Showing posts with label patent. Show all posts
Showing posts with label patent. Show all posts
Sunday 3 December 2023
Friday 21 July 2023
A Level Economics 54: Monopoly
Market failure arising from monopoly firms occurs due to the significant market power they possess, which allows them to restrict output, charge higher prices, and limit competition. This results in an inefficient allocation of resources and a loss of consumer welfare. Let's explore the market failures arising from monopoly firms:
Higher Prices and Reduced Output: Monopoly firms can set prices higher than their production costs due to the lack of competition. Since they are the sole providers of a particular good or service, consumers have no choice but to accept the higher prices. This leads to reduced consumer surplus, as consumers pay more for the product than they would in a competitive market.
Example: A pharmaceutical company holds a patent for a life-saving drug. As the only producer, they can charge exorbitant prices, making it unaffordable for many patients in need.
Inefficient Resource Allocation: Monopoly firms may not allocate resources efficiently to meet consumer demand. Their focus may be on maximizing profits rather than producing the optimal quantity of goods or services that align with consumer preferences.
Example: A monopoly internet service provider may invest less in network expansion and improvements since they face limited competition. As a result, consumers may experience slower and unreliable internet services.
Lack of Innovation: Monopoly firms may lack incentives for innovation and improvement since they face no pressure from competitors. Without competition, there is less motivation to invest in research and development or enhance products and services.
Example: A monopoly operating in the telecommunications sector may not invest in new technologies or offer innovative services since they already dominate the market.
Deadweight Loss: Deadweight loss refers to the welfare loss experienced by society when resources are not efficiently allocated. In a monopoly, deadweight loss arises due to the underproduction of goods and services compared to a competitive market.
Example: A monopoly producing widgets may restrict output to maximize profits, leading to an inefficiently low quantity of widgets produced and consumed.
Rent-Seeking Behavior: Monopoly firms may engage in rent-seeking behavior, using their market power to lobby for regulations and policies that protect their position. This diverts resources away from productive activities and undermines overall economic efficiency.
Example: A monopoly energy company may lobby the government to impose regulations that limit competition from renewable energy sources, protecting its market dominance.
Inequitable Distribution of Income: Monopoly profits may be concentrated in the hands of a few, exacerbating income inequality and wealth disparities in society.
Example: A monopoly in the media industry may control multiple platforms and generate significant profits, contributing to media ownership concentration and limiting diversity of voices.
Government intervention through antitrust laws, regulations, and competition policies is crucial to address the market failures arising from monopoly firms. By promoting competition, governments can encourage innovation, ensure efficient resource allocation, protect consumer welfare, and foster a more equitable distribution of economic benefits.
Saturday 17 June 2023
Economics Essay 59: Protectionism
Explain the main ways in which countries can protect their domestic industries from foreign competition.
Countries can employ several measures to protect their domestic industries from foreign competition. The main ways in which such protection can be achieved include:
Tariffs: Tariffs are taxes imposed on imported goods, making them more expensive compared to domestically produced goods. By levying tariffs, countries can increase the price of imported products, making them less competitive and protecting domestic industries. Tariffs can be specific (a fixed amount per unit) or ad valorem (a percentage of the product's value).
Import Quotas: Import quotas place a limit on the quantity of a particular product that can be imported into a country. By restricting the quantity of imports, domestic industries are shielded from foreign competition, ensuring that they have a larger share of the domestic market. Import quotas are often used to protect sensitive industries or to safeguard national security interests.
Subsidies: Governments can provide financial assistance or subsidies to domestic industries, making their products more competitive in the market. Subsidies can be in the form of direct payments, tax breaks, or low-cost loans, reducing production costs and enabling domestic industries to offer lower prices or invest in research and development.
Regulatory Barriers: Governments can impose regulations, standards, or licensing requirements that foreign producers must meet to enter the domestic market. These regulations may create additional costs and barriers for foreign competitors, providing an advantage to domestic industries that are already compliant.
Intellectual Property Protection: Strong intellectual property rights and enforcement mechanisms can safeguard domestic industries by preventing unauthorized use or replication of their proprietary technologies, processes, and inventions. This protection encourages innovation and provides a competitive advantage to domestic firms.
Government Procurement Policies: Governments can implement policies that prioritize the purchase of goods and services from domestic suppliers. By giving preference to domestic industries in government procurement contracts, countries can stimulate demand for domestic products and support local businesses.
Exchange Rate Manipulation: Governments may manipulate their exchange rates to gain a competitive advantage. By intentionally devaluing their currency, countries can lower the price of their exports, making them more attractive to foreign buyers and potentially reducing the competitiveness of imports.
It is important to note that while these protectionist measures may offer short-term benefits to domestic industries, they can have negative consequences in the long run. They can distort market forces, hinder international trade, and lead to retaliation from trading partners, potentially escalating trade tensions.
Countries often implement protectionist measures to support infant industries, protect national interests, or promote economic development. However, striking a balance between protection and the benefits of open trade is crucial for long-term economic growth and global cooperation.
Thursday 18 November 2021
Monday 11 October 2021
Saturday 26 June 2021
Wednesday 12 May 2021
Sunday 9 May 2021
Sunday 4 April 2021
Friday 2 April 2021
The Poor and the Covid vaccine
Achal Prabhala and Leena Menghaney in The Guardian
As the UK’s vaccination programme was “knocked off course” due to a delay in receiving five million doses of the AstraZeneca vaccine from India, a far more chilling reality was unfolding: about a third of all humanity, living in the poorest countries, found out that they will get almost no coronavirus vaccines in the near future because of India’s urgent need to vaccinate its own massive population.
It’s somewhat rich for figures in Britain to accuse India of vaccine nationalism. That the UK, which has vaccinated nearly 50% of its adults with at least one dose, should demand vaccines from India, which has only vaccinated 3% of its people so far, is immoral. That the UK has already received several million doses from India, alongside other rich countries such as Saudi Arabia and Canada, is a travesty.
The billions of AstraZeneca doses being produced by the Serum Institute in India are not for rich countries – and, in fact, not even for India alone: they are for all 92 of the poorest countries in the world.
Except they’re now being treated as the sovereign property of the Indian government.
How did we get here? Exactly one year ago, researchers at Oxford University’s Jenner Institute, frontrunners in the race to develop a coronavirus vaccine, stated that they intended to allow any manufacturer, anywhere, the rights to their jab. One of the early licences they signed was with the Serum Institute, the world’s largest vaccine manufacturer. One month later, acting on advice from the Gates Foundation, Oxford changed course and signed over exclusive rights to AstraZeneca, a UK-based multinational pharmaceutical group.
AstraZeneca and Serum signed a new deal. Serum would produce vaccines for all poor countries eligible for assistance by Gavi, the Vaccines Alliance – an organisation backed by rich countries’ governments and the Gates Foundation. These 92 nations together counted for half the world – or nearly four billion people. India’s fair share of these vaccines, by population, should have been 35%. However there was an unwritten arrangement that Serum would earmark 50% of its supply for domestic use and 50% for export.
The deal included a clause that allowed AstraZeneca to approve exports to countries not listed in the agreement. Some countries which asked for emergency vaccine shipments from Serum, including South Africa and Brazil, were justified: they had nothing else. Rich countries like the UK and Canada, however, which had bought up more doses than required to vaccinate their people, to the detriment of everyone else, had no moral right to dip into a pool of vaccines designated for poor countries.
Paradoxically, when South Africa and India asked the World Trade Organization to temporarily waive patents and other pharmaceutical monopolies so that vaccines could be manufactured more widely to prevent shortfalls in supply, among the first countries to object were the UK, Canada and Brazil. They were the very governments that would later be asking India to solve their own shortfalls in supply.
