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The Ethics of Intellectual Property

Rights in an Era of Globalization


Aakash Kaushik Shah, Jonathan Warsh, and Aaron S. Kesselheim

I
n recent decades, advances in information tech- concerns with regard to agriculture and textiles as
nology have given rise to a post-industrial society1 well as the rapidly growing field of intellectual prop-
in which emphasis on the manufacture of material erty.5 Against this backdrop, a coalition of developed
goods has been supplanted by the creation of intellec- nations led by the United States, the countries of the
tual property. Indeed, this new “knowledge economy”2 European Union, and Japan brought forth the Agree-
can be tracked by the exponential growth in patented ment on Trade-Related Aspects of Intellectual Prop-
products across a range of sectors since the 1980s (see erty Rights in 1994.6
Figure 1). According to the United States Patent and The TRIPS Agreement standardized intellectual
Trademark Office, the number of annual patent appli- property rights across its member states by requiring
cations submitted grew from 112,379 to 520,277 over lesser-developed and lower-middle income countries7
the past three decades, a 464% increase.3 to adopt protections covering intellectual property
The transformation in the industrial markets has that were comparable to their more developed coun-
been accompanied by the rise of a new, global insti- terparts.8 Since the ratification of TRIPS became a
tution for coordinating intellectual property rights condition for entry into the WTO, developing coun-
(IPRs): the World Trade Organization (WTO). The tries seeking the free-trade benefits of WTO mem-
WTO, created in 1994 as a replacement to the post- bership became subject to the rigorous intellectual
World War II General Agreement on Tariffs and Trade property provisions of the agreement.9 The TRIPS
(GATT), was intended to liberalize trade while pro- Agreement thus formally merged the debate over
viding a framework for trade agreement negotiations intellectual property with the era of globalization.
and dispute resolution amongst member nations. 4 One of the most controversial areas affected by the
Conceived largely in response to enhanced globaliza- TRIPS Agreement was patents on pharmaceutical
tion, the WTO was meant to address evolving trade products. Pharmaceutical manufacturers have long
considered a robust patent system essential to spurring
Aakash Kaushik Shah, M.B.A., M.Sc., is an M.D. candidate research and development.10 A survey of manufactur-
at Harvard Medical School. He received his M.B.A. and  M. ers’ internal reports of drugs entering human clinical
Sc. in Comparative Social Policy from Oxford University.  trials between 1989 and 2002 found that the average
Jonathan Warsh, M.Sc., is a D.Phil. candidate in public total cost of developing a single drug was $868 mil-
health at the University of Oxford and holds a master’s de-
lion.11 Although arguably a substantial overestimate,12
gree in health policy, planning, and financing from the Lon-
don School of Economics and the London School of Hygiene these figures are used by pharmaceutical firms to sup-
and Tropical Medicine. Aaron S. Kesselheim, M.D., J.D., port their claim that a period of patent protection,
M.P.H., is an Assistant Professor of Medicine at Harvard which allows for higher prices, is crucial to financing
Medical School and the Director of the Program On Regula- initial investment costs. However, before the TRIPS
tion, Therapeutics, And Law (PORTAL) in the Division of
Agreement, most low- and middle-income countries
Pharmacoepidemiology and Pharmacoeconomics, Depart-
ment of Medicine, Brigham and Women’s Hospital. Dr. Kes- had chosen not to permit patents on pharmaceutical
selheim’s work is supported by the Greenwall Faculty Scholars products, instead choosing to ensure rapid access to
in Bioethics.

