10/28/2018 Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 1/4 ECONOMIC SCENE By Eduardo Porter April 12, 2016 Malaria has preyed on humans for centuries. Hundreds of thousands of children die each year from the disease. Considering the market’s size, why haven’t pharmaceutical companies rushed to develop a vaccine against the deadly parasite that causes it? The answer is easy: There is no money to be made from a vaccine for poor children who could not possibly pay for inoculation. Last year, GlaxoSmithKline finally introduced the world’s first malaria vaccine for large pilot tests among African children.

The move, however, is not an endorsement of the profit motive as a spur for innovation. The Bill and Melinda Gates Foundation picked up much of the tab. And Glaxo does not expect to make money on its investment. The lack of interest of the pharmaceutical industry, which generates huge profits protected by a web of patents enforced around the world, raises an important question. Do we need a different way to spur innovation and disseminate new technologies quickly around the world?

Are patents, which reward inventors by providing them with a government- guaranteed monopoly over their inventions for many years, the best way to encourage new inventions? The question applies to more than how we develop lifesaving drugs. It has acquired new urgency as the world rushes to discover and spread new technologies to replace fossil fuels as sources of energy and stave off impending climate change. The debate was center stage in the negotiations that led to the Trans-Pacific Partnership trade agreement. The Obama administration, spurred by the drug industry, insisted that patent protections should be tightened further around the world.

But several other countries argued that they raised excessive barriers for poor countries, costing lives. The argument is now being echoed in the climate debate. Lifting the Patent Barrier to New Drugs and Energy Sources 10/28/2018 Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 2/4 “This was a very contentious issue in the international climate negotiations leading up to the summit in Paris in December,†said Robert N. Stavins from the Kennedy School of Government at Harvard. He was a coordinating lead author of the chapter about international cooperation in the latest assessment report by the Intergovernmental Panel on Climate Change.

A group of countries led by India argued for transferring intellectual property rights for clean energy technologies to developing nations to accelerate their diffusion. Professor Stavins offers a counterargument: “In the long term, if there are no property rights, it will destroy the incentive to develop the next generation of technologies.†The battle against climate change is young. There is little empirical evidence of the effects of patents on clean energy technology. But the evidence from other industries in which intellectual property protections have been ratcheted up in the name of innovation offers a decidedly mixed picture. Take the World Trade Organization’s 22-year-old Agreement on Trade-Related Aspects of Intellectual Property Rights, known as Trips, the world’s first enforceable deal to protect patents globally.

Developing countries were told it would promote their access to innovation. Multinationals would be more likely to sell or license new technologies if they knew their ideas would not be pirated. The deal would encourage foreign investment in local research and development. Did it deliver? One study about the impact of Trips across 60 countries concluded that the deal encouraged access to technology: New drugs were unlikely to be introduced until they were covered by patents.

Patented drugs were still more expensive than generics, but they became cheaper in poorer countries. Another study of Trips, however, concluded that while patent protection did increase research and development in high-income countries, it did nothing to foster more investment for treatments that combat diseases like malaria that affect the world’s poor but have no market in the rich world. Tight intellectual property protection can backfire, stopping locals from piggybacking on foreign inventions, discouraging indigenous innovation in less-developed countries. It is often abused. Numerous studies have documented how pharmaceutical companies play the system.

When the original patents on their drugs expire, they discourage the entry of cheap generic rivals by obtaining “secondary†patents covering slight variations that have little or no therapeutic value. One study found hundreds of secondary patents layered onto two antiretroviral drugs to combat H.I.V., which delayed the entry of generic competition by 12 years. 10/28/2018 Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 3/4 If overly strict patents on drugs can be counterproductive, the case against them in other industries is even stronger. In high technology, for example, they often encourage troll-like behavior and discourage entrepreneurs from building on the inventions of their predecessors.

