Compulsory Licensing of IP-protected Drugs: Colombia’s Panacea for Access to Better Healthcare Services?
By: Matthias Bauer
Subjects: Healthcare Latin America Services
On 30 May 2018, Colombia joined the OECD as the group’s 37th member. Prior to the country’s accession, the Colombian government implemented a number of reforms aimed at modernising its economy and improving the governance and effectiveness of the public sector. This is in line with the broader objectives of the OECD, which aims to promote policies that improve the economic and social well-being of people around the world.
Given the current state of Colombia’s economic and social development, the economy’s dependency on commodity prices and Colombian businesses’ backwardness in manufacturing and services sectors, the need to implement sound economic policies is pressing. In addition, high levels of corruption and ongoing challenges of organised crime call for bold political decisions.
Among the policy priorities recently announced by the Colombian government, improving the quality of public healthcare ranks particularly high. Colombia’s new President, Ivan Duque, announced a comprehensive reform of the country’s healthcare sector. Colombia’s Ministry of Health and Social Protection (MinSalud) has already taken a number of steps to improve health expenditure efficiency. The government also announced several initiatives for 2019, including the strengthening of the National Drug and Food Regulatory Agency (INVIMA), which ‘must have sufficient funds to deal with technological innovation [and to] speed up processes for the industry’.
Public announcements like these create the impression that the importance of innovation in healthcare services, including approval procedures for drugs, medical devices and new business models, is explicitly recognised by the Colombian government. At the same time, however, public spending on healthcare remains a major concern in domestic politics and the public debate. Colombia, as most low and middle-income countries, still suffers from insufficient financial resources needed to maintain an inclusive healthcare system that allows for sufficient coverage for all members of the population.
As reported by the World Health Organisation (WHO), access to healthcare services is still a serious problem. The Colombian government still spends well under the OECD average on public healthcare. The healthcare system is in permanent deficit. And at the same time many hospitals and healthcare providers are heavily indebted. As a consequence, about 2 million people in Colombia have no access to health services (Colombia’s total population is about 48 million). ‘Inequities’, as the WHO states, persist, particularly in remote areas and among indigenous populations. In addition to these challenges, modern sanitation system coverage in urban areas is 92 per cent, while in rural areas it is only 15 per cent.
Even though these challenges are well-known by policymakers, they hardly make the headlines. In fact, the true miseries are often obscured by domestic policymakers blaming outsiders rather than pointing to profound political mismanagement at home.
In the case of Colombia, ‘compulsory licensing’ of patented medicines is a case in point. In 2016, Colombia threatened to introduce compulsory licensing for a number of innovative drugs on spurious economic grounds. The Colombian government more recently threatened its trading partners to use compulsory licenses to slash the prices of a whole range of Hepatitis C drugs.
Admittedly, the Colombian government is not an isolated case. Several Latin American countries have been trying to circumvent patents for new drugs, even though they are considered upper-middle-income or high-income countries by the World Bank. And they have been trying to mainstream this practice even though they do not face health emergencies. Such conduct, however, is troubling for other OECD members that are committed to strong protection of intellectual property to incentivise investment and research- in knowledge-intensive industries.
EU Member States, for example, are aware of the trade-off between research- and capital-intensive pharmaceutical development and market exclusivity rights. They are also aware of the effects of temporary monopolies in markets for new medicines and therapies. But after all, EU governments understand that developing drugs is a risky and very costly business because of extremely complex and time-consuming regulatory procedures for drug discovery, efficacy confirmation, preclinical work and clinical trials. Accordingly, the need for both safe and effective new drugs is reflected in the EU’s trade policy, which aims to strengthen intellectual property rights in the life sciences industries.
So what’s at stake for Colombia?
First of all, blaming big pharma and international rules for the protection of intellectual property won’t solve the country’s fundamental problems in the provision and coverage of high-quality healthcare services.
Secondly, strong intellectual property rights are a precondition for structural economic change and economic renewal. They incentivise market-oriented research activities. And they help countries to transition to more knowledge-based economies over time.
Thirdly, it is hard to transplant research-intensive commercial activities from one country to another. For smaller countries like Colombia and many other low- and middle-income countries, it is generally difficult to attract investment as smaller countries lack the gravitation of a big market. Compared to India, Brazil and China, smaller countries like Colombia will always have a comparative disadvantage – by default. But adopting strong and enforceable intellectual property rights increases the likelihood that knowledge-intensive companies invest in smaller countries, which most of them would not do otherwise.
Finally, for investors – domestic or foreign by passport – strong and enforceable intellectual property rights increase the predictability of business success. They are, after all, a matter of trust, i.e. a key determinant of commercial decisions. Any political appetite for an erosion of intellectual property rights in certain sectors of the economy not only discourages investment; it also contributes to the erosion of trust in the government’s ability to implement and maintain sound economic policies. In other words: it comes as a tax on future economic and social development, with – and contrary to the objectives of the OECD – detrimental effects on the welfare of citizens and the effectiveness and accountability of the public sector.