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Figure 1
A round of multinational trade negotiations con-
Annual Rise in Utlity Patent Applications in the
ducted in Uruguay in 1986 marked the first time that
U.S. (1980–2011)
the issue of intellectual property’s effect on global
trade was presented as a possible agenda item.17 This
stood in marked contrast to prior international nego-
tiations that had taken place under the province of the
United Nations and the World Intellectual Property
Organization (e.g., the Paris and Berne conventions).
A group of 10 developing countries (led by India and
Brazil) staunchly opposed the move, and refused to
participate in negotiations in which intellectual prop-
erty rights were part of the agenda.18 For the next three
years, developing countries’ representatives refused to
negotiate an agreement on intellectual property pro-
tection. Many believed that inclusion of IPRs in trade
negotiations was a mechanism for multinational cor-
porations to drive up prices on essential goods and
push domestic companies out of business.19 Others,
low-cost copies of innovative medications. Therefore, like India, wanted to de-link trade from IPRs and saw
many criticized the TRIPS Agreement for overlooking these trade negotiations as an inappropriate forum for
the need for access to low-cost medicine in develop- discussing a framework for IPRs.20 Still others drew
ing countries. Indeed, the passage of the TRIPS Agree- on a deeper philosophical justification, arguing that
ment catalyzed a debate surrounding intellectual prop- technological innovation should be considered a pub-
erty, the process of pharmaceutical innovation, and lic, rather than a private, good.21
pharmaceutical needs in the developing world. Eventually, however, developing countries relented.
In this paper, we provide an overview of the con- Though most were still fearful of the impact of a poten-
troversy surrounding the TRIPS Agreement. Then, we tial agreement, they agreed to negotiate for two main
describe the two ethical arguments most commonly reasons. First, many believed that compromising on IP
presented in favor of its application to pharmaceu- would allow them to extract concessions in other areas
tical products: a theory of natural property rights of the negotiations, such as access to markets for their
and a utilitarian framework focusing on policy con- emerging textile and agricultural industries.22 Second,
sequences. We conclude that both justifications for the potential agreement created a multilateral dispute
stricter pharmaceutical patent laws in developing resolution that offered an avenue leading to the end of
countries are ethically problematic. unilateral trade sanctions from the U.S. for “noncom-
pliance with adequate standards of intellectual prop-
The TRIPS Agreement erty.”23 Following the Agreement, however, the U.S. has
The origin of the TRIPS Agreement can be traced continued to use these “section 301 sanctions” against
back to the 1970s and 1980s, when U.S.-based indus- noncompliant countries while critics have charged that
tries began to grow globally and encountered limited developing and lesser-developed countries were never
— often nominal — IPRs in developing countries, given the kind of access to textile and agricultural
leading to substantial losses.13 Pfizer, for example, saw goods that they believed compromising on IP would
its overall profits in developing countries plummet in facilitate.24 Formal talks surrounding trade and intel-
the 1960s and 1970s as producers of generics in coun- lectual property rights commenced in 1989.
tries like India and Brazil emerged.14 In the words of After multiple rounds of volatile negotiations, the
Pfizer’s then-CEO Edmund Pratt, “We were beginning talks finally produced the TRIPS Agreement in 1994.25
to notice that we were losing market share dramati- The Agreement required the developing countries
cally [in developing countries] because our intellec- participating in the WTO to pass legislative reforms
tual property rights were not being respected in these to align protections for copyrights, trademarks, and
countries.”15 A 1987 survey by the U.S. International patents, among other intellectual property areas, with
Trade Commission found that U.S. businesses lost those found in the developed world.26 For example,
approximately $50 billion per year overseas as a result patent protection had to be enforced for at least 20
of insufficient restrictions on intellectual property.16 years, copyright terms had to be extended to 50 years
after the death of an author, and states could not offer

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Shah, Warsh, and Kesselheim

favorable treatment to their own citizens over those of from 2006 to 2016 by which time least-developed
any other TRIPS signatory.27 countries would have to pass the necessary legisla-
Most contentiously, TRIPS stated that product and tive reforms including patent protection policies (for
process patents must be made available “in all fields either policy or process patents).38 The Agreement
of technology,”28 including the pharmaceutical and also made clear that countries had discretion to deter-
agrochemical sectors.29 Prior to the Agreement, phar- mine what constituted a “national emergency.”
maceuticals were excluded from the full range of pat- Nearly a decade after the Doha Declaration, how-
ent protection in over 50 countries.30 Some countries ever, the TRIPS flexibilities have rarely been used.
offered no patent protection at all, while others uti- Even when countries have sought to employ the flex-
lized “process” as opposed to “product” patents, offer- ibilities, they have faced stiff resistance from the pri-