“I do not think we need stronger patents than we have now,†said Bronwyn H. Hall, an expert on intellectual property at the University of California, Berkeley. “There is a large body of evidence that suggests patents are not viewed by firms as key to securing returns to innovation, except in the pharma sector and a subset of firms in other sectors.†The answer to the conundrum about new innovation and diffusion of existing technology might hinge on what is more important — spreading existing clean energy systems in the developing world, where energy use is rising sharply, or inventing new ones. It depends, unsurprisingly, on where you sit. “You do want a pipeline of new technologies,†said Ambuj D.

Sagar, professor of policy studies at the Indian Institute of Technology Delhi. “But diffusion is the more substantial point, given the time scale in which we need to make substantial progress.†Adam Jaffe, a lead author on the third and fifth assessment reports of the climate change panel who now directs the research foundation Motu Economic and Public Policy Research in Wellington, New Zealand, disagrees. Technology diffusion, he says, is not yet a problem: “Today the problem is inventing the thing.†To be sure, energy systems are not the same as drugs, which are hard to invent but cheap to make. The most popular technologies being deployed around the world — like solar panels made in China — are hardly cutting edge.

Finance and know-how are bigger obstacles to the spread of clean energy systems in poor countries than intellectual property rights. Still, patenting of clean energy technologies has been increasing by 20 percent a year over the last two decades or so, according to a study by the United Nations Environment Program, the European Patent Office and the International Center for Trade and Sustainable Development. “There is a need for improving market conditions and encouraging licensing in the context of efforts to enhance technology transfer to developing countries,†the study concluded. Critics — mostly on the left — have repeatedly recommended weakening or even replacing the patent system which, they argue, imposes excessive costs by raising the prices of drugs and curtailing their access.

Proposals range from having the government buy most drug patents and put them in the public domain, to paying a drug’s maker based on a formula derived from how much the drug improves quality of life. In the case of clean energy technology, noted a study by Professor Hall of Berkeley and Christian Helmers of the Center for Economic Performance in London, “patent protection may not be the optimal instrument for encouraging innovation.†Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 4/4 Nonetheless, patents are probably here to stay. Still, rich countries will end up one way or another paying to spread clean energy technology among the world’s poor. Why not create a government- supported global fund to buy intellectual property on behalf of poorer nations?

Another idea: Finance prizes to encourage innovation to solve poor people’s problems. Both inventing new clean energy technologies and spreading them around the world are behind schedule. We don’t have as much time as it took to create a vaccine against malaria. Email: [email protected] ; Twitter: @portereduardo A version of this article appears in print on April 13, 2016, on Page B1 of the New York edition with the headline: Patentsʼ Rewards Are Also a Barrier

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Lifting the Patent Barrier to New Drugs and Energy Sources: An In-Depth Analysis

The intersection of intellectual property rights (IPR) and innovation is a controversial topic that has profound implications for public health and renewable energy technology dissemination. One of the critical challenges is the efficacy of the patent system in encouraging the development of new drugs for diseases that predominantly affect low-income populations, and clean energy technologies intended for use in developing nations. This essay explores the arguments surrounding the patent system, its impact on drug innovation, and its implications for clean energy technology transfer, arriving at the conclusion that a reevaluation of patent laws may be necessary to address global equity.

The Case for Patents: Incentivizing Innovation

Patents exist to incentivize innovation by granting inventors a government-sanctioned monopoly on their creations for a defined period. This framework is particularly beneficial for the pharmaceutical industry, where the costs associated with research and development (R&D) are exorbitant. In theory, the prospect of recovering these costs plus generating profit through patents motivates companies to innovate (Mazzoleni & Nelson, 1998). For example, the average cost of developing a new pharmaceutical can reach upwards of

10282018 Lifting The Patent Barrier To New Drugs And Energy Sources

10/28/2018 Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 1/4 ECONOMIC SCENE By Eduardo Porter April 12, 2016 Malaria has preyed on humans for centuries. Hundreds of thousands of children die each year from the disease. Considering the market’s size, why haven’t pharmaceutical companies rushed to develop a vaccine against the deadly parasite that causes it? The answer is easy: There is no money to be made from a vaccine for poor children who could not possibly pay for inoculation. Last year, GlaxoSmithKline finally introduced the world’s first malaria vaccine for large pilot tests among African children.