The deal did not include restrictions on what price Serum could charge, despite AstraZeneca’s pledge to sell its vaccine for no profit “during the pandemic”, which led to Uganda, which is among the poorest countries on Earth, paying three times more than Europe for the same vaccine. (An AstraZeneca spokesperson told Politico that the “price of the vaccine will differ due to a number of factors, including the cost of manufacturing – which varies depending on the geographic region – and volumes requested by the countries”.)
As it became clear that the western pharmaceutical industry could barely supply the west, let alone anywhere else, many countries turned to Chinese and Russian vaccines. Meanwhile, the Covax Facility – the Gavi-backed outfit that actually procures vaccines for poor countries – stuck to its guns and made deals exclusively with western vaccine manufacturers. From those deals, the AstraZeneca vaccine is now the only viable candidate it has. The bulk of the supply of this vaccine comes from Serum, and a smaller quantity from SK Bioscience in South Korea. As a result, a third of all humanity is now largely dependent on supplies of one vaccine from one company in India.
Cue the Indian government’s involvement. Unlike western governments, which poured billions into the research and development of vaccines, there is no evidence that the Indian government has provided a cent in research and development funding to the Serum Institute. (This did not stop it turning every overseas vaccine delivery into a photo-op.) The government then commandeered approval of every single Covax shipment sent out from Serum – even, according to one well-placed source within the institute, directing how many doses would be sent and when.
The Indian government has not publicly commented on its involvement in the vaccine shipments and has refused requests for comment.
Last month, faced with a surge in infections, the Indian government announced an expansion of its domestic vaccination programme to include 345 million people, and halted all exports of vaccines. About 60m vaccine doses have already been dispensed, and the government needs another 630m to cover everyone in this phase alone. One other vaccine is approved for use – Bharat Biotech’s Covaxin – but it is being produced and utilised in smaller quantities. As more vaccines are approved, the pressure on Serum might decrease. For now, however, the bulk of India’s vaccination goals will be met by just one supplier, which faces the impossible choice of either letting down the other 91 countries depending on it, or offending its own government.
The consequences are devastating. To date, 28m Covax Facility doses have been produced by Serum for the developing world – 10m of which went to India. The second largest shipment went to Nigeria, which received 4m doses, or enough to cover only 1% of its population. Given the new Indian government order of 100m doses, further supplies to countries like Nigeria may be delayed until July. And given the Indian government’s need of 500m more vaccine doses in the short run, that date could surely be pushed out even further.
This colossal mess was entirely predictable, and could have been avoided at every turn. Rich countries such as the UK, the US, and those of the EU, and rich organisations such as Covax should have used their funding of western pharmaceutical companies to nip vaccine monopolies in the bud. Oxford University should have stuck to its plans of allowing anyone, anywhere, to make its vaccine. AstraZeneca and Covax should have licensed as many manufacturers in as many countries as they could to make enough vaccines for the world. The Indian government should have never been effectively put in charge of the wellbeing of every poor country on the planet.
For years, India has been called “the pharmacy of the developing world”. It’s time to rethink that title. We will need many more pharmacies in many more countries to survive this pandemic.
As the UK’s vaccination programme was “knocked off course” due to a delay in receiving five million doses of the AstraZeneca vaccine from India, a far more chilling reality was unfolding: about a third of all humanity, living in the poorest countries, found out that they will get almost no coronavirus vaccines in the near future because of India’s urgent need to vaccinate its own massive population.
It’s somewhat rich for figures in Britain to accuse India of vaccine nationalism. That the UK, which has vaccinated nearly 50% of its adults with at least one dose, should demand vaccines from India, which has only vaccinated 3% of its people so far, is immoral. That the UK has already received several million doses from India, alongside other rich countries such as Saudi Arabia and Canada, is a travesty.
The billions of AstraZeneca doses being produced by the Serum Institute in India are not for rich countries – and, in fact, not even for India alone: they are for all 92 of the poorest countries in the world.
Except they’re now being treated as the sovereign property of the Indian government.
How did we get here? Exactly one year ago, researchers at Oxford University’s Jenner Institute, frontrunners in the race to develop a coronavirus vaccine, stated that they intended to allow any manufacturer, anywhere, the rights to their jab. One of the early licences they signed was with the Serum Institute, the world’s largest vaccine manufacturer. One month later, acting on advice from the Gates Foundation, Oxford changed course and signed over exclusive rights to AstraZeneca, a UK-based multinational pharmaceutical group.
AstraZeneca and Serum signed a new deal. Serum would produce vaccines for all poor countries eligible for assistance by Gavi, the Vaccines Alliance – an organisation backed by rich countries’ governments and the Gates Foundation. These 92 nations together counted for half the world – or nearly four billion people. India’s fair share of these vaccines, by population, should have been 35%. However there was an unwritten arrangement that Serum would earmark 50% of its supply for domestic use and 50% for export.
The deal included a clause that allowed AstraZeneca to approve exports to countries not listed in the agreement. Some countries which asked for emergency vaccine shipments from Serum, including South Africa and Brazil, were justified: they had nothing else. Rich countries like the UK and Canada, however, which had bought up more doses than required to vaccinate their people, to the detriment of everyone else, had no moral right to dip into a pool of vaccines designated for poor countries.
Paradoxically, when South Africa and India asked the World Trade Organization to temporarily waive patents and other pharmaceutical monopolies so that vaccines could be manufactured more widely to prevent shortfalls in supply, among the first countries to object were the UK, Canada and Brazil. They were the very governments that would later be asking India to solve their own shortfalls in supply.
The deal did not include restrictions on what price Serum could charge, despite AstraZeneca’s pledge to sell its vaccine for no profit “during the pandemic”, which led to Uganda, which is among the poorest countries on Earth, paying three times more than Europe for the same vaccine. (An AstraZeneca spokesperson told Politico that the “price of the vaccine will differ due to a number of factors, including the cost of manufacturing – which varies depending on the geographic region – and volumes requested by the countries”.)
As it became clear that the western pharmaceutical industry could barely supply the west, let alone anywhere else, many countries turned to Chinese and Russian vaccines. Meanwhile, the Covax Facility – the Gavi-backed outfit that actually procures vaccines for poor countries – stuck to its guns and made deals exclusively with western vaccine manufacturers. From those deals, the AstraZeneca vaccine is now the only viable candidate it has. The bulk of the supply of this vaccine comes from Serum, and a smaller quantity from SK Bioscience in South Korea. As a result, a third of all humanity is now largely dependent on supplies of one vaccine from one company in India.
Cue the Indian government’s involvement. Unlike western governments, which poured billions into the research and development of vaccines, there is no evidence that the Indian government has provided a cent in research and development funding to the Serum Institute. (This did not stop it turning every overseas vaccine delivery into a photo-op.) The government then commandeered approval of every single Covax shipment sent out from Serum – even, according to one well-placed source within the institute, directing how many doses would be sent and when.
The Indian government has not publicly commented on its involvement in the vaccine shipments and has refused requests for comment.
Last month, faced with a surge in infections, the Indian government announced an expansion of its domestic vaccination programme to include 345 million people, and halted all exports of vaccines. About 60m vaccine doses have already been dispensed, and the government needs another 630m to cover everyone in this phase alone. One other vaccine is approved for use – Bharat Biotech’s Covaxin – but it is being produced and utilised in smaller quantities. As more vaccines are approved, the pressure on Serum might decrease. For now, however, the bulk of India’s vaccination goals will be met by just one supplier, which faces the impossible choice of either letting down the other 91 countries depending on it, or offending its own government.
The consequences are devastating. To date, 28m Covax Facility doses have been produced by Serum for the developing world – 10m of which went to India. The second largest shipment went to Nigeria, which received 4m doses, or enough to cover only 1% of its population. Given the new Indian government order of 100m doses, further supplies to countries like Nigeria may be delayed until July. And given the Indian government’s need of 500m more vaccine doses in the short run, that date could surely be pushed out even further.