Nearly a decade after the Doha Declaration, the TRIPS flexibilities have
rarely been used. Even when countries have sought to employ the flexibilities,
they have faced stiff resistance from the private sector. In some cases,
multinational companies have sought to prevent developing countries from
using TRIPS flexibilities, alleging IP violations.

ing protection for the process of manufacturing a drug vate sector. In some cases, multinational companies
but not for the product itself.31 Since the product itself have sought to prevent developing countries from
was not protected, competing companies could use using TRIPS flexibilities, alleging IP violations.39 For
reverse engineering to quickly develop and sell inex- example, in 1998 the South African Pharmaceutical
pensive copies, lowering prices and virtually excluding Manufacturers’ Association (PMA), along with sev-
brand-name companies from entering the market.32 eral foreign-based drug manufacturers, sued the gov-
In addition, countries with similar IP regimes could ernment of South Africa on the grounds that a 1997
then import the low-cost products for their citizens. Act, which sought to implement TRIPS flexibilities,
Thus, if implemented in their original form, the violated both the intellectual property protections of
stricter IPRs imposed by TRIPS would threaten pub- TRIPS as well as the South African Constitution.40 A
lic health by curtailing the availability of low-cost series of legal holes soon emerged in the PMA’s case
generic drugs. TRIPS would result in protection for which, coupled with an international wave of demon-
previously unprotected drugs, for a longer period, with strations and protests by public health interest groups
fewer restrictions. This led a number of prominent and activists, prompted the PMA and involved com-
ethicists and economists to speak out about the threat panies to drop the case.41
the TRIPS Agreement posed to public health in devel- In other cases, these flexibilities have been pre-
oping countries.33 Defenders of the TRIPS Agreement empted by bilateral trade agreements between the
pointed out that it did permit countries to override U.S. and other countries — commonly referred to as
patent rights “in the case of a national emergency or “TRIPS-plus” agreements. In 2005, for example, the
other circumstance of extreme urgency.”34 However, U.S. signed an agreement with several Central Ameri-
the Agreement did not define these terms, offering lit- can countries (known as the United States–Domini-
tle guidance as to how member states should navigate can Republic–Central America Free Trade Agree-
the tension between IPRs and access to medicines. ment) that extended the term of patents beyond 20
To provide heightened clarity, the WTO Doha Min- years to compensate for “unreasonable delays” in the
isterial Conference in 2001 promulgated the Doha granting of patent or market approval when such
Declaration, which outlined a number of “TRIPS flex- delays were attributed to government action. 42 This
ibilities,” or mechanisms through which developing extended patent period was well outside the scope of
countries could selectively circumvent TRIPS con- countries’ established TRIPS obligations. The FTS
straints to promote public health.35 These flexibilities also “introduce[d] rules for pharmaceutical and agri-
included compulsory licensing, parallel importation,36 cultural chemicals market exclusivity and test data
limitations on the grant of new use pharmaceutical protection” that, according to the World Health Orga-
patents, and limitations on the extent of test data pro- nization (WHO), “go way beyond the TRIPS require-
tection.37 The Declaration also extended the deadline ments.”43 Thus, the Doha Declaration does not appear