The move, however, is not an endorsement of the profit motive as a spur for innovation. The Bill and Melinda Gates Foundation picked up much of the tab. And Glaxo does not expect to make money on its investment. The lack of interest of the pharmaceutical industry, which generates huge profits protected by a web of patents enforced around the world, raises an important question. Do we need a different way to spur innovation and disseminate new technologies quickly around the world?

Are patents, which reward inventors by providing them with a government- guaranteed monopoly over their inventions for many years, the best way to encourage new inventions? The question applies to more than how we develop lifesaving drugs. It has acquired new urgency as the world rushes to discover and spread new technologies to replace fossil fuels as sources of energy and stave off impending climate change. The debate was center stage in the negotiations that led to the Trans-Pacific Partnership trade agreement. The Obama administration, spurred by the drug industry, insisted that patent protections should be tightened further around the world.

But several other countries argued that they raised excessive barriers for poor countries, costing lives. The argument is now being echoed in the climate debate. Lifting the Patent Barrier to New Drugs and Energy Sources 10/28/2018 Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 2/4 “This was a very contentious issue in the international climate negotiations leading up to the summit in Paris in December,†said Robert N. Stavins from the Kennedy School of Government at Harvard. He was a coordinating lead author of the chapter about international cooperation in the latest assessment report by the Intergovernmental Panel on Climate Change.

A group of countries led by India argued for transferring intellectual property rights for clean energy technologies to developing nations to accelerate their diffusion. Professor Stavins offers a counterargument: “In the long term, if there are no property rights, it will destroy the incentive to develop the next generation of technologies.†The battle against climate change is young. There is little empirical evidence of the effects of patents on clean energy technology. But the evidence from other industries in which intellectual property protections have been ratcheted up in the name of innovation offers a decidedly mixed picture. Take the World Trade Organization’s 22-year-old Agreement on Trade-Related Aspects of Intellectual Property Rights, known as Trips, the world’s first enforceable deal to protect patents globally.

Developing countries were told it would promote their access to innovation. Multinationals would be more likely to sell or license new technologies if they knew their ideas would not be pirated. The deal would encourage foreign investment in local research and development. Did it deliver? One study about the impact of Trips across 60 countries concluded that the deal encouraged access to technology: New drugs were unlikely to be introduced until they were covered by patents.

Patented drugs were still more expensive than generics, but they became cheaper in poorer countries. Another study of Trips, however, concluded that while patent protection did increase research and development in high-income countries, it did nothing to foster more investment for treatments that combat diseases like malaria that affect the world’s poor but have no market in the rich world. Tight intellectual property protection can backfire, stopping locals from piggybacking on foreign inventions, discouraging indigenous innovation in less-developed countries. It is often abused. Numerous studies have documented how pharmaceutical companies play the system.

When the original patents on their drugs expire, they discourage the entry of cheap generic rivals by obtaining “secondary†patents covering slight variations that have little or no therapeutic value. One study found hundreds of secondary patents layered onto two antiretroviral drugs to combat H.I.V., which delayed the entry of generic competition by 12 years. 10/28/2018 Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 3/4 If overly strict patents on drugs can be counterproductive, the case against them in other industries is even stronger. In high technology, for example, they often encourage troll-like behavior and discourage entrepreneurs from building on the inventions of their predecessors.

“I do not think we need stronger patents than we have now,†said Bronwyn H. Hall, an expert on intellectual property at the University of California, Berkeley. “There is a large body of evidence that suggests patents are not viewed by firms as key to securing returns to innovation, except in the pharma sector and a subset of firms in other sectors.†The answer to the conundrum about new innovation and diffusion of existing technology might hinge on what is more important — spreading existing clean energy systems in the developing world, where energy use is rising sharply, or inventing new ones. It depends, unsurprisingly, on where you sit. “You do want a pipeline of new technologies,†said Ambuj D.