This colossal mess was entirely predictable, and could have been avoided at every turn. Rich countries such as the UK, the US, and those of the EU, and rich organisations such as Covax should have used their funding of western pharmaceutical companies to nip vaccine monopolies in the bud. Oxford University should have stuck to its plans of allowing anyone, anywhere, to make its vaccine. AstraZeneca and Covax should have licensed as many manufacturers in as many countries as they could to make enough vaccines for the world. The Indian government should have never been effectively put in charge of the wellbeing of every poor country on the planet.
For years, India has been called “the pharmacy of the developing world”. It’s time to rethink that title. We will need many more pharmacies in many more countries to survive this pandemic.
Wednesday 16 December 2020
Does the WTO help a poor nation become rich? Economic History in Small Doses 4
Girish Menon*
Today, when we look at the world that
we live in, we find that Huawei (a Chinese technology company) is being
subjected to a systematic campaign of defamation and discrimination among the
Non-discrimination
A country should not
discriminate between its trading partners and it should not discriminate
between its own and foreign products, services or nationals.
The question this article attempts to explore is whether the WTO’s purpose is compatible with the desire of developing countries to join the ranks of the developed world.
The globalisation rhetoric dictates that countries stick to what they are already good at (theory of comparative advantage). Stated bluntly, this means that poor countries are supposed to continue with their current engagement in low-productivity activities. But their engagement in those activities is exactly what makes them poor. If they wish to leave poverty behind they have do the more difficult things that bring them higher incomes. And the WTO’s non-discrimination principle stops them from improving their earning capabilities.
Unfortunately, poor countries are not allowed to adopt such time frames for developing their industries. The non-discrimination clause of the WTO demands that poor countries compete immediately with more advanced foreign producers, leading to the demise of their domestic firms before they can acquire new capabilities.
Like any other investment, investment in capability building is fraught with risk and does not guarantee success. Some countries make it and some don’t. And even the most successful countries will bungle things in certain areas.
However, economic development without investment in enhancing productive capabilities is a near impossibility.
* Adapted and simplified by the author from Ha Joon Chang's Bad Samaritans - The Guilty Secrets of Rich Nations & The Threat to Global Prosperity
** When GD Birla died his secretary tried to get him a seat in Vaikuntha. The Dwarapalaka (gatekeeper) asked the secretary to state the reason why GD should be let into heaven.
The secretary: ‘GD is one of the biggest industrialists in
Dwarapalaka: ‘Usually that involves doing acts which are not acceptable here. This is Vaikuntha; not some unquestioning tax haven for moneybags! Please let me know what he has done in the name of God’
The secretary: ‘GD has established many Birla temples all
over
Dwarapalaka: ‘Birla is worshipped in these temples. Not good enough!’
The secretary: ‘GD is the owner of Hindustan Motors’
Dwarapalaka: ‘I am confused. How is that a case for entering heaven?’
The secretary: ‘Because whenever someone gets into an Ambassador car he says “Oh God” and whenever someone reaches her destination she says “Thank God”.
Dwarapalaka: That has definitely advanced the cause of God. Please ask him to come in’
This anecdote was first narrated by the late Sharu Rangnekar. It has been modified by the author.
Thursday 14 May 2020
Any Covid-19 vaccine must be treated as a global public good
David Pilling in The Financial Times
Imagine if, in a year’s time, 300m doses of a safe and effective Covid-19 vaccine have been manufactured in Donald Trump’s America, Xi Jinping’s China or Boris Johnson’s Britain. Who is going to get them? What are the chances that a nurse in India, or a doctor in Brazil, let alone a bus driver in Nigeria or a diabetic in Tanzania, will be given priority? The answer must be virtually nil.
The ugly battle between nations over limited supplies of tests and personal protective equipment will be a sideshow compared to the scramble over a vaccine. Yet if a vaccine is to be anything like the silver bullet that some imagine, it will have to be available to the world’s poor as well as to its rich.
Any vaccine should be deployed to create the maximum possible benefit to public health. That will mean prioritising doctors, nurses and other frontline workers, as well as those most vulnerable to the disease, no matter where they live or how much they can afford.
It will also mean deploying initially limited quantities of vaccine in order to snuff out clusters of infection by encircling them with a “curtain” of immunised people — as was done successfully against Ebola last year in the Democratic Republic of Congo.
With Covid-19, this looks like a pipe dream. Far from bringing the world together, the pandemic has exposed a crisis of international disunity. The World Health Organization is only as good as its member states allow. That it finds itself squeezed between China and the US when humanity is facing its worst pandemic in 100 years, is a sign of the broken international order.
How, under such circumstances, can we possibly conceive of a vaccine policy that is global, ethical and effective?
There are precedents. The principle of access to medicines was established with the HIV-Aids pandemic, in which life-saving medicines were originally priced far above the ability of patients in Africa and other parts of the developing world to pay.
But in 2001, in the so-called Doha declaration on Trade-Related Aspects of Intellectual Property Rights, the World Trade Organization made it clear that governments could override patents in public health emergencies. Largely as a result, a tiered pricing system has developed in which drug companies make profits in richer countries while allowing medicines to be sold more cheaply in poorer ones.
There are also tried-and-tested methods of funding immunisation campaigns that have saved literally millions of lives in Africa, Asia and Latin America. Gavi, the Vaccine Alliance, was founded in 2000 to address market failures. It guarantees the purchase of a set number of vaccine doses so that companies can manufacture existing, or develop new, vaccines knowing there will be a market for their product.
Along similar lines, 40 governments this month pledged $8bn to speed up the development, production and equitable deployment of Covid-19 vaccines, as well as diagnostics and therapeutics. There are already more than 80 candidates for a Covid-19 vaccine, with some of these now in human trials.
Then there is manufacturing. Lack of diagnostics and PPE has exposed the flaws of a just-in-time system that builds in no redundancy. Vaccine capacity must be built up now, even if that means some of it will go to waste. Nor can existing capacity simply be given over to a putative Covid-19 vaccine. That could unwittingly unleash outbreaks of previously controlled diseases, such as mumps or rubella.
Manufacturing will also have to be dispersed geographically to ensure a vaccine can be deployed globally.
Most vaccines are international collaborations. One against Ebola was discovered in Canada, developed in the US and manufactured in Germany. It is unlikely — and certainly undesirable — that any one country will be able to claim a Covid-19 vaccine all to itself.
Even if a successful candidate is developed, not everyone will want to take it.
Heidi Larson, director of the Vaccine Confidence Project, says surveys show that up to 9 per cent of British people, 18 per cent of Austrians and 20 per cent of Swiss would not agree to be immunised. Trust in vaccines is generally higher in the developing world, where the impact of infectious disease is more obvious. But here too there could be resistance, particularly if people suspect they are being used as guinea pigs.
The vaccine against a fictional pandemic in the 2011 film Contagion is distributed through a lottery based on birth date. When a vaccine against a real-life Covid-19 is found, it must be deployed as a global public good.
Health experts estimate it will cost some $20bn to vaccinate everyone on earth, equivalent to roughly two hours of global output. This is the best bargain in the world. Let us hope the world can recognise it.
Imagine if, in a year’s time, 300m doses of a safe and effective Covid-19 vaccine have been manufactured in Donald Trump’s America, Xi Jinping’s China or Boris Johnson’s Britain. Who is going to get them? What are the chances that a nurse in India, or a doctor in Brazil, let alone a bus driver in Nigeria or a diabetic in Tanzania, will be given priority? The answer must be virtually nil.
The ugly battle between nations over limited supplies of tests and personal protective equipment will be a sideshow compared to the scramble over a vaccine. Yet if a vaccine is to be anything like the silver bullet that some imagine, it will have to be available to the world’s poor as well as to its rich.