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to be effective in permitting developing countries to act of picking the apple. Concluding that it does not,
manage the public health concerns introduced by Hettinger suggested that laborers should be entitled
TRIPS. to only the value they added to a product as opposed
to the total value of the product.46 Distinguishing the
Ethical Bases for the TRIPS Agreement two is a challenging task, but nonetheless necessary in
Arguments supporting the TRIPS Agreement are Hettinger’s view.
almost always underpinned by ethical reasoning. Hettinger’s critique also applies to IPRs. Consider
Indeed, IPRs have been defended as being intrinsi- the development of a pharmaceutical product. A new
cally valuable, thus invoking a natural right to prop- medication or biotechnology drug usually emerges
erty, and as being essential policy tools to promote from a long course of research that starts with pivotal
innovation, which draws on utilitarian ethical prin- basic science discoveries, followed by translational
ciples. In this section, we deconstruct the bases for and applied studies, product development research,
two key arguments in favor of TRIPS’ application to and clinical testing. Academic and non-profit research
pharmaceutical IPRs and explain why they offer insuf- centers are the focus of basic science work, with more
ficient justifications for the Agreement. than 75% of their work funded by the federal govern-
ment, foundations, and internal sources.47 Transla-
Rights-Based Justifications tional research converts basic science insights into
Early advocates for the TRIPS Agreement justified the practical applications. Pharmaceutical companies
need for more robust intellectual property protections devote an enormous amount of funding to such
with deontological arguments that implied a duty to research, and in the U.S., the National Institutes of
honor IPRs regardless of the consequences of doing so. Health (NIH) contributes over $15 billion from its
This line of argument is based on theories of natural nearly $30 billion dollar annual budget. 48 Transla-
rights and the notion that individuals own the fruits tional research may occur at academic institutions,
of their personal labor. Edwin Hettinger notes that start-ups funded by venture capital, and large compa-
this compelling intuition is often expressed colloqui- nies.49 Product development research, including bio-
ally as “Why is it mine? Well, it’s mine because I made availability and trials to identify the efficacy and safety
it, that’s why. It wouldn’t have existed but for me.”44 of a drug, is largely left to the private sector.50 Clinical
A more rigorous articulation of this sentiment can be trials encompass over $20 billion in annual costs, over
found in John Locke’s labor justification for property two-thirds of industry R&D expenditures, and are the
rights. According to Locke, individuals have owner- fastest growing type of research investment.51
ship over their bodies and as a consequence have own- Thus, the intellectual labor that went into the drug
ership over what they do with them. Work done with design process did not occur from first principles;
the body — labor — often results in a tangible product. rather, in every case, the inventor’s thought process
Since labor and its products are so closely intertwined, was critically shaped by the cumulative insights of his
individuals’ ownership also extends to the products of or her predecessors. While the scientist in charge can
their labor. Locke goes further, stating that products certainly be awarded the market value of his or her
are generally of little value unless they include labor. invention, such a conception overlooks all others who
In fact, in his Second Treatise, he averred that 99% of a contributed to the discovery. In that vein, Hettinger
product’s value can be attributed to the labor invested argues that “a person who relies on human intellec-
in it.45 tual history and makes a small modification to pro-
While intuitive, this justification for property rights duce something of great value should no more receive
is not incontrovertible. Locke views labor as an asset what the market will bear than should the last person
that an individual imparts to objects of little value to needed to lift a car receive full credit for lifting it…The
create a desirable product. Inherent to this concep- fact that most of these contributors are no longer pres-
tualization is the assumption that labor invariably ent to receive their fair share is not a reason to give the
confers value. Even if that is the case, Locke’s justifica- entire market value to the last contributor.”52
tion remains problematic because it assumes that the However, such a scenario occurs frequently in the
end products derive virtually all of their worth from pharmaceutical sciences, where patents are the pri-
an individual’s labor. Hettinger has noted that such mary means used to adjudicate ownership and finan-
an assumption is unrealistic when labor is coupled to cial rewards. Patent law provides all legal control over
natural resources such as land. Responding to Locke’s a new medication to the patent holder, which is usu-
assertion that 99% of a product’s value can be attrib- ally the manufacturer, even when pivotal advances in
uted to labor, Hettinger wondered if 99% of the value basic and translational science that may not be pat-
of an apple rests in the human effort that goes into the entable underlie the final stages of drug development.

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Although some legal criteria for earning a patent — cal products, adds another layer of complexity to the
namely novelty and non-obviousness — attempt to last-contributor conundrum. Such drug development
prevent inventors from profiting off of extremely small strategies implicitly rely on the Lockean notion that
modifications to existing knowledge, that does not investing labor, however, nominal, confers rights to its
deny the fundamental idea that all scientific advances fruits and are frequently successful. A review of drug
must, to some extent, rely on advances by one’s pre- patent applications to the FDA revealed that in recent
decessors. In the case of the chemotherapy agent years, almost 80% of the applications were consid-
paclitaxel (Taxol), the drug with the highest sales in ered similar to existing products instead of represent-
the history of oncology, the U.S. General Accounting ing a significant degree of novelty.56 A survey by the
Office (GAO) estimated that through 2002, the NIH National Institute for Health Care Management Foun-
invested $484 million to fund Taxol-related research.53 dation suggests that despite arguably lacking novelty
Even after the NIH granted a development agreement or being obvious in light of current technologies, inap-
to Bristol-Meyers Squibb, the GAO wrote that “NIH propriate patents covering incremental innovations
conducted most of the clinical trials associated with are often approved by the U.S. Patent and Trademark
the drug. The results of these trials were critical for Office (USPTO).57 These strategies provide additional
BMS to secure FDA’s approval.”54 To be sure, approval ways for pharmaceutical manufacturers — the last