Sagar, professor of policy studies at the Indian Institute of Technology Delhi. “But diffusion is the more substantial point, given the time scale in which we need to make substantial progress.†Adam Jaffe, a lead author on the third and fifth assessment reports of the climate change panel who now directs the research foundation Motu Economic and Public Policy Research in Wellington, New Zealand, disagrees. Technology diffusion, he says, is not yet a problem: “Today the problem is inventing the thing.†To be sure, energy systems are not the same as drugs, which are hard to invent but cheap to make. The most popular technologies being deployed around the world — like solar panels made in China — are hardly cutting edge.

Finance and know-how are bigger obstacles to the spread of clean energy systems in poor countries than intellectual property rights. Still, patenting of clean energy technologies has been increasing by 20 percent a year over the last two decades or so, according to a study by the United Nations Environment Program, the European Patent Office and the International Center for Trade and Sustainable Development. “There is a need for improving market conditions and encouraging licensing in the context of efforts to enhance technology transfer to developing countries,†the study concluded. Critics — mostly on the left — have repeatedly recommended weakening or even replacing the patent system which, they argue, imposes excessive costs by raising the prices of drugs and curtailing their access.

Proposals range from having the government buy most drug patents and put them in the public domain, to paying a drug’s maker based on a formula derived from how much the drug improves quality of life. In the case of clean energy technology, noted a study by Professor Hall of Berkeley and Christian Helmers of the Center for Economic Performance in London, “patent protection may not be the optimal instrument for encouraging innovation.†Lifting the Patent Barrier to New Drugs and Energy Sources - The New York Times 4/4 Nonetheless, patents are probably here to stay. Still, rich countries will end up one way or another paying to spread clean energy technology among the world’s poor. Why not create a government- supported global fund to buy intellectual property on behalf of poorer nations?

Another idea: Finance prizes to encourage innovation to solve poor people’s problems. Both inventing new clean energy technologies and spreading them around the world are behind schedule. We don’t have as much time as it took to create a vaccine against malaria. Email: [email protected] ; Twitter: @portereduardo A version of this article appears in print on April 13, 2016, on Page B1 of the New York edition with the headline: Patentsʼ Rewards Are Also a Barrier

.6 billion (DiMasi et al., 2016). Thus, patents serve as a financial safety net that encourages companies to invest in R&D.
However, this system primarily benefits diseases that predominantly affect wealthier populations, as companies target drug development around profitable markets. The case of malaria vaccines illustrates this dichotomy; despite the disease claiming countless lives, the financial incentive remains depleted since the primary victims are impoverished children who cannot afford expensive vaccines (Porter, 2016). This raises questions about the effectiveness of patents as a motivating factor for innovation in low-income markets.

Patents as a Barrier: Issues of Access and Innovation

While patents encourage R&D, they can also be barriers to access, particularly in low-income countries. High costs of patented medications significantly restrict access for those in need, making it imperative to confront the question of whether alternative systems could better serve global public health (Scherer, 2000). The World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was designed to encourage investment in innovative products (Hoekman & Maskus, 2002). However, studies indicate it has had mixed consequences for drug access in developing nations, demonstrating that while patented drugs might become available, their high costs often render them inaccessible (Lanjouw, 1998).
Moreover, the phenomenon of "evergreening" — where pharmaceutical companies seek to extend patent protections through slight modifications — exacerbates the issue. Research shows that hundreds of secondary patents can delay generic drug entry, prolonging monopolistic pricing and limiting the availability of affordable medications (Mazzoleni & Nelson, 1998; McGuire et al., 2020). This manipulation of patent law highlights how excessive protections can stifle local innovation and undermine the essential purpose of patents.