Any vaccine should be deployed to create the maximum possible benefit to public health. That will mean prioritising doctors, nurses and other frontline workers, as well as those most vulnerable to the disease, no matter where they live or how much they can afford.
It will also mean deploying initially limited quantities of vaccine in order to snuff out clusters of infection by encircling them with a “curtain” of immunised people — as was done successfully against Ebola last year in the Democratic Republic of Congo.
With Covid-19, this looks like a pipe dream. Far from bringing the world together, the pandemic has exposed a crisis of international disunity. The World Health Organization is only as good as its member states allow. That it finds itself squeezed between China and the US when humanity is facing its worst pandemic in 100 years, is a sign of the broken international order.
How, under such circumstances, can we possibly conceive of a vaccine policy that is global, ethical and effective?
There are precedents. The principle of access to medicines was established with the HIV-Aids pandemic, in which life-saving medicines were originally priced far above the ability of patients in Africa and other parts of the developing world to pay.
But in 2001, in the so-called Doha declaration on Trade-Related Aspects of Intellectual Property Rights, the World Trade Organization made it clear that governments could override patents in public health emergencies. Largely as a result, a tiered pricing system has developed in which drug companies make profits in richer countries while allowing medicines to be sold more cheaply in poorer ones.
There are also tried-and-tested methods of funding immunisation campaigns that have saved literally millions of lives in Africa, Asia and Latin America. Gavi, the Vaccine Alliance, was founded in 2000 to address market failures. It guarantees the purchase of a set number of vaccine doses so that companies can manufacture existing, or develop new, vaccines knowing there will be a market for their product.
Along similar lines, 40 governments this month pledged $8bn to speed up the development, production and equitable deployment of Covid-19 vaccines, as well as diagnostics and therapeutics. There are already more than 80 candidates for a Covid-19 vaccine, with some of these now in human trials.
Then there is manufacturing. Lack of diagnostics and PPE has exposed the flaws of a just-in-time system that builds in no redundancy. Vaccine capacity must be built up now, even if that means some of it will go to waste. Nor can existing capacity simply be given over to a putative Covid-19 vaccine. That could unwittingly unleash outbreaks of previously controlled diseases, such as mumps or rubella.
Manufacturing will also have to be dispersed geographically to ensure a vaccine can be deployed globally.
Most vaccines are international collaborations. One against Ebola was discovered in Canada, developed in the US and manufactured in Germany. It is unlikely — and certainly undesirable — that any one country will be able to claim a Covid-19 vaccine all to itself.
Even if a successful candidate is developed, not everyone will want to take it.
Heidi Larson, director of the Vaccine Confidence Project, says surveys show that up to 9 per cent of British people, 18 per cent of Austrians and 20 per cent of Swiss would not agree to be immunised. Trust in vaccines is generally higher in the developing world, where the impact of infectious disease is more obvious. But here too there could be resistance, particularly if people suspect they are being used as guinea pigs.
The vaccine against a fictional pandemic in the 2011 film Contagion is distributed through a lottery based on birth date. When a vaccine against a real-life Covid-19 is found, it must be deployed as a global public good.
Health experts estimate it will cost some $20bn to vaccinate everyone on earth, equivalent to roughly two hours of global output. This is the best bargain in the world. Let us hope the world can recognise it.
Wednesday 27 December 2017
How India rejects bad patents
Feroz Ali & Sudarsan Rajagopal In The Hindu
In 2005, India made some remarkable amendments to the Indian Patents Act of 1970, to keep medicines affordable in the country. Since then we have faced a significant blowback not just from the global pharmaceutical industry but also from developed world including from the U.S. and the European Union.
At the heart of the matter are the strong standards for patents which India introduced to promote genuine innovation across all fields of technology, in perfect compliance with the World Trade Organisation (WTO) norms. In contrast, developed countries have weaker standards as a result of incessant lobbying by corporate behemoths. Twelve years later, we now know what it means: India rejects bad patents in far greater number than developed countries.
The background
The findings of a new study by us which examined all 1,723 pharmaceutical applications rejected by the Indian Patent Office (IPO) between 2009 and 2016 have been an eye-opener.
Section 3(d) of the Indian Patents Act, a provision introduced to restrict the patenting of new forms of known pharmaceutical substances, became the subject of international attention after its use in rejecting a patent application by Novartis for the anti-cancer drug, Gleevec. We found that exceptions to patentability in Section 3 of the Act, which includes Section 3(d), were responsible for 65% of all rejected pharmaceutical patent applications.
Over its short lifetime, Section 3(d) has survived a challenge to its constitutionality before the Madras High Court, and Novartis’s fight against the rejection of its patent that went to the Supreme Court. Both courts ruled decisively to uphold the legality of Section 3(d). The United States Trade Representative has also repeatedly rebuked India for this provision in its Special 301 Report, despite its perfect compliance with WTO norms. While the world’s attention is still fixed on this legal experiment that the Indian Parliament introduced into law, there has been a dearth of information on how the IPO has applied Section 3(d). We found that it filters the bad from the good, with the lowest possible administrative and financial burden.
Rejected using Section 3(d)
An astonishing 45% of all rejected pharmaceutical patent applications cited Section 3(d) as a reason for rejection: the applications were identified as mere variants of known compounds that lacked a demonstrable increase in therapeutic value.
Between 1995 and 2005, prior to our new law, India provided a temporary measure to receive patent applications for pharmaceutical products at the IPO, called the mailbox system. Though introduced in 2005, the use of Section 3(d) gradually increased from 2009 when mailbox applications were examined. The spike coincides with the Supreme Court’s ruling in the Novartis case, in April 2013. It would appear that this judgment provided legal certainty to Indian patent law in general, and Section 3(d) in particular, enabling the IPO to weed out trivial innovations.
At the patent office
In the last decade, we found that the IPO rejected about 95% of all pharmaceutical patent applications on its own. Only 5% were through the intervention of a third party, such as a pre-grant opponent. Our basic patentability criteria, that the invention should be new, involve an inventive step (also known as non-obviousness), and should be capable of industrial application, were the most frequently used grounds for rejection, followed by the exceptions to patentability grounds in Section 3.
Section 3(d) invaluably equips the IPO with a yardstick to evaluate applications that are merely trivial innovations over existing technology. In cases where the invention is a variant of a known substance, the criterion for patentability is proof of a necessary improvement in its performance for its designated use, i.e., increased efficacy. In the context of pharmaceuticals, as was the case involving Novartis, this translates to evidence of an improvement in therapeutic efficacy. In other words, trivial innovation must result in a far better product in order to qualify for patent protection.
Within the arcane world of patent law, an argument against provisions such as Section 3(d) is that it is no more than an extension of one of the basic requirements of patentability: non-obviousness. Certainly, for an application to be deemed non-obvious, it has to establish a technical advance over what was known before.
But non-obviousness standards are more effectively applied in invalidity proceedings before a court of law than by officials at the IPO. The advantage that a provision such as Section 3(d) provides is the ability to question an application at the IPO itself without having to go through expensive and time-consuming litigation. The high cost of litigation poses significant barriers. Cases are often settled before reaching a conclusion, in pay-for-delay settlements negotiated by patent owners, where generic manufacturers are essentially paid to stay off the market. Patent litigation is expensive, but it is the patient who eventually pays a higher price — by being subject to exorbitant medicine prices, driven by the unmerited exclusivity that bad patents create.
As a check
Without Section 3(d), the Indian public would have to bear the burden of invalidating a bad patent through litigation.
India is certainly not alone in facing two connected challenges: constrained government budgets and urgent public health needs. As Section 3(d) has been efficient in separating the bad patents from the good in India, it would be a wise move for other developing countries, grappling with similar challenges, to incorporate similar provisions in their law.