Intellectual property, of course, differs from physical property in that material


is not literally taken from the commons by an inventor. The inventor of a
patented drug, for instance, does not take anything physical away from other
individuals since there would be no drug without the inventor. As a result,
in the context of intellectual property, the first proviso is more generally
interpreted to mean that the claiming of a given piece of property must not
“worsen the situation of others.” However, drug patents as outlined by the
TRIPS Agreement arguably appear to violate this formulation.
As Hettinger points out, after a patent has been awarded, those who invent
the product independently of the patent holder “clearly suffer a great
and unfair loss because of the original patent grant.” Not only are these
subsequent inventors prevented from selling or sharing their product, they
are technically prohibited from using it for themselves.

by the Food and Drug Administration (FDA) is not contributors according to Hettinger’s analysis — to be
the same thing as granting patent protection. But rewarded for drugs that they have contributed little to
as a practical matter, FDA approval is required for a develop. While the prevalence of follow-on drug pat-
company to bring its product to market and reap the ents may partly reflect shortcomings of the USPTO
commercial benefits from the patent. Bristol Myers- review process and its inability to screen out all dupli-
Squibb agreed to repay royalties at the rate of one half cative patent claims, it also underscores the relevance
of 1 percent of its worldwide Taxol sales. However, by of the last-contributor conundrum to the current drug
2002, despite $9 billion in worldwide profits for Bris- patent regime.
tol Myers-Squibb, NIH had received only $35 million. Even if one is willing to accept the potential unfair-
Sampat recently identified at least 72 drugs approved ness of disproportionately rewarding the last contrib-
in the past 25 years whose patents point to involve- utor, closer inspection of Locke’s labor justification of
ment by academic inventors, including some of the property reveals that it is inconsistent with the IPRs
most novel and clinically useful drugs produced dur- promulgated by the TRIPS Agreement. Recognizing
ing that time.55 that labor cannot result in property rights uncondition-
The proliferation of follow-on drugs, marginally ally, Locke provides two provisos to guide the appro-
altered versions of genuinely innovative pharmaceuti- priation of natural property rights. The first states that

