E-drug: David Dollar on globalisation and health
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[Interestingly, this morning the Bulletin of the World Health
Organization fell on my doormat, and I now see that it contains an
article of David Dollar on globalisation and health. Might be
interesting in the light of the paper he wrote for World Bank, and on
which I just circulated a message on E-drug. Below some abstracts
from the article in the Bulletin. Copied as fair use. HH]
Bulletin of the World Health Organization, 2001, 79: 827 833.
Is globalization good for your health?
David Dollar
Abstract
Four points are made about globalization and health. First, economic
integration is a powerful force for raising the incomes of poor
countries. In the past 20 years several large developing countries
have opened up to trade and investment, and they are growing well
faster than the rich countries. Second, there is no tendency for
income inequality to increase in countries that open up. The higher
growth that accompanies globalization in developing countries
generally benefits poor people. Since there is a large literature
linking income of the poor to health status, we can be reasonably
confident that globalization has indirect positive effects on nutrition,
infant mortality and other health issues related to income. Third,
economic integration can obviously have adverse health effects as
well: the transmission of AIDS through migration and travel is a
dramatic recent example. However, both relatively closed and
relatively open developing countries have severe AIDS problems.
The practical solution lies in health policies, not in policies on
economic integration. Likewise, free trade in tobacco will lead to
increased smoking unless health-motivated disincentives are put in
place. Global integration requires supporting institutions and
policies. Fourth, the international architecture can be improved so
that it is more beneficial to poor countries. For example, with regard
to intellectual property rights, it may be practical for pharmaceutical
innovators to choose to have intellectual property rights in either
rich country markets or poor country ones, but not both. In this
way incentives could be strong for research on diseases in both rich
and poor countries.
(Snip)
Globalization and life-saving drugs
While there are reasons for believing that greater trade and
integration of markets will produce net benefits of poverty reduction
and improvements in global health, a separate issue is whether
existing global institutions are adequate in terms of ensuring that
the health care needs of the poorest people and the poorest
countries are addressed. A case in point is the need for better and
cheaper drugs for health problems in developing countries. One of
the hot-button issues in the globalization debate concerns
intellectual property rights (IPRs), especially with regard to
pharmaceuticals. The controversy over AIDS drugs for developing
countries epitomizes what is both good and bad about globalization.
Innovation is spurred by the combination of a large market and IPRs
that ensure that innovations are rewarded. As the global economy
has become more integrated, the pace of technological advance has
accelerated. The development of the highly active antiretroviral
therapy (HAART) which slows the onset of AIDS in HIV patients is
a good example of this productivity. In wealthy countries, the price
of this treatment is more than US$10 000 per year. I do not want
to discuss, here, whether or not the specific price is ''fair ''in rich
countries. The OECD system of innovation is based on public
funding of basic science and private funding of commercially viable
research. This system, which has been phenomenally productive,
depends on a framework of IPRs that allows a return well above
manufacturing costs so that innovators get re- warded for their
investment in ideas.
At the same time, it strikes almost everyone as immoral that people
in the developing world infected with HIV cannot get access to
these drugs whose manufacturing cost is only several hundred
dollars for a year 's supply. Because of the outcry over this issue,
several pharmaceutical companies have chosen not to defend their
patents over these drugs in poor African countries.
The main thing I want to do in this section is highlight an interesting
critique by Jean Lanjouw of the IPRs regime for pharmaceuticals
(20). I am not sure if her proposal is politically viable, but it nicely
illustrates the complexity of the IPRs issue and the shallowness of
extreme views on either side of the debate (defend IPRs everywhere
and always, or eliminate such rights completely).
Lanjouw 's proposal is that for drugs which combat global diseases,
pharmaceutical innovators can choose to have IPRs in either rich
country markets or poor country markets, but not in both. So, in
the case of the AIDS drugs, such a system would bring us to
exactly where we have ended up:the pharmaceutical companies
carried out their research and development primarily with rich
country markets in mind and they will earn their return from those
markets. Poor countries in Africa will have access to these
technologies free of charge. This is a very minor disincentive to
innovation because most of the potential profits are in OECD
markets. But that is not true for all potential health innovations.
Even if a disease is global, it may have a concentration in
developing countries (a particular form of cancer, for example).
Where there is little demand in OECD markets for an innovation,
IPRs in developing countries can be an important incentive for firms
(based anywhere) to research and develop products to deal with the
problem.
Lanjouw 's regime illustrates that IPRs are important in stimulating
innovation and that it is in the interests of developing countries to
protect rights that will lead to more innovation in response to their
problems. On the other hand, developing countries will gain nothing
by protecting IPRs on treatments for AIDS or cancers that are
common in rich countries, because that research is going to go
ahead anyway on the strength of returns in OECD markets.
I cannot say how realistic this proposal is. To implement it would
require that firms producing pharmaceuticals in developing countries
based on others 'discoveries could not sell these products back into
rich country markets. Inevitably, there would be a black market, but
it could probably be kept fairly small. Lanjouw 's proposal nicely
illustrates how developing countries can gain from protecting IPRs
in health fields in some cases, while, at the same time, recognizing
that there is little justification for protecting IPRs in all cases. There
have been other recent proposals to strengthen incentives for
research on health technologies through subsidies, including
guarantees of markets if successful drugs can be developed, for
example, for antimalarials (21). The general point here is that the
international architecture to encourage innovation in health
technologies could be vastly improved.
Conclusions
The bottom line is that global economic integration can be a
powerful force for increasing incomes and hence improving health
and other aspects of welfare, but for that potential to be fulfilled,
complementary policies within developing countries and further
improvements in the international architecture, for example, in
intellectual property rights, are required.
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