In 2005, India made some remarkable amendments to the Indian Patents Act of 1970, to keep medicines affordable in the country. Since then we have faced a significant blowback not just from the global pharmaceutical industry but also from developed world including from the U.S. and the European Union.
At the heart of the matter are the strong standards for patents which India introduced to promote genuine innovation across all fields of technology, in perfect compliance with the World Trade Organisation (WTO) norms. In contrast, developed countries have weaker standards as a result of incessant lobbying by corporate behemoths. Twelve years later, we now know what it means: India rejects bad patents in far greater number than developed countries.
The background
The findings of a new study by us which examined all 1,723 pharmaceutical applications rejected by the Indian Patent Office (IPO) between 2009 and 2016 have been an eye-opener.
Section 3(d) of the Indian Patents Act, a provision introduced to restrict the patenting of new forms of known pharmaceutical substances, became the subject of international attention after its use in rejecting a patent application by Novartis for the anti-cancer drug, Gleevec. We found that exceptions to patentability in Section 3 of the Act, which includes Section 3(d), were responsible for 65% of all rejected pharmaceutical patent applications.
Over its short lifetime, Section 3(d) has survived a challenge to its constitutionality before the Madras High Court, and Novartis’s fight against the rejection of its patent that went to the Supreme Court. Both courts ruled decisively to uphold the legality of Section 3(d). The United States Trade Representative has also repeatedly rebuked India for this provision in its Special 301 Report, despite its perfect compliance with WTO norms. While the world’s attention is still fixed on this legal experiment that the Indian Parliament introduced into law, there has been a dearth of information on how the IPO has applied Section 3(d). We found that it filters the bad from the good, with the lowest possible administrative and financial burden.
Rejected using Section 3(d)
An astonishing 45% of all rejected pharmaceutical patent applications cited Section 3(d) as a reason for rejection: the applications were identified as mere variants of known compounds that lacked a demonstrable increase in therapeutic value.
Between 1995 and 2005, prior to our new law, India provided a temporary measure to receive patent applications for pharmaceutical products at the IPO, called the mailbox system. Though introduced in 2005, the use of Section 3(d) gradually increased from 2009 when mailbox applications were examined. The spike coincides with the Supreme Court’s ruling in the Novartis case, in April 2013. It would appear that this judgment provided legal certainty to Indian patent law in general, and Section 3(d) in particular, enabling the IPO to weed out trivial innovations.
At the patent office
In the last decade, we found that the IPO rejected about 95% of all pharmaceutical patent applications on its own. Only 5% were through the intervention of a third party, such as a pre-grant opponent. Our basic patentability criteria, that the invention should be new, involve an inventive step (also known as non-obviousness), and should be capable of industrial application, were the most frequently used grounds for rejection, followed by the exceptions to patentability grounds in Section 3.
Section 3(d) invaluably equips the IPO with a yardstick to evaluate applications that are merely trivial innovations over existing technology. In cases where the invention is a variant of a known substance, the criterion for patentability is proof of a necessary improvement in its performance for its designated use, i.e., increased efficacy. In the context of pharmaceuticals, as was the case involving Novartis, this translates to evidence of an improvement in therapeutic efficacy. In other words, trivial innovation must result in a far better product in order to qualify for patent protection.
Within the arcane world of patent law, an argument against provisions such as Section 3(d) is that it is no more than an extension of one of the basic requirements of patentability: non-obviousness. Certainly, for an application to be deemed non-obvious, it has to establish a technical advance over what was known before.
But non-obviousness standards are more effectively applied in invalidity proceedings before a court of law than by officials at the IPO. The advantage that a provision such as Section 3(d) provides is the ability to question an application at the IPO itself without having to go through expensive and time-consuming litigation. The high cost of litigation poses significant barriers. Cases are often settled before reaching a conclusion, in pay-for-delay settlements negotiated by patent owners, where generic manufacturers are essentially paid to stay off the market. Patent litigation is expensive, but it is the patient who eventually pays a higher price — by being subject to exorbitant medicine prices, driven by the unmerited exclusivity that bad patents create.
As a check
Without Section 3(d), the Indian public would have to bear the burden of invalidating a bad patent through litigation.
India is certainly not alone in facing two connected challenges: constrained government budgets and urgent public health needs. As Section 3(d) has been efficient in separating the bad patents from the good in India, it would be a wise move for other developing countries, grappling with similar challenges, to incorporate similar provisions in their law.
Sunday 6 December 2015
The art of profitable giving - PhilanthroCapitalism
G Sampath in The Hindu
Not too long ago, public opinion was against philanthropy. A new book explains how attitudes have changed, and why we must scrutinise them.
Once upon a time there was charity. The haves gave some to the have-nots, and that was that. Sometimes the giving impulse was religious, sometimes guilt-induced. But charity was more about the soul of the giver than the welfare or rights or dignity of the receiver. This is why there can be no charity between equals. Or between friends. For all these reasons, charity had for long remained an activity rooted in the personal-private, quasi-religious sphere.
Then came philanthropy. Jeremy Beer, in his The Philanthropic Revolution: An Alternative History of American Charity, argues that the displacement of charity by philanthropy was “the result of a reconceptualisation of voluntary giving as primarily a tool for social change.” It also marks, according to Beer, a shift from a theological to a secular framework for giving, bringing with it all the baggage that secularisation entails – blind faith in the technological mastery of the social world, centralisation, and the bureaucratization of personal relations.”
And today we have ‘philanthrocapitalism’. The term gained currency after The Economist carried a report in 2006 on ‘The birth of philanthrocapitalism’. Noting that “the need for philanthropy to become more like the for-profit capital markets is a common theme among the new philanthropists,” the article explains why philanthropists “need to behave more like investors.”
Two years later came the book that today’s biggest philanthropists swear by: Philanthrocapitalism: How the Rich can Save the World by Matthew Bishop (a senior business editor from The Economist) and Michael Green. The title is not intended to be ironic. It is an earnest argument: in a world of rich men and poor states, who better to save the poor than the rich themselves?
The advent of philanthrocapitalism may have finally brought to the fore what is tacitly understood but rarely made explicit -- the symbiotic relationship between capitalist excess and philanthropic redress.
When philanthropy was shunned
It is no accident that the first great philanthropists were also the greatest capitalists of their age. Nor is it a coincidence that many of these men, remembered today by their philanthropic legacies – John D Rockefeller, Andrew Carnegie, Andrew Mellon, Leland Stanford, James Buchanan Duke – also figure in Wikipedia’s list of “businessmen who were labelled robber barons”.
If one is to make sense of the recent surge in the quantum of philanthropic funds sloshing around looking for worthy causes – the Bain & Co. Indian Philanthropy Report 2015 notes that foreign philanthropic funding in India more than doubled from 2004 to 2009, jumping from $0.8 billion in FY‘04 to $1.9 billion in FY’09 – then one needs to go beyond the numbers and look at the economic underpinnings of corporate philanthropic initiatives. This is precisely what sociologist Linsey McGoey sets out to do in No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy, which released last month.
No Such Thing… kicks off with a quick reminder of the shady origins of philanthropy. How many of us know, for instance, that not too long ago public opinion (and government opinion) was against philanthropy in general, and corporate philanthropy in particular?
In the early 20th century, philanthropic foundations were “viewed as mere outposts of profit-seeking empires, only cosmetically different from the corporations that had spawned them, a convenient way for business magnates to extend their reach over domestic and foreign populaces.” McGoey quotes US Attorney General George Wickersham, who had observed that they were “a scheme for perpetuating vast wealth” and “entirely inconsistent with the public interest.”
Yet what was common sense in 1910 would sound blasphemous in 2015. While no self-respecting economist today can deny the obscene economic inequality that characterises our age, not many would willingly acknowledge the connection between concentration of wealth and philanthropy. That is to say, an equitable society would suffer neither a club of the super-rich that seeks self-expression through philanthropy, nor a class of the super-poor that is dependant on philanthropic charity for survival. McGoey makes this point simply with a quote from the economic historian RH Tawney: “What thoughtful rich people call the problem of poverty, thoughtful poor people call with equal justice the problem of riches.”