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the property being acquired must be “enough, and as first proviso, it may prove difficult to implement. From
good left in common for others.”58 Robert Nozick illus- a practical standpoint, determining how long an indi-
trates this precondition with the example of appropri- vidual would take to discover a drug independently of
ating a grain of sand from a beach. He notes that in the patent owner is likely to be challenging, as illus-
doing so, “no one else may now do as they will with trated by analogous cases in trade secret law.
that grain of sand. But there are plenty of other grains Locke’s second proviso states that “one must not
of sand left for them to do the same with. Or if not take more than one can use.”65 Locke also notes that
grains of sand, then other things.”59 “as much as any one can make use of to any advantage
Intellectual property, of course, differs from physi- of life before it spoils; so much he may by his labour
cal property in that material is not literally taken from fix a Property in.”66 Again, because of the fundamental
the commons by an inventor. The inventor of a pat- way in which intellectual property differs from physi-
ented drug, for instance, does not take anything physi- cal property, this clause is often reformulated as the
cal away from other individuals since there would be appropriation of property should not produce spoilage
no drug without the inventor. As a result, in the con- or waste.67 The IPRs advanced by the TRIPS Agree-
text of intellectual property, the first proviso is more ment once again fail to meet Locke’s precondition for
generally interpreted to mean that the claiming of a representing natural property rights. Since the patent
given piece of property must not “worsen the situation reforms mandated by the Agreement do not require
of others.”60 However, drug patents as outlined by the patent holders to maximally utilize their right to pro-
TRIPS Agreement arguably appear to violate this for- duction — or use it at all, for that matter — there is
mulation. As Hettinger points out, after a patent has a heightened probability that the patents will lead to
been awarded, those who invent the product indepen- waste or deadweight loss by not resulting in products
dently of the patent holder “clearly suffer a great and reaching those who need them. In fact, this outcome
unfair loss because of the original patent grant.”61 Not becomes virtually certain when one considers that
only are these subsequent inventors prevented from the basic economic rules governing monopolies dic-
selling or sharing their product, they are technically tate that the product be withheld from individuals
prohibited from using it for themselves. who could afford the marginal cost of its production.68
Admittedly, the likelihood of two independent The purpose of a patent is to give its holder the right
inventors developing the same drug simultaneously to effectively limit its use. One way of measuring the
is highly unlikely. By contrast, the chance of an inde- amount of waste patents generate is the number of
pendent inventor identifying a novel use for a drug people who would be prevented from using the pat-
already on patent — a practice known as repurposing ented products and the amount of benefit they would
or repositioning — is not. For example, six medications be deprived of as a result. In the case of drug patents
originally developed to treat depression — dapoxetine, covered by the TRIPS Agreement — take, for exam-
buproprion, duloxetine, fluoxetine, milnacipran, and ple, patents on antiretroviral therapies to treat those
sibutramine — have subsequently been the subject of infected with HIV — such loss is clearly very high.69 In
clinical trials showing their utility in treating condi- sub-Saharan Africa, to take just one example, deaths
tions such as premature ejaculation, smoking cessa- from HIV/AIDS — treatable with insufficiently afford-
tion, stress urinary incontinence, premenstrual dys- able and available anti-retroviral therapies — com-
phoria, fibromyalgia syndrome, and obesity.62 At least prise roughly 20% of all overall deaths.70 Though it
six other neurological drugs and fourteen other non- would be overly simplistic to assert that access to these
neurological drugs have also been repositioned for therapies is a public health “silver bullet,” as other
new indications.63 The prevalence of drug repurposing challenges such as adherence to therapies71 remain,
underscores one way in which an inventor who invents it would be difficult to make the case that there are
a novel use for a drug independently of the patent not millions of people in the developing world who
holder may “suffer a great and unfair loss because of are currently prevented from using patented products
the original patent grant.” Of course, it is conceivable with life-saving capabilities under TRIPS.
that the original patent could limit out this possibility, Thus, using a deontological justification of prop-
but in practice, that has not been the case. erty to defend the IPRs promulgated by the TRIPS
Nozick recognizes the unfairness behind this out- Agreement is inadequate on multiple levels. First,
come. Consequently, he proposes that patents grant its conceptualization of labor as an act of mixing or
exclusive production rights for the time it would take joining that automatically confers value is not neces-
a subsequent inventor to independently develop the sarily accurate. Second, its assumption that nearly all
product.64 While his solution would help bring the the value of a product can be attributed to the labor of
administration of drug patents in line with Locke’s an individual, and particularly its last contributor, is

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problematic. Most significantly, the application of the will offset the harm it does by restricting access to
justification of property to drug patents is inconsistent essential medicines. For example, projections com-
in that such IPRs contravene the preconditions for the piled by Jayashree Watal of the WTO showed that the
appropriation of property underlying this principle. implementation of product patents mandated by the
TRIPS Agreement will result in a 200-300% increase
Consequence-Based Justifications in the price of pharmaceuticals in developing coun-
Given the shortcomings of rights-based justifications tries.75 In addition, it appears that the Agreement is
for the TRIPS Agreement, a strong contingent of its being used as a stepping stone towards more robust
advocates put forth a teleological, or consequence- IPRs, often referred to as TRIPS-plus protections. It is
based argument.72 While IPRs may be applied to well documented that pharmaceutical patent holders
a range of subject matters, the ones outlined by the may seek to delay the introduction of low-cost gener-
Agreement have had the greatest impact on drug pat- ics through litigation and practices such as obtaining
ents. Accordingly, defenses of the TRIPS Agreement questionably innovative secondary pharmaceutical

