The beauty of a free market lies not in its morality but in the fact that it provides an equal opportunity to all, sellers and buyers alike, to be immoral. What is immoral is a grey area, too: not incentivising the creator of an essential product, for example, or not making the essential product affordable for the have-nots? If the developer of the product cannot make the technology theft-proof, tough luck! What can be stolen will be stolen. This is where the US’s act of putting India on what it calls the “Priority Watch List… for longstanding challenges in its intellectual property framework” misses the spirit of a free market. On focus is India’s pharmaceutical industry that is a godsend not only for poor Indians but also for millions of citizens of struggling economies across Africa and the rest of Asia. That does not, however, mean that the American concern reflects its greed alone. The part of the “Big Pharma” that operates out of Europe is not comfortable with India and other countries on the US list either, and it would be too simplistic to disregard their concerns as callous. Certain inventions including those in medicine are capital-intensive, with a humongous amount wasted on several rounds of studies and trials where the products do not pass the regulator’s scrutiny. A Forbes article quoted the Tufts Center for the Study of Drug Development last year to say that the cost of bringing medicine from invention to pharmacy shelves was $2.7 billion. Ninety per cent, the article said, of what is made never reached the market. The industry that has to regain 100% of its cost from the sale of 10% of the total ‘property’ it produces cannot be sustained. The scientists would simply have to be terminated owing to their employers’ bankruptcy. That, in turn, would imply an end of the supply of essential items to the poor.
On the long term, it is important that the world recognises that patenting is an odd way of ensuring the finances for research and development. If 20 years of a lock-in period, by when copies of the intellectual property cannot be made, is unable to recover a producer’s expenses on R&D, the revenue model of the country where the producer is based is flawed. The cost of every sequel in the chain of ingredients, regulatory bodies and ancillary industries that finally come up with a finished product must be reduced. For all the virtues of market freedom that the West preached to the developing economies so that the latter opened up their markets for global vendors, the tax regime in both Europe and the US is prohibitive. There have to be ways of sustaining the state welfare schemes that socialist capitalists are known for other than taxpayers’ money. ‘Tax and welfare’ is, after all, a vicious cycle: Government takes away from you a bulk of what you earn and gives back a fraction in the name of service. They are taxes and stiff regulations that make the R&D cost soar in the West. Then there is the cost of marketing, which the companies are not — to be ethical — supposed to recover from the buyers, but they do. Instead, the companies must go for portfolio diversification, thereafter extracting their pounds of flesh from consumers of lifestyle products while casting a benign gaze at products the poor must have, lest they should die. In other words, recover the money from per unit sale of luxury items that sell less and make the prices of essential ones, which would see large volumes of sale, nominal.
As for India, Algeria, Argentina, Canada, Chile, China, Colombia, Indonesia, Kuwait, Russia, Ukraine and Venezuela, their respective governments must negotiate special terms and conditions for the Trade-Related Aspects of Intellectual Property Rights (TRIPs) applicable to medicines on humanitarian ground. For products of physics, the inventor must be fully compensated.