“The idea of a better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death.”

-Indira Gandhi, World Health Assembly 1982.


Jayashree Watal, Counsellor at the Intellectual Property Division of the World Trade Organization (WTO)[1], visited the Washington College of Law today to discuss the economics of the international pharmaceutical industry. Towards the beginning of her presentation she posed an unanswered question: in poor countries can the right to life be left to the state or should companies have moral responsibilities to supply life-saving medicines?

Since the mid 1970s, the pharmaceutical industry has depended more on the patent system than any other industry to profit from their drug products.[2] The prohibitive cost of developing therapeutic drugs and simplicity in copying chemical compounds drive these companies to the patent system for protection. While companies undoubtedly need to profit from the medicines they innovate, human rights lawyers additionally point to the need for poor citizens of the least developed countries to have access to those medicines, without which they would die. These lawyers argue that the U.N.’s Universal Declaration of Human Rights, which provides everyone with the right to life,[3] health, and medical care,[4] justifies access to life-saving patented medicines.

While Watal acknowledged that companies are unlikely to act morally absent incentives to do so, she also recognized that countries cannot expect companies to simply provide free medicine. To that point, she laid out two possible plans based in economics to encourage companies to increase access to medicines for the least developed countries.

Her first suggestion was for countries alongside companies to enter into a global agreement to create perfectly sealed markets. This means that companies would have to push countries to stop the importation and exportation of drugs on a free market entirely. Instead countries would be limited to the supply of drugs in their individual domestic markets. By creating perfectly sealed markets, Watal argued, pharmaceutical companies could effectively engage in tiered pricing. Therefore, a company could charge a higher price in an OECD country while charging a lower price in lesser-developed countries without the threat of parallel importation. However, she cautioned that such a global agreement must come from the companies and be fully embraced by industry to be feasible.

Her second concept was to reform domestic tax codes to allow concessions for the voluntary licensing of medicines. This means that the OECD countries with large pharmaceutical industries would need to look to domestic lawmakers to reform domestic law. However, this process may be extremely arduous and subject to political vulnerabilities in election cycles. She elaborated on this theory in a publication with economist F.M. Scherer.[5]

While either theory has their own unique legal hurdles, both take the position that companies need economic incentives to act morally. However, trends moving away from the stakeholder maximization norm and increasing public interest concerns suggest that companies may be changing their models to take into account the social good alongside profits.[6]

The WTO, World Health Organization, and World Intellectual Property Organization recently collaborated on a trilateral study regarding the intersections between trade, property, and health aimed at “enhance[ing] our shared understanding . . . and provide policy makers with a comprehensive compendium of issues at stake.”[7] Hopefully companies and lawmakers will carefully consider the compendium and find ways to provide essential medicines to the least developed countries and most needy people.

[2] Christopher Thomas Taylor & Aubrey Silberston, The Economic Impact of the Patent System: A Study of the British Experience,  231 (Cambridge University Press, 1973) (determining the pharmaceutical industry to be the most patent dependent industry).

[3] Universal Declaration of Human Rights, art. III.

[4] Id. at art. XXV.

[5] F. M. Scherer & Jayashree Watal, Post –TRIPS Options for Access to Patented Medicines in Developing Nations, J. 5 Int. Economic Law 913 (2002).

[6] Dana Brakman Reiser, The Next Big Thing: Flexible Purpose Corporations, 2 Am. U. Bus. L. Rev. 55 (2012) (discussing the ne corporate model that blends missions of earning profits and promoting social good), available at https://aublr.org/aublr/2013/03/the-next-big-thing-flexible-purpose-corporations/.

[7] World Trade Organization, World Health Organization, and World Intellectual Property Organization, Promoting Access to Medical Technologies and Innovation: Intersections between public health, intellectual property and trade (Feb. 5, 2013), available at https://www.wto.org/english/res_e/publications_e/who-wipo-wto_2013_e.htm.


Business and Marketing Editor: Diane Ghrist


Share this post