It is not clear that the good created by a global patent-based incentive


structure will offset the harm it does by restricting access to essential
medicines. For example, projections compiled by Jayashree Watal of the
WTO showed that the implementation of product patents mandated by
the TRIPS Agreement will result in a 200-300% increase in the price
of pharmaceuticals in developing countries. In addition, it appears that
the Agreement is being used as a stepping stone towards more robust
IPRs, often referred to as TRIPS-plus protections.

on these grounds appeal to a utilitarian framework and patents76 and data exclusivity clauses.77 Manufactur-
emphasize the positive consequences of more robust ers’ additional patents on nominally modified ver-
intellectual property protections of pharmaceuticals. sions of their brand-name product allow them to
More specifically, the teleological justification argues effectively extend their monopoly privileges, while
that IPRs provide both the incentive to disclose and data exclusivity clauses prevent generic manufactur-
the incentive to innovate.73 The reasoning behind the ers from using clinical trial data originally collected by
former is that inventors usually have little reason to the patent holder to apply for regulatory permission
share the technical details underlying their product — to produce drugs even when the patent has already
even when protected by trade secret laws — and as a expired. Given the expense of clinical trials, generic
result, society may miss out on the opportunity to learn manufacturers must wait until the data exclusivity
and improve upon the idea. Patents address this pitfall clause expires before they are able to bring their ver-
by offering an inventor exclusive production rights in sions to market. These strategies allow patent holders
exchange for disclosing sufficient detail about a prod- to obstruct the introduction of generic competition
uct in its original patent application. Similar logic and maintain the relatively high prices of patented
underlies the incentive to innovate. In light of the high drugs beyond the 20-year patent on the truly inven-
input costs associated with research and development, tive underlying active ingredient.78 This very idea was
inventors are not inclined to pursue drug discovery cited by the U.S. Supreme Court in the recent case of
improvement without the opportunity to recoup and Federal Trade Commission v. Actavis when it held
potentially profit from their initial investment. Here that financial agreements between generic and brand-
again, patents provide a powerful encouragement to name manufacturers may violate antitrust laws when
spur the engines of innovation. As the proponents of they include large payments that primarily serve to
the TRIPS Agreement point out, the need for these lengthen the time that generics stay off the market.79
incentives is particularly acute in research-intensive Since the decision did not outlaw such agreements but
sectors like pharmaceuticals.74 merely made them reviewable by the FTC, its impact
Despite such assertions, it is not clear that the good on public health markets, including those in develop-
created by a global patent-based incentive structure ing countries, will probably be limited.