If philanthropy is thriving in this age of extreme inequality, it is because it serves a dual purpose: one, to make inequality more acceptable ideologically and morally; and two, to define poverty as a problem of scarcity rather than of inequality. Hence the ultimate argument in favour of philanthropy, deployed when all else fails, is the one based on scarcity: ‘something (from a foundation) is better than nothing (from the government)’.
Philanthropy is the palliative that makes the pain of capitalism bearable for those fated to endure it. Philanthrocapitalism, on the other hand, is about transcending this palliative function to represent capitalism itself as a philanthropic enterprise.
In Bishop and Green’s formulation, such a philanthropic capitalism – also known as ‘venture philanthropy’, ‘social entrepreneurship’, ‘impact investing’ – would drive innovation in a way that “tends to benefit everyone, sooner or later, through new products, higher quality and lower prices.”
As McGoey reveals in her book (and Bishop and Green attest in theirs), no one does philanthrocapitalism better, or bigger, than Bill Gates, who helms the world’s largest philanthropic foundation, the Bill and Melinda Gates Foundation (henceforth Gates Foundation), with an endowment of $42.3 billion. For this very reason, the Gates Foundation is an ideal case study for understanding the social impact of philanthropic foundations.
Problems with philanthrocapitalism
McGoey enumerates three obvious problems with philanthrocapitalism, illustrating each with reference to the Gates Foundation.
First is the lack of accountability and transparency. McGoey points out that the Gates Foundation is the single largest donor to the World Health Organisation (WHO), donating more than even the US government. While the WHO is accountable to the member governments, the Gates Foundation is accountable only to its three trustees – Bill, Melinda, and Warren Buffet. It is not unreasonable to wonder if the WHO’s independence would not be compromised when 10% of its funding comes from a single private entity “with the power to stipulate exactly where and how the UN institution spends its money.”
Secondly, “philanthropy, by channelling private funds towards public services, erodes support for governmental spending on health and education.” With governments everywhere slashing their budgets for public goods such as education and healthcare, the resultant funding gap is sought to be filled by philanthropic money channelled through NGOs. But with one crucial difference: while the citizen has a rights-based claim on government-funded social security, she can do nothing if a philanthropic donor decides to stop funding a given welfare project – as has happened time and again in many parts of the world.
At the same time, even as it facilitates government withdrawal from provision of social goods, philanthropy paves the way for entry of private players into the same space. McGoey details how the Gates Foundation orchestrated this brilliantly in the American education sector, where it helped create a whole new market for private investment: secondary and primary schools run on a for-profit basis.
Third, the same businessmen who made their money through unhealthy practices that worsened economic inequalities are now, in their philanthropic avatar, purporting to remedy the very inequalities they helped create. In the case of the Gates Foundation, Microsoft’s illegal business practices are well documented in the US Department of Justice anti-trust case against the company. As McGoey puts it, the fortune now being administered through the Gates Foundation “was accumulated in some measure through ill-gotten means.”
Of course, none of this should detract from the undeniably good work that philanthropic bodies have done. The Gates Foundation has saved countless lives, especially in Africa, through its funding of immunisation programmes and outreach projects. Its several achievements, therefore, have been deservedly celebrated. Nonetheless, critical scrutiny lags far behind the lavish accolades.
Even the three issues discussed above barely scratch the surface. McGoey goes on to raise several more.
She asks, for instance, asks how the Gates Foundation’s interventions in global health tally with Bill Gates’ violent opposition to any dilution of the patent regime. The Gates Foundation was the largest private donor to the Global Fund to Fight AIDS, Tuberculosis and Malaria. At the same time, it “has continually lobbied against price reductions of HIV drugs and other medicines”, infuriating activists who “want a more equitable global patent regime” and “do not want charity handouts.”
She examines the Gates Foundation’s partnerships with Coca-Cola, not exactly popular among those who value public health. In the context of the Foundation’s work to help combat global hunger, she reveals how its financial ties with Monsanto and investments in Goldman Sachs “may be compounding food insecurity rather than mitigating it”.
She interrogates its skewed research portfolio. Of the 659 grants made by the Gates Foundation in the field of global health, 560 went to organisations in high-income countries, even though the problems being targeted were in low-income countries. How does excluding local scientists and programme managers who are best placed to understand the problems help the cause, asks McGoey.
While it is generally taken for granted that a philanthropic foundation would make grants only to non-profits, McGoey draws attention to the Gates Foundation’s non-repayable grant of $4.8 million to Vodacom, a subsidiary of Vodafone. In 2014, the Gates Foundation also announced a grant of $11 million to Mastercard for a “financial inclusion” project in Nairobi. Interesting how philanthropy has evolved to such an extent that in a world wracked by hunger, disease, war, and malnutrition, two entities found to be most in need include a multinational credit card network and a multinational mobile service provider.
Finally, not to be forgotten are the tax breaks that philanthropic foundations enjoy. Critics have pointed out that nearly half of the billions of dollars in funds that philanthropic foundations hold actually belong to the public, as it is money foregone by the state through tax exemptions. History has shown that progressive taxation is the most efficacious route to redistribution. But a strong case for philanthropy is another way of making a strong case for lower taxation of the rich – after all, it’ll leave them with more money to spend on uplifting the poor. Small wonder then that philanthropy’s biggest enthusiasts are political conservatives.
The Economist report on philanthrocapitalism cited above also quotes a young Indian philanthropist, Uday Khemka, who predicts that “philanthropy will increasingly come to resemble the capitalist economy.” That was in 2006. Nine years later, the publication of McGoey’s No Such Thing As a Free Gift marks the first systematic attempt to document this phenomenon.
sampath.g@thehindu.co.in
Not too long ago, public opinion was against philanthropy. A new book explains how attitudes have changed, and why we must scrutinise them.
Once upon a time there was charity. The haves gave some to the have-nots, and that was that. Sometimes the giving impulse was religious, sometimes guilt-induced. But charity was more about the soul of the giver than the welfare or rights or dignity of the receiver. This is why there can be no charity between equals. Or between friends. For all these reasons, charity had for long remained an activity rooted in the personal-private, quasi-religious sphere.
Then came philanthropy. Jeremy Beer, in his The Philanthropic Revolution: An Alternative History of American Charity, argues that the displacement of charity by philanthropy was “the result of a reconceptualisation of voluntary giving as primarily a tool for social change.” It also marks, according to Beer, a shift from a theological to a secular framework for giving, bringing with it all the baggage that secularisation entails – blind faith in the technological mastery of the social world, centralisation, and the bureaucratization of personal relations.”
And today we have ‘philanthrocapitalism’. The term gained currency after The Economist carried a report in 2006 on ‘The birth of philanthrocapitalism’. Noting that “the need for philanthropy to become more like the for-profit capital markets is a common theme among the new philanthropists,” the article explains why philanthropists “need to behave more like investors.”
Two years later came the book that today’s biggest philanthropists swear by: Philanthrocapitalism: How the Rich can Save the World by Matthew Bishop (a senior business editor from The Economist) and Michael Green. The title is not intended to be ironic. It is an earnest argument: in a world of rich men and poor states, who better to save the poor than the rich themselves?
The advent of philanthrocapitalism may have finally brought to the fore what is tacitly understood but rarely made explicit -- the symbiotic relationship between capitalist excess and philanthropic redress.
When philanthropy was shunned
It is no accident that the first great philanthropists were also the greatest capitalists of their age. Nor is it a coincidence that many of these men, remembered today by their philanthropic legacies – John D Rockefeller, Andrew Carnegie, Andrew Mellon, Leland Stanford, James Buchanan Duke – also figure in Wikipedia’s list of “businessmen who were labelled robber barons”.
