International Patent Regimes and Access to Medicines: Is the Health Impact Fund an Effective Solution?

Patents are currently the most common mechanism to stimulate pharmaceutical innovation. They are considered an efficient allocation mechanism and a system in which fewer resources are squandered. Patents are of importance for pharmaceutical companies, since innovation is expensive with developing costs per new drug at more than 2 billion U.S. Dollars. In 1995, members of the World Trade Organization (WTO) signed the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) to standardize patent rights in an international context. The trade agreement entails strict patent protection laws, i.e. a market exclusivity for patented drug over a period of at least 20 years. One of the main incentives to design the TRIPS agreement was to create a reward mechanism for pharmaceutical companies in order to recover costs, to make profits and importantly, to promote research and development (R&D) for diseases that affect developing nations. However, the adoption of the TRIPS agreement exacerbated two problems that are persistent in the discussion about essential medicines for the global poor. Namely, there are the problem of the distribution of existing innovations as well as the problem of suboptimal research for neglected diseases. Under high price patent regimes, in which drugs are sold under a monopoly, most R&D is dedicated to diseases predominant in developed nations where the purchasing power for expensive pharmaceuticals is the highest.