Obama’s Trade Deal and Drug Patents: A Painful, Necessary Compromise

With negotiations concluded, the twelve-country Trans-Pacific Partnership (TPP) is headed to the U.S. Congress for an up-or-down vote, and the trade deal’s intellectual property (IP) provisions have put debate over pharmaceutical patents in the spotlight. The drug industry wanted twelve years of market protections in signatory countries, and the final deal only guarantees five. According to Politico, the White House has done “little to assuage the industry’s anger.” On the other side, health activists say the five-year protections “will cost lives” by raising the price of drugs in low- and middle-income countries. Seemingly, no one is happy.

Discovering and developing new drugs is an exceptionally costly and uncertain proposition, requiring years of research, years of clinical trials, and many millions of dollars. It is the work of discovery, not simply the manufacture of pills, that provides value — a true example of intellectual property. The reward must be large, or no well-run company would ever make the necessary investment and take the necessary risks. “The pharmaceutical industry,” concludes The Economist, “makes the best case for patents (and makes the most of patents when they are approved).”

In the absence of patent protections overseas, drug companies can be reluctant to work internationally on research and development — making promising collaborations (like this exciting relationship between Eli Lilly and China’s Innovent on experimental cancer drugs) more difficult. In 2013, the WTO Council for Trade-Related Aspects of Intellectual Property Rights (IPR) cited data “that companies will simply not invest R&D resources into markets without effective IPR protection.”

At the same time, global health advocates are correct that patent protections can enable higher prices and keep drugs out of reach for low- and middle-income countries. Who’s right? Who’s wrong? In this case, there is truth on both sides. Drugs are less likely to come into existence without strong patent protections, yet these same protections make these same drugs — once they exist — less available to people who need them.

We are left with a balancing act, making inevitable compromises between innovation and access. How much protection do pharmaceutical companies require to develop the new drugs the world needs? Ideally, that’s how much protection they’ll receive. Ideally, strong patent protections and profits for lifestyle drugs targeted at wealthier markets will help underwrite development and wide availability of drugs for neglected diseases. With a focus on access and investments in treatments for HIV/AIDS, drug-resistant TB, and neglected tropical diseases, Johnson & Johnson provides one example of this positive-sum game in practice.

Of course, this balancing act is an imperfect science. But multinational organizations like Gavi and The Global Fund — and innovative financing and price negotiation mechanisms like Advanced Market Commitments — have improved access without compromising pharmaceutical companies’ IP rights in markets that can afford their products.

It’s possible that TPP will make this subtle work more difficult. It’s also possible that TPP will open new, safe markets and improve the incentives for pharmaceutical innovation. Here’s one reason for optimism: like any good compromise, everyone is a little bit dissatisfied.

Zeshan Muhammedi is the co-founder of FundRx, an equity investment platform that empowers physicians to fund promising early stage healthcare companies and advance meaningful medical innovation.