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Thailand’s misuse of ‘compulsory licensing’ allowed corrupt officials to steal millions – Pacific Research Institute

Thailand’s misuse of ‘compulsory licensing’ allowed corrupt officials to steal millions

When it comes to public health, Thailand’s former government leaders would like the world to think that they’re a collection of 21st-century Robin Hoods.

Last year, the unelected military-backed government gave Thailand’s state-run pharmaceutical firm, the Government Pharmaceutical Organization (GPO), permission to manufacture generic versions of drugs that fight heart disease and AIDS, even though the medicines were still patented by Western firms.

Robbing the rich to give to the poor, right?

Not really. Sick Thai citizens have yet to see any benefits and the move has set a dangerous precedent that will stifle medical innovation and endanger the health of millions.

Thai officials broke the patents by using “compulsory licenses,” a legal maneuver afforded to poor countries by the World Trade Organization (WTO) in the event of a public health crisis. If a local government can’t afford a pertinent patented drug, it can issue a compulsory license to produce it before the patent has expired.

But these provisions were never intended to be used by countries that could afford the medicines but are simply choosing to pay less in order to make other purchases – like tanks for example.

Last year, for instance, Bangkok spent $9 million on pay raises for military leaders. Since 2006, the nation has increased its defense budget by over 30 percent.

The reality is that the former military government officials used compulsory licenses to pursue their own economic development. Their scheme is just protectionism by a different name – and world governments and trade bodies should see it for what it is.

Giving the GPO permission to manufacture patented drugs is part of the Thai government’s plan to establish itself as a globally competitive producer of generics. Of course, there is nothing wrong with the government wanting to encourage its own industry – but not when that’s done at the expense of patients and other countries who abide by both the letter and the spirit of the law.

So far, the gambit has proven quite lucrative. In 2005, Thailand’s GPO reaped $35 million in profits by copying medicines. Only 2 percent of that went toward research and development.

The literally billions of dollars in free medicines and development projects pouring into sub-Saharan Africa don’t come for free. Those must be funded by sales from the developed world and, at least in part, from countries like Thailand that can afford to pay some small part of the cost of innovation – even if not at the same scale countries in the U.S. and Europe can afford.

Activists justify compulsory licenses by claiming that drug makers focus on diseases affecting only rich countries.

But that’s simply not true. Over 100 drug-development projects that specifically target diseases plaguing the Third World are currently underway. Western pharmaceutical firms have already devised life-saving treatments for HIV/AIDS, tuberculosis, and malaria. And they often offer patented drugs to poor countries for free or at a steep discount.

In fact, even in Thailand, the affected companies were all offering their products at steep discounts to the Thai government. When one looks at the potential savings to the Thai government between those prices and potential generic prices the distinctions are insignificant to a national budget – less than the price of one tank.

Compulsory licenses can have a use in rare instances. But using them as a deceptive tool for building up one’s own industry perverts the spirit of the trade agreement and will ultimately prove harmful to patients.

The newly elected Thai government is wisely examining this issue and appears more interested in pursuing a thoughtful, long-term policy of economic development that will serve its citizens far better than quick-fix political schemes that result in Thailand becoming a hero to anti-capitalist activists, but a pariah to the world economic community.

Sally C. Pipes is president & CEO of the Pacific Research Institute, (www.pacificresearch.org), a nonprofit, nonpartisan think-tank that champions free market policy solutions.

Argus Leader (Sioux Falls, SD), March 27, 2008
Janesville Gazette (WI), March 26, 2008
Fresno Bee (CA), March 24, 2008
Bellingham Herald (WA), March 24, 2008
Tri-City Herald (Kennewick, WA), March 24, 2008
News & Observer (Raleigh, NC), March 24, 2008
Belleville News-Democrat (IL), March 24, 2008
Island Packet (Bluffton, SC), March 24, 2008

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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