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Moreover, the notion that drug patents are uni- “[th]e fact that in developing countries few new tech-
versally effective at inducing innovation — that they nologies are being developed has more to do with fun-
can serve the same investment-supporting function damental economical problems (e.g., a lack of skilled
in developing countries that they have in developed workers and the absence of infrastructures capable of
ones — is far from certain. According to the propo- absorbing new technologies) than with patent protec-
nents of TRIPS, the benefits to innovation fostered tion standards.”85
by the Agreement will be numerous. There will be Further cause for skepticism is fueled by the fact
greater foreign investment in the discovery-based that pharmaceutical patents support profits that far
industries in developing countries, increased transfer exceed basic research and development costs. In the
of production technology, and ultimately the creation U.S., data from the Securities and Exchange Com-
of research and development operations in develop- mission and the Department of Health and Human
ing countries that would uniquely address the local Services indicate that the large pharmaceutical com-
burden of disease.80 In other words, least-developed panies spend higher proportions of their revenues
countries are said to actually benefit in the long run (about 30%) on promotion, marketing, and adminis-
because this investment creates local incentives to tration and profit for shareholders (about 20%) than
innovate, rather than copy. the proportion (about 13%) spent on research and
However, as stated by several developing coun- development.86 Given the close link between patents
tries at the World Intellectual Property Organization and profits, it is not surprising that of the over 1200
(WIPO), the intellectual property protections found drugs sold in the last quarter of the 20th century, less
in the low- and moderate-income countries are delib- than 1% of them were meant for tropical diseases that
erately designed to be relatively weak. The case of afflict a disproportionately high number of individuals
India’s generic pharmaceutical industry demonstrates living in poverty.87 Since the stricter IPRs outlined by
how a developing country might benefit from such a the TRIPS Agreement do not address the fundamen-
regime. By significantly scaling back on intellectual tal lack of purchasing power in least developed coun-
property protections in 1971, the Indian government tries, it is unlikely that they will stimulate domestic
not only enabled local generic pharmaceutical com- research and development operations that target the
panies to thrive, it leveraged them against its disease uniquely local but unprofitable burden of disease in
crises to aggressively promote its domestic develop- these countries.
ment and public health agenda.81 Advocates of more Thus, the teleological justifications for the TRIPS
exhaustive IPRs argue that while this may work over Agreement remain unconvincing. Though the appeal
the short-term, it will ultimately prove counter-pro- to a utilitarian framework is initially persuasive and
ductive since the country will fail to establish domestic provides legitimate reasons for the need for strong
research and development industries that can cater to intellectual property protections, this framework is
its specific public health needs. Yet this outcome did problematic in its application to developing countries.
not occur in India. Between 1972 and 2004, under More specifically, the promises of global patent-based
its less restrictive drug patent regime, the pharma- incentives are far from certain. If stronger IPRs play
ceutical industry in India grew to become the fourth only a minor role in foreign investment decisions, for
largest in the world. In addition, as the largest Indian example, it will be unlikely for them to single-hand-
generic manufacturers became well established, they edly push pharmaceutical manufacturers into unprof-
moved towards investing in innovative research and itable markets. Any resulting benefit would also need
development.82 to outweigh the risks posed to public health through
Empirical data also do not support the claims about reduced access to medicines.
the economic dangers of weak patent regimes. For
example, George Haley and Usha Haley, comparing Conclusion
drug discovery in India pre- and post-TRIPS, found There are two dominant ethical arguments used to
that the implementation of TRIPS negatively affected support the TRIPS Agreement. The first is based on
domestic innovation.83 Though one might argue that the notion that individuals have a natural right to
insufficient time has passed in order to evaluate this the products of their labor. This justification remains
claim as India only implemented TRIPS-complying unsound in its assumptions about labor and value, as
legislation in 2004, these findings are consistent with well as inconsistent in its reference to natural property
recent research showing that the strength of IPRs in rights. The second is made on utilitarian grounds, but
a given country plays a relatively small role in foreign its claims regarding the benefits that the Agreement
investment decisions.84 Sigrid Sterckx provides one will bring are tenuous and unlikely to counterbalance
potential explanation for such findings by arguing that its potential harms. The weak nature of these ethical

848 journal of law, medicine & ethics


Shah, Warsh, and Kesselheim

15. M. A. Santoro, Pfizer: Protecting Intellectual Property in


foundations of the TRIPS Agreement underscores the a Global Marketplace (Cambridge, MA: Harvard Business
need to modify the theory and practice of the Agree- School, 1992): at 6.
ment as well as to consider its potential alternatives. 16. A. O. Adede, “Origins and History of the TRIPS negotiations,”
in Trading in Knowledge: Development Perspectives on TRIPS,
Several alternative proposals for rewarding intellec- Trade and Sustainability (London: Earthscan Publications,
tual labor in an era of globalization have been put forth. 2003): at 24.
These include the creation of streamlined compulsory 17. B. M. Hoekman, “New Issues in the Uruguay Round and
Beyond,” Economic Journal 103, no. 421 (1993): 1528-1539.
licensing and parallel importing mechanisms,88 tier- 18. The other 8 countries were Argentina, Cuba, Egypt, Nicaragua,
based IPRs,89 advanced market commitments,90 prize Nigeria, Peru, Tanzania, and Yugoslavia.
funds,91 health impact funds,92 patent pools,93 generic 19. A . Lanoszka, “The Global Politics of Intellectual Property
Rights and Pharmaceutical Drug Policies in Developing Coun-
open licenses,94 and south-south regional partner- tries,” International Political Science Review 24, no. 2 (2003):
ships in discovery-based industries.95 The unique ethi- 181-197.
cal challenges posed by IPRs in an era of globalization 20. D. M. Nachane, “Intellectual Property Rights in the Uruguay
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Aakash Kaushik Shah and Jonathan Warsh contributed equally to 22. K. Timmermans and T. Hutadjulu, The TRIPS Agreement and
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