If one is to make sense of the recent surge in the quantum of philanthropic funds sloshing around looking for worthy causes – the Bain & Co. Indian Philanthropy Report 2015 notes that foreign philanthropic funding in India more than doubled from 2004 to 2009, jumping from $0.8 billion in FY‘04 to $1.9 billion in FY’09 – then one needs to go beyond the numbers and look at the economic underpinnings of corporate philanthropic initiatives. This is precisely what sociologist Linsey McGoey sets out to do in No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy, which released last month.
No Such Thing… kicks off with a quick reminder of the shady origins of philanthropy. How many of us know, for instance, that not too long ago public opinion (and government opinion) was against philanthropy in general, and corporate philanthropy in particular?
In the early 20th century, philanthropic foundations were “viewed as mere outposts of profit-seeking empires, only cosmetically different from the corporations that had spawned them, a convenient way for business magnates to extend their reach over domestic and foreign populaces.” McGoey quotes US Attorney General George Wickersham, who had observed that they were “a scheme for perpetuating vast wealth” and “entirely inconsistent with the public interest.”
Yet what was common sense in 1910 would sound blasphemous in 2015. While no self-respecting economist today can deny the obscene economic inequality that characterises our age, not many would willingly acknowledge the connection between concentration of wealth and philanthropy. That is to say, an equitable society would suffer neither a club of the super-rich that seeks self-expression through philanthropy, nor a class of the super-poor that is dependant on philanthropic charity for survival. McGoey makes this point simply with a quote from the economic historian RH Tawney: “What thoughtful rich people call the problem of poverty, thoughtful poor people call with equal justice the problem of riches.”
If philanthropy is thriving in this age of extreme inequality, it is because it serves a dual purpose: one, to make inequality more acceptable ideologically and morally; and two, to define poverty as a problem of scarcity rather than of inequality. Hence the ultimate argument in favour of philanthropy, deployed when all else fails, is the one based on scarcity: ‘something (from a foundation) is better than nothing (from the government)’.
Philanthropy is the palliative that makes the pain of capitalism bearable for those fated to endure it. Philanthrocapitalism, on the other hand, is about transcending this palliative function to represent capitalism itself as a philanthropic enterprise.
In Bishop and Green’s formulation, such a philanthropic capitalism – also known as ‘venture philanthropy’, ‘social entrepreneurship’, ‘impact investing’ – would drive innovation in a way that “tends to benefit everyone, sooner or later, through new products, higher quality and lower prices.”
As McGoey reveals in her book (and Bishop and Green attest in theirs), no one does philanthrocapitalism better, or bigger, than Bill Gates, who helms the world’s largest philanthropic foundation, the Bill and Melinda Gates Foundation (henceforth Gates Foundation), with an endowment of $42.3 billion. For this very reason, the Gates Foundation is an ideal case study for understanding the social impact of philanthropic foundations.
Problems with philanthrocapitalism
McGoey enumerates three obvious problems with philanthrocapitalism, illustrating each with reference to the Gates Foundation.
First is the lack of accountability and transparency. McGoey points out that the Gates Foundation is the single largest donor to the World Health Organisation (WHO), donating more than even the US government. While the WHO is accountable to the member governments, the Gates Foundation is accountable only to its three trustees – Bill, Melinda, and Warren Buffet. It is not unreasonable to wonder if the WHO’s independence would not be compromised when 10% of its funding comes from a single private entity “with the power to stipulate exactly where and how the UN institution spends its money.”
Secondly, “philanthropy, by channelling private funds towards public services, erodes support for governmental spending on health and education.” With governments everywhere slashing their budgets for public goods such as education and healthcare, the resultant funding gap is sought to be filled by philanthropic money channelled through NGOs. But with one crucial difference: while the citizen has a rights-based claim on government-funded social security, she can do nothing if a philanthropic donor decides to stop funding a given welfare project – as has happened time and again in many parts of the world.
At the same time, even as it facilitates government withdrawal from provision of social goods, philanthropy paves the way for entry of private players into the same space. McGoey details how the Gates Foundation orchestrated this brilliantly in the American education sector, where it helped create a whole new market for private investment: secondary and primary schools run on a for-profit basis.
Third, the same businessmen who made their money through unhealthy practices that worsened economic inequalities are now, in their philanthropic avatar, purporting to remedy the very inequalities they helped create. In the case of the Gates Foundation, Microsoft’s illegal business practices are well documented in the US Department of Justice anti-trust case against the company. As McGoey puts it, the fortune now being administered through the Gates Foundation “was accumulated in some measure through ill-gotten means.”
Of course, none of this should detract from the undeniably good work that philanthropic bodies have done. The Gates Foundation has saved countless lives, especially in Africa, through its funding of immunisation programmes and outreach projects. Its several achievements, therefore, have been deservedly celebrated. Nonetheless, critical scrutiny lags far behind the lavish accolades.
Even the three issues discussed above barely scratch the surface. McGoey goes on to raise several more.
She asks, for instance, asks how the Gates Foundation’s interventions in global health tally with Bill Gates’ violent opposition to any dilution of the patent regime. The Gates Foundation was the largest private donor to the Global Fund to Fight AIDS, Tuberculosis and Malaria. At the same time, it “has continually lobbied against price reductions of HIV drugs and other medicines”, infuriating activists who “want a more equitable global patent regime” and “do not want charity handouts.”
She examines the Gates Foundation’s partnerships with Coca-Cola, not exactly popular among those who value public health. In the context of the Foundation’s work to help combat global hunger, she reveals how its financial ties with Monsanto and investments in Goldman Sachs “may be compounding food insecurity rather than mitigating it”.
She interrogates its skewed research portfolio. Of the 659 grants made by the Gates Foundation in the field of global health, 560 went to organisations in high-income countries, even though the problems being targeted were in low-income countries. How does excluding local scientists and programme managers who are best placed to understand the problems help the cause, asks McGoey.
While it is generally taken for granted that a philanthropic foundation would make grants only to non-profits, McGoey draws attention to the Gates Foundation’s non-repayable grant of $4.8 million to Vodacom, a subsidiary of Vodafone. In 2014, the Gates Foundation also announced a grant of $11 million to Mastercard for a “financial inclusion” project in Nairobi. Interesting how philanthropy has evolved to such an extent that in a world wracked by hunger, disease, war, and malnutrition, two entities found to be most in need include a multinational credit card network and a multinational mobile service provider.
Finally, not to be forgotten are the tax breaks that philanthropic foundations enjoy. Critics have pointed out that nearly half of the billions of dollars in funds that philanthropic foundations hold actually belong to the public, as it is money foregone by the state through tax exemptions. History has shown that progressive taxation is the most efficacious route to redistribution. But a strong case for philanthropy is another way of making a strong case for lower taxation of the rich – after all, it’ll leave them with more money to spend on uplifting the poor. Small wonder then that philanthropy’s biggest enthusiasts are political conservatives.
The Economist report on philanthrocapitalism cited above also quotes a young Indian philanthropist, Uday Khemka, who predicts that “philanthropy will increasingly come to resemble the capitalist economy.” That was in 2006. Nine years later, the publication of McGoey’s No Such Thing As a Free Gift marks the first systematic attempt to document this phenomenon.
sampath.g@thehindu.co.in
Thursday 5 June 2014
The Indian Pharmaceutical Sector
By Jill E. Sackman, PhD,Michael Kuchenreuther
Biopharma companies should not overlook India's growing market.
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India, a member of the BRIC nations (Brazil, Russia, India, and China), is much more comparable to the United States in terms of market size and must be included in this list of promising potential markets for global pharmaceutical manufacturers. Recent changes in India’s population and economy have contributed to a shift in the country’s epidemiological profile towards ‘lifestyle’ diseases that are more prevalent in Western markets. Such changes have increased the demand for better healthcare and for medications that address chronic diseases. Furthermore, India’s own pharmaceutical industry, a recognized world leader in the production of generic drugs, offers manufacturing expertise to organizations looking to outsource or create networks of collaboration and discovery. However, a more granular assessment of India’s pharmaceutical market reveals growing concerns over patent protection, price capping, quality, and safety. Understanding this country’s complex market dynamics will be crucial for manufacturers exploring new opportunities for growth in India.
India health and pharmaceutical market overview
India is the second most populous country in the world with about 1.27 billion people, and is projected to surpass China by 2028 (1). As the Indian population has continued to grow in recent years, so too has the country’s economy. Over the past decade, India’s economy grew above the Organization for Economic Co-operation and Development (OECD) average, which can be attributed to rising average income levels, an expanding middle class, and a drive toward urbanization (2). These socio-economic changes are contributing to a significant shift in India’s epidemiological profile. With working-age adults accounting for the majority of the overall population and more people becoming affluent and living longer, Indian health service users are facing increasing challenges associated with the prevention and treatment of chronic diseases such as obesity, heart disease, stroke, cancer, and diabetes (3).
At the same time, India continues to be challenged by a range of infectious disorders. Despite economic advancements, significant income inequality still exists throughout the country. In fact, per capita gross national income in India was only $3,391 in 2012 when adjusted by purchasing power parity (compared to $50,000 in US) (4). In rural areas, where two-thirds of the nation’s citizens are located, hundreds of millions of people are still living in severe poverty, and vaccination coverage for children remains poor.
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Approximately 243 million people are covered by different forms of government-sponsored insurance schemes while approximately 55 million rely on commercial insurers (5). With the vast majority of people in India uninsured, out-of-pocket payments are among the highest in the world. According to the World Health Organization (WHO), 70% of Indians are spending their entire out-of-pocket income on medicines and healthcare services (6). On top of this, most insurance plans only provide coverage for inpatient healthcare services and do not include coverage for outpatient treatments, including prescription medicines. Thus, it is no surprise that approximately 90% of India’s pharmaceutical market is currently made up of branded generic drugs (7).
Against this backdrop, India’s Ministry of Health has been focused on improving access to healthcare facilities, increasing population coverage by way of healthcare insurance, and creating initiatives for the prevention and early stage management of chronic diseases. In 2012, as part of the country’s 12th Five-Year Plan, the government proposed to double its public expenditure on healthcare to 2-3% of GDP in an effort to boost local access and affordability to quality healthcare. In light of these efforts, the Indian healthcare industry as a whole is expected to reach $158 billion by 2017 (8).
India’s pharmaceutical market accounts for about 10% of the global pharmaceutical industry in terms of volume and represents a major component of growth for the country’s healthcare industry (9). The Indian pharmaceutical market was estimated at $18.4 billion in 2012 and is expected to almost double by 2016. Although India’s market is currently dominated by generic drugs, rising incomes, enhanced medical infrastructure, and insurance coverage could provide a valuable opportunity for manufacturers’ higher-priced branded healthcare products moving forward.
Key market challenges and considerations
Regulatory. Similar to many other countries, India’s medical regulatory structure is divided between national and state authorities. The Drug Controller General of India (DCGI) is the national authority responsible for the regulation of pharmaceuticals. The DCGI registers all imported drugs, new drugs, and biologicals in selected categories and has responsibility for approving clinical trials and quality standards in the country. Recently, these standards have come under question by FDA, citing quality-control problems ranging from data manipulation to sanitation. While FDA and regulatory bodies in other countries step up inspections of Indian plants in response to these developments, global manufacturers have had to reassess their contracted relations with these plants and give careful consideration to developing new strategic partnerships in this country moving forward (10).
Concerns over quality and data integrity have also impacted manufacturers’ perception of India’s clinical trials system. India’s large and diverse patient pool and low drug trial costs have made the country an attractive destination for multinational pharmaceutical clinical trials. However, India has recently seen the number of clinical trials fall dramatically among allegations that protocols were not being conducted properly and that companies were taking advantage of disadvantaged patients (11). In response to these developments, manufacturers have been forced to either shift their trials to another country or encounter significant delays in clinical trial approval--both of which are holding their organizations back.
Market access and pricing. The high prevalence of self-pay generic drugs throughout the country has created little incentive for the development of certain market access disciplines such as health economics and outcome research (HEOR) and reimbursement. Government affairs and pricing functions, on the other hand, play an important role and have been broadly cited as the most crucial challenges global manufacturers face in the Indian marketplace.
India’s National Pharmaceutical Pricing Authority (NPPA) controls product pricing throughout the country. In 2013, the NPPA expanded the National List of Essential Medicines (NLEM) to include 652 drugs, a substantial increase over the 74 drugs previously listed. These products will now be subject to price controls that are projected to reduce prices by more than 20% for half the drugs (12). As if this did not challenge manufacturers enough, the Indian government recently decided to revise the NLEM later this year in response to complaints that the list should include all dosages, strengths, delivery mechanisms, and combinations of these previously identified drugs (13). The NPPA is also allowed to control prices of patented drugs that lie outside this list, and last month the government began exploring the possibility of using a reference pricing system for these products (14). With intense generic competition already driving down drug prices in India, these additional controls pose a significant threat to international manufacturers’ ability to generate revenue.
Intellectual property. Aside from pricing, patent protection has also come under the microscope as of late. In an effort to ensure greater accessibility to higher-cost, branded drugs, India, as well as other BRIC countries, has begun to allow generic-drug manufacturers to market these drugs at dramatically reduced costs without consequence through compulsory licenses. While only one compulsory license has been approved by India’s government to date (Bayer’s Nexavar), other manufacturers have recently had their patents weakened, revoked, or rejected. While appeals to some of these rulings are still in process, precedents have been set, leading manufacturers to question their future investment in India.
Implications for successful market entry
Despite the aforementioned challenges, major pharmaceutical companies recognize the long-term prospects of this market and continue launching new patented drugs and pursuing unique business opportunities in India. To encourage future investment, the government has made tax breaks available to the pharmaceutical sector, including a weighted tax deduction of 150% for any R&D expenditure incurred. In addition, the government recently declared that all drugs that offer some form of innovation would be exempt from price regulation for the first five years following approval. Here, innovation refers to drugs or drug delivery systems that arise from native R&D efforts or existing drugs that are improved upon by an Indian company. This measure is aimed to spur growth in the domestic pharmaceutical market and to ensure that pricing regulations do not turn global manufacturers away from India. Thus, companies that develop strategic partnerships with local businesses and outsource some of their R&D and manufacturing activities will be well-positioned to maximize revenue by avoiding steep price cuts. This opportunity for manufacturers will only apply, however, for those products that offer true innovation by providing economic and/or clinical value.
Uncertainty over patent security and obstacles to clinical trials are discouraging Western companies from conducting drug research in India. With that said, the government has already initiated clinical research reform efforts through new amendments and regulations that could quickly restore the growth of clinical trials throughout the country. At the same time, there is speculation that a transfer of power in India’s upcoming election could dampen fears of additional compulsory licenses (15). Manufacturers should closely monitor these internal developments and react accordingly.
Moving forward
A growing middle class that is projected to see a significant rise in noncommunicable diseases provides an excellent opportunity for global companies to launch their premium products and expand their market share. India’s underdeveloped insurance industry and high poverty rates, however, require that manufacturers first develop a careful pricing strategy. Pricing products appropriately can go a long way towards ensuring future growth as well as avoiding disputes over patent protection and licensing agreements. In a country that holds about one-fifth of the world’s population, India’s market is too big for pharmaceutical companies to shy away from, despite all of the hurdles placed in front of them.
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