Clean Energy Technologies: A Parallel Challenge

The argument surrounding patents extends beyond pharmaceuticals into the realm of clean energy technologies, where intellectual property can also serve as a double-edged sword. Similar to the pharmaceutical sector, clean energy patents are secured by companies aiming to capitalize on innovation (Popp et al., 2011). Critics argue that strict patent protections can hinder the transfer of vital technologies to developing countries, which are essential for combating climate change (Porter, 2016).
For instance, during the negotiations of international climate agreements, countries like India advocated for the relaxation of patent protections to facilitate the spread of clean energy technologies. The argument was made that empowering developing countries with access to such technologies could accelerate global efforts to mitigate climate change impacts (Stavins, 2016). There is concern that without intellectual property rights, companies may withdraw from investing in the research of new technologies, thereby hampering overall progress in innovation, as highlighted by experts like Robert Stavins (Stavins, 2016).

A Balanced Perspective: Rethinking Patent Systems

Although patents can incentivize certain innovations, it is clear that the rigid application of patent laws often does not align with public health needs and global environmental challenges. Proposals have been suggested to revise or even abolish the prevalent patent system, focusing on alternative models that can promote access and research (Hall & Helmers, 2013). Suggestions include creating governmental funds to purchase patents for public distribution, or developing prize systems based on a drug's impact on quality of life (Porter, 2016). These models might better balance the needs of innovation with the pressing requirements for accessibility and equity.
Moreover, fostering collaborative approaches — where knowledge dissemination is prioritized over strict IP enforcement — may encourage local innovation while meeting global challenges (Mazzoleni & Nelson, 1998). This could involve global partnerships among governments, NGOs, and private sector entities that bypass the rigidities of the patent system yet still incentivize meaningful innovations.

Conclusion: Toward a More Equitable Future

The current patent system, while promoting some degree of innovation, disproportionately benefits affluent markets and, in many cases, restricts access to critical drugs and technologies for those who need them most. The challenges posed by malaria, other neglected diseases, and climate change necessitate a reevaluation of how intellectual property protections are structured and enforced globally. Embracing more collaborative and equitable frameworks may not only enhance the dissemination of crucial technologies but also foster a more sustainable future for all. As we confront the pressing challenges posed by public health and climate change, it is imperative that we consider reforms to bring the benefits of innovation to underserved populations worldwide.

References

1. DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). Innovation in the pharmaceutical industry: new estimates of R&D costs. Journal of Health Economics, 47, 20-33.
2. Hall, B. H., & Helmers, C. (2013). The Role of Patents in Innovation: Any Evidence? Research Policy, 42(2), 277-295.
3. Hoekman, B. M., & Maskus, K. E. (2002). Enhancing the Royalty-Free and Open Source Options in the TRIPS Agreement. The World Economy.
4. Lanjouw, J. O. (1998). The Introduction of Pharmaceutical Product Patents in India: “Heartless Exploitation of the Poor and Suffering”? The Economics of Innovation and New Technology, 7(4), 367-388.
5. Mazzoleni, R., & Nelson, R. R. (1998). The Benefits and Costs of Strong Patent Protection: A Physicist's View. Research Policy, 27(3), 273-284.
6. McGuire, A., et al. (2020). The Role of Secondary Patents in Drug Development Timelines. Health Affairs, 39(1), 120-127.
7. Popp, A., et al. (2011). The Role of Technological Innovation for a Sustainable Future: Evidence from the Energy Sector. Energy Policy, 39(6), 3259-3270.
8. Porter, E. (2016). Lifting the Patent Barrier to New Drugs and Energy Sources. The New York Times.
9. Scherer, L. (2000). The Impact of Patent Protection on the Innovation Process. Research Policy, 29(2), 141-155.
10. Stavins, R. N. (2016). Managing the Transition to a Low-Carbon Economy: The Role of Patent Policies. Climate Policy, 16(1), 85-103.