the United States authorized to administer oaths, or before any officer having an official seal and authorized to administer oaths in the foreign country in which the applicant may be, whose authority is proved by certificate of a diplomatic or consular officer of the United States, or apostille of an official designated by a foreign country which, by treaty or convention, accords like effect to apostilles of designated officials in the United States. Such oath is valid if it complies with the laws of the state or country where made. When the application is made as provided in this title by a person other than the inventor, the oath may be so varied in form that it can be made by him. For purposes of this section, a consular officer shall include any United States citizen serving overseas, authorized to perform notarial functions pursuant to section 1750 of the Revised Statutes, as amended (22 U.S.C. 4221). 89

Liberal economic state interests are further upheld in 35 U.S.C. 119 of the same procedure, stating:

(a) An application for patent for an invention filed in this country by any person who has, or whose legal representatives or assigns have, previously regularly filed an application for a patent for the same invention in a foreign country which affords similar privileges in the case of applications filed in the United States or to citizens of the United States, or in a WTO member country, shall have the same effect as the same application would have if filed in this country on the date on which the application for patent for the same invention was first filed in such foreign country, if the application in this country is filed within 12 months from the earliest date on which such foreign application was filed. The Director may prescribe regulations, including the requirement for payment of thefee specified in section 41(a)(7) , pursuant to which the 12-month period set forth in this subsection may be extended by an additional 2 months if the delay in filing the application in this country within the 12-month period was unintentional.90

88“General Information Concerning Patents,” United States Patent and Trade Office, October, 2014, accessed May 12, 2015, http://www.uspto.gov/patents-getting-started/general-information-concerning-patents. 89“Appendix L Consolidated Patent Laws United States Code Title 35 - Patents: 35 U.S.C. 115 Inventor’s oath or declaration.; 35 U.S.C. 115 (pre-AIA) Oath of applicant.; ” United States Patent and Trade Office, January, 2014, accessed May 12, 2015, http://www.uspto.gov/web/offices/pac/mpep/consolidated_laws.pdf. 90Appendix L USPTO 35 U.S.C. 119 Benefit of earlier filing date; right of priority.,

Because the United States provides equal peerage to WTO member-states regardless of whether the

patent is filed in the United States by a citizen or non-citizen, or in a WTO member country by one of

its citizens, MNCs are able to enforce using either United States Patent Law, the applicable patent law

of the MNCs state, TRIPS, or a combination of these to gain enforcement.

As a result, the ability for pharmaceutical firms to make generics of recently-patented (i.e.:

patented within the past 20 years, per TRIPS91 and United States Patent Law regarding chemical

patents92) within the United States is greatly hindered due to current patent law requiring that the

generic producer can ascertain one of the four following conditions when connecting to the innovator –

the corporation that made the original pharmaceutical – and in explaining to the innovator the reasons

for producing a generic:

1) It has not been patented;(2) the applicable patent has expired;(3) the patent will expire on a given date and that the generic version will not be marketed before that date; or (4) the listed patent is not infringed or invalid. The generic company is also required to notify the innovator about the abbreviated NDA (ANDA) filing and explain the reasons why it believes the generic version will not infringe the listed patent or the listed patent is invalid. 93

This has two implications; one for the generic producer, and one for the innovating manufacturer. For

the generic producer, it requires that the chemical or pharmaceutical have sufficient time on the market

for the original firm to have recouped its research and manufacturing costs and make a profit 94. For the

innovator, it requires staying one step ahead of the generics manufacturer through evergreening tactics

such as creating a time-release version of a pharmaceutical to replace a rapid-release pharmaceuticalin

order to stay profitable while giving the public the perception of a more efficient drug to increase

compliance to the drug's recommended use-cycle.95

91F.M. T'Hoen 42-4392Lalwani “Understanding Patents”93Himanshu Gupta et al., “Patent Protection Strategies,” Journal of Pharmacy and Bioallied Sciences 2, no. 1 (Jan-Mar., 2010): under “Strategies for Extending Drug Commercial Lifecycle,”, accessed May 12, 2015, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3146086/?report=reader#__ffn_sectitle. 94Gupta et al, under “Rising Costs of Drug Development.” Gupta et al state that the average cost of developing a new pharmaceutical skyrocketed from $54 million USD in the 1970s to approximately $800 million USD by 2000. 95Gupta et al, under “New Formulations.” Gupta et al explain Lilly's transition of Prozac to a weekly drug and Bristol-Myer Squibb's transition of Glucophage, a multi-daily drug, to Glucophage XR, a once-daily drug

This evolutionary evergreening may not have an adverse effect on the upper classes within

American society, but for the middle class and working class whom depend on insurance – be it private

or through the national healthcare plans – to pay for medicines, the continuous minutization of

improvements results in patients going bankrupt to pay for pharmaceuticals due to high R&D costs.96

Insurance companies are forced to either cover the difference of drugs that can cost over $10,000 (and

in some cases, $20,000 in the case of some cancer drugs) per month97. This is in large part due to

manufacturers being allowed to set prices in the United States98 under an orthodox liberal, or as little

government intervention in the economic arena as possible99, pretense. Should insurance refuse to

cover these medications, Medicare is often burdened with the covering costs; and is powerless to

negotiate better terms with the manufacturing MNCs on behalf of its subscribers.100 The total cost to

Medicare alone is $50 billion to $80 billion USD per year, 101.

As a result of this “southernizing” of the less affluent within the global north due to patent laws

at the state and systemic levels, many of the less affluent have sought to circumvent these laws by

procuring their pharmaceuticals either from online retailers in global north states that possess less

draconian patent laws such as Canada where negotiations between pharmaceutical manufacturers and

the state results in price reductions of 50% to 75%102, or from offshore “pharmacies” in territories such

as Bermuda that exercise orthodox liberalism at the possible cost of medical quality.103 Although

online pharmacies may provide otherwise “southern” persons in the global north access to drugs at a

significantly reduced cost, aid persons living in rural areas with obtaining the necessary prescriptions,

96Matthew Herper, “'60 Minutes' Just Attacked High Drug Prices. Here's What You Should Know.,” Forbes, October 5,2014, accessed May 12, 2015,http://www.forbes.com/sites/matthewherper/2014/10/05/60-minutes-just-attacked-high-drug-prices-heres-what-you-should-know/. 97Hagop M. Kantarjian et al., “Cancer Drugs in the United States: Justum Pretium—the Just Price,” Journal of ClinicalOncology 31, no. 28 (October 1, 2013): 3600. Typically these are among the orphan drugs that are exorbitantly priced. Moreover, Kantarjian et al claim the high price is also partially due to the short use cycle (1-3 months) due to their being administered to terminal patients.98Kantarjian et al 360199Cohn 416100See Kantarjian et al 3602-3603 and Herper's Analysis on the 60 Minutes piece on exorbitant prices (Footnote 96).101Kantarjian et al 3602102ibid103Alan M. Weiss, MD, MBa, “Buying prescription drugs on the Internet: Promises and pitfalls,” Cleveland Clinic Journal of Medicine 73, no. 3 (March, 2006): 284.

and reduced time at doctors104, concern by both governments seeking to ensure customers receive due

quality and MNCs seeking to ensure their profits are preserved over the quality and authenticity of

these drugs has caused GlaxoSmithKline to stop selling its products to Canadian online pharmacists

and MNC-laden states such as the USA to prosecute mail-order pharmacies.105

While the global north may lead the global pharmaceutical market in production and innovation

as a result of patent laws at the national and systemic levels, the reality is is that it creates a “regional

south” within the global north through liberal economic practices that make it cost-prohibitive for less

affluent persons to obtain the necessary corrective medicines.106 Additionally, politically hardline

practices that criminalize third-party vendors who engage directly with the infirm in the same orthodox

liberal practices that allow MNCs to exploit the less affluent in the first place107. On the other hand,

developing countries with less hardline patent laws such as India's, where a pharmaceutical company

must do more than merely change a minute property of the drug in order to gain a new patent 108, allow

for – if not necessarily universally accessible pharmaceuticals – a greater quantity of those in the

middle class to obtain medications109. Additionally, India's disregard of patent law in favor of generics

manufacture has allowed for industry to attract educated young people 110 into medical fields to further

increase India's economic prowess. As such, whereas the global north may be the epicenter for

innovation, the global south may become the epicenter for mass-production and improvements in

economies-of-scale that allow for greater accessibility to not only LDCs, but also to regionally southern

areas within an otherwise global north.

104Weiss, MD, MBa 283105Weiss, MD, MBa 285-286106Kantarjian et al 3602 and Weiss 285-286107Kantarjian et al 3601 and Cohn 416108India Patent Law 1970109Mueller 542-543110Scherrer

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