Yale economist introduces proposal to settle debate between pharmaceutical companies and developing nations

A proposal to “resolve the conflict between drug companies desperate to defend their patents and poor nations desperate to buy cheap drugs” to treat AIDS is “attracting attention” from policymakers and pharmaceutical companies, the Wall Street Journal reports.

Yale University economist Jenny Lanjouw crafted the proposal, under which pharmaceutical companies “would surrender patent rights for any new AIDS drugs in poor countries but enforce them in rich ones.”

The plan is “creating a stir” at the World Bank and United Nations, and the U.S. Treasury Department held a conference on the plan last week.

Rich or poor?

The “key” to the proposal, which will be published by the Brookings Institution, is to create two separate markets for new drugs – one encompassing poor countries, where “unfettered competition would keep prices low”; and one in rich countries, where drug companies would enforce patents to “earn the profits they require to finance new research.” Drug companies would be required to choose between enforcing patent protections in rich countries or poor countries. The Journal explains that a drug company with a new malaria drug might choose to enforce patents in poor countries, where most malaria patients live.

But a company developing a new cancer or AIDS treatment might prefer to establish patent rights in the United States and Europe, where the most profit could be made. The proposal is being viewed as a “starting point for discussion” on how developing countries can obtain cheaper drugs without compromising drug research, the Journal reports. But pharmaceutical companies are still concerned that generic drugs produced in developing countries could “leak” into U.S. and European markets. Merck, which is reviewing the proposal, has not yet delivered a response (Phillips, Wall Street Journal